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HARRIS TEETER SUPERMARKETS, INC. 10-Q 2009

Documents found in this filing:

  1. 10-Q
  2. Ex-10.1
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.2
  7. Ex-32.2
Table of Contents

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 29, 2009 
 
 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   (I.R.S. Employer 
 incorporation or organization)   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              

     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                                  No              

     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               
     Non-accelerated filer                Smaller reporting company               
     (Do not check if a smaller reporting company)     

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

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

      Outstanding Shares  
 Class  as of April 27, 2009
 Common Stock  48,514,758 shares


RUDDICK CORPORATION
AND CONSOLIDATED SUBSIDIARIES

TABLE OF CONTENTS

PART I           FINANCIAL INFORMATION
       Page
Item 1. Financial Statements
 

Consolidated Condensed Balance Sheets (unaudited) – March 29, 2009 and September 28, 2008

1
 

Consolidated Condensed Statements of Operations (unaudited) – 13 and 26 Weeks Ended March 29, 2009
and March 30, 2008

2
 

Consolidated Condensed Statements of Shareholders’ Equity and Comprehensive Income (unaudited) – 26 Weeks Ended March 29, 2009 and March 30, 2008

3
 

Consolidated Condensed Statements of Cash Flows (unaudited) – 26 Weeks Ended March 29, 2009
and March 30, 2008

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 21
 
Item 4. Controls and Procedures 21
 
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 22
 
Item 4. Submission of Matters to a Vote of Security Holders 23
 
Item 5. Other Information 23
 
Item 6. Exhibits 23
 
Signatures 24


PART I

Item 1. Financial Statements

CONSOLIDATED CONDENSED BALANCE SHEETS
RUDDICK CORPORATION AND SUBSIDIARIES

(dollars in thousands)
(unaudited)

March 29, September 28,
     2009      2008
ASSETS
Current Assets
       Cash and Cash Equivalents 30,142 29,759
       Accounts Receivable, Net of Allowance for Doubtful Accounts of $3,041 and $2,819 84,288 91,528
       Refundable Income Taxes 7,346 8,607
       Inventories 302,959   312,589
       Deferred Income Taxes 6,944 6,477
       Prepaid Expenses and Other Current Assets 23,226 28,196
              Total Current Assets 454,905   477,156
Property, Net 1,024,542 967,331
Investments 154,991 143,902
Deferred Income Taxes 864 361
Goodwill 8,169 8,169
Intangible Assets 25,030 26,355
Other Long-Term Assets 73,183 73,133
              Total Assets $ 1,741,684 $ 1,696,407
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
       Notes Payable $ 7,558 $ 11,150
       Current Portion of Long-Term Debt and Capital Lease Obligations 10,380 9,625
       Accounts Payable 213,422 236,649
       Dividends Payable   5,822 -
       Deferred Income Taxes 52 347
       Accrued Compensation 55,372 63,826
       Other Current Liabilities   98,503 89,206
              Total Current Liabilities 391,109 410,803
Long-Term Debt and Capital Lease Obligations 335,909 310,953
Deferred Income Taxes 15,483 10,877
Pension Liabilities 44,866 44,306
Other Long-Term Liabilities 90,805 89,685
Minority Interest 6,124 5,948
Commitments and Contingencies - -
Shareholders' Equity
       Common Stock, no par value - Shares Outstanding: 48,514,758 at March 29, 2009
              and 48,278,136 at September 28, 2008 86,346 83,252
       Retained Earnings 801,744 767,562
       Accumulated Other Comprehensive Income (Loss), Net of Income Taxes (30,702) (26,979)
       Total Shareholders' Equity 857,388 823,835
       Total Liabilities and Shareholders' Equity $ 1,741,684 $ 1,696,407

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 29, March 30, March 29, March 30,
     2009      2008      2009      2008
Net Sales 1,010,004 975,572 2,004,989 1,952,315
Cost of Sales 705,126 674,201 1,399,268 1,359,911
Selling, General and Administrative Expenses 265,856 257,295 524,899 505,442
Operating Profit 39,022 44,076 80,822 86,962
Interest Expense 4,135 4,950 9,024   9,911
Interest Income (43) (107)   (120) (197)
Net Investment (Gain) Loss (35) 41 (35) 95
Minority Interest   68 111 176 198
Income Before Taxes   34,897   39,081 71,777 76,955
Income Tax Expense 11,955 15,019 25,953 29,545
Net Income $ 22,942 $ 24,062 $ 45,824 $ 47,410
 
