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EX-32.2 - HARRIS TEETER SUPERMARKETS, INC.d26411_ex32-2.htm
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EX-31.2 - HARRIS TEETER SUPERMARKETS, INC.d26411_ex31-2.htm
EX-10.1 - HARRIS TEETER SUPERMARKETS, INC.d26411_ex10-1.htm
EX-32.1 - HARRIS TEETER SUPERMARKETS, INC.d26411_ex32-1.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(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, 2010

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 of
incorporation or organization)
    (I.R.S. Employer
Identification Number)
 

           
  301 S. Tryon St., Suite 1800, Charlotte, North Carolina     28202  
  (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 for 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):


           
  Large accelerated filer x     Accelerated filer o  
  Non-accelerated filer o
(Do not check if a smaller reporting company)
    Smaller reporting company o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


           
 

 

Class

    Outstanding Shares
as of April 26, 2010
 
  Common Stock     48,784,436 shares  

RUDDICK CORPORATION
AND CONSOLIDATED SUBSIDIARIES

TABLE OF CONTENTS


                 
  PART I     FINANCIAL INFORMATION        
              Page  
  Item 1.     Financial Statements        
        Consolidated Condensed Balance Sheets (unaudited) - March 28, 2010 and September 27, 2009     1  
        Consolidated Condensed Statements of Operations (unaudited) - 13 and 26 Weeks Ended March 28, 2010 and March 29, 2009     2  
        Consolidated Condensed Statements of Equity and Comprehensive Income (unaudited) — 26 Weeks Ended March 28, 2010 and March 29, 2009     3  
        Consolidated Condensed Statements of Cash Flows (unaudited) - 26 Weeks Ended March 28, 2010 and March 29, 2009     4  
        Notes to Consolidated Condensed Financial Statements (unaudited)     5  
  Item 2.     Management's Discussion and Analysis of Financial Condition And Results of Operations     11  
  Item 3.     Quantitative and Qualitative Disclosures About Market Risk     22  
  Item 4.     Controls and Procedures     22  
                 
  PART II     OTHER INFORMATION        
  Item 1.     Legal Proceedings     22  
  Item 1A.     Risk Factors     22  
  Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds     22  
  Item 3.     Defaults Upon Senior Securities     23  
  Item 4.     Other Information     23  
  Item 5.     Exhibits     24  
                 
  Signatures     25  
                 

PART I

Item 1. Financial Statements


                 
  CONSOLIDATED CONDENSED BALANCE SHEETS              
  RUDDICK CORPORATION AND SUBSIDIARIES              
  (dollars in thousands)              
  (unaudited)              
        March 28,
2010
    September 27,
2009
 
  ASSETS              
  Current Assets              
  Cash and Cash Equivalents   $ 36,785   $ 37,310  
  Accounts Receivable, Net of Allowance for Doubtful Accounts of $4,039 and $3,690     93,529     80,146  
  Refundable Income Taxes     2,876     9,707  
  Inventories     319,366     310,271  
  Deferred Income Taxes     6,962     6,502  
  Prepaid Expenses and Other Current Assets     24,700     30,350  
  Total Current Assets     484,218     474,286  
  Property, Net     1,062,451     1,080,326  
  Investments     165,339     156,434  
  Deferred Income Taxes     28,847     30,285  
  Goodwill     515     515  
  Intangible Assets     22,548     23,754  
  Other Long-Term Assets     81,551     78,721  
  Total Assets   $ 1,845,469   $ 1,844,321  
  LIABILITIES AND EQUITY              
  Current Liabilities              
  Notes Payable   $ 6,631   $ 7,056  
  Current Portion of Long-Term Debt and Capital Lease Obligations     10,283     9,526  
  Accounts Payable     212,154     227,901  
  Dividends Payable     5,853     5,825  
  Deferred Income Taxes     27     68  
  Accrued Compensation     56,331     65,295  
  Other Current Liabilities     91,602     87,194  
  Total Current Liabilities     382,881     402,865  
  Long-Term Debt and Capital Lease Obligations     325,913     355,561  
  Deferred Income Taxes     574     580  
  Pension Liabilities     175,394     168,060  
  Other Long-Term Liabilities     102,559     98,892  
  Commitments and Contingencies     -     -  
  Equity              
  Common Stock, no par value — Shares Outstanding: 48,784,406 at March 28, 2010 and 48,545,080 at September 27, 2009    

92,363

   

89,878

 
  Retained Earnings     869,742     830,236  
  Accumulated Other Comprehensive Loss     (109,710 )   (108,524 )
  Total Equity of Ruddick Corporation     852,395     811,590  
  Noncontrolling Interest     5,753     6,773  
  Total Equity     858,148     818,363  
  Total Liabilities and Equity   $ 1,845,469   $ 1,844,321  
                 
  See Notes to Consolidated Condensed Financial Statements (unaudited)              


1


                             
  CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS  
  RUDDICK CORPORATION AND SUBSIDIARIES  
  (in thousands, except per share data)  
  (unaudited)  
        13 Weeks Ended     26 Weeks Ended  
        March 28,
2010
    March 29,
2009
    March 28,
2010
    March 29,
2009
 
  Net Sales   $ 1,071,438   $ 1,010,004   $ 2,111,950   $ 2,004,989  
  Cost of Sales     751,195     705,126     1,485,163     1,399,268  
  Selling, General and Administrative Expenses     271,411     265,856     534,528     524,899  
  Operating Profit     48,832     39,022     92,259     80,822  
  Interest Expense     4,981     4,135     10,014     9,024  
  Interest Income     (122 )   (43 )   (139 )   (120 )
  Net Investment Gain     -     (35 )   (1 )   (35 )
  Income Before Income Taxes     43,973     34,965     82,385     71,953  
  Income Tax Expense     16,336     11,955     30,731     25,953  
  Net Income     27,637     23,010     51,654     46,000  
  Less: Net Income Attributable to the Noncontrolling Interest     158     68     444     176  
  Net Income Attributable to Ruddick Corporation   $ 27,479   $ 22,942   $ 51,210   $ 45,824  
                             
  Net Income Attributable to Ruddick Corporation Per Share:                          
  Basic   $ 0.57   $ 0.48   $ 1.06   $ 0.96  
  Diluted   $ 0.57   $ 0.48   $ 1.06   $ 0.95  
                             
  Weighted Average Number of Shares of Common Stock Outstanding:                          
  Basic     48,193     47,972     48,144     47,932  
  Diluted     48,538     48,287     48,516     48,288  
     
  See Notes to Consolidated Condensed Financial Statements (unaudited)  


2


                                               
  CONSOLIDATED CONDENSED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME  
  RUDDICK CORPORATION AND SUBSIDIARIES  
  (dollars in thousands, except share and per share amounts)  
  (unaudited)  
       


Common
Stock
Shares

   



Common
Stock

   



Retained
Earnings

    Accumulated
Other
Comprehensive
Income (Loss)
    Total
Equity of
Ruddick
Corporation
   


Non-
controlling
Interest

   



Total
Equity

 
                                               
  Balance at September 28, 2008     48,278,136   $ 83,252   $ 767,562   $ (27,655 ) $ 823,159   $ 6,624   $ 829,783  
                                               
  Comprehensive Income:                                            
  Net earnings     -     -     45,824     -     45,824     176     46,000  
  Unrealized loss on cash flow hedge, net of tax benefits    

-

   

-

   

-

   

(276

)

 

(276

)

 

-

   

(276

)

  Postemployment benefits liability adjustment, net of tax benefits    

-

   

-

   

-

   

(76

)

 

(76

)

 

-

   

(76

)

  Foreign currency translation adjustment, net of tax benefits    

-

   

-

   

-

   

(3,330

)

 

(3,330

)

 

(41

)

 

(3,371

)

  Total Comprehensive Income                             42,142     135     42,277  
                                               
  Dividends ($0.24 a share)     -     -     (11,642 )   -     (11,642 )   -     (11,642 )
  Exercise of stock options, including tax benefits of $287    

68,111

   

1,381

   

-

   

-

   

1,381

   

-

   

1,381

 
  Share-based compensation     211,528     2,877     -     -     2,877     -     2,877  
  Shares effectively purchased and retired for withholding taxes    

(43,017

)

 

(1,164

)

 

-

   

-

   

(1,164

)

 

-

   

(1,164

)

  Balance at March 29, 2009     48,514,758   $ 86,346   $ 801,744   $ (31,337 ) $ 856,753   $ 6,759   $ 863,512  
                                               
  Balance at September 27, 2009     48,545,080   $ 89,878   $ 830,236   $ (108,524 ) $ 811,590   $ 6,773   $ 818,363  
                                               
  Comprehensive Income:                                            
  Net earnings     -     -     51,210     -     51,210     444     51,654  
  Unrealized loss on cash flow hedge, net of tax benefits    

-

   

-

   

-

   

(331

)

 

(331

)

 

-

   

(331

)

  Foreign currency translation adjustment, net of tax benefits    

-

   

-

   

-

   

(855

)

 

(855

)

 

(54

)

 

(909

)

  Total Comprehensive Income                             50,024     390     50,414  
                                               
  Dividends ($0.24 a share)     -     -     (11,704 )   -     (11,704 )   -     (11,704 )
  Exercise of stock options, including tax benefits of $559    

138,134

   

2,651

   

-

   

-

   

2,651

   

