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 January 2, 2000
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.
Yes X 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 February 10, 2000
---------------- -------------------------
Common Stock 46,359,888 shares
<PAGE>
RUDDICK CORPORATION
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS -
JANUARY 2, 2000 AND OCTOBER 3, 1999 2
CONSOLIDATED CONDENSED STATEMENTS OF
INCOME - THREE MONTHS ENDED JANUARY 2,
2000 AND DECEMBER 27, 1998 3
CONSOLIDATED CONDENSED STATEMENTS OF
TOTAL NONOWNER CHANGES IN EQUITY -
THREE MONTHS ENDED JANUARY 2, 2000 AND
DECEMBER 27, 1998 4
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS - THREE MONTHS ENDED
JANUARY 2, 2000 AND DECEMBER 27, 1998 5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7-11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 12
<PAGE> -1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUDDICK CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands) January 2, October 3,
ASSETS 2000 1999
(Unaudited) (Unaudited)
------------- -------------
CURRENT ASSETS:
Cash and Temporary Cash Investments $ 15,756 $ 14,467
Accounts Receivable, Net 74,799 76,827
Inventories 240,776 223,694
Other 33,487 43,886
------------ ------------
Total Current Assets 364,818 358,874
PROPERTY, NET 543,567 539,557
INVESTMENTS AND OTHER ASSETS 74,300 71,683
----------- -------------
Total $982,685 $970,114
=========== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 44 $ 177
Current Portion of Long-Term Debt 2,926 429
Accounts Payable 127,495 143,095
Income Taxes Payable 18,913 14,986
Other Accrued Liabilities 63,547 80,181
----------- --------------
Total Current Liabilities 212,925 238,868
LONG-TERM DEBT 228,642 198,532
DEFERRED LIABILITIES 85,316 84,305
MINORITY INTEREST 4,867 4,726
SHAREHOLDERS' EQUITY:
Capital Stock - Common 50,278 52,137
Retained Earnings 402,883 393,699
Cumulative Translation Adjustments (2,226) (2,153)
----------- ------------
Shareholders' Equity 450,935 443,683
----------- ------------
Total $982,685 $970,114
=========== ============
<PAGE> -2-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except share and per share data)
THREE MONTHS ENDED
-------------------------------------
January 2, December 27,
2000 1998
(Unaudited) (Unaudited)
---------------- ------------------
NET SALES
American & Efird $ 82,187 $ 86,147
Harris Teeter 583,270 565,998
--------------- ------------------
Total 665,457 652,145
---------------- ------------------
GROSS PROFIT
American & Efird 24,941 25,251
Harris Teeter 163,365 152,960
---------------- ------------------
Total 188,306 178,211
---------------- ------------------
OPERATING PROFIT
American & Efird 11,670 11,342
Harris Teeter 15,754 14,438
----------------- -----------------
Total 27,424 25,780
OTHER COSTS AND DEDUCTIONS
Interest expense, net 3,836 3,737
Other expense, net 1,457 1,692
Minority interest 141 109
----------------- -----------------
Total 5,434 5,538
----------------- -----------------
Income before income taxes 21,990 20,242
Income taxes 8,633 7,601
----------------- -----------------
Net income $13,357 $12,641
================= =================
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING:
Basic 46,390,942 46,591,704
Diluted 46,555,006 46,862,258
NET INCOME PER SHARE -
BASIC $.29 $.27
DILUTED $.29 $.27
DIVIDENDS DECLARED PER SHARE - Common $.09 $.08
<PAGE> -3-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF TOTAL NONOWNER CHANGES IN
EQUITY (in thousands)
THREE MONTHS ENDED
------------------------------------
January 2, December 27,
2000 1998
(Unaudited) (Unaudited)
----------------- ----------------
Net Income $ 13,357 $ 12,641
Other nonowner changes in equity,
net of tax:
Foreign currency translation adjustment (73) (281)
---------------- ----------------
Total nonowner changes in equity $ 13,284 $ 12,360
================ ================
<PAGE> -4-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
THREE MONTHS ENDED
----------------------------------
January 2, December 27,
2000 1998
-------------- -----------------
(Unaudited) (Unaudited)
-------------- -----------------