Net Income Per Share:
       Basic $ 0.48 $ 0.50 $ 0.96 $ 0.99
       Diluted $ 0.48 $ 0.50 $ 0.95 $ 0.98
 
Weighted Average Number of Shares of Common Stock Outstanding:
       Basic 47,972 47,815 47,932 47,834
       Diluted 48,287 48,265 48,288 48,314

See Notes to Consolidated Condensed Financial Statements (unaudited)

2


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

Common Stock Accumulated Other Total
Shares Common Retained Comprehensive   Shareholders' Comprehensive
  (No Par Value)     Stock     Earnings     Income (Loss)     Equity     Income
Balance at September 30, 2007 48,127,252 81,677 693,992 (39,059) 736,610
Exercise of stock options,
       including tax benefits of $1,375 135,922 3,386 - - 3,386
Directors' Stock Plan - (12) - - (12)
Share-based compensation 203,874 2,766 - - 2,766
Shares effectively purchased and
       retired for withholding taxes (28,257) (1,033) - - (1,033)
Shares purchased and retired (203,500) (6,601) - - (6,601)
Net earnings - - 47,410 - 47,410 $ 47,410
Dividends ($0.24 a share) - - (11,595) - (11,595)
Foreign currency translation
       adjustment, net of $484 for taxes - - - 2,027 2,027 2,027
Balance at March 30, 2008 48,235,291 $ 80,183 $ 729,807 $ (37,032) $ 772,958 $ 49,437
 
Balance at September 28, 2008 48,278,136 $ 83,252 $ 767,562 $ (26,979) $ 823,835
Exercise of stock options,
       including tax benefits of $287 68,111 1,381 - - 1,381
Directors' stock plan   - - - - -
Share-based compensation 211,528 2,877 - - 2,877
Shares effectively purchased and retired
       for withholding taxes (43,017)     (1,164) - - (1,164)
Net earnings - - 45,824 - 45,824   $ 45,824
Dividends ($0.24 a share) - -   (11,642) -   (11,642)
Unrealized loss on cash flow hedge,
       net of tax benefits of $180 - -   -     (276) (276) (276)
Postemployment benefits liability  
       adjustment, net of tax benefits of $29 - - - (76)   (76) (76)
Foreign currency translation adjustment,  
       net of tax benefits of $375 - - - (3,371) (3,371) (3,371)
Balance at March 29, 2009 48,514,758 $ 86,346 $ 801,744 $ (30,702) $ 857,388 $ 42,101

See Notes to Consolidated Condensed Financial Statements (unaudited)

3


CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
RUDDICK CORPORATION AND SUBSIDIARIES
(in thousands)
(unaudited)

26 Weeks Ended
March 29, March 30,
     2009      2008
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 45,824 $ 47,410
Non-Cash Items Included in Net Income
       Depreciation and Amortization 61,341   54,904
       Deferred Income Taxes 3,865 (4,005)
       Net (Gain) Loss on Sale of Property   (369) 68
       Impairment Losses -   113
       Share-Based Compensation 2,877 2,766
       Other, Net   323 208
Changes in Operating Accounts Utilizing Cash (1,261) (18,638)
Net Cash Provided by Operating Activities 112,600 82,826
 
INVESTING ACTIVITIES:
Capital Expenditures (109,964) (92,280)
Purchase of Other Investments (12,750) (27,352)
Proceeds from Sale of Property 3,080 3,071
Return of Partnership Investments 596 129
Investments in Company-Owned Life Insurance (656) (1,091)
Other, Net (174) (284)
Net Cash Used in Investing Activities (119,868) (117,807)
 
FINANCING ACTIVITIES:
Net Payments on Short-Term Debt Borrowings (2,687) (769)
Net Proceeds from (Payments on) Revolver Borrowings 24,200 (38,000)
Proceeds from Long-Term Debt Borrowings 1,470 100,077
Payments on Long-Term Debt and Capital Lease Obligations (8,950) (8,215)
Dividends Paid (5,820) (11,595)
Proceeds from Stock Issued 1,094 2,011
Share-Based Compensation Tax Benefits 287 1,375
Purchase and Retirement of Common Stock - (6,601)
Other, Net (1,165) (1,300)
Net Cash Provided by Financing Activities 8,429 36,983
Increase in Cash and Cash Equivalents 1,161 2,002
Effect of Foreign Currency Fluctuations on Cash (778) 409
Cash and Cash Equivalents at Beginning of Period 29,759 26,747
Cash and Cash Equivalents at End of Period $ 30,142 $ 29,158
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
       Interest, Net of Amounts Capitalized $ 9,139 $ 9,308
       Income Taxes 20,340 26,356
NON-CASH ACTIVITY:
       Assets Acquired under Capital Leases 8,560 19,276

See Notes to Consolidated Condensed Financial Statements (unaudited)

4


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

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 United States, including Delaware and the District of Columbia. 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. To the extent that non-affiliated parties held minority equity investments in joint ventures of the Company, such investments are classified as minority interest.

