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 July 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.)
301 S. Tryon Street, Suite 1800
Charlotte, North Carolina 28202
------------------------------- -------
(Address of principal executive offices) (Zip Code)
(704) 372-5404
----------------
Registrant's telephone number, including area code
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 August 11, 2000
------------------- ---------------------
Common Stock 46,216,908 shares
<PAGE>
RUDDICK CORPORATION
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS -
JULY 2, 2000 AND OCTOBER 3, 1999 2
CONSOLIDATED CONDENSED STATEMENTS OF
INCOME - THREE MONTHS AND NINE MONTHS
ENDED JULY 2, 2000 AND JUNE 27, 1999 3
CONSOLIDATED CONDENSED STATEMENTS OF
TOTAL NONOWNER CHANGES IN EQUITY -
THREE MONTHS AND NINE MONTHS
ENDED JULY 2, 2000 AND JUNE 27,1999 4
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS - NINE MONTHS ENDED
JULY 2, 2000 AND JUNE 27, 1999 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 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUDDICK CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
July 2, October 3,
ASSETS 2000 1999
------ (Unaudited) (Unaudited)
----------- -----------
CURRENT ASSETS:
Cash and Temporary Cash Investments $11,889 $14,467
Accounts Receivable, Net 87,497 76,827
Inventories 242,492 223,694
Other 32,527 43,886
---------- --------
Total Current Assets 374,405 358,874
PROPERTY, NET 564,263 539,557
INVESTMENTS AND OTHER ASSETS 75,841 71,683
---------- --------
Total $1,014,509 $970,114
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes Payable $ - $ 177
Current Portion of Long-Term Debt 2,882 429
Accounts Payable 127,097 143,095
Income Taxes Payable 11,949 14,986
Other Accrued Liabilities 77,263 80,181
---------- --------
Total Current Liabilities 219,191 238,868
LONG-TERM DEBT 237,169 198,532
DEFERRED LIABILITIES 87,509 84,305
MINORITY INTEREST 5,077 4,726
SHAREHOLDERS' EQUITY:
Capital Stock - Common 48,350 52,137
Retained Earnings 420,217 393,699
Cumulative Translation Adjustments (3,004) (2,153)
---------- --------
Shareholders' Equity 465,563 443,683
---------- --------
Total $1,014,509 $970,114
========== ========
<PAGE> -2-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except share and per share data)
THREE MONTHS ENDED
-----------------------
July 2, June 27,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
NET SALES
American & Efird $90,363 $90,342
Harris Teeter 592,540 546,286
-------- --------
Total 682,903 636,628
-------- --------
GROSS PROFIT
American & Efird 26,476 27,505
Harris Teeter 161,309 151,997
-------- --------
Total 187,785 179,502
-------- --------
OPERATING PROFIT
American & Efird 12,163 12,937
Harris Teeter 13,702 12,474
-------- --------
Total 25,865 25,411
-------- --------
OTHER COSTS AND
DEDUCTIONS
Interest expense, net 3,956 3,734
Other expense, net 1,584 1,895
Minority interest 176 137
-------- --------
Total 5,716 5,766
-------- --------
Income before
income taxes 20,149 19,645
Income taxes 7,859 7,377
-------- --------
Net income $12,290 $12,268
======== ========
WEIGHTED AVERAGE NUMBER
OF SHARES OF
COMMON STOCK
OUTSTANDING:
Basic 46,207,342 46,480,687
Diluted 46,244,465 46,693,916
NET INCOME PER SHARE -
BASIC $.27 $.26
DILUTED $.27 $.26
DIVIDENDS DECLARED
PER SHARE - Common $.09 $.08
NINE MONTHS ENDED
-----------------------
July 2, June 27,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
NET SALES
American & Efird $ 261,109 $ 257,792
Harris Teeter 1,749,570 1,676,620
---------- ----------
Total 2,010,679 1,934,412
---------- ----------
GROSS PROFIT
American & Efird 78,044 76,786
Harris Teeter 486,156 456,059
---------- ----------
Total 564,200 532,845
---------- ----------
OPERATING PROFIT
American & Efird 35,906 35,095
Harris Teeter 45,237 42,125
---------- ----------
Total 81,143 77,220
---------- ----------
OTHER COSTS AND
DEDUCTIONS
Interest expense, net 11,542 11,150
Other expense, net 4,853 5,454
Minority interest 511 330
---------- ----------
Total 16,906 16,934
---------- ----------
Income before
income taxes 64,237 60,286
Income taxes 25,229 22,647
---------- ----------
Net income $39,008 $37,639
========== ==========
WEIGHTED AVERAGE NUMBER
OF SHARES OF
COMMON STOCK
OUTSTANDING:
Basic 46,293,621 46,544,262
Diluted 46,383,569 46,786,011
NET INCOME PER SHARE -
BASIC $.84 $.81
DILUTED $.84 $.80
DIVIDENDS DECLARED