-

   

2,651

 
  Share-based compensation     206,684     2,856     -     -     2,856     -     2,856  
  Shares effectively purchased and retired for withholding taxes    

(50,192

)

 

(1,366

)

  -     -    

(1,366

)

  -    

(1,366

)

  Shares purchased and retired     (55,300 )   (1,491 )   -     -     (1,491 )   -     (1,491 )
  Acquisition from noncontrolling interest    

-

   

(165

)

 

-

   

-

   

(165

)

 

(1,264

)

 

(1,429

)

  Distributions to noncontrolling interest    

-

   

-

   

-

   

-

   

-

   

(146

)

 

(146

)

  Balance at March 28, 2010     48,784,406   $ 92,363   $ 869,742   $ (109,710 ) $ 852,395   $ 5,753   $ 858,148  
                                               
  See Notes to Consolidated Condensed Financial Statements (unaudited)  


3


                             
  CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS  
  RUDDICK CORPORATION AND SUBSIDIARIES  
  (dollars in thousands) (unaudited)  
        26 Weeks Ended  
        March 28, 2010     March 29, 2009  
  CASH FLOW FROM OPERATING ACTIVITIES:              
  Net Income   $ 51,210   $ 45,824  
  Non-Cash Items Included in Net Income:              
  Depreciation and Amortization     66,387     61,341  
  Deferred Income Taxes     1,305     3,865  
  Net Gain on Sale of Property     (900 )   (369 )
  Share-Based Compensation     2,856     2,877  
  Other, Net     (3,490 )   323  
  Changes in Operating Accounts Providing (Utilizing) Cash:              
  Accounts Receivable     (12,963 )   6,826  
  Inventories     (9,452 )   7,778  
  Prepaid Expenses and Other Current Assets     3,817     4,749  
  Accounts Payable     (16,229 )   (23,831 )
  Other Current Liabilities     3,626     2,317  
  Other Long-Term Operating Accounts     6,855     900  
  Dividends Received     100     -  
  Net Cash Provided by Operating Activities     93,122     112,600  
  INVESTING ACTIVITIES:              
  Capital Expenditures     (49,000 )   (109,964 )
  Purchase of Other Investments     (9,483 )   (12,750 )
  Proceeds from Sale of Property     4,646     3,080  
  Return of Partnership Investments     3,364     596  
  Investments in COLI, Net of Proceeds from Death Benefits     (85 )   (656 )
  Other, Net     (1,592 )   (174 )
  Net Cash Used in Investing Activities     (52,150 )   (119,868 )
  FINANCING ACTIVITIES:              
  Net Payments on Short-Term Debt Borrowings     (18 )   (2,687 )
  Net (Payments on) Proceeds from Revolver Borrowings     (20,700 )   24,200  
  Proceeds from Long-Term Debt Borrowings     -     1,470  
  Payments on Long-Term Debt and Capital Lease Obligations     (8,735 )   (8,950 )
  Dividends Paid     (11,676 )   (5,820 )
  Proceeds from Stock Issued     2,092     1,094  
  Share-Based Compensation Tax Benefits     559     287  
  Purchase and Retirement of Common Stock     (1,491 )   -  
  Other, Net     (1,500 )   (1,165 )
  Net Cash (Used in) Provided by Financing Activities     (41,469 )   8,429  
  (Decrease) Increase in Cash and Cash Equivalents     (497 )   1,161  
  Effect of Foreign Currency Fluctuations on Cash     (28 )   (778 )
  Cash and Cash Equivalents at Beginning of Period     37,310     29,759  
  Cash and Cash Equivalents at End of Period   $ 36,785   $ 30,142  
  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:              
  CASH PAID DURING THE YEAR FOR:              
  Interest, Net of Amounts Capitalized   $ 9,351   $ 9,139  
  Income Taxes     25,035     20,340  
  NON-CASH ACTIVITY:              
  Assets Acquired under Capital Leases     -     8,560  
     
  See Notes to Consolidated Condensed Financial Statements (unaudited)  


4


NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
RUDDICK CORPORATION AND SUBSIDIARIES
(unaudited)

1. Summary of Significant Accounting Policies

Description of Business

Ruddick Corporation (the "Company") is a holding company which, through its wholly-owned subsidiaries, is engaged in two primary businesses: Harris Teeter, Inc. ("Harris Teeter") currently operates a regional chain of supermarkets in eight states primarily in the southeastern and mid-Atlantic United States, including the District of Columbia; and American & Efird, Inc. ("A&E") manufactures and distributes industrial sewing thread, embroidery thread and technical textiles on a global basis.

Basis of Presentation

The accompanying unaudited consolidated condensed financial statements include the accounts of Ruddick Corporation and subsidiaries, including its wholly-owned operating companies, Harris Teeter and A&E, collectively referred to herein as the Company. All material intercompany amounts have been eliminated.

In December 2007, the Financial Accounting Standards Board ("FASB") issued new guidance on accounting for the noncontrolling interest in the consolidated financial statements. The Company implemented the new guidance effective September 28, 2009, the beginning of the first quarter of fiscal 2010. The new guidance changes the accounting and reporting standards for the noncontrolling interest in a subsidiary (previously referred to as minority interest). A&E owns subsidiaries with noncontrolling interest. Net income attributable to the noncontrolling interest of $68,000 and $176,000 for the 13 weeks and 26 weeks ended March 29, 2009, respectively, have been reclassified within the Company's Consolidated Condensed Statements of Operations. The amount of consolidated net income attributable to both the Company and the noncontrolling interest are shown in the Company's Consolidated Condensed Statements of Operations. Noncontrolling interest related to subsidiaries owned by A&E totaled $5.8 million and $6.8 million at March 28, 2010 and September 27, 2009, respectively. These amounts have been reclassified as noncontrolling interest in the equity section of the Company's Consolidated Condensed Balance Sheets.

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 statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's 2009 Annual Report on Form 10-K filed with the SEC on November 20, 2009 ("Company's 2009 Annual Report").

The Company's Consolidated Condensed Balance Sheet as of September 27, 2009 has been derived from the audited Consolidated Balance Sheet as of that date. The results of operations for the 26 weeks ended March 28, 2010 are not necessarily indicative of results for a full year.

Reporting Periods

The Company's quarterly reporting periods are generally 13 weeks and periodically consist of 14 weeks because the Company's fiscal year ends on the Sunday nearest to September 30. However, Harris Teeter's fiscal periods end on the Tuesday following the Company's fiscal period end.

The Company has evaluated subsequent events up to the filing date of this Form 10-Q, and has determined that there were no subsequent events to recognize or disclose in these financial statements.


5


Derivatives

The Company utilizes derivative financial instruments to hedge its exposure to changes in interest rates. All derivative financial instruments are recorded on the balance sheet at their respective fair value. The Company does not use financial instruments or derivatives for any trading or other speculative purposes.

Harris Teeter enters into purchase commitments for a portion of the fuel utilized in its distribution operations. Harris Teeter expects to take delivery of and to utilize these resources in a reasonable period of time and in the conduct of normal business. Accordingly, these fuel purchase commitments qualify as normal purchases. Harris Teeter also utilizes derivative financial instruments to hedge its exposure in the price variations of fuel.

Statements of Consolidated Cash Flows

A portion of the sales and operating costs of A&E's foreign operations are denominated in currencies other than the U.S. dollar. This creates an exposure to foreign currency exchange rates. The impact of changes in the relationship of other currencies to the U.S. dollar has historically not been significant, and such changes in the future are not expected to have a material impact on the Company's results of operations or cash flows.

Reclassifications

To conform with classifications used in the current year, the financial statements for the prior year reflect certain reclassifications.

2. Industry Segment Information

As discussed above, the Company operates primarily in two businesses and evaluates the performance of its two businesses utilizing various measures which are primarily based on operating profit. The following table summarizes net sales and operating profit by each of the Company's business segments and for the holding company ("Corporate") for the 13 and 26 weeks ended March 28, 2010 and March 29, 2009 (in thousands):


                             
        13 Weeks Ended     26 Weeks Ended  
        March 28,
2010
    March 29,
2009
    March 28,
2010
    March 29,
2009
 
  Net Sales:                          
  Retail Grocery   $ 1,000,651   $ 949,427   $ 1,972,966   $ 1,878,354  
  Industrial Thread     70,787     60,577     138,984     126,635  
  Consolidated   $ 1,071,438   $ 1,010,004   $ 2,111,950   $ 2,004,989  
                             
  Operating Profit (Loss):                          
  Retail Grocery   $ 47,121   $ 45,044   $ 89,400   $ 89,351  
  Industrial Thread     3,140     (4,570 )   7,090     (5,671 )
  Corporate     (1,429 )   (1,452 )   (4,231 )   (2,858 )
  Consolidated   $ 48,832   $ 39,022   $ 92,259   $ 80,822  

3. 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 resulting from the operation of the Company's equity incentive plans.