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 2008 Annual Report on Form 10-K filed with the SEC on November 21, 2008 (“Company’s 2008 Annual Report”).

The Company’s Consolidated Condensed Balance Sheet as of September 28, 2008 has been derived from the audited Consolidated Balance Sheet as of that date. The results of operations for the 26 weeks ended March 29, 2009 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.

Derivative Instruments
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.

Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, defines derivatives, requires that derivatives be carried at fair value on the balance sheet and provides for hedge accounting when certain conditions are met. In accordance with this standard, the Company’s derivative financial instruments are recognized on the balance sheet at fair value. Changes in the fair value of derivative instruments designated as “cash flow” hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income, net of tax effects. Ineffective portions of cash flow hedges, if any, are recognized in current period earnings. Other comprehensive income or loss is reclassified into current period earnings when the hedged transaction affects earnings.

The Company assesses, both at the inception of the hedge and on an ongoing basis, whether derivatives used as hedging instruments are highly effective in offsetting the changes in the cash flow of the hedge items. If it is determined that a derivative is not highly effective as a hedge or ceases to be highly effective, the Company will discontinue hedge accounting prospectively.

During the second quarter of fiscal 2009, the Company entered into a three-year interest rate swap agreement with a notional amount of $40 million to effectively fix the interest rate on $40 million of the Company’s term loan at 1.81%, excluding the applicable margin and associated fees. The interest rate swap was designated as a cash flow hedge.

5


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.

Counterparty Credit Risk
By entering into derivative instrument contracts, the Company exposes itself, from time to time, to counterparty credit risk. Counterparty credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is in an asset position, the counterparty has a liability to the Company, which creates credit risk for the Company. The Company attempts to minimize this risk by selecting counterparties with investment grade credit ratings, limiting its exposure to any single counterparty and regularly monitoring its market position with each counterparty.

Credit-Risk Related Contingent Features
The Company’s derivative instrument does not contain any credit-risk related contingent features.

The following tables present the required quantitative disclosures under SFAS No.157 and SFAS No. 161, on a combined basis, for the Company’s financial instrument, the interest rate swap derivative, designated as a cash flow hedge (in thousands):

  Fair Value Measurements at March 29, 2009
  Quoted Prices in Significant
  Active Markets for   Significant Other   Unobservable
  March 29, 2009 Identical Instruments   Observable Inputs Inputs
    Carrying Value      (Level 1)      (Level 2)      (Level 3)
Interest rate swap (included with  
       Other Long-Term Liabilities on
       the balance sheet) 456   $ -   $ 456   $ -

  13 Weeks Ended 26 Weeks Ended
  March 29,   March 30, March 29, March 30,
  2009      2008           2009      2008
Loss recognized in other comprehensive      
       income $ 456   - $ 456  -

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 29, 2009 and March 30, 2008 (in thousands):

13 Weeks Ended           26 Weeks Ended
March 29, March 30, March 29, March 30,
2009      2008      2009      2008
Net Sales:  
       Retail Grocery 949,427 893,064   1,878,354 1,789,668
       Industrial Thread   60,577   82,508 126,635   162,647
       Consolidated  $ 1,010,004 $ 975,572 $ 2,004,989 1,952,315
 
Operating Profit (Loss):
       Retail Grocery $ 45,044 $ 46,364 $ 89,351 90,599
       Industrial Thread (4,570) (710) (5,671) (480)
       Corporate (1,452) (1,578) (2,858) (3,157)
       Consolidated  $ 39,022 $ 44,076 $ 80,822 86,962

6


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

  13 Weeks Ended 26 Weeks Ended
  March 29, March 30, March 29, March 30,
  2009      2008           2009      2008
Basic EPS:                 
       Net income  $   22,942 $   24,062 $   45,824 $   47,410
       Weighted average common shares outstanding   47,972   47,815   47,932     47,834
       Basic EPS $ 0.48 $ 0.50 $ 0.96 $ 0.99
 