PER SHARE - Common $.27 $.24
<PAGE> -3-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF TOTAL NONOWNER
CHANGES IN EQUITY
(in thousands)
THREE MONTHS ENDED
-----------------------
July 2, June 27,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
Net Income $12,290 $12,268
Other nonowner changes
in equity, net of tax:
Foreign currency
translation adjustment (596) 18
------- -------
Total nonowner changes
in equity $11,694 $12,286
======= =======
NINE MONTHS ENDED
-----------------------
July 2, June 27,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
Net Income $39,008 $37,639
Other nonowner changes
in equity, net of tax:
Foreign currency
translation adjustment (851) (219)
------- -------
Total nonowner changes
in equity $38,157 $37,420
======= =======
<PAGE> -4-
RUDDICK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
NINE MONTHS ENDED
--------------------------
July 2, June 27,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $39,008 $37,639
Non-Cash Items Included
in Net Income
Depreciation and Amortization 57,235 52,208
Other, Net (649) 208
Decrease (Increase) in
Current Assets (18,305) (15,279)
Increase (Decrease) in
Current Liabilities (22,130) (22,448)
-------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 55,159 52,328
-------- --------
INVESTING ACTIVITIES
Capital Expenditures (85,887) (63,475)
Cash Proceeds from Sale of Property 1,683 1,213
Company Owned Life Insurance, Net (2,753) 6,355
Other, Net 3,726 (4,913)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (83,231) (60,820)
-------- --------
FINANCING ACTIVITIES
Proceeds of Long-Term Borrowings 41,400 18,937
Payment of Principal on Long-Term
Debt (311) (653)
Dividends (12,489) (11,163)
Other, Net (3,106) (1,831)
-------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 25,494 5,290
-------- --------
DECREASE IN BALANCE SHEET CASH (2,578) (3,202)
BALANCE SHEET CASH AT BEGINNING
OF PERIOD 14,467 16,668
-------- --------
BALANCE SHEET CASH AT END OF PERIOD $11,889 $13,466
======== ========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest $11,644 $11,788
Income Taxes $24,960 $19,162
<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 quarter and nine months ended July 2, 2000
and June 27, 1999:
(In Thousands) Quarter Ended Nine Months Ended
------------------ ----------------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
-------- -------- ---------- ----------
Net Sales
American & Efird $ 90,363 $ 90,342 $ 261,109 $ 257,792
Harris Teeter 592,540 546,286 1,749,570 1,676,620
-------- -------- ---------- ----------
Total $682,903 $636,628 $2,010,679 $1,934,412
-------- -------- ---------- ----------
Gross Profit
American & Efird $ 26,476 $ 27,505 $ 78,044 $ 76,786
Harris Teeter 161,309 151,997 486,156 456,059
-------- -------- ---------- ----------
Total $187,785 $179,502 $ 564,200 $ 532,845
-------- -------- ---------- ----------
Operating Profit
American & Efird $ 12,163 $ 12,937 $ 35,906 $ 35,095
Harris Teeter 13,702 12,474 45,237 42,125
-------- -------- ---------- ----------
Total $ 25,865 $ 25,411 $ 81,143 $ 77,220
-------- -------- ---------- ----------
For the Three Months Ended July 2, 2000 and June 27, 1999
---------------------------------------------------------
Consolidated sales of $683 million in the third quarter of
fiscal 2000 increased 7.3% over the $637 million reported for
the comparable period last year. Total gross profit was up 4.6%
from $180 million in the third quarter of fiscal 1999 to $188
million in fiscal 2000. Total operating profit of $25.9 million
increased 1.8% from $25.4 million for the comparable period last
year. Net income of $12.3 million in the third quarter of fiscal
2000 was essentially equal to the comparable prior year period.
Basic and diluted earnings per share rose from $.26 in the
fiscal 1999 quarter to $.27 in fiscal 2000 due to a reduction in
the weighted average number of shares outstanding. Higher sales
and profitability were recorded for the quarter at Harris
Teeter, the supermarket subsidiary, while American & Efird
(A&E), the industrial thread subsidiary, experienced essentially
flat sales and decreased resulting profitability.
Harris Teeter sales in the third quarter of fiscal 2000 of
$592.5 million increased by 8.5% over the $546.3 million
reported for the comparable period last year, reflecting new
stores in operation and an increase in comparable store sales.