6


The following table details the computation of EPS (in thousands except per share data):

 


                             
        13 Weeks Ended     26 Weeks Ended  
        March 28,
2010
    March 29,
2009
    March 28,
2010
    March 29,
2009
 
  Basic EPS:                          
  Net income attributable to Ruddick Corporation   $ 27,479   $ 22,942   $ 51,210   $ 45,824  
  Weighted average common shares outstanding     48,193     47,972     48,144     47,932  
  Basic EPS   $ 0.57   $ 0.48   $ 1.06   $ 0.96  
  Diluted EPS:                          
  Net income attributable to Ruddick Corporation   $ 27,479   $ 22,942   $ 51,210   $ 45,824  
  Weighted average common shares outstanding     48,193     47,972     48,144     47,932  
  Net potential common share equivalents - stock options     85     108     94     131  
  Net potential common share equivalents - stock awards     260     207     278     225  
  Weighted average common shares outstanding - diluted     48,538     48,287     48,516     48,288  
  Diluted EPS   $ 0.57   $ 0.48   $ 1.06   $ 0.95  
  Excluded from the calculation of common share equivalents:                          
  Anti-dilutive common share equivalents — stock options     10     10     10     10  
  Anti-dilutive common share equivalents — stock awards     -     50     -     -  

Stock awards that are based on performance are excluded from the calculation of potential common share equivalents until the performance criteria are met. Accordingly, the impact of 139,920 performance shares for each of the periods ended March 28, 2010 and 139,000 performance shares for each of the periods ended March 29, 2009 were excluded from the computation of diluted shares.

4. Employee Benefit Plans

The Company maintains various retirement benefit plans for substantially all domestic full-time employees of the Company and its subsidiaries. These plans include the Ruddick Corporation Employees' Pension Plan ("Pension Plan"), which is a qualified non-contributory defined benefit plan, the Supplemental Executive Retirement Plan ("SERP"), which is a non-qualified supplemental defined benefit pension plan for certain executive officers and the Ruddick Retirement and Savings Plan ("Savings Plan") which is a defined contribution retirement plan. The following table summarizes the components of the net periodic pension expense for the Pension Plan and SERP (in thousands):


                             
        13 Weeks Ended     26 Weeks Ended  
        March 28,
2010
    March 29,
2009
    March 28,
2010
    March 29,
2009
 
  Pension Plan:                          
  Service cost (income)   $ 419   $ (171 ) $ 894   $ 126  
  Interest cost     4,791     5,251     9,262     9,091  
  Expected return on plan assets     (4,818 )   (5,258 )   (9,283 )   (9,278 )
  Amortization of prior service cost     34     44     66     78  
  Recognized net actuarial loss     2,470     -     4,722     -  
  Net periodic pension expense (income)   $ 2,896   $ (134 ) $ 5,661   $ 17  
                             
  SERP:                          
  Service cost   $ 188   $ 166   $ 377   $ 332  
  Interest cost     550     529     1,100     1,059  
  Amortization of prior service cost     62     62     124     124  
  Recognized net actuarial loss     344     -     688     -  
  Net periodic pension expense   $ 1,144   $ 757   $ 2,289   $ 1,515  

Expense related to the Savings Plan amounted to $5,418,000 and $5,072,000 for the 13 weeks and $10,259,000 and $10,620,000 for the 26 weeks ended March 28, 2010 and March 29, 2009, respectively.


7


As previously disclosed in the Notes to the Consolidated Financial Statements in the Company's 2009 Annual Report, the Company's current funding policy for its Pension Plan is to contribute annually the amount required by regulatory authorities to meet minimum funding requirements and an amount to increase the funding ratios over future years to a level determined by the Company's actuaries to be effective in reducing the volatility of contributions. The Company was not required to make a contribution to the Pension Plan in fiscal 2010; however, the Company elected to contribute $22.0 million on March 30, 2010, subsequent to the end of the second quarter of fiscal 2010. This contribution was based on the final actuarial calculations and the Company's desire to meet certain funding levels.

Contributions to the SERP are equal to the benefit payments made during the year. The Company has contributed $616,000 during the 26 weeks ended March 28, 2010, and anticipates contributing approximately $616,000 more for expected future benefit payments during the remainder of fiscal 2010.

5. Equity Incentive Plans

The Company has various equity incentive plans that allow for the granting of incentive stock options, nonqualified stock options or stock awards such as performance shares and restricted stock. As previously disclosed in the Notes to the Consolidated Financial Statements in the Company's 2009 Annual Report, the Company's Board of Directors began approving stock awards in lieu of stock options beginning in November 2004.

A summary of the status of the Company's stock awards as of March 28, 2010 and March 29, 2009, changes during the 26-week periods ending on those dates and the weighted average grant-date fair value (WAGFV) is presented below (shares in thousands):


                             
        March 28, 2010     March 29, 2009  
        Shares     WAGFV     Shares     WAGFV  
  Non-vested at beginning of period     667   $ 29.02     589   $ 30.34  
  Granted     272     26.68     268     26.54  
  Vested     (167 )   28.02     (128 )   26.96  
  Forfeited     (62 )   27.19     (54 )   36.11  
  Non-vested at end of period     710     28.52     675     29.01  

The total fair value of stock awards vested during the 26 weeks ended March 28, 2010 and March 29, 2009 was $4,545,000 and $3,484,000, respectively.

The stock awards are being expensed over the employees' five-year vesting service period in accordance with the graded vesting schedule, resulting in more expense being recognized in the early years. Compensation expense related to restricted awards amounted to $1,564,000 and $1,478,000 for the 13 weeks and $2,856,000 and $2,866,000 for the 26 weeks ended March 28, 2010 and March 29, 2009, respectively. Unamortized expense related to these awards as of March 28, 2010 amounted to $11,511,000 and have a weighted average recognition period of 2.43 years.

A summary of the status of the Company's stock option plans as of March 28, 2010 and March 29, 2009, changes during the 26-week periods ending on those dates and related weighted average exercise price is presented below (shares in thousands):


                             
        March 28, 2010     March 29, 2009  
        Shares     Price     Shares     Price  
  Outstanding at beginning of period     373   $ 16.49     483   $ 16.40  
  Exercised     (144 )   15.72     (68 )   16.24  
  Outstanding at end of period     229     16.98     415     16.42  
  Options exercisable at end of period     229     16.98     415     16.42  

As of March 28, 2010, all outstanding stock options were exercisable and the price per share ranged from $11.50 to $35.24. The total cash received from stock options exercised for the exercise price and related tax deductions is included in the Consolidated Condensed Statements of Equity and Comprehensive Income. The Company has historically issued new shares to satisfy the stock options exercised.


8


The aggregate intrinsic value of stock options as of March 28, 2010 and March 29, 2009, and stock options exercised during the periods ending on those dates is presented below (in thousands):


                 
        March 28, 2010     March 29, 2009  
  Intrinsic value of outstanding options at end of period   $ 3,416   $ 2,829  
  Intrinsic value of options exercisable at end of period     3,416     2,829  
  Intrinsic value of stock options exercised during the 26-week period     1,800     726  

Amortization of compensation costs related to stock options ceased at the end of the first quarter of fiscal 2009 since all outstanding options had become fully vested. Results for the 26 weeks ended March 29, 2009 included $11,000 of compensation costs related to stock options. There were no stock options granted in the first six months of fiscal 2010 or fiscal 2009.

6. Inventory

The following table summarizes the components of inventories as of the balance sheet dates (in thousands):


                 
        March 28, 2010     September 27, 2009  
  Finished Goods   $ 294,533   $ 286,113  
  Raw Materials and Supplies     19,126     19,504  
  Work in Process     5,707     4,654  
  Total Inventories   $ 319,366   $ 310,271  

7. Goodwill

Goodwill is recorded by A&E. A fair value-based impairment test of the net book value of goodwill is performed annually or at an interim basis if certain events or circumstances indicate that an impairment loss may have occurred. The annual review was conducted in the first quarter of fiscal 2010, resulting in no goodwill impairment charge being required.

8. Intangible Assets

The following table summarizes the carrying amount of intangible assets as of the balance sheet dates (in thousands):


                 
        March 28, 2010     September 27, 2009  
  Acquired favorable operating leases   $ 18,170   $ 18,170  
  Customer lists     5,534     5,534  
  Land use rights — foreign operations     4,450     4,451  
  Non-compete agreements     2,963     2,963  
  Trademarks, licenses and other     2,554     2,554  
  Total intangible assets     33,671     33,672  
  Accumulated amortization     (11,123 )   (9,918 )
  Total intangible assets, net of accumulated amortization   $ 22,548   $ 23,754  

Acquired favorable operating leases are recorded at Harris Teeter. All other intangible assets are recorded by A&E. The Company has no non-amortizing intangible assets. Amortization expense for intangible assets was $597,000 and $683,000 for the 13 weeks and $1,204,000 and $1,335,000 for the 26 weeks ended March 28, 2010 and March 29, 2009, respectively. Intangible assets have remaining useful lives from 1 year to 46 years. Projected amortization expense for intangible assets existing as of March 28, 2010 is: $1,174,000 for the remainder of fiscal 2010 and $1,938,000, $1,737,000, $1,636,000 and $1,584,000 for fiscal years 2011, 2012, 2013 and 2014, respectively.

9. Derivative Financial Instruments

The Company maintains two separate three-year interest rate swap agreements with an aggregate notional amount of $80 million. The swap agreements effectively fixed the interest rate on $80 million of the Company's term loan, of which $40 million is at 1.81% and $40 million is at 1.80%, excluding the applicable margin and associated fees. Both interest rate swaps were designated as cash flow hedges.