Diluted EPS:                 
       Net income  $ 22,942 $ 24,062 $ 45,824 $ 47,410
       Weighted average common shares outstanding   47,972   47,815   47,932   47,834
       Net potential common share equivalents - stock options   108     268   131   291
       Net potential common share equivalents - stock awards   207   182   225   189
       Weighted average common shares outstanding   48,287   48,265     48,288   48,314
       Diluted EPS  $ 0.48 $ 0.50 $ 0.95 $ 0.98
 
Excluded from the calculation of common share equivalents:                
       Anti-dilutive common share equivalents – stock options   10   4   10   2
       Anti-dilutive common share equivalents – stock awards   50   -   -   1

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 139,000 performance shares for each of the periods ended March 29, 2009 and March 30, 2008 were excluded from the computation of diluted shares.

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 29,   March 30,   March 29,   March 30,
  2009      2008           2009      2008
Pension Plan:               
       Service cost (income) $   (171)   $   387   $   126   $ 794
       Interest cost    5,251     4,235     9,091     8,505
       Expected return on plan assets   (5,258)     (4,666)     (9,278)     (9,299)
       Amortization of prior service cost   44     56     78     110
       Recognized net actuarial loss   -     1,058     -     2,212
       Net periodic pension expense (income) $   (134)   $   1,070   $   17   $ 2,322
 
SERP:              
       Service cost  $   166   $   205   $   332   $ 411
       Interest cost    529     473     1,059     945
       Amortization of prior service cost   62     62     124     124
       Recognized net actuarial loss   -     115     -     230
       Net periodic pension expense $   757   $   855   $   1,515   $ 1,710

Expense related to the Savings Plan amounted to $5,072,000 and $5,359,000 for the 13 weeks and $10,620,000 and $9,820,000 for the 26 weeks ended March 29, 2009 and March 30, 2008, respectively.

7


As previously disclosed in the Notes to the Consolidated Financial Statements in the Company’s 2008 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 contributed $0.5 million to its Pension Plan in the first quarter of fiscal 2009 and presently anticipates contributing an additional $7.0 million in the third quarter of fiscal 2009, based on preliminary information. The actual contribution will be determined based on the final actuarial calculations, plan asset performance, possible changes in law and other factors.

Contributions to the Company’s SERP are equal to the benefit payments made during the year. The Company has contributed $716,000 during the 26 weeks ended March 29, 2009, and anticipates contributing approximately $715,000 more for expected future benefit payments during the remainder of fiscal 2009.

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 2008 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 29, 2009 and March 30, 2008, 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):

Stock Awards  March 29, 2009 March 30, 2008
  Shares      WAGFV           Shares      WAGFV
Non-vested at beginning of period  589   $   30.34 477   $   25.17
Granted  268   26.54 278   36.69
Vested  (128)     26.96 (87)     23.45
Forfeited  (54)   36.11 (65)   28.64
Non-vested at end of period  675   29.01 603   30.35

The total fair value of stock awards vested during the 26 weeks ended March 29, 2009 and March 30, 2008 was $3,484,000 and $3,190,000, 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 $1,478,000 and $1,450,000 for the 13 weeks and $2,866,000 and $2,746,000 for the 26 weeks ended March 29, 2009 and March 30, 2008, respectively. Unamortized expense related to these awards as of March 29, 2009 amounted to $10,609,000 and have a weighted average recognition period of 2.19 years.

A summary of the status of the Company's stock option plans as of March 29, 2009 and March 30, 2008, changes during the 26-week periods ending on those dates and related weighted average exercise price is presented below (shares in thousands):

Stock Options  March 29, 2009 March 30, 2008
  Shares           Price           Shares           Price
Outstanding at beginning of period  483   $   16.40 731   $   16.01
Granted  -     - 10     35.24
Exercised  (68)   16.24 (140)   16.57
Forfeited  -   -   (5)   15.71
Outstanding at end of period  415   16.42 596   16.40
Options exercisable at end of period  415   16.42 494   16.30

As of March 29, 2009, 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 Shareholders’ 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 29, 2009 and March 30, 2008, and stock options exercised during the periods ending on those dates is presented below (in thousands):

  March 29, 2009           March 30, 2008
Intrinsic value of outstanding options at end of period  $   2,829 $   12,066
Intrinsic value of options exercisable at end of period    2,829   10,052
Intrinsic value of stock options exercised during the 26-week period    726 2,754

