FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1999
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
RUDDICK CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0905940
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1800 Two First Union Center
Charlotte, North Carolina 28282
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704) 372-5404
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 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.
X
Yes ----- No -------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding Shares
Class As of May 11, 1999
______________ _________________________
Common Stock 46,521,003 shares
<PAGE>
RUDDICK CORPORATION
INDEX
PAGE NO.
__________
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS -
MARCH 28, 1999 AND SEPTEMBER 27, 1998 2
CONSOLIDATED CONDENSED STATEMENTS OF
INCOME - THREE MONTHS AND SIX MONTHS
ENDED MARCH 28, 1999 AND MARCH 29, 1998 3
CONSOLIDATED CONDENSED STATEMENTS OF
TOTAL NONOWNER CHANGES IN EQUITY -
THREE MONTHS AND SIX MONTHS ENDED
MARCH 28, 1999 AND MARCH 29, 1998 4
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS - SIX MONTHS ENDED
MARCH 28, 1999 AND MARCH 29, 1998 5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7-12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 14
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUDDICK CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
March 28, September 27,
ASSETS 1999 1998
(Unaudited) (Unaudited)
---------------- -----------------
CURRENT ASSETS:
Cash and Temporary Cash Investments $ 14,348 $ 16,668
Accounts Receivable, Net 78,312 76,948
Inventories 223,438 211,404
Other 38,768 27,733
------------------ -------------------
Total Current Assets 354,866 332,753
PROPERTY, NET 519,541 513,788
INVESTMENTS AND OTHER ASSETS 78,386 85,077
------------------- ------------------
Total $ 952,793 $ 931,618
=================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 1,775 $ 2,411
Current Portion of Long-Term Debt 387 571
Accounts Payable 132,244 149,875
Income Taxes Payable 8,469 5,456
Other Accrued Liabilities 76,371 87,107
-------------------- -----------------
Total Current Liabilities 219,246 245,420
LONG-TERM DEBT 219,767 191,360
DEFERRED LIABILITIES 82,243 79,600
MINORITY INTEREST 4,425 4,513
SHAREHOLDERS' EQUITY:
Capital Stock - Common 53,389 54,686
Retained Earnings 376,249 358,328
Cumulative Translation Adjustments (2,526) (2,289)
--------------------- ----------------
Shareholders' Equity 427,112 410,725
--------------------- ---------------
Total $ 952,793 $ 931,618
===================== ===============
<PAGE> -2-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except share and per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
March 28, March 29, March 28, March 29,
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------ ------------ -----------
NET SALES
American & Efird $ 81,303 $ 87,673 $ 167,450 $ 175,398
Harris Teeter 564,336 528,589 1,130,334 1,058,466
------------ ------------- ------------ -----------
Total 645,639 616,262 1,297,784 1,233,864
------------ ------------- ------------ ------------
GROSS PROFIT
American & Efird 24,030 24,731 49,281 50,342
Harris Teeter 151,102 143,145 304,062 285,919
------------- ------------- ------------ -----------
Total 175,132 167,876 353,343 336,261
------------- ------------- ------------ -----------
OPERATING PROFIT
American & Efird 10,816 10,037 22,158 20,658
Harris Teeter 15,213 12,803 29,651 26,228
-------------- -------------- ------------ -----------
Total 26,029 22,840 51,809 46,886
OTHER COSTS AND DEDUCTIONS
Interest expense, net 3,679 3,966 7,416 8,071
Other expense, net 1,867 1,758 3,559 3,582
Minority interest 84 65 193 215
------------- --------------- ----------- ---------
Total 5,630 5,789 11,168 11,868
------------- --------------- ----------- ----------