In the first quarter of fiscal 2010, Harris Teeter entered into a series of purchased call options and written put options in order to limit the price variability in fuel purchases. The options effectively established the purchase price of 1,092,000


9


gallons of fuel at $1.62 to $2.40 per gallon, excluding shipping, handling and taxes. The options terminate on June 30, 2010 and are deemed to be net purchase options which are designated as a cash flow hedge.

The following tables present the required fair value quantitative disclosures, on a combined basis, for the Company's financial instruments, designated as cash flow hedges (in thousands):


                             
       




Carrying
Value

   

Quoted Prices
in Active Markets
for Identical
Instruments

(Level 1)

   

Significant Other
Observable Inputs

(Level 2)

   


Significant
Unobservable
Inputs

(Level 3)

 
  Fair Value Measurement at March 28, 2010:                          
  Interest rate swaps (included with Other Long-Term Liabilities on the balance sheet)  

$

(1,111

)

$

-

 

$

(1,111

)

$

-

 
  Net purchase options (included with Prepaid Expenses and Other Current Assets on the balance sheet)    

42

   

-

   

42

   

-

 
                             
  Fair Value Measurement at September 27, 2009:                          
  Interest rate swaps (included with Other Long-Term Liabilities on the balance sheet)  

$

(585

)

$

-

 

$

(585

)

$

-

 

There were no transfers into or out of Level 1 and Level 2 fair-value measurements during the periods ended March 28, 2010.

The pre-tax unrealized loss associated with the cash flow hedges for the reporting periods of fiscal 2010 and 2009 is as follows (in thousands):


                             
        13 Weeks Ended     26 Weeks Ended  
        March 28,
2010
    March 29,
2009
    March 28,
2010
    March 29,
2009
 
  Unrealized loss recognized in other comprehensive income   $ 443   $ 456   $ 537   $ 456  

10. Financial Instruments

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash equivalents and receivables. The Company limits the amount of credit exposure to each individual financial institution and places its temporary cash into investments of high credit quality. Concentrations of credit risk with respect to receivables are limited due to their dispersion across various companies and geographies.

The carrying amounts for certain of the Company's financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and other accrued liabilities approximate fair value because of their short maturities. The fair value of variable interest debt is equal to its carrying amount. The estimated fair value of the Company's senior notes due at various dates through 2017 (which accounts for 99% of the Company's fixed interest debt obligations) is computed based on borrowing rates currently available to the Company for loans with similar terms and maturities. The estimated fair value of the Company's senior notes and its carrying amount outstanding as of the balance sheet dates is as follows (in thousands):


                 
        March 28, 2010     September 27, 2009  
  Senior notes — estimated fair value   $ 126,717   $ 134,322  
  Senior notes — carrying amount     107,143     114,285  


10


11. Commitments and Contingencies

The Company is involved in various lawsuits and environmental matters arising in the normal course of business. Management believes that such matters will not have a material effect on the financial condition or results of operations of the Company.

In connection with the closing of certain store locations, Harris Teeter has assigned leases to several other sub-tenants with recourse. These various leases expire over the next 11 years and the future minimum lease payments totaling $46,409,000 over this period have been assumed by the other merchants.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Overview

The Company operates primarily in two business segments through two wholly owned subsidiaries: retail grocery (including related real estate and store development activities) — operated by Harris Teeter; and industrial sewing thread (textile primarily), including embroidery thread and technical textiles — operated by A&E. Harris Teeter is a regional supermarket chain operating primarily in the southeastern and mid-Atlantic United States, including the District of Columbia. A&E is a global manufacturer and distributor of sewing thread for the apparel and other markets, embroidery thread and technical textiles. The Company evaluates the performance of its two businesses utilizing various measures which are based on operating profit.

The economic environment has motivated changes in the consumption habits of the retail consumer which has impacted the financial results of both operating subsidiaries. Unprecedented economic uncertainty, tumultuous market conditions and a decreasing level of consumer confidence has created a more cautious consumer and increased the competitive environment in Harris Teeter's primary markets. Harris Teeter competes with other traditional grocery retailers, as well as other retail outlets including, but not limited to, discount retailers such as "neighborhood or supercenters" and "club and warehouse stores," specialty supermarkets and drug stores. Generally, Harris Teeter's markets continue to experience new store opening activity and increased feature pricing or everyday low prices by competitors. In response, Harris Teeter utilizes information gathered from various sources, including its Very Important Customer ("VIC") loyalty card program, and works with suppliers to deliver effective retail pricing and targeted promotional spending programs that drive customer traffic and create value for Harris Teeter customers. In addition, Harris Teeter differentiates itself from its competitors with its product selection, assortment and variety, and its focus on customer service.

Harris Teeter has continued with its planned new store development program. Since the end of the second quarter of fiscal 2009, Harris Teeter has opened 20 new stores and closed 4 stores, for a net addition of 16 stores. Harris Teeter operated 195 stores as of the end of the second quarter of fiscal 2010. Much of Harris Teeter's new store growth is focused on expanding its Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware.

Business conditions for A&E's customers have also been negatively impacted by the current economic environment and the cautious consumer. During fiscal 2009, A&E experienced a significant decline in sales as a result of the serious global economic conditions facing its customers in the apparel and non-apparel markets. In addition, apparel production in the Americas has declined over the past several years due to the shift of apparel sourcing from the Americas to other regions of the world, predominately Asia. It has been estimated by the U.S. Department of Commerce Office of Textiles and Apparel that Asia and the Indian sub-continent accounted for approximately 69% of the apparel imports into the U.S. in 2006, approximately 73% in 2007, approximately 74% in 2008, approximately 78% in 2009 and approximately 78% for the first two months in 2010. This has greatly impacted A&E's operations in the Americas. In response to the shifting of apparel sourcing, A&E's strategic plans have included the expansion of its operations in the Asian markets and the expansion of product lines beyond apparel sewing thread.

A&E's growth in China, India and other Asian markets has been accomplished through additional investments in its wholly owned subsidiaries by way of capital expenditures and through strategic joint ventures. As previously disclosed, A&E exercised its option to purchase an additional 14% ownership interest in Vardhman Yarns and Threads Limited ("Vardhman") under the terms of the original joint venture agreement during the first quarter of fiscal 2009. This additional investment increased A&E's total ownership interest in Vardhman to 49%. A&E continues to transform its business to be more Asian centric, which is in line with the global shifting of A&E's customer base.


11


In prior years, A&E has expanded its customer base and product line offerings through strategic acquisitions of businesses that produce technical textiles, embroidery thread and other non-apparel yarns. Technical textiles represent non-apparel yarns A&E supplies to its customers in the automotive, telecommunication, wire and cable, paper production and other industries. The sale of non-apparel threads and yarns resulting from these acquisitions has partially offset sales declines in the U.S. resulting from the shifting of apparel manufacturing. A&E continues to expand the manufacturing and distribution of non-apparel products throughout its global operations.

Quarterly Results

Consolidated

The following table sets forth the operating profit components by each of the Company's business segments and Corporate for the 13 weeks ended March 28, 2010 and March 29, 2009. The table also sets forth each of the segment's net sales as a percent to total net sales, the net income components as a percent to total net sales and the percentage increase or decrease of such components over the prior year (in thousands):


                                   
        March 28, 2010     March 29, 2009        
              % to Total
Net Sales
          % to Total
Net Sales
    % Inc.
(Dec.)
 
  Net Sales                                
  Harris Teeter   $ 1,000,651     93.4   $ 949,427     94.0     5.4  
  American & Efird     70,787     6.6     60,577     6.0     16.9  
  Total   $ 1,071,438     100.0   $ 1,010,004     100.0     6.1  
                                   
  Gross Profit                                
  Harris Teeter   $ 303,572     28.33   $ 295,006     29.21     2.9  
  American & Efird     16,671     1.56     9,872     0.98     68.9  
  Total     320,243     29.89     304,878     30.19     5.0  
                                   
  Selling, General and Admin. Expenses                                
  Harris Teeter     256,451     23.94     249,962     24.75     2.6  
  American & Efird     13,531     1.26     14,442     1.43     (6.3 )
  Corporate     1,429     0.13     1,452     0.14     (1.6 )
  Total     271,411     25.33     265,856     26.32     2.1  
                                   
  Operating Profit (Loss)                                
  Harris Teeter     47,121     4.40     45,044     4.46     4.6  
  American & Efird     3,140     0.29     (4,570 )   (0.45 )   n.a.  
  Corporate     (1,429 )   (0.13 )   (1,452 )   (0.14 )   (1.6 )
  Total     48,832     4.56     39,022     3.87     25.1  
                                   
  Other Expense (Income), net     4,859     0.45     4,057     0.40     19.8  
  Income Tax Expense     16,336     1.53     11,955     1.19     36.6  
  Net Income     27,637     2.58     23,010     2.28     20.1  
  Less: Net Income of Noncontrolling Interest     158     0.02     68     0.01     n.a.  
  Net Income of Ruddick Corporation   $ 27,479     2.56   $ 22,942     2.27     19.8  
                                   
  n.a. — not applicable                                

As depicted in the table above, the increase in consolidated net sales was attributable to sales increases at Harris Teeter and A&E when compared to the prior year. A&E's foreign sales for the second quarter of fiscal 2010 represented 3.5% of the consolidated net sales of the Company compared to 3.2% in the same period last year. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.