Compensation costs related to stock options amounted to zero and $132,000 for the 13 weeks ended March 29, 2009 and March 30, 2008, respectively. For the 26 weeks ended March 29, 2009 and March 30, 2008, stock option compensation costs amounted to $12,000 and $20,000, respectively. The fair value of the stock options was estimated at the date of grant using the Black-Scholes option pricing model. The Company used historical data to estimate the expected life, volatility and expected forfeitures in valuing the stock options. The risk-free rate was based on the U.S. Treasury rate in effect at the time of grant. There were no stock options granted during fiscal 2009. The weighted average fair value for stock options granted in fiscal 2008 was $11.28 per option and was based on the following weighted average assumptions: an expected life of 6.32 years; a risk-free interest rate of 3.23%; volatility of 31.51%; and a dividend yield of 1.38%.

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

  March 29, 2009           September 28, 2008
Finished Goods  $   278,400   $   281,952
Raw Materials and Supplies  19,496   23,901
Work in Process    5,063     6,736
Total Inventories  $ 302,959 $ 312,589

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

  March 29, 2009           September 28, 2008
Acquired favorable operating leases  $   18,170   $   18,170
Customer lists  5,534   5,534
Land use rights – foreign operations  4,449   4,439
Non-compete agreements    3,732   4,054
Trademarks, licenses and other  2,554     2,554
Total intangibles  34,439   34,751
Accumulated amortization  (9,409)   (8,396)
Total intangible assets, net of accumulated amortization  $ 25,030   $ 26,355

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 $683,000 and $676,000 for the 13 weeks and $1,335,000 and $1,320,000 for the 26 weeks ended March 29, 2009 and March 30, 2008, respectively. Intangible assets have remaining useful lives from 1 year to 47 years. Projected amortization expense for intangible assets existing as of March 29, 2009 is: $1,278,000 for the remainder of fiscal 2009 and $2,340,000, $1,902,000, $1,624,000 and $1,406,000 for fiscal years 2010, 2011, 2012 and 2013, respectively.

Goodwill
Goodwill is recorded by A&E. In accordance with Statement SFAS No. 142, “Goodwill and Other Intangible Assets,” A&E conducts an annual review during the first fiscal quarter to determine possible goodwill impairment. The most recent review was conducted in the first quarter of fiscal 2009, resulting in no goodwill impairment charge being required. In addition, A&E conducts quarterly evaluations for goodwill impairment triggering events and if such events occur, will conduct a test to determine if there is any goodwill impairment.

Income Taxes
The Company and its subsidiaries file a consolidated U.S. federal income tax return. The U.S. federal statute of limitations remains open for the fiscal year 1999 and onward with fiscal years 1999 to 2004 under examination by the Internal Revenue Service (the “IRS”). In connection with the fiscal years under examination, the Company has filed a protest with respect to certain IRS-proposed adjustments with which it does not agree. Those adjustments are being addressed with the Appeals Division of the IRS. Although there have been discussions with the Appeals Division, the timing of any resolution is currently uncertain. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years.

9


Although the timing of any resolution of the tax matters for those years currently in appeals is uncertain, the Company believes it is reasonably possible that a settlement could occur within the next twelve months and has included the related liabilities with Other Current Liabilities in the Company’s Consolidated Balance Sheets. Any outcomes and the timing of audit settlement are subject to significant uncertainty; however, management believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open tax years.

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 merchants with recourse. These various leases expire over the next 13 years and the future minimum lease payments totaling $55,417,000 over this period have been assumed by the other merchants.

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.

10


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 United States, including Delaware and 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 markets continue to experience new store opening activity and aggressive 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. These efforts along with Harris Teeter’s new store development program have resulted in overall gains in market share within Harris Teeter’s primary markets.

Harris Teeter has continued with its planned new store development program. Since the end of the second quarter of fiscal 2008, Harris Teeter has opened 13 new stores while closing 3 stores for a net addition of 10 stores. Harris Teeter operated 179 stores at March 29, 2009. Much of Harris Teeter’s new store growth is focused on its expanding Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. The new store activity, and its associated pre-opening and incremental start-up costs, has required additional borrowings under the Company’s revolving credit facility.

Business conditions for A&E’s customers have also been negatively impacted by the current economic environment and the cautious consumer. A&E has experienced a significant decline in sales as a result of the serious global economic conditions facing their customers in the apparel and non-apparel markets, including the automotive segment. In addition, apparel production in the Americas has continued to decline due to the continued 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 and approximately 77% for the first two months in 2009. This has greatly impacted A&E operations in the Americas. As a result, 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. During the first quarter of fiscal 2009, 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. 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.