Income before income taxes 20,399 17,051 40,641 35,018
Income taxes 7,669 5,672 15,270 11,647
------------- --------------- ------------ ----------
Net income $ 12,730 $ 11,379 $25,371 $23,371
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING:
Basic 46,560,396 46,723,286 46,576,050 46,684,883
Diluted 46,801,439 47,041,576 46,832,054 47,012,252
NET INCOME PER SHARE -
BASIC AND DILUTED $.27 $.24 $.54 $.50
DIVIDENDS DECLARED PER SHARE
- Common $.08 $.08 $.16 $.16
<PAGE> -3-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF TOTAL NONOWNER
CHANGES IN EQUITY
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
March 28, March 29, March 28, March 29,
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ------------ ------------ ------------
Net Income $ 12,730 $ 11,379 $ 25,371 $ 23,371
Other nonowner changes in
equity, net of tax:
Foreign currency translation
adjustment 44 (165) (237) (433)
------------ ----------- ------------- ------------
Total nonowner changes
in equity $ 12,774 $ 11,214 $ 25,134 $ 22,938
============ =========== ============= ==========
<PAGE> -4-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
SIX MONTHS ENDED
March 28 March 29,
1999 1998
----------------- ----------------
(Unaudited) (Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 25,371 $ 23,371
Non-Cash Items Included in Net Income
Depreciation and Amortization 34,715 32,075
Other, Net (1,256) 1,785
Decrease (Increase) in Current Assets (23,997) (2,795)
Increase (Decrease) in Current Liabilities (25,991) (17,634)
---------------- ----------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 8,842 36,802
---------------- ----------------
INVESTING ACTIVITIES
Capital Expenditures (40,800) (56,574)
Cash Proceeds from Sale of Property 950 428
Company Owned Life Insurance, Net 6,394 6,450
Other, Net 1,654 (5,035)
---------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (31,802) (54,731)
---------------- ----------------
FINANCING ACTIVITIES
Proceeds of Long-Term Borrowings 28,837 24,000
Payment of Principal on Long-Term Debt (580) (249)
Dividends (7,449) (7,474)
Other, Net (168) 2,242
--------------- ---------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 20,640 18,519
---------------- --------------
INCREASE (DECREASE) IN BALANCE SHEET CASH (2,320) 590
BALANCE SHEET CASH AT BEGINNING OF PERIOD 16,668 17,150
----------------- ----------------
BALANCE SHEET CASH AT END OF PERIOD $ 14,348 $ 17,740
================ ===============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest $ 7,561 $ 8,077
Income Taxes $ 12,916 $ 11,042
<PAGE> -5-
RUDDICK CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
IN THE OPINION OF MANAGEMENT, THE INFORMATION FURNISHED REFLECTS
ALL ADJUSTMENTS (CONSISTING ONLY OF NORMAL RECURRING ACCRUALS)
NECESSARY TO PRESENT FAIRLY THE RESULTS FOR THE INTERIM PERIODS
PRESENTED.
THE COMPANY ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
(SFAS) NO. 130, "REPORTING COMPREHENSIVE INCOME", EFFECTIVE WITH THE
BEGINNING OF ITS FIRST FISCAL QUARTER OF 1999 AND, ACCORDINGLY, HAS
PRESENTED AN ADDITIONAL BASIC FINANCIAL STATEMENT "CONSOLIDATED
CONDENSED STATEMENTS OF TOTAL NONOWNER CHANGES IN EQUITY" WHICH
REPORTS NET INCOME, AS REPORTED UNDER GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, ADJUSTED FOR EACH APPLICABLE COMPONENT OF
NONOWNER CHANGES IN SHAREHOLDERS' EQUITY.
THE COMPANY ADOPTED SFAS NO. 131, "DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION", EFFECTIVE WITH THE BEGINNING
OF ITS FIRST FISCAL QUARTER OF 1999. THIS PRONOUNCEMENT WILL REQUIRE,
EFFECTIVE FOR THE COMPANY'S FISCAL YEAR ENDING OCTOBER 3, 1999,
ANNUAL FINANCIAL STATEMENTS, AND FOR INTERIM AND ANNUAL REPORTING
PERIODS IN FISCAL 2000 AND THEREAFTER, NEW STANDARDS OF DISCLOSURE
FOR INFORMATION ABOUT OPERATING SEGMENTS OF THE ENTERPRISE AND
RELATED DISCLOSURES ABOUT PRODUCTS AND SERVICES, GEOGRAPHIC AREAS
AND MAJOR CUSTOMERS.