12


The gross profit increase during the second quarter of fiscal 2010 over the prior year period was driven by strong gross profit performance at Harris Teeter and significant gross profit improvement at A&E. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Selling, general & administrative ("SG&A") expenses as a percent to sales decreased when compared to the prior year period. This decrease resulted from: decreased operating costs at A&E; Harris Teeter's continued emphasis on operational efficiencies and cost controls; and, the leverage created through sales gains that apply against fixed costs. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Other expense, net includes interest expense, interest income and investment gains and losses. Net interest expense (interest expense less interest income) increased by $0.8 million over the prior year period as a result of increased interest associated with capital leases and higher effective interest rates on outstanding borrowings during the second quarter of fiscal 2010, as compared to the second quarter of fiscal 2009.

The effective income tax rate for the second quarter of fiscal 2010 was 37.1%, as compared to 34.2% in the prior year period. As previously disclosed, income tax expense for the second quarter of fiscal 2009 included a reversal of $1.6 million of valuation allowances associated with foreign tax credits.

As a result of the items discussed above, consolidated net income attributable to the Company for the second quarter of fiscal 2010 increased by $4.5 million, or 19.8%, over the prior year period and earnings per diluted share increased by 18.8% to $0.57 per share in fiscal 2010 from $0.48 per share in fiscal 2009.

Harris Teeter, Retail Grocery Segment

The following table sets forth the consolidated operating profit components for the Company's Harris Teeter supermarket subsidiary for the 13 weeks ended March 28, 2010 and March 29, 2009. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):


                                   
        March 28, 2010     March 29, 2009        
              % to
Sales
          % to
Sales
    % Inc.
(Dec.)
 
  Net Sales   $ 1,000,651     100.00   $ 949,427     100.00     5.4  
  Cost of Sales     697,079     69.66     654,421     68.93     6.5  
  Gross Profit     303,572     30.34     295,006     31.07     2.9  
  SG&A Expenses     256,451     25.63     249,962     26.33     2.6  
  Operating Profit   $ 47,121     4.71   $ 45,044     4.74     4.6  

Net sales increased by 5.4% in the second quarter of fiscal 2010, as compared to the prior year period. The increase in net sales was attributable to incremental new store sales that were partially offset by a comparable store sales decline. The increase in sales from new stores exceeded the loss of sales from closed stores by $63.0 million for the comparable periods. Comparable store sales (see definition below) decreased 1.33% ($12.5 million) in the second quarter of fiscal 2010, as compared to an increase of 0.09% ($0.8 million) in the second quarter of fiscal 2009. Comparable store sales have been negatively impacted by retail price deflation and, to some extent, the cannibalization created by strategically opening stores in key major markets that have a close proximity to existing stores. Management believes that Harris Teeter's strategy of opening additional stores within close proximity to existing stores, and any similar new additions in the foreseeable future, have a strategic benefit of enabling Harris Teeter to capture sales and expand market share as the markets it serves continue to grow. In addition, Harris Teeter customers, in these economic times, are choosing lower priced products and reducing their purchases of more discretionary categories such as floral, tobacco, and certain general merchandise. The number of items sold continued to increase during the second quarter of fiscal 2010, however value of the average basket and the number of customer visits was down. In addition, Harris Teeter experienced average increases in active households per comparable store (based on VIC data) of 0.40% for the second quarter of fiscal 2010, evidencing a continued growing customer base in those stores. Store brand product penetration was slightly down from the prior year at 24.38 % in the second quarter of fiscal 2010, as compared to 24.80% in the second quarter of fiscal 2009.

Harris Teeter considers its reporting of comparable store sales growth to be effective in determining core sales growth during periods of fluctuation in the number of stores in operation, their locations and their sizes. While there is no standard industry definition of "comparable store sales," Harris Teeter has been consistently applying the following definition.


13


Comparable store sales are computed using corresponding calendar weeks to account for the occasional extra week included in a fiscal year. A new store must be in operation for 14 months before it enters into the calculation of comparable store sales. A closed store is removed from the calculation in the month in which its closure is announced. A new store opening within an approximate two-mile radius of an existing store that is to be closed upon the new store opening is included as a replacement store in the comparable store sales measurement as if it were the same store. Sales increases resulting from existing comparable stores that are expanded in size are included in the calculations of comparable store sales, if the store remains open during the construction period.


Gross profit as a percent to sales for the second quarter of fiscal 2010 declined 73 basis points from the prior year period as a result of promotional retail price investments designed to enhance the overall value provided to Harris Teeter's customers. Harris Teeter continues to invest in its in-store promotional activity and lower everyday prices in order to drive unit sales and customer loyalty. The cost of these price investments was offset, in part, by management's emphasis on distribution and manufacturing cost controls and a lower LIFO charge.

SG&A expenses for the second quarter of fiscal 2010 increased from the prior year period, primarily as a result of increased labor and occupancy costs associated with new store growth and increased pension expense. However, SG&A expenses as a percent to sales decreased 70 basis points in fiscal 2010 from fiscal 2009, as a result of the leverage created through sales gains that apply against fixed costs, along with improved labor management and additional cost saving initiatives. Pre-opening costs, included with SG&A expenses, consist of rent, labor and associated fringe benefits, and recruiting and relocation costs incurred prior to a new store opening and amounted to $2.2 million (0.22% to sales) for the second quarter of fiscal 2010 as compared to $3.4 million (0.36% to sales) for the second quarter of fiscal 2009. Pre-opening costs fluctuate between periods depending on the new store opening schedule.

As a result of the increased sales and cost elements described above, operating profit increased 4.6% in the second quarter of fiscal 2010 from the prior year. Harris Teeter continues to invest within its core markets, which management believes have greater potential for improved returns on investment in the foreseeable future.

American & Efird, Industrial Thread Segment

The following table sets forth the consolidated operating profit components for the Company's A&E textile subsidiary for the 13 weeks ended March 28, 2010 and March 29, 2009. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):


                                   
        March 28, 2010     March 29, 2009        
              % to
Sales
          % to
Sales
    % Inc.
(Dec.)
 
  Net Sales   $ 70,787     100.00   $ 60,577     100.00     16.9  
  Cost of Sales     54,116     76.45     50,705     83.70     6.7  
  Gross Profit     16,671     23.55     9,872     16.30     68.9  
  SG&A Expenses     13,531     19.11     14,442     23.84     (6.3 )
  Operating Profit (Loss)   $ 3,140     4.44   $ (4,570 )   (7.54 )   n.a.  

Net sales increased 16.9% in the second quarter of fiscal 2010 as compared to the prior year period. This increase was driven primarily by sales gains between the second quarters of fiscal 2010 and fiscal 2009 for the U.S. and all foreign regions driven by improvements in retail sales of apparel and automobiles. Foreign sales accounted for approximately 53% of total A&E sales in the second quarter of both fiscal 2010 and fiscal 2009. Foreign sales, especially in the Asian markets, will continue to be a significant proportion of total A&E sales due to the shifting global production of its customers and A&E's strategy of increasing its presence in such global markets. Management recognizes that a major challenge facing A&E is the geographic shift of its customer base and, as a result, management remains committed to its strategic plans that will transform A&E's business to a more Asian-centric global supplier of sewing thread, embroidery thread and technical textiles.

Gross profit and its percent to sales, in the second quarter of fiscal 2010 increased from the second quarter of fiscal 2009, as a result of the cost reduction measures taken in fiscal 2009 and improved operating schedules at most of A&E's manufacturing facilities, created by increased sales and inventories being in line with sales volumes. Management continues to focus on optimizing costs and manufacturing capacities in its domestic and foreign operations.

SG&A expenses and its percent to sales in the second quarter of fiscal 2010 decreased from the first quarter of fiscal 2009, primarily as a result of increased net profit realized from non-consolidated subsidiaries and benefits realized from the


14


cost reduction measures taken in fiscal 2009. Net profit from non-consolidated subsidiaries is recorded as a reduction to SG&A expenses and amounted to $1.5 million in the second quarter of fiscal 2010, as compared to $0.2 million in the second quarter of fiscal 2009.

As a result of the sales and cost elements described above, A&E realized operating profit of $3.1 million for the second quarter of fiscal 2010, as compared to an operating loss of $4.6 million in the second quarter of fiscal 2009. Management at A&E intends to continue to reduce expenses at its U.S. operations and certain foreign operations and focus on its strategic plans to become more Asian centric. A&E's operating results are not indicative of the progress that has been made in becoming more Asian centric due to the fact that A&E has noncontrolling interests in certain Asian operations that are not consolidated with A&E's reported sales, but have substantial sales and good operating results. A&E currently has over 60% of its total finishing production capacity located in Asia, including its joint ventures, which emphasizes A&E's progress toward its strategic plans.

Year-To-Date Results

Consolidated

The following table sets forth the operating profit components by each of the Company's business segments and Corporate for the 26 weeks ended March 28, 2010 and March 29, 2009. The table also sets forth each of the segment's net sales as a percent to total net sales, the net income components as a percent to total net sales and the percentage increase or decrease of such components over the prior year (in thousands):


                                   
        March 28, 2010     March 29, 2009        
              % to Total
Net Sales
          % to Total
Net Sales
    % Inc.
(Dec.)
 