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.

11


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 29, 2009 and March 30, 2008. 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 29, 2009   March 30, 2008  
      % to Total     % to Total   % Inc.
         Net Sales           Net Sales      (Dec.)
Net Sales           
       Harris Teeter  $   949,427   94.0   $   893,064   91.5     6.3
       American & Efird    60,577   6.0   82,508   8.5   (26.6)
              Total  $  1,010,004   100.0   $ 975,572   100.0   3.5
 
Gross Profit           
       Harris Teeter  $  295,006   29.21   $ 283,955   29.11   3.9
       American & Efird    9,872   0.98   17,416   1.78   (43.3)
              Total    304,878   30.19   301,371   30.89   1.2
 
Selling, General and Admin. Expenses           
       Harris Teeter    249,962   24.75   237,591   24.35   5.2
       American & Efird    14,442   1.43   18,126   1.86   (20.3)
       Corporate    1,452   0.14   1,578   0.16   (8.0)
              Total    265,856   26.32   257,295   26.37   3.3
 
Operating Profit (Loss)           
       Harris Teeter    45,044   4.46   46,364   4.75   (2.8)
       American & Efird    (4,570)   (0.45)   (710)   (0.07)   n.m.
       Corporate    (1,452)   (0.14)   (1,578)   (0.16)   (8.0)
              Total    39,022   3.87   44,076   4.52   (11.5)
 
       Other Expense (Income), net    4,125   0.41   4,995   0.51   (17.4)
       Income Tax Expense    11,955   1.19   15,019   1.54   (20.4)
       Net Income  $  22,942   2.27   $ 24,062   2.47   (4.7)

       n.m. – not meaningful

As depicted in the table above, the increase in consolidated sales was attributable to sales increases at Harris Teeter and was partially offset by a decrease in sales at A&E, when compared to the prior year. A&E’s foreign sales for the second quarter of fiscal 2009 represented 3.2% of the consolidated net sales of the Company compared to 4.6% 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.

Gross profit increased during the second quarter of fiscal 2009 over the prior year period as a result of gross profit increases at Harris Teeter that were offset, in part, by a gross profit decline 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 increased when compared to the prior year period as a result of the increased operating costs at Harris Teeter driven by store expansion. The increased expenses were partially offset by reduced SG&A expenses at A&E and Corporate. 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, investment gains and losses, and minority interest. Interest expense decreased over the prior year period by $0.8 million as a result of lower average interest rates on outstanding debt balances.

12


The effective income tax rate for the second quarter of fiscal 2009 was 34.3%, as compared to 38.4% in the prior year period. 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 which management now believes will be realized.

As a result of the items discussed above, consolidated net income for the second quarter of fiscal 2009 decreased by $1.1 million, or 4.7%, over the prior year period and earnings per diluted share decreased by 4.0% to $0.48 per share in fiscal 2009 from $0.50 per share in fiscal 2008.

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 29, 2009 and March 30, 2008. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):

  March 29, 2009 March 30, 2008
    % to   % to % Inc.
              Sales                       Sales           (Dec.)
   Net Sales $   949,427 100.00 $   893,064 100.00   6.3
   Cost of Sales    654,421 68.93 609,109 68.20 7.4
   Gross Profit  295,006 31.07     283,955 31.80 3.9
   SG&A Expenses 249,962 26.33 237,591   26.61 5.2
   Operating Profit $ 45,044 4.74 $ 46,364 5.19 (2.8)