<PAGE> -6-
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table shows net sales, gross profit and operating profit for
each of Ruddick Corporation's operating subsidiaries for the quarters and
six months ended March 28, 1999 and March 29, 1998:
(In Thousands) Quarter Ended Six Months Ended
March 28, March 29, March 28, March 29,
1999 1998 1999 1998
--------- ---------- --------- ----------
Net Sales
American & Efird $ 81,303 $ 87,673 $ 167,450 $ 175,398
Harris Teeter 564,336 528,589 1,130,334 1,058,466
--------- --------- ---------- ---------
Total $ 645,639 $ 616,262 $ 1,297,784 $1,233,864
Gross Profit
American & Efird $ 24,030 $ 24,731 $ 49,281 $ 50,342
Harris Teeter 151,102 143,145 304,062 285,919
---------- --------- ----------- ---------
Total $ 175,132 $ 167,876 $ 353,343 $ 336,261
Operating Profit
American & Efird $ 10,816 $ 10,037 $ 22,158 $ 20,658
Harris Teeter 15,213 12,803 29,651 26,228
--------- --------- ---------- ---------
Total $ 26,029 $ 22,840 $ 51,809 $ 46,886
FOR THE THREE MONTHS ENDED MARCH 28, 1999 AND MARCH 29, 1998
Consolidated sales of $646 million in the second quarter of
fiscal 1999 increased 4.8% over the $616 million reported for the
comparable period last year. Total gross profit was up 4.3% from
$168 million in the second quarter of fiscal 1998 to $175 million
in fiscal 1999. Total operating profit of $26.0 million
increased 14% from $22.8 million for the comparable period last
year. Net income of $12.7 million increased 11.9% from the $11.4
million reported in the second fiscal quarter last year, and the
quarter's basic and diluted earnings per share rose from $.24 in
fiscal 1998 to $.27 in fiscal 1999. Due to the higher operating
profit for both Harris Teeter and A&E and a reduction in interest
expense, Ruddick's pre-tax earnings rose by 19.6%, from $17.1
million the fiscal second quarter of 1998 to $20.4 million in the
current quarter. As expected, however, the Company's income tax
rate increased from 33.3% in the prior year quarter to 37.6%
in the current quarter due to the reduction of favorable tax
attributes related to Company owned life insurance, and thereby
diminished the growth in net income.
In the second quarter of fiscal 1999, A&E sales of $81.3
million decreased 7.3% from the $87.7 million reported for the
comparable period last year, primarily due to the continuation of
soft demand for industrial thread, particularly in U.S. apparel
markets, and further due to the elimination of
<PAGE> -7-
$1.1 million in sales from the Korean operations, which were closed
in June 1998. Several U.S. apparel market segments were weak due to the
substantial increase of apparel imports from Asia. However, A&E
continued to take advantage of the growth in apparel
production in Mexico, Central America and the Caribbean as a
result of NAFTA. A&E's foreign sales increased by 15% in the
quarter in comparison to the prior year period and accounted for
28% of A&E's total sales in the current quarter. A&E's gross
profit of $24.0 million in the second quarter of fiscal 1999
declined 2.8% from $24.7 million in the second quarter last
year. However, in spite of soft sales and a tough competitive
environment worldwide, A&E was able to increase operating
profitability. Operating profit of $10.8 million in the second
quarter of fiscal 1999 grew by 7.8% from $10.0 million in the
comparable period last year. Operating margins were favorably
impacted by improved operating efficiencies worldwide and the
elimination of losses associated with the company's Korean
operations, which were closed in 1998. In addition,
the current plan for consolidation of dyeing, finishing and
distribution was completed during the quarter, including the
consolidation of A&E's Salisbury, North Carolina dyehouse into
its Gastonia, N.C. facility, as well as the reduction of total
service centers in the U.S. from 17 at the beginning of the
fiscal year to 14. These consolidations are designed to reduce
expenses and enhance productivity. The majority of the foreign
operations of A&E generated improvements in operating
profitability, although none are individually material to the
Company. A&E's operating profit in the U.S. market, which
displayed a 7% reduction in comparison to the prior year quarter,
reflected the reduction in manufacturing operating schedules,
which decreased overall profitability, due to the continuation of
relatively sluggish demand.
Harris Teeter sales in the second quarter of fiscal 1999 of
$564.3 million increased by 6.8% over the $528.6 million reported
for the comparable period last year. Net sales for stores in
operation during both periods increased by 1.54%. These increases
were achieved despite the intensely competitive supermarket
environment in the company's markets and the lack of inflation
in the grocery sector, both conditions which the company expects
to continue for the foreseeable future. The comparative sales
results are believed to reflect the continued success of the
company's merchandising efforts, including more aggressive
promotional, advertising and customer service activities, and the
greater use of the customer loyalty card. Gross profit of
$151.1 million increased by 5.6% from $143.1 million in the
second fiscal quarter of 1998 while gross margin on sales
declined slightly due to aggressive promotions. Merchandising
initiatives combined with improved control of store operating
expenses resulted in an expansion of operating
margins. Operating profit in the second fiscal quarter of 1999 of
$15.2 million increased by a robust 18.8% over the $12.8 million
reported for the comparable period last year. Operating
margin on sales increased to 2.70% of sales in the current
quarter from 2.42% of sales in the second quarter of fiscal 1998.