  Net Sales                                
  Harris Teeter   $ 1,972,966     93.4   $ 1,878,354     93.7     5.0  
  American & Efird     138,984     6.6     126,635     6.3     9.8  
  Total   $ 2,111,950     100.0   $ 2,004,989     100.0     5.3  
                                   
  Gross Profit                                
  Harris Teeter   $ 594,093     28.13   $ 583,355     29.09     1.8  
  American & Efird     32,694     1.55     22,366     1.12     46.2  
  Total     626,787     29.68     605,721     30.21     3.5  
                                   
  Selling, General and Admin. Expenses                                
  Harris Teeter     504,693     23.90     494,004     24.64     2.2  
  American & Efird     25,604     1.21     28,037     1.40     (8.7 )
  Corporate     4,231     0.20     2,858     0.14     48.0  
  Total     534,528     25.31     524,899     26.18     1.8  
                                   
  Operating Profit (Loss)                                
  Harris Teeter     89,400     4.23     89,351     4.45     0.1  
  American & Efird     7,090     0.34     (5,671 )   (0.28 )   n.a.  
  Corporate     (4,231 )   (0.20 )   (2,858 )   (0.14 )   48.0  
  Total     92,259     4.37     80,822     4.03     14.2  
                                   
  Other Expense, net     9,874     0.47     8,869     0.44     11.3  
  Income Tax Expense     30,731     1.46     25,953     1.29     18.4  
  Net Income     51,654     2.44     46,000     2.30     12.3  
  Less: Net Income of Noncontrolling Interest     444     0.02     176     0.01     n.a.  
  Net Income of Ruddick Corporation   $ 51,210     2.42   $ 45,824     2.29     11.8  

As depicted in the table above, the increase in consolidated sales was attributable to sales increases at Harris Teeter and A&E when compared to the prior year. A&E's foreign sales for the 26 weeks ended March 28, 2010, represented 3.6%


15


of the consolidated net sales of the Company compared to 3.4% in the same period last year. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

The gross profit increase during the first half of fiscal 2010 over the prior year period was driven by strong gross profit performance at Harris Teeter and significant gross profit improvement at A&E. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

SG&A expenses increased for the first half of fiscal 2010 over the prior year; however, SG&A expenses as a percent to sales decreased in the comparative periods. The decrease in the SG&A margin resulted from: decreased operating costs at A&E; Harris Teeter's continued emphasis on operational efficiencies and cost controls; and, the leverage created through sales gains that apply against fixed costs. The increase in Corporate SG&A expenses was due, in part, to increased costs associated with certain benefit programs. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.

Other expense, net includes interest expense, interest income and investment gains and losses. Net interest expense (interest expense less interest income) increased $1.0 million over the prior year period primarily as a result of increased interest associated with capital leases.

The effective income tax rate for the 26 weeks ended March 28, 2010 was 37.3% as compared to 36.1% in the prior year period. As previously disclosed, income tax expense for the first half of fiscal 2009 included a reversal of $1.6 million of valuation allowances associated with foreign tax credits.

As a result of the items discussed above, consolidated net income for the 26 weeks ended March 28, 2010 increased by $5.4 million, or 11.8%, over the prior year period and earnings per diluted share increased by 11.6% to $1.06 per share in fiscal 2010 from $0.95 per share in fiscal 2009.

Harris Teeter, Retail Grocery Segment

The following table sets forth the consolidated operating profit components for the Company's Harris Teeter supermarket subsidiary for the 26 weeks ended March 28, 2010 and March 29, 2009. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):


                                   
        March 28, 2010     March 29, 2009        
              % to
Sales
          % to
Sales
    % Inc.
(Dec.)
 
  Net Sales   $ 1,972,966     100.00   $ 1,878,354     100.00     5.0  
  Cost of Sales     1,378,873     69.89     1,294,999     68.94     6.5  
  Gross Profit     594,093     30.11     583,355     31.06     1.8  
  SG&A Expenses     504,693     25.58     494,004     26.30     2.2  
  Operating Profit   $ 89,400     4.53   $ 89,351     4.76     0.1  

Net sales increased by 5.0% for the 26 weeks of fiscal 2010, as compared to the prior year period. The increase in net sales was attributable to incremental new stores and was partially offset by a decline in comparable store sales. The increase in sales from new stores exceeded the loss of sales from closed stores by $128.1 million for the comparable periods. Comparable store sales, as previously defined, decreased 1.85% ($34.2 million) for the 26 weeks ended March 28, 2010, as compared to a decrease of 1.01% ($17.7 million) for the 26 weeks ended March 29, 2009. Comparable store sales for the 26-week period of fiscal 2010 have been negatively impacted by retail price deflation and, to some extent, the cannibalization created by strategically opening stores in key major markets that have a close proximity to existing stores. Management believes that Harris Teeter's strategy of opening additional stores within close proximity to existing stores, and any similar new additions in the foreseeable future, have a strategic benefit of enabling Harris Teeter to capture sales and expand market share as the markets it serves continue to grow. In addition, Harris Teeter customers, in these economic times, are choosing lower priced products and reducing their purchases of more discretionary categories such as floral, tobacco, and certain general merchandise. The number of shopping visits and items sold continued to increase during the first half of fiscal 2010, however the value of the average basket was down. In addition, Harris Teeter experienced average increases in active households per comparable store (based on VIC data) of 1.29% for the first half of fiscal 2010, evidencing a


16


continued growing customer base in those stores. Store brand product penetration was slightly down from the prior year at 24.60 % for the first half of fiscal 2010, as compared to 24.84% during the first half of fiscal 2009.

Gross profit as a percent to sales for the first half of fiscal 2010 declined 95 basis points from the prior year period as a result of promotional retail price investments designed to enhance the overall value provided to Harris Teeter's customers. Harris Teeter continues to invest in its in-store promotional activity and lower everyday prices in order to drive unit sales and customer loyalty. The cost of these price investments was offset, in part, by management's emphasis on distribution and manufacturing cost controls and a lower LIFO charge.

SG&A expenses for the first half of fiscal 2010 increased from the prior year period, primarily as a result of increased labor and occupancy costs associated with new store growth and increased pension expense. However, SG&A expenses as a percent to sales decreased 72 basis points in fiscal 2010 from fiscal 2009, as a result of the leverage created through sales gains that apply against fixed costs, along with improved labor management and additional cost saving initiatives. Pre-opening costs, included with SG&A expenses, consist of rent, labor and associated fringe benefits, and recruiting and relocation costs incurred prior to a new store opening and amounted to $4.8 million (0.24% to sales) for the 26 weeks ended March 28, 2010, as compared to $7.4 million (0.39% to sales) for the 26 weeks ended March 29, 2009. Pre-opening costs fluctuate between periods depending on the new store opening schedule.

As a result of the increased sales and cost elements described above, operating profit increased 0.1% in the first half of fiscal 2010 from the prior year. Harris Teeter continues to invest within its core markets, which management believes have greater potential for improved returns on investment in the foreseeable future.

American & Efird, Industrial Thread Segment

The following table sets forth the consolidated operating profit components for the Company's A&E textile subsidiary for the 26 weeks ended March 28, 2010 and March 29, 2009. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):


                                   
        March 28, 2010     March 29, 2009        
              % to
Sales
          % to
Sales
    % Inc.
(Dec.)
 
  Net Sales   $ 138,984     100.00   $ 126,635     100.00     9.8  
  Cost of Sales     106,290     76.48     104,269     82.34     1.9  
  Gross Profit     32,694     23.52     22,366     17.66     46.2  
  SG&A Expenses     25,604     18.42     28,037     22.14     (8.7 )
  Operating Profit (Loss)   $ 7,090     5.10   $ (5,671 )   (4.48 )   n.a.  

Net sales increased 9.8% for the 26 weeks ended March 28, 2010, as compared to the prior year period. This increase was driven primarily by sales gains between the comparable 26 week periods of fiscal 2010 and fiscal 2009 for the U.S. and all foreign regions driven by improvements in retail sales of apparel and automobiles. Foreign sales accounted for approximately 54% of total A&E sales for the 26-week period of fiscal 2010, as compared to 55% for the 26-week period of fiscal 2009. Foreign sales, especially in the Asian markets, will continue to be a significant proportion of total A&E sales due to the shifting global production of its customers and A&E's strategy of increasing its presence in such global markets. Management recognizes that a major challenge facing A&E is the geographic shift of its customer base and, as a result, management remains committed to its strategic plans that will transform A&E's business to a more Asian-centric global supplier of sewing thread, embroidery thread and technical textiles.

Gross profit and its percent to sales, increased during the 26 weeks ended March 28, 2010 from the prior year period, as a result of the cost reduction measures taken in fiscal 2009 and improved operating schedules at most of A&E's manufacturing facilities, created by increased sales and inventories being in line with sales volumes. Management continues to focus on optimizing costs and manufacturing capacities in its domestic and foreign operations.

SG&A expenses and its percent to sales in the first half of fiscal 2010 decreased from the first half of fiscal 2009, primarily as a result of increased net profit realized from non-consolidated subsidiaries and benefits realized from the cost reduction measures taken in fiscal 2009. Net profit from non-consolidated subsidiaries is recorded as a reduction to SG&A expenses and amounted to $3.5 million during the 26 weeks ended March 28, 2010, as compared to $1.8 million during the 26 weeks ended March 29, 2009.