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 13,357 $ 12,641
Non-Cash Items Included in Net Income
Depreciation and Amortization 18,485 17,224
Other, Net (568) (2,535)
Decrease (Increase) in Current Assets (4,556) (23,006)
Increase (Decrease) in Current Liabilities (28,439) (10,786)
------------- ----------------
NET CASH USED IN OPERATING ACTIVITIES (1,721) (6,462)
------------- ----------------
INVESTING ACTIVITIES
Capital Expenditures (24,840) (22,324)
Cash Proceeds from Sale of Property 183 862
Company Owned Life Insurance, Net (2,322) (3,536)
Other, Net 2,827 1,397
------------ ---------------
NET CASH USED IN INVESTING ACTIVITIES (24,152) (23,601)
------------ ---------------
FINANCING ACTIVITIES
Proceeds of Long-Term Borrowings 32,700 42,637
Payment of Principal on Long-Term Debt (94) (498)
Dividends (4,172) (3,728)
Other, Net (1,272) 1,667
------------ --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 27,162 40,078
------------ --------------
INCREASE (DECREASE) IN BALANCE SHEET CASH 1,289 10,015
BALANCE SHEET CASH AT BEGINNING OF PERIOD 14,467 16,668
------------ --------------
BALANCE SHEET CASH AT END OF PERIOD $15,756 $26,683
============ ===============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest $3,875 $3,769
Income Taxes $4,315 $2,639
<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 SFAS NO. 131, "DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION", EFFECTIVE WITH THE
BEGINNING OF ITS FIRST FISCAL QUARTER OF 1999. ALL INTERIM
PERIOD INFORMATION AND DISCLOSURES REGARDING THE BUSINESS
SEGMENTS OF THE COMPANY - INDUSTRIAL THREAD, AMERICAN & EFIRD AND
RETAIL GROCERY, HARRIS TEETER - REQUIRED BY THIS ACCOUNTING
PRONOUNCEMENT ARE CONTAINED IN THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
<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 ended January 2, 2000 and December
27, 1998:
(In Thousands) Quarter Ended
------------------------------------
January 2, December 27,
2000 1998
--------------- -----------------
Net Sales
American & Efird $ 82,187 $ 86,147
Harris Teeter 583,270 565,998
--------------- ------------------
Total $ 665,457 $ 652,145
--------------- ------------------
Gross Profit
American & Efird $ 24,941 $ 25,251
Harris Teeter 163,365 152,960
--------------- ------------------
Total $ 188,306 $ 178,211
--------------- ------------------
Operating Profit
American & Efird $ 11,670 $ 11,342
Harris Teeter 15,754 14,438
--------------- -----------------
Total $ 27,424 $ 25,780
Consolidated sales of $665 million in the first quarter of
fiscal 2000 increased 2.0% over the $652 million reported for the
comparable period last year. Total gross profit was up 5.7% from
$178 million in the first quarter of fiscal 1999 to $188 million
in fiscal 2000. Total operating profit of $27.4 million
increased 6.4% from $25.8 million for the comparable period last
year. Net income of $13.4 million grew by 5.7% from the $12.6
million reported in the first fiscal quarter last year, and basic
and diluted earnings per share for the quarter rose to $.29 in
fiscal 2000 from $.27 in fiscal 1999. As expected, the Company's
effective income tax rate increased to 39.3% in the current
quarter from 37.5% in the prior year quarter as tax deductions
for interest paid on certain life insurance policy loans were
fully phased out effective January 1, 1999 by federal
legislation.
Harris Teeter sales in the first quarter of fiscal 2000 of
$583.3 million increased by 3.1% over the $566.0 million reported
for the comparable period last year. Net sales for stores in
operation during both periods were flat. Sales continued to be
negatively impacted by the lack of inflation in the grocery
sector, new stores opened in the region by competitors and
aggressive feature pricing by competitors in a number of the
company's key markets. While the company expects both the
intensely competitive environment and minimal food inflation to
continue for the foreseeable future, valuable customer
information gained through the VIC loyalty card is helping Harris
Teeter refine its merchandising and promotional activities for
each of its major markets in order to drive future sales.