At March 28, 1999, 148 stores were in operation, up from 141 at
March 29, 1998. Harris Teeter opened one new store during the
second quarter of fiscal 1999.
In addition, Harris Teeter recently announced that it would
acquire 10 Kroger stores in the Winston-Salem and Greensboro,
North Carolina areas and sell 11 of its western Virginia stores
to Kroger. The transaction is an asset purchase of lease rights,
fixtures, equipment and some inventory. The transaction is
expected to result in reduced operating profit of approximately
$5.5 million, or $3.3 million after tax, primarily in the third
and fourth fiscal quarters, due to non-recurring expenses
associated with the closings of the western Virginia stores and
the opening of the new stores, as well as a lack of contribution
from sales lost during the period. Harris Teeter expects to
reopen the closed Kroger stores within one to two months of the
purchase, during which time remodeling, stocking and training of
employees will be completed. This market realignment is designed
to increase sales, as
<PAGE> -8-
well as to improve operating profitability by achieving greater
distribution efficiency, better utilization of advertising costs and
other enhancements in productivity.
FOR THE SIX MONTHS ENDED MARCH 28, 1999 AND MARCH 29, 1998
Consolidated sales in the six months ended March 28, 1999 of
$1.30 billion increased 5.2% over the $1.23 billion reported for
the first six months of fiscal 1998, due to continued sales
growth at Harris Teeter, while sales at A&E decreased. Total
gross profit increased by 5.1% from $336.3 million in the first
half of fiscal 1998 to $353.3 million in the first six months of
fiscal 1999, with A&E reporting a decrease and Harris Teeter
showing an increase. Operating profit of $51.8 million was up
10.5% from $46.9 million in the comparable period of fiscal 1998,
with both subsidiaries showing improvement. Net income rose by
8.6%, from $23.4 million in the first half of fiscal 1998 to
$25.4 million for the current six-month period. Basic and
diluted earnings per share for the first six months of this year
were $.54 versus $.50 a year ago.
A&E sales of $167.5 million for the first six months of this
year decreased by 4.5% from $175.4 million in the comparable
period last year. This sales decrease was primarily due to weak
demand for industrial thread in the U.S. market by A&E's apparel
customers as the result of an increase in apparel imports from
Asia and the continued growth of apparel production outside of
the U.S. Sales were also impacted by the elimination of $2.4
million in sales from the Korean operations that were closed in
June 1998. The relative distribution of the company's business
in Latin America, particularly in Mexico, continued to grow as
the result of NAFTA. Further, A&E's total foreign sales
increased by 18% for the six months in comparison to the six
months in fiscal 1998 and accounted for 29% of total year-to-date
sales. For the first six months of fiscal 1999, A&E's gross
profit of $49.3 million decreased by 2.1% from the $50.3 million
in the comparable period last year. Operating profit of $22.2
million in the first six months increased by 7.3% from $20.7
million in the first six months of last year. Operating margins
improved as the result of improved efficiencies worldwide and the
elimination of prior period operating losses of $1.5 milliion
associated with the company's Korean operations, which were
closed in 1998. The completion of A&E's current U.S.
consolidation plans for dyeing, finishing and distribution, which
took place during the second fiscal quarter of 1999, should have
a positive effect through expense reduction and enhanced
productivity during the second half of fiscal 1999. Although none
of the foreign operations are individually material to the
Company, the majority showed improvements in operating profit,
while A&E's operating profit in the U.S. during the six-month
period decreased by 6% as compared to the prior year six months.
This decrease in profitability reflected the reduction in
manufacturing operating schedules due to the continuation of weak
sales demand.
Despite the very competitive environment in its Southeast
U.S. markets and the low inflation in the grocery sector, which
are expected to continue in the foreseeable future, Harris
Teeter sales of $1.13 billion for the first six months of fiscal
1999 increased by 6.8% over the $1.06 billion recorded in the
period last year. Net sales for stores in operation during both
periods increased by 1.34%. These results were achieved through
increased promotional, advertising and customer service
activities, including customer acceptance and increased use of
Harris Teeter's customer loyalty card. Although the company
experienced a very competitive pricing environment during the six
months, it was able to increase gross profit by 6.3%, from
$285.9 million during fiscal 1998 to $304.1 million in fiscal
1999, and hold gross margin on sales relatively flat due to
careful management of promotional strategies. Operating profit
increased by 13.1% to $29.7 million in the first six months of
fiscal 1999
<PAGE> -9-
from $26.2 million in the comparable prior year period and, as a
percentage to sales, improved marginally. The company believes
these results were achieved due to improved control of store operating
expenses, store productivity enhancements and increased sales volume.