17


As a result of the sales and cost elements described above, A&E realized operating profit of $7.1 million for the first half of fiscal 2010, as compared to an operating loss of $5.7 million in the first half of fiscal 2009. Management at A&E intends to continue to reduce expenses at its U.S. operations and certain foreign operations and focus on its strategic plans to become more Asian centric. A&E's operating results are not indicative of the progress that has been made in becoming more Asian centric due to the fact that A&E has noncontrolling interests in certain Asian operations that are not consolidated with A&E's reported sales, but have substantial sales and good operating results. A&E currently has over 60% of its total finishing production capacity located in Asia, including its joint ventures, which emphasizes A&E's progress toward its strategic plans.

Outlook

Harris Teeter's operating performance and the Company's strong financial position provides the flexibility to continue with Harris Teeter's store development program that includes new and replacement stores along with the remodeling and expansion of existing stores. Harris Teeter plans to open an additional 4 new stores and complete major remodeling of one additional store (which will be expanded in size) during the remainder of fiscal 2010. The new store development program for fiscal 2010 is expected to include a total of 13 new stores (two of which replace existing stores) and result in a 6.4% increase in retail square footage as compared to an 8.7% increase in fiscal 2009. The annual number of new store openings for fiscal year 2011 and thereafter are expected to be similar to, or slightly less than that of fiscal 2010. Management will continue to evaluate Harris Teeter's capital expenditures during these times of economic uncertainty and will adjust its strategic plan accordingly. In addition, Harris Teeter routinely evaluates its existing store operations in regards to its overall business strategy and from time to time will close or divest older or underperforming stores.

Harris Teeter's capital expenditures for fiscal 2010 are presently estimated at approximately $125 million. The new store program for fiscal 2010 anticipates the continued expansion of Harris Teeter's existing markets, including the Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. Real estate development by its nature is both unpredictable and subject to external factors including weather, construction schedules and costs. Any change in the amount and timing of new store development would impact the expected capital expenditures, sales and operating results.

Startup costs associated with opening new stores under Harris Teeter's store development program can negatively impact operating margins and net income. In the current competitive environment, promotional costs to maintain market share could also negatively impact operating margins and net income in future periods. The continued execution of productivity initiatives implemented throughout all stores, maintaining controls over waste, implementation of operating efficiencies and effective merchandising strategies will dictate the pace at which Harris Teeter's operating results could improve, if at all.

A&E has been able to diversify its customer base, product mix and geographical locations through acquisitions and joint venture agreements completed in recent years. In addition, A&E continues to increase its investment in China and India to support the growth opportunities in these countries and to become more Asian-centric. Although A&E has benefited from improved business conditions and the cost reduction measures taken in fiscal 2009, the economic environment for A&E's customers could worsen in the future. A&E management continues to focus on providing best-in-class service to its customers and expanding its product lines throughout A&E's global supply chain. In addition, management intends to continue to reduce expenses at its U.S. operations and certain foreign operations, and to evaluate its structure to best position A&E to take advantage of opportunities available through its enhanced international operations.

The Company's management remains cautious in its expectations for fiscal 2010 due to the current economic environment and its impact on our customers. The Company will continue to refine its merchandising strategies to respond to the changing shopping demands and to maintain or increase its customer base. The retail grocery market remains intensely competitive and there is no assurance that the recent improvements in the textile and apparel industries will continue. Any operating improvement will be dependent on the Company's ability to increase Harris Teeter's market share, to continue to rationalize A&E's operations, to offset increased operating costs with additional operating efficiencies, and to effectively execute the Company's strategic expansion plans.

Capital Resources and Liquidity

The Company is a holding company which, through its wholly-owned operating subsidiaries, Harris Teeter and A&E, is engaged in the primary businesses of retail grocery and the manufacturing and distribution of industrial thread, technical textiles and embroidery thread, respectively. The Company has no material independent operations, nor material assets, other than the investments in its operating subsidiaries, as well as investments in certain property and equipment, cash equivalents


18


and life insurance contracts to support corporate-wide operations and benefit programs. The Company provides a variety of services to its subsidiaries and is dependent upon income and associated cash flows from its operating subsidiaries.

The Company's principal source of liquidity has been cash generated from operating activities and borrowings available under the Company's credit facility. During the 26 weeks ended March 28, 2010, operating activities generated $93.1 million of cash as compared to generating $112.6 million in the comparable period last year. Investing activities during the 26 weeks ended March 28, 2010 required net cash of $52.2 million, down $67.7 million from the comparable prior year period. The reduced cash requirement for investing activities was driven by the Company's efforts to reduce capital expenditures during these uncertain economic times. Financing activities during the 26 weeks ended March 28, 2010 utilized $41.4 million of cash and included a net reduction of $20.7 million of borrowings under the Company's credit facility, $11.7 million for the payment of dividends and $1.5 million for the purchase and retirement of 55,300 shares of the Company's common stock, at an average price of $26.97 per share.

During the 26 weeks ended March 28, 2010, capital expenditures totaled $49.0 million, comprised of $47.5 million for Harris Teeter's and $1.5 million for A&E. During the 26 weeks ended March 28, 2010, Harris Teeter made an additional net investment of $1.8 million ($9.4 million additional investments less $7.6 million received from property investment sales and partnership distributions) in connection with the development of certain new stores. Additionally, A&E spent $0.3 million to acquire the noncontrolling interest in its joint ventures in South Africa and now has a 100% ownership interest.

Fiscal 2010 consolidated capital expenditures are expected to total approximately $130 million, consisting of approximately $125 million for Harris Teeter and approximately $5 million for A&E. Harris Teeter anticipates that its capital for new store growth and store remodels will be concentrated in its existing markets in fiscal 2010 as well as in the foreseeable future. A&E expects to invest in the expansion and modernization of its global operations. Such capital investment is expected to be financed by internally generated funds, liquid assets and borrowings under the Company's credit facility. The Company's credit facility provides substantially more liquidity than what management expects the Company will require through the expiration of the line of credit in December 2012.


The Company's credit facility was entered into on December 20, 2007 with eleven banks and provides for a five-year revolving credit facility ("Revolving Credit Facility") in the aggregate amount of up to $350 million and a non-amortizing term loan of $100 million due December 20, 2012. The credit agreement also provides for an optional increase of the Revolving Credit Facility by an additional amount of up to $100 million and two 1-year maturity extension options, both of which require the consent of the lenders. The amount which may be borrowed from time to time and the interest rate on any outstanding borrowings are each dependent on a leverage factor. The leverage factor is based on a ratio of rent-adjusted consolidated funded debt divided by earnings before interest, taxes, depreciation, amortization and operating rents, as set forth in the credit agreement. The more significant of the financial covenants which the Company must meet during the term of the credit agreement include a maximum leverage ratio and a minimum fixed charge coverage ratio. As of March 28, 2010, the Company was in compliance with all financial covenants of the credit agreement and $32.2 million of borrowings were outstanding under the Revolving Credit Facility. Issued letters of credit reduce the amount available for borrowings under the Revolving Credit Facility and amounted to $22.1 million as of March 28, 2010. In addition to the $295.7 million of borrowings available under the Revolving Credit Facility as of March 28, 2010, the Company has the capacity to borrow up to an aggregate amount of $32.3 million from two major U.S. life insurance companies utilizing certain insurance assets as collateral. In the normal course of business, the Company will continue to evaluate other financing opportunities based on the Company's needs and market conditions.

Covenants in certain of the Company's long-term debt agreements limit the total indebtedness that the Company may incur. As of March 28, 2010, the amount of additional debt that could be incurred within the limitations of the most restrictive debt covenants exceeds the additional borrowings available under the Revolving Credit Facility. As such, Management believes that the limit on indebtedness does not restrict the Company's ability to meet future liquidity requirements through borrowings available under the Company's Revolving Credit Facility, including any liquidity requirements expected in connection with the Company's expansion plans for the foreseeable future.

Contractual Obligations and Commercial Commitments

The Company has assumed various financial obligations and commitments in the normal course of its operations and financing activities. Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements, such as debt and lease agreements. There have been no material changes in the scheduled maturities of the Company's contractual obligations as of September 27, 2009, as disclosed in the table under the heading "Contractual Obligations and Commercial Commitments" in the Company's 2009 Annual Report.


19


In connection with the closing of certain store locations, Harris Teeter has assigned leases to several other sub-tenants with recourse. These leases expire over the next 11 years, and the future minimum lease payments of approximately $46.4 million, in the aggregate, over that future period have been assumed by these sub-tenants. In the highly unlikely event, in management's opinion based on the current operations and credit worthiness of the assignees, that all such contingent obligations would be payable by Harris Teeter, the approximate aggregate amounts due by year would be as follows: $3.9 million for the remainder of fiscal 2010 (24 stores), $7.6 million in fiscal 2011 (22 stores), $7.2 million in fiscal 2012 (21 stores), $6.0 million in fiscal 2013 (16 stores), $5.1 million in fiscal 2014 (14 stores) and $16.6 million in the aggregate during all remaining years thereafter.

The Company utilizes various standby letters of credit and bonds as required from time to time by certain programs, most significantly for self-insured programs such as workers' compensation and various casualty insurance. These letters of credit and bonds do not represent additional obligations of the Company since the underlying liabilities are recorded as insurance reserves and included with other current liabilities on the Company's consolidated balance sheets. In addition, the Company occasionally utilizes documentary letters of credit for the purchase of merchandise in the normal course of business. Issued and outstanding letters of credit totaled $22.1 million at March 28, 2010.