Net sales for stores in operation during both periods increased
by 2.3% for the current quarter as compared to .8% in last
year's third quarter. This comparable store sales growth was
primarily generated by expanded and refocused promotional
activities designed to reverse a slowdown in sales growth that
occurred during the first half of the year as a result of the
<PAGE> -7-
highly competitive Southeast supermarket environment and the
continuing modest rate of food inflation. The company expects
both the highly competitive environment and minimal food
inflation to continue for the foreseeable future. However, two
supermarket competitors have implemented store closing programs
impacting Charlotte, N.C., and, to a lesser extent, other
markets, which could benefit Harris Teeter as it plans to
continue in the fourth fiscal quarter its promotional activities
designed to attract potential new customers and increase its
market share.
Harris Teeter's gross profit of $161.3 million expanded by
6.1% from $152.0 million in the third fiscal quarter of 1999 but
gross margin on sales fell to 27.2% from 27.8% last year,
primarily due to the company's enhanced investment in
promotional activities to boost comparable store sales. The
negative impact on margins of this investment is expected to
moderate beyond the short term. Even with this increase in
promotional spending, Harris Teeter's operating profit of $13.7
million in the third quarter of 2000 increased by 9.8% from
$12.5 million in the third quarter of 1999. Operating margin on
sales improved to 2.31% in the third quarter of 2000 as compared
to 2.28% in the third fiscal quarter of 1999. Harris Teeter's
operating profit was reduced in the third quarter of last year
due to the decreased revenues and increased costs related to the
sale of 11 western Virginia stores and the opening during the
prior year quarter of five of 10 stores it purchased from Kroger
in the Winston-Salem and Greensboro, N.C. market. During the
third quarter of 2000, Harris Teeter opened two new stores,
resulting in a total of 153 stores in operation at July 2, 2000,
up from 143 at June 27, 1999. Harris Teeter anticipates opening
another three stores in the fourth fiscal quarter of 2000,
including its second store in the northern Virginia/Washington
D.C. area
In the third quarter of fiscal 2000, sales at A&E of $90.4
million were essentially flat when compared to $90.3 million in
fiscal 1999. Sales softened during the third quarter primarily
due to the slowdown in consumer spending in the United States,
as well as the continued shift of apparel production out of the
U.S. A&E sales in the U.S. market decreased by 6.9% compared to
the same quarter last year as A&E's customers curtailed
production to match weaker retail sales, particularly in home
furnishings and intimate apparel. However, A&E continued to see
sales growth in its non-apparel thread markets, which represent
approximately 30% of A&E's total business. It also launched its
Signature line of embroidery thread during the third quarter and
has received positive feedback from customers. Foreign sales
increased by 14.3% in the quarter in comparison to the prior
year period and represented 34% of A&E's total sales in the
current quarter compared to 30% in the prior year quarter. A&E
expects that the Caribbean Basin Initiative (CBI) trade bill,
which will take effect in October 2000, could have a potentially
favorable trade impact on its customers in Central America and
the Caribbean and result in increased demand for U.S.
manufactured thread in that region.
A&E's gross profit of $26.5 million in the third quarter of
fiscal 2000 decreased 3.7% from $27.5 million in the third
quarter last year, reflecting competitive pricing pressures and
rising costs. Accordingly, gross margin on sales decreased to
29.3% in the third quarter of 2000 compared to 30.4% in the
third quarter of 1999. Likewise, operating profit of $12.2
million in the current third quarter decreased by 6.0% from
$12.9 million in the comparable period last year. Operating
margin on sales of 13.5% in the current quarter also declined
from 14.3% in the prior year. A&E's operating profit in the U.S.
market declined by 5.3% in comparison to the prior year quarter.
Further, A&E reported a 9.1% decline in operating profits for
its foreign subsidiaries, although none are individually
material to the Company. The comparative decline in operating
profits reflected the reduction in manufacturing operating
schedules in response to lower sales, as well as the rising
costs and competitive pricing pressures which were partially
offset by a better mix of products sold and improved
efficiencies related
<PAGE> -8-
to the 1999 consolidation of certain finishing and distribution operations.
A&E expects the pressure on operating margins to continue in the fourth
quarter.
For the Nine Months Ended July 2, 2000 and June 27, 1999
--------------------------------------------------------
Consolidated sales for the nine months ended July 2, 2000
of $2.01 billion increased 3.9% over the $1.93 billion reported
for the nine months of fiscal 1999. Total gross profit
increased by 5.9% to $564.2 million in fiscal 2000 from $532.8
million in fiscal 1999. Operating profit was up 5.1% to $81.1
million in the nine months of 2000 from $77.2 million in the
comparable period of fiscal 1999, with both subsidiaries showing
improvement. Net income rose by 3.6% to $39.0 million in fiscal
2000 from $37.6 million in the nine-month period in 1999. Both
basic and diluted earnings per share for the nine months of this
year were $.84, versus basic and diluted earnings per share of
$.81 and $.80, respectively, for the prior year period.