Gross profit of $163.4 million expanded by 6.8% from $153.0
million in the first fiscal quarter of 1999
<PAGE> -7-
and gross margin on sales grew to 28.0% from 27.0% last year,
primarily due to a more favorable sales mix of higher margin business,
including an increase in private label and store brands, and more
successful pricing and merchandising programs. Harris Teeter's operating
profit of $15.8 million in the first quarter of 2000 rose 9.1%
from the $14.4 million reported for the comparable period last
year and operating margin on sales increased to 2.70% of sales in
the current quarter from 2.55% of sales in the first quarter of
fiscal 1999. The improvement in operating margin was primarily
due to the increased gross margin on sales, enhanced productivity
in the stores and improved control of certain store expenses,
offset somewhat by higher merchandising, operations and store
occupancy costs. Harris Teeter opened two stores during the
first quarter, including its first store in the northern
Virginia/Washington D.C. area, resulting in 149 stores in
operation at January 2, 2000, up from 147 at December 27, 1998.
In the first quarter of fiscal 2000, A&E sales of $82.2
million decreased by 4.6% from the $86.1 million reported for the
comparable period last year. Quarterly sales were lower
primarily as a result of customer holiday plant closings
occurring in their entirety in the first quarter this year versus
being spread over the first and second quarters last year.
Excluding the impact of the timing of these holiday closings,
management estimated that sales would have been relatively flat.
Sales also continued to be affected by the growth of apparel
imports, the shift of apparel manufacturing out of the U.S. and
weakness in European retail denim apparel sales. As a result, in
the quarter A&E's sales in the U.S. decreased by 7.7%. A&E's
foreign sales expanded by 2.9% over the prior year period and
accounted for 31% of A&E's total sales. Most significantly,
Mexico displayed significant year over year growth while sales in
Europe were soft in comparison to the prior year quarter. A&E's
gross profit of $24.9 million in the first quarter of fiscal 2000
decreased 1.2% from $25.3 million in the first quarter last year
but gross margin on sales improved somewhat. Even with lower
sales, A&E was also able to increase operating profitability.
Operating profit of $11.7 million in the first quarter of fiscal
2000 grew by 2.9% from $11.3 million in the comparable period
last year and operating margin on sales also increased from 13.2%
in fiscal 1999 to 14.2% in fiscal 2000. The improvement in
margins primarily reflected the benefits of the consolidation of
certain finishing and distribution operations completed in fiscal
1999. A&E's operating profit in the U.S. market declined by 1.7%
in comparison to the prior year quarter but the majority of the
foreign operations of A&E generated improvements in operating
profitability, although none are individually material to the
Company.
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 January 2, 2000, this percentage was 33.7%, as compared to
30.7% at October 3, 1999.
<PAGE> -8-
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 January 2, 2000 was $100 million, and $73.5 million was
outstanding at quarter end compared to $40.8 million at October
3, 1999. 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. Under the evergreen provisions of
the revolving credit agreements, two of the banks extended their
term by one year resulting in a maturity of February 15, 2005 for
up to an aggregate $66.7 million, while the outstanding balance
of up to $33.3 million with the third bank will mature February
15, 2004 at the request of the bank, pending negotiations of
primarily pricing of the facility with that bank. In addition,
the Company has short-term, uncommitted lines of credit with two
banks for a total of $10 million each bank, and no borrowings
were outstanding at quarter end.
Working capital of $151.9 million at January 2, 2000
increased $31.9 million from October 3, 1999, primarily the
result of increases in inventories, including an increase of
$14.9 million to support increased sales activity at Harris
Teeter, and reductions in accounts payable at A&E and Harris
Teeter aggregating $13.5 million. The current ratio was 1.7 at
January 2, 2000 and 1.5 at October 3, 1999.
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 three months of fiscal 2000, capital
expenditures totaled $24.8 million. A&E has spent $3.6 million
year to date and is budgeted to spend a total of $27 million for
fiscal year 2000. Harris Teeter has spent $21.2 million of an
anticipated $86 million in fiscal year 2000. 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.
Other Matters
Year 2000 Remediation
The Company successfully completed its Year 2000 remediation
programs and encountered no significant disruptions or other
adverse effects as the result of functioning beyond calendar year
1999. Further, the well-developed contingency plans of Harris
Teeter and A&E were not required to be activated. The combined
companies spent $3.3 million to achieve Year 2000 compliance
since beginning in fiscal year 1997.