Net sales increased by 6.3% in the second quarter of fiscal 2009, as compared to the prior year period. The increase in net sales was attributable to incremental new stores and comparable store sales increases. The increase in sales from new stores exceeded the loss of sales from closed stores by $58.5 million for the comparable periods. Comparable store sales (see definition below) increased 0.09% ($0.8 million) in the second quarter of fiscal 2009, as compared to 3.28% ($25.8 million) in the second quarter of fiscal 2008. Management believes that Harris Teeter’s comparable store sales for the quarter were negatively impacted by the changing consumer buying habits created by the current economic environment and the timing of the Easter holiday which will fall into Harris Teeter’s third fiscal quarter of 2009. Management also believes that comparable sales for the quarter were positively impacted by the timing of the New Year’s holiday. As previously disclosed, the New Year’s holiday is included in the second fiscal quarter of 2009, whereas in fiscal 2008, the New Year’s holiday was included in the first quarter. On a comparable 11-week basis which excludes New Year’s and Easter from the second quarter of both fiscal 2008 and 2009, comparable store sales increased by 0.11%. In addition, during the second quarter of fiscal 2009, Harris Teeter realized a higher percentage of sales of its lower priced store brand products, which management believes negatively impacted comparable store sales. Store brand product penetration was 24.80% during the second quarter of fiscal 2009, an increase of 62 basis points over the second quarter of fiscal 2008. The number of shopping visits was up, however the average ticket size was down in the second quarter of fiscal 2009, as compared to the prior year. In addition, Harris Teeter experienced an average increase in active households of 1.99% per comparable store (based on VIC data), evidencing a growing customer base in those stores. Comparable store sales were also negatively impacted by the cannibalization created by Harris Teeter’s strategy of opening additional stores in its core markets that have a close proximity to existing stores. However, management expects these stores, and any similar new additions in the foreseeable future, to have a strategic benefit of enabling Harris Teeter to capture sales and expand market share as the markets it serves continue to grow.

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. 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 in the second quarter of fiscal 2009, declined 73 basis points from the prior year as a result of additional promotional activity designed to provide more value to Harris Teeter’s customers. Management continues to adjust Harris Teeter’s promotional spending programs in response to the changing purchasing habits of Harris Teeter’s customers. The decline in the gross profit margin was offset, in part, by management’s emphasis on distribution and manufacturing cost controls and decreasing fuel costs.

13


SG&A expenses as a percent to sales, for the second quarter of fiscal 2009 decreased 28 basis points from the prior year period as a result of the leverage created through sales gains that apply against fixed costs, improved labor management and additional cost controls in support departments. The sales increases along with a continued emphasis on operational efficiencies and cost controls have provided the leverage to partially offset the additional costs associated with Harris Teeter’s increased promotional activity and new store program (pre-opening costs and incremental start-up costs), increased credit and debit card fees and other occupancy costs. 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 $3.4 million (0.36% to sales) for the second quarter of fiscal 2009 as compared to $4.2 million (0.47% to sales) for the second quarter of fiscal 2008. Pre-opening costs fluctuate between periods depending on the new store opening schedule.

As a result of the sales and cost elements described above, operating profit declined slightly over the prior year period. Harris Teeter continues to concentrate on expanding 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 29, 2009 and March 30, 2008. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):

  March 29, 2009   March 30, 2008  
      % to     % to   % Inc.
                 Sales                     Sales           (Dec.)
   Net Sales  $   60,577   100.00   $   82,508   100.00   (26.6)
   Cost of Sales    50,705   83.70   65,092   78.89   (22.1)
   Gross Profit    9,872   16.30   17,416   21.11   (43.3)
   SG&A Expenses    14,442   23.84   18,126   21.97   (20.3)
   Operating Profit (Loss)  $  (4,570)   (7.54)   $ (710)   (0.86)   n.m.

Net sales decreased 26.6% in the second quarter of fiscal 2009 as compared to the prior year period. The decrease was driven by sales declines between the second quarters of fiscal 2009 and fiscal 2008 for all regions. Foreign sales accounted for approximately 53% of total A&E sales in the second quarter of fiscal 2009, as compared to approximately 55% in the second quarter of fiscal 2008. 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 2009 decreased from the second quarter of fiscal 2008, as a result of weak sales and poor overhead absorption in A&E’s U.S. operations and certain other foreign operations. The shifting of apparel production from the Americas to Asia has continued and management is focused on optimizing costs and manufacturing capacities in its domestic and foreign operations.

SG&A expenses in the second quarter of fiscal 2009 decreased from the second quarter of fiscal 2008; however SG&A expenses as a percent to sales increased primarily due to the decrease in sales that provide the leverage to offset fixed expenses. A&E has realized some SG&A expense reductions through the consolidation and rationalization of A&E's U.S. operations. Net profit from non-consolidated subsidiaries is recorded as a reduction to SG&A expenses and amounted to $0.2 million in the second quarter of fiscal 2009, as compared to $0.5 million in the second quarter of fiscal 2008.

A&E’s operating loss for the second quarter of fiscal 2009 resulted from a challenging automotive and retail apparel environment in many parts of the world and its impact on A&E’s customers. Although A&E has significantly reduced expenses, it was not enough to offset the decline in sales and reduced operating schedules. Management at A&E intends to continue to reduce expenses at its U.S. operations and certain foreign operations to more closely match sales volumes.