A total of five new stores were opened during the six-month period in fiscal
1999 and one store was closed, with 148 stores in operation at
March 28, 1999.
Capital Resources and Liquidity
Ruddick Corporation is a holding company which, through its
wholly-owned subsidiaries, American & Efird, Inc. and Harris
Teeter, Inc., is engaged in the primary businesses of industrial
sewing thread manufacturing and distribution, and regional
supermarket operations, respectively. Ruddick has no material
independent operations, nor material assets, other than the
investments in its operating subsidiaries. Ruddick provides a
variety of services to its subsidiaries and is dependent upon
income and upstream dividends from its subsidiaries. There exist
no material restrictions on such dividends, which are determined
as a percentage of net income of each subsidiary.
The Company seeks to limit long-term debt so that it
constitutes no more than 40% of capital employed, which includes
long-term debt, minority interest and shareholders' equity. As
of March 28, 1999, this percentage was 33.8%, as compared to
31.6% at September 27, 1998.
The Company's principal source of liquidity has been
revenues from operations. The Company also has the ability to
borrow up to an aggregate of $100 million under established
revolving lines of credit with three banks. The maximum amount
outstanding under these credit facilities during the quarter
ended March 28, 1999 was $75.3 million, and $61.8 million was
outstanding at quarter end compared to $36.0 million at September
27, 1998. The additional borrowings under Ruddick's revolving
credit facilities were used primarily for capital
expenditures. Borrowings and repayments under these revolving
credit facilities are of the same nature as short-term credit
lines; however, due to the nature and terms of the agreements
allowing up to five years for repayment, all borrowings under
these facilities are classified as long-term debt.
Working capital of $135.6 million at March 28, 1999
increased $48.3 million from September 27, 1998, primarily the
result of increases in inventories to support increased sales
activity at Harris Teeter and reductions in accounts payable
accrued liabilities. The current ratio was 1.6 at March 28, 1999
and 1.4 at September 27, 1998.
Covenants in certain of the Company's long-term debt
agreements limit the total indebtedness that the Company may
incur. Management believes that the limit on indebtedness
does not significantly restrict the Company's liquidity and that
such liquidity is adequate to meet foreseeable requirements.
During the first six months of fiscal 1999, capital
expenditures totaled $40.8 million. A&E has spent $7.6 million
of the $25 million it is budgeted to spend in fiscal year 1999,
and Harris Teeter has spent $32.8 million of an anticipated $95
million. These expenditures are for modernization and expansion.
Management expects that internally generated funds, supplemented
by available borrowing capacity, will be adequate to finance such
expenditures.
<PAGE> -10-
Other Matters
The Company is in the process of the modification or
conversion of Company computer (IT) systems, as well as non-IT
systems which have embedded technology such as microcontrollers,
to provide for proper functioning beyond calendar year 1999.
During the fiscal year ended September 28, 1997, the Company
instituted plans and initiated its Year 2000 remediation programs
by which it would complete such remediation by the end of April
1999 in the U.S. and June 1999 in its foreign operations,
including final testing in all operations worldwide
by September 1999. Such remediation plans have been modified as
the project progressed and a very limited number of U.S. systems
will be remediated beyond April, 1999. Specifically, certain
administrative programs for retirement benefits are expected to
be remediated by July, 1999; A&E's frame relay equipment, one of
several dye machine controllers and one of several plant
energy management systems are expected to be remediated by
September, 1999; and Harris Teeter's vendor purchasing system is
expected to be remediated by July, 1999. Additionally,
compliance testing of a very limited number of systems will be
completed by October, 1999, an extension beyond the original plan
of September, 1999. Routine periodic reports have displayed
that the project activities are on schedule with the requirements
of the latest Year 2000 remediation plans. At both Harris Teeter
and A&E, the assessment and technical plan development phases
have been completed and the companies are at various levels of
completion of the remediation implementation and testing phases.