>PAGE> -9-
Income Taxes
As a result of federal legislation which phased out,
effective January 1, 1999, interest deductions on certain
insurance 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 fiscal year, 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 pursuing an adverse position
regarding the deductibility of COLI policy loan interest for
years prior to January 1, 1999. The IRS issued Technical Advice
Memoranda regarding the COLI deductibility to taxpayers unrelated
to the Company. Further, on October 19, 1999, the Tax Court
ruled, in a single judge's decision, that Winn-Dixie Stores, Inc.
was not entitled to deduct interest on policy loans from its COLI
program, finding that the program lacked economic substance.
Management understands that the adverse position taken by the IRS
will be subjected to extensive further challenges in the courts,
not only by Winn-Dixie but also by many other large corporations
with similar life insurance programs. On June 17, 1999, the IRS
issued a notice of assessment of tax to the Company for the
amounts of COLI loan interest deducted in fiscal years 1994 and
1995. If the IRS were to prevail, the income tax payable
(including federal and state amounts) would total approximately
$7.4 million, for 1994 and 1995, and for all years a total of
approximately $30 million, including interest thereon. The
Company strongly disagrees with the position of the IRS, has
begun the appeal of the assessment and intends to vigorously
pursue justice through the taxpayer appeals process and, if
necessary, the judicial system. In the event that the IRS
prevails, this outcome would 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 or
judicial position which prevails, if any, that could have an
adverse impact on the tax benefits of COLI,
<PAGE> -10-
-management's ability to accurately predict the adequacy of
the Company's present liquidity to meet future requirements, and
-changes in the Company's capital expenditures, new store
openings and store closings.
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> -11-
PART II. OTHER INFORMATION
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: February 15, 2000 /s/ JOHN B. WOODLIEF
John B. Woodlief
VICE PRESIDENT - FINANCE
(PRINCIPAL FINANCIAL OFFICER)
<PAGE> -12-
EXHIBIT 11
RUDDICK CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED
-----------------------------------
January 2, December 27,
2000 1998
-------------- ----------------
NET INCOME PER SHARE COMPUTED AS
FOLLOWS:
BASIC:
1. Net Income available to
common shareholders $ 13,357,000 $ 12,641,000
============== ===============
2. Weighted average common
shares outstanding -- Basic 46,390,942 46,591,704
============== ===============
3. Basic net income per share
(Item 1 divided by Item 2) $.29 $.27
============== ===============
DILUTED:
1. Net income available to
common shareholders $ 13,357,000 $ 12,641,000
=============== ================
2. Weighted average common
shares outstanding - Basic 46,390,942 46,591,704
3. Weighted potential shares under
stock options computed for the
periods using the Treasury
Stock Method 164,064 270,554
---------------- ---------------
4. Weighted average common
shares outstanding - Diluted 46,555,006 46,862,258
================ ================
5. Net Income Per Share (Item
1 divided by Item 4) $.29 $.27
================= =================
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-03-2000
<PERIOD-END> JAN-2-2000
<CASH> 15,756,000
<SECURITIES> 0
<RECEIVABLES> 77,849,000
<ALLOWANCES> 3,050,000
<INVENTORY> 240,776,000
<CURRENT-ASSETS> 364,818,000
<PP&E> 984,878,000
<DEPRECIATION> 441,311,000
<TOTAL-ASSETS> 982,685,000
<CURRENT-LIABILITIES> 212,925,000
<BONDS> 228,642,000
0
0
<COMMON> 50,278,000
<OTHER-SE> 400,675,000
<TOTAL-LIABILITY-AND-EQUITY> 982,685,000
<SALES> 665,457,000
<TOTAL-REVENUES> 665,457,000
<CGS> 477,151,000
<TOTAL-COSTS> 638,033,000
<OTHER-EXPENSES> 1,598,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,836,000
<INCOME-PRETAX> 21,990,000
<INCOME-TAX> 8,633,000
<INCOME-CONTINUING> 13,357,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,357,000
<EPS-BASIC> .29
<EPS-DILUTED> .29
</TABLE>