Contributions to the SERP are equal to the benefit payments made during the year. The Company anticipates contributing approximately $616,000 to the SERP for expected future benefit payments during the remainder of fiscal 2010.

Off Balance Sheet Arrangements

The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company's financial condition, results of operations or cash flows.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. Future events and their effects cannot be determined with absolute certainty. Therefore, management's determination of estimates and judgments about the carrying values of assets and liabilities requires the exercise of judgment in the selection and application of assumptions based on various factors including historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances. Actual results could differ from those estimates. The Company constantly reviews the relevant, significant factors and makes adjustments where the facts and circumstances dictate. Management has identified the following accounting policies as the most critical in the preparation of the Company's financial statements because they involve the most difficult, subjective or complex judgments about the effect of matters that are inherently uncertain: vendor rebates, credits and promotional allowances; inventory valuation; self-insurance reserves for workers' compensation, healthcare and general liability; impairment of long-lived assets and closed store obligations; and retirement plans and post-retirement benefit plans. For additional discussion of these critical accounting policies, see the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Company's 2009 Annual Report. There have been no material changes to any of the critical accounting policies contained therein.

Recent Accounting Standards

In December 2008, the FASB issued an update to its authoritative literature for disclosures about pensions and other postretirement benefits. The guidance is incorporated in ASC Sections 715-20-50 and 55, and requires employers to disclose more information about how investment allocation decisions are made, more information about major categories of plan assets, including concentrations of risk and fair-value measurements, and the fair-value techniques and inputs used to measure plan assets. The updated disclosure requirements become effective for the Company's fiscal year ending on October 3, 2010.

In June 2009, the FASB issued an update to its authoritative literature for the consolidation of variable interest entities ("VIE"). The guidance is incorporated in ASC Topic 810 and requires reporting entities to evaluate former qualifying special purpose entities for consolidation, changes the approach to determining a VIE's primary beneficiary from a quantitative assessment to a qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. It also clarifies, but does not significantly change, the characteristics that identify a VIE. The new guidance also requires additional year-end and interim disclosures. The updated standards become effective for the Company's 2011 fiscal year beginning on October 4, 2010. The Company is currently evaluating the impact of the updated standards on its consolidated financial statements.


20


Regarding Forward-Looking Statements

This report contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as "expects," "anticipates," "believes," "estimates" and other similar expressions or future or conditional verbs such as "will," "should," "would" and "could" are intended to identify such forward-looking statements. Readers of this report should not rely solely on the forward-looking statements and should consider all uncertainties and risks throughout this report as well as those discussed under Item 1A, "Risk Factors" of the Company's 2009 Annual Report. The statements are representative only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement.

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. We face risks that are inherent in the businesses and the market places in which Harris Teeter and A&E operate. While management believes these forward-looking statements are accurate and reasonable, uncertainties, risks and factors, including those described below, could cause actual results to differ materially from those reflected in the forward-looking statements.

Factors that could cause the Company's actual results to differ materially from those anticipated in the forward-looking statements in this report 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;
  • Changes in the competitive environment for either of the Company's subsidiaries, including increased competition in the Company's primary geographic markets, the entry of new competitors or changes in the strategies of current competitors and consolidation in the retail grocery industry;
  • Changes in federal, state or local laws or regulations affecting the manufacturing, distribution or retailing of food and changes in food safety requirements;
  • Changes in accounting standards or taxation requirements, including the passage of future tax legislation or any regulatory or judicial position that could have an adverse impact on past, current or future tax benefits;
  • Economic (including inflation) or political changes in the regions and countries in which the Company's subsidiaries operate, adverse trade regulations, restrictions or tariffs or changes in import quotas;
  • The Company's requirement to impair recorded goodwill or long-lived assets;
  • Cost and stability of energy sources;
  • Cost and availability of raw materials;
  • Management's ability to predict accurately the adequacy of the Company's present liquidity to meet future requirements;
  • Adverse economic conditions in the financial markets, including availability of financing and an increase in costs related to obtaining financing at acceptable rates;
  • The Company's ability to successfully integrate the operations of acquired businesses;
  • The success of the Company's expansion plans and their effect on store openings, closings and other investments;
  • Continued solvency of any third parties on leases the Company has guaranteed;
  • Management's ability to predict the required contributions to the pension plans of the Company;
  • Changes in labor and employee benefit costs, such as increased health care and other insurance costs;
  • Ability to recruit, train and retain effective employees and management in both of the Company's subsidiaries;
  • The extent and speed of successful execution of strategic initiatives designed to increase sales and profitability of each of the Company's subsidiaries and the ability to implement new technology; and
  • Unexpected outcomes of any legal proceedings arising in the normal course of business of the Company.


21


Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and also could cause actual results to differ materially from those included, contemplated or implied by the forward-looking statements made in this report, and the reader should not consider the above list of factors to be a complete set of all potential risks or uncertainties.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company does not utilize financial instruments for trading or other speculative purposes, nor does it utilize leveraged financial instruments. The Company's exposure to market risks results primarily from changes in interest rates and there have been no material changes regarding the Company's market risk position from the information provided under Item 7A, "Quantitative and Qualitative Disclosures about Market Risk" in the Company's 2009 Annual Report.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. As of March 28, 2010, an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting. During the Company's second quarter of fiscal 2010, there has been no change in the Company's internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

PART II

Item 1. Legal Proceedings

The Company and its subsidiaries are involved in various legal matters from time to time in connection with their operations, including various lawsuits and environmental matters. These matters considered in the aggregate have not had, nor does the Company expect them to have, a material effect on the Company's results of operations, financial position or cash flows.

Item 1A. Risk Factors

There are no material changes from the risk factors set forth under Part I, Item 1A. "Risk Factors" in the Company's 2009 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not have any unregistered sales of its equity securities during the quarter ended March 28, 2010.

The following table summarizes the Company's purchases of its common stock during the quarter ended March 28, 2010.


                             
  Period     Total
Number of
Shares
Purchased
    Average Price
Paid per Share
    Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
    Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
 
  December 28, 2009 to January 31, 2010     0     n.a.     0     2,822,469  
  February 1, 2010 to February 28, 2010     55,300   $ 26.97     55,300     2,767,169  
  March 1, 2010 to March 28, 2010     0     n.a.     0     2,767,169  
  Total     55,300   $ 26.97     55,300     2,767,169  


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  (1)     In February 1996, the Company announced the adoption of a stock buyback program, authorizing, at management's discretion, the Company to purchase and retire up to 4,639,989 shares, 10% of the then-outstanding shares of the Company's common stock, for the purpose of preventing dilution as a result of the operation of the Company's comprehensive stock option and awards plans. The stock purchases are effected from time to time pursuant to this authorization. As of March 28, 2010, the Company had purchased and retired 1,872,820 shares under this authorization, of which 55,300 shares were purchased during the quarter ended March 28, 2010. The stock buyback program has no set expiration or termination date.  

Item 3. Defaults Upon Senior Securities

None

Item 4. Other Information

The Annual Meeting of Shareholders of Ruddick Corporation was held on February 18, 2010 (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:

Election of Directors: The shareholders elected ten directors for one-year terms to expire in 2011. There was no solicitation in opposition to the nominees as listed in the proxy statement, and all such nominees were elected. In regards to Proposal #1, "Election of Directors," there were 2,823,236 broker non-votes. The following information is furnished with respect to each director elected at the meeting:


                 
  Director Elected at Annual Meeting     Shares Voted
for Election
    Shares
Withholding
Authority
 
  For a one-year term:              
  John R. Belk     38,042,114     342,674  
  John P. Derham Cato     38,085,039     299,749  
  Thomas W. Dickson     37,897,960     486,827  
  James E. S. Hynes     38,087,994     296,793  
  Anna Spangler Nelson     38,047,344     337,443  
  Bailey W. Patrick     38,225,367     159,420  
  Robert H. Spilman, Jr.     37,281,101     1,103,686  
  Harold C. Stowe     38,046,810     337,978  
  Isaiah Tidwell     38,130,100     254,687  
  William C. Warden, Jr.     38,150,637     234,150  

Ratify the Appointment of KPMG LLP: The shareholders ratified the appointment of KPMG LLP as the independent registered public accounting firm for the fiscal year ending October 3, 2010 with 40,708,191 shares voting for the ratification, 470,345 shares voting against the ratification and 29,486 shares abstaining.


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Item 5. Exhibits


           
  Exhibit        
  Number     Description of Exhibit  
           
  10.1     Amendment No. 1 to the Ruddick Corporation Flexible Deferral Plan (Amended and Restated July 1, 2009) (Commission File No. 1-6905).  
           
  31.1     Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  
           
  31.2     Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  
           
  32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  
           
  32.2     Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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  
              (Registrant)  
  Dated: April 30, 2010     By:     /s/ JOHN B. WOODLIEF  
              John B. Woodlief,
Vice President — Finance and
Chief Financial Officer
(Principal Financial Officer)
 


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EXHIBIT INDEX


                 
  Exhibit No.
(per Item 601 of Reg. S-K)
    Description of Exhibit     Sequential
Page No.
 
                 
  10.1     Amendment No. 1 to the Ruddick Corporation Flexible Deferral Plan (Amended and Restated July 1, 2009) (Commission File No. 1-6905).        
                 
  31.1     Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002        
                 
  31.2     Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002        
                 
  32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002        
                 
  32.2     Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002        


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