As of March 28, 1999 Harris Teeter remediation was 95% complete
and A&E remediation was 99% complete in the U.S. in their
respective mission-critical IT and non-IT systems. A&E has
foreign operations which are not material to the Company as a
whole; even so, the programming for the Latin American IT system
model is 100% complete and all foreign entities are scheduled for
completion on various dates up to June 30, 1999. At both Harris
Teeter and A&E, the integration testing of most U.S. systems is
already underway and compliance testing will proceed on a
priority basis for completion by October 1999. A current
assessment of the total amount of Year 2000 remediation
expenditures over the fiscal years 1997 through completion in
1999 yielded an estimate of $3.4 to $3.7 million.
The combined companies have spent $2.0 million cumulatively for
all periods prior to March 28, 1999, and expect to spend $1.7
million more during the remainder of 1999 in order to complete
the Year 2000 remediation and testing. Maintenance and
modification costs will be expensed as incurred, while the costs
of new software will be capitalized and amortized over the
software's useful life. The Company has formal correspondence
programs with its major suppliers and its major thread customers,
of which no single customer exceeds 9% of A&E sales, for inquiry,
monitoring and assessing their Year 2000 remediation plans and
efforts. All costs of their remediation will be borne by the
suppliers and customers. Management expects that the costs of
the Company's Year 2000 remediation will have no material impact
on its results of operations, liquidity and capital resources and
further, that resources are available to complete the
modification and conversion as planned. It must be recognized,
however, that failure to do so could have a material adverse
effect on the Company's future results of operations. The
Company is currently developing contingency plans to address the
potential worst-case scenarios which could conceivably evolve in
mission-critical systems, presumably as a result of the lack of
readiness of outside parties. This will include temporary and
manual procedures to follow in the event of a system or subsystem
failure. In reference to the supply of goods and services by
vendors, the contingency plans will largely take into account the
vendors' progress to adequately address the Year 2000 issue. The
contingency plans are scheduled to be completed by the end of
the second calendar quarter of 1999.
<PAGE> -11-
As a result of federal legislation which phased out interest
deductions on certain policy loans and thereby significantly
diminished the favorable tax attributes of Company owned life
insurance ("COLI"), the Company's effective income tax rate, in
comparison to the prior year quarter and year to date, has risen
to a level slightly below statutory rates domestically. The
Company has recorded income tax reductions of approximately $25
million cumulatively as the result of COLI interest deductions
from October 1993 through December 27, 1998. The Internal
Revenue Service, on a comprehensive national level, is evaluating
its position regarding the deductibility of COLI policy loan
interest for years prior to January 1, 1999. The IRS has issued
Technical Advice Memoranda regarding the COLI deductibility to
taxpayers unrelated to the Company. Management understands that
the adverse position taken by the IRS will be subjected
to extensive challenges in the courts. In the event that the IRS
prevails, this outcome could result in a material impact upon the
Company's future income taxes and results of operations.
Regarding Forward-Looking Statements
The foregoing discussion contains some forward-looking
statements about the Company's financial condition and results of
operations, which are subject to certain risks and uncertainties
that could cause actual results to differ materially from those
reflected in the forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which reflect management's judgment only as of the
date hereof. The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events and
circumstances that arise after the date hereof.
Factors that might cause the Company's actual results to
differ materially from those anticipated in forward-looking
statements include the following:
-generally adverse economic and industry conditions,
including a decline in consumer demand for apparel products or
significant changes in consumer food preferences or eating
habits,
-changes in the competitive environment, including increased
competition in the Company's primary geographic markets, the
entry of new competitors and consolidation in the
supermarket industry,
-economic or political changes in the countries in which the
Company operates or adverse trade regulations,
-the passage of future tax legislation, or any regulatory
position which prevails, if any, that could have an adverse
impact on the tax benefits of the ESOP dividends and COLI,
-management's ability to accurately predict the adequacy of
the Company's present liquidity to meet future requirements,
-changes in the Company's capital expenditures, new store
openings and store closings, and
-non-availability of resources for the Company, or its
suppliers and customers, to complete their respective Year 2000
compliance effectively.
ITEM 3. Quantitative and Qualitative Disclosures About Market
Risk
The Company's market risk sensitive instruments do not
subject the Company to material market risk exposures.
<PAGE> -12-
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Ruddick Corporation
was held on February 18,1999 (the "Annual Meeting"). Proxies for
the Annual Meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended. The
shareholders voted upon the following matters at the Annual
Meeting.