For the year to date, Harris Teeter sales increased 4.4% to
$1.75 billion from $1.68 billion for the nine months of fiscal
1999. Net sales for stores in operation during both periods
increased by .61% as compared to 1.17% in the nine months of
1999. Sales results were impacted by the lack of inflation in
the grocery sector, competitors' new store openings in the
region and aggressive feature pricing by competitors. In
response, Harris Teeter expanded its promotional activities in
the third fiscal quarter in order to increase comparable store
sales for the second half of fiscal 2000 after virtually flat
comparable store sales during the first half. A reversal of the
negative trend in comparable store sales was achieved during the
third quarter. While the supermarket environment in the
southeastern U.S. remained highly competitive during the current
nine months, Harris Teeter increased gross profit by 6.6%, to
$486.2 million from $456.1 million during fiscal 1999. Gross
margin on sales increased to 27.8% in the current year to date
compared to 27.2% in the comparable period in 1999. Operating
profit increased by 7.4% to $45.2 million in the nine months of
fiscal 2000 from $42.1 million in the comparable prior year
period and, as a percentage of sales, increased to 2.59% from
2.51% in 1999. These results were primarily achieved due to the
increased gross margin on sales and store productivity
enhancements, offset somewhat by higher merchandising,
operations and store occupancy costs. A total of six new stores
were opened during the nine-month period in fiscal 2000,
resulting in 153 stores in operation at July 2, 2000.
A&E sales of $261.1 million for the nine months of this
year increased by 1.3% from $257.8 million in the comparable
period last year. This sales growth was entirely due to
increased foreign sales, partially offset by weaker sales in the
U.S. due to the continued growth of apparel production outside
of the U.S. and the increase in apparel imports. The relative
distribution of the company's business in Latin America,
particularly in Mexico, continued its growth as a result of
NAFTA. The CBI trade bill, effective in October 2000, might
further increase demand for U.S. manufactured thread in Central
America and the Caribbean. While U.S. sales declined by 3.5%,
A&E's total foreign sales increased by 13.1% for the current
nine months in comparison to the nine months in fiscal 1999 and
accounted for 32% of total year-to-date sales. For the nine
months of fiscal 2000, A&E's gross profit of $78.0 million
increased 1.6% from the $76.8 million in the comparable period
last year, but gross margin on sales increased only slightly, to
29.9% from 29.8% in the prior year. Gross profit improvements
were due to a more favorable mix of products sold and the
benefits realized from the consolidation of certain dyeing,
finishing and distribution facilities in 1999, offset somewhat
by the highly competitive pricing environment and rising costs.
Operating profit of $35.9 million in 2000 increased by 2.3% from
$35.1 million in the nine months of last year, and operating
margin on sales
<PAGE> -9-
increased to 13.8% from 13.6% in fiscal 1999. Despite reduced sales,
A&E's operating profit in the U.S. during the nine-month period remained
relatively the same as in the prior year. Overall, the foreign operations
of A&E achieved comparative operating profit improvement of 13.3%,
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 July 2, 2000, this percentage was 33.8%, as compared to 30.7%
at October 3, 1999.
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 July 2, 2000 was $82.2 million, and this was also the
amount 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. Two-thirds
of the aggregate balance outstanding under these revolving lines
of credit will mature February 15, 2005, and one-third will
mature February 15, 2004, however, an annual one-year extension
of term may be provided by the lenders under the evergreen
provisions of the loan agreement. In addition, the Company has
a short-term, uncommitted bank line of credit for $10 million on
which no borrowing was outstanding at quarter end.
Working capital of $155.2 million at July 2, 2000 increased
$35.2 million from October 3, 1999, primarily the result of
increases in inventories (up $18.8 million) and accounts
receivable (up $10.7 million) to support sales activity at
Harris Teeter and A&E, and reductions in accounts payable and
accrued liabilities. The current ratio was 1.7 at July 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 nine months of fiscal 2000, capital
expenditures totaled $85.9 million. A&E has spent $11.5 million
year to date of an anticipated $24 million and Harris Teeter has
spent $74.4 million of the $100 million planned for fiscal year
2000. These expenditures are for modernization and
<PAGE> -10-
expansion. Management expects that internally generated funds,
supplemented by available borrowing capacity, will be adequate
to finance such expenditures.
Other Matters
-------------
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 $31.0
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,
<PAGE> -11-
-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 COLI,
-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> -12-
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: August 15, 2000 /s/ Douglas A. Stephenson
---------------------------------
Douglas A. Stephenson
VICE PRESIDENT AND TREASURER
(PRINCIPAL ACCOUNTING OFFICER)
<PAGE> -13-
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