1. ELECTION OF DIRECTORS
The shareholders elected three directors at the Annual
Meeting and they are serving for terms to expire in 2002. In
addition, the following directors currently are serving for
terms to expire in 2000 and 2001, as indicated: John R. Belk
(2000), Thomas W. Dickson (2000), James E.S. Hynes (2000), Harold
C. Stowe (2000), John W. Copeland (2001), Alan T. Dickson (2001),
Roddey Dowd, Sr. (2001) and Anna Spangler Nelson (2001). There
was no solicitation in opposition to management's nominees as
listed in the proxy statement, and all such nominees were
elected. The following information is furnished with respect to
each director elected at the meeting:
Shares
Director Elected Shares Voted Withholding Broker
at Annual Meeting for Election Authority Non-Votes
- ----------------- ------------ ------------ -----------
For a three-year term:
Edwin B. Borden, Jr. 39,465,710 758,397 N/A
R. Stuart Dickson 39,365,118 858,989 N/A
Hugh L. McColl, Jr. 38,881,686 1,342,422 N/A
2. APPROVAL OF PROPOSAL TO INCREASE THE SIZE OF THE BOARD OF
DIRECTORS FROM ELEVEN TO TWELVE DIRECTORS
The shareholders approved the proposal to increase the size of
the Board of Directors from eleven to twelve directors, and the
following information is provided with respect to the approval
thereof:
Shares Voted Shares Voted Shares Broker
For Against Abstaining Non-Votes
-------------- ------------- ----------- ------------
36,621,289 2,919,607 683,211 N/A
<PAGE> -13-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit No. Description of Exhibit
----------- -----------------------------
11 Statement Re: Computation of Per
Share Earnings
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K - None
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
RUDDICK CORPORATION
DATE: May 11, 1999 /s/ R. N. Brigden
R. N. BRIGDEN
VICE PRESIDENT - FINANCE
(PRINCIPAL FINANCIAL OFFICER)
<PAGE> -14
EXHIBIT INDEX
Exhibit No.
(per Item 601 Description Sequential
Of Reg. S-K) of Exhibit Page No.
- -------------- ----------------- ------------
11 Statement Re: Computation of Per
Share Earnings
27 Financial Data Schedule
RUDDICK CORPORATION EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
SIX MONTHS ENDED
March 28, March 29,
1999 1998
_______________ ______________
NET INCOME PER SHARE COMPUTED
AS FOLLOWS:
BASIC:
1. Net income available to
common shareholders $25,371,000 $23,371,000
=========== ===========
2. Weighted average common
shares outstanding - Basic 46,576,050 46,684,883
=========== ===========
3. Basic net income per share
(Item 1 divided by Item 2) $.54 $.50
=========== ===========
DILUTED:
1. Net income available to
common shareholders $25,371,000 $23,371,000
=========== ===========
2. Weighted average common
shares outstanding - Basic 46,576,050 46,684,883
3. Weighted potential shares
under stock options computed
for the periods using the
Treasury Stock Method. 256,004 327,369
------------ ------------
4. Weighted average common shares
outstanding - Diluted 46,832,054 47,012,252
============ ============
5. Net Income Per Share (Item
1 divided by Item 4) $.54 $.50
============= =============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RUDDICK CORPORATION
FINANCIAL DATA SCEDULE FOR THE THREE MONTHS ENDED
3/28/99
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1998
<PERIOD-END> MAR-28-1999
<CASH> 14,348,000
<SECURITIES> 0
<RECEIVABLES> 80,879,000
<ALLOWANCES> 2,567,000
<INVENTORY> 223,438,000
<CURRENT-ASSETS> 354,866,000
<PP&E> 918,957,000
<DEPRECIATION> 399,416,000
<TOTAL-ASSETS> 952,793,000
<CURRENT-LIABILITIES> 219,246,000
<BONDS> 219,767,000
0
0
<COMMON> 53,389,000
<OTHER-SE> 373,723,000
<TOTAL-LIABILITY-AND-EQUITY> 952,793,000
<SALES> 645,639,000
<TOTAL-REVENUES> 645,639,000
<CGS> 470,507,000
<TOTAL-COSTS> 619,610,000
<OTHER-EXPENSES> 1,951,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,679,000
<INCOME-PRETAX> 20,399,000
<INCOME-TAX> 7,669,000
<INCOME-CONTINUING> 12,730,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,730,000
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