14


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 29, 2009 and March 30, 2008. 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 29, 2009 March 30, 2008
% to Total % to Total % Inc.
     Net Sales           Net Sales      (Dec.)
Net Sales
      Harris Teeter $   1,878,354 93.7 $   1,789,668 91.7 5.0
      American & Efird 126,635 6.3 162,647 8.3 (22.1)
            Total $ 2,004,989 100.0 $ 1,952,315 100.0 2.7
 
Gross Profit
      Harris Teeter $ 583,355 29.09 $ 557,382 28.55 4.7
      American & Efird 22,366 1.12 35,022 1.79 (36.1)
            Total 605,721 30.21 592,404 30.34 2.2
 
Selling, General and Admin. Expenses
      Harris Teeter   494,004 24.64 466,783 23.91 5.8
      American & Efird 28,037 1.40 35,502 1.82 (21.0)
      Corporate 2,858 0.14 3,157 0.16 (9.5)
            Total 524,899 26.18 505,442 25.89 3.8
 
Operating Profit (Loss)
      Harris Teeter 89,351 4.45 90,599 4.64 (1.4)
      American & Efird (5,671) (0.28) (480) (0.03) n.m.
      Corporate (2,858) (0.14) (3,157) (0.16) (9.5)
            Total 80,822 4.03 86,962 4.45 (7.1)
 
Other Expense, net 9,045 0.45 10,007 0.51 (9.6)
Income Tax Expense 25,953 1.29 29,545 1.51 (12.2)
Net Income $ 45,824 2.29 $ 47,410 2.43 (3.3)

As depicted in the table above, the increase in consolidated sales was attributable to sales increases at Harris Teeter which were partially offset by a decrease in sales at A&E when compared to the prior year. A&E’s foreign sales for the 26 weeks ended March 29, 2009, represented 3.4% of the consolidated net sales of the Company compared to 4.6% 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.

Gross profit increased during the first half of fiscal 2009 over the prior year period as a result of gross profit increases at Harris Teeter that were offset, in part, by a gross profit decline 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 increased during the first half of fiscal 2009, when compared to the prior year period, as a result of the increased operating costs at Harris Teeter driven by store expansion. The increased expenses were partially offset by reduced SG&A expenses at A&E and Corporate. 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, investment gains and losses, and minority interest. Interest expense for the 26 week period decreased over the prior year period by $0.9 million. The decrease in interest expense was driven by lower average interest rates on outstanding debt balances. Average outstanding debt balances actually increased between the comparable periods as a result of increased borrowings under the Company’s credit facility and new capital leases entered into in support of Harris Teeter’s new store development program.

15


The effective income tax rate for the 26 weeks ended March 29, 2009 was 36.2% as compared to 38.4% in the prior year period. 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 which management now believes will be realized.

As a result of the items discussed above, consolidated net income for the 26 weeks ended March 29, 2009 decreased by $1.6 million, or 3.3%, over the prior year period and earnings per diluted share decreased by 3.1% to $0.95 per share in fiscal 2009 from $0.98 per share in fiscal 2008.

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 29, 2009 and March 30, 2008. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):

March 29, 2009 March 30, 2008
% to % to % Inc.
      Sales             Sales       (Dec.)
Net Sales $   1,878,354 100.00 $   1,789,668 100.00 5.0
Cost of Sales 1,294,999 68.94 1,232,286 68.86 5.1
Gross Profit 583,355 31.06 557,382 31.14 4.7
SG&A Expenses 494,004 26.30 466,783 26.08 5.8
Operating Profit $ 89,351   4.76 $ 90,599   5.06   (1.4)

Net sales increased by 5.0% for the 26 weeks of fiscal 2009, 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 $112.6 million for the comparable periods. Comparable store sales, as previously defined, decreased 1.01% ($17.7 million) for the 26 weeks ended March 29, 2009, as compared to an increase of 3.83% ($59.4 million) for the 26 weeks ended March 30, 2008. Management believes that Harris Teeter’s comparable store sales for the 26-week period of fiscal 2009 were negatively impacted by the changing consumer buying habits created by the current economic environment and the timing of the Easter holiday which will fall into Harris Teeter’s third quarter of fiscal 2009, as opposed to the second quarter of fiscal 2008. On a comparable 25-week basis which excludes the Easter holiday in both periods, comparable store sales decreased by 0.71%. In addition, during the first half of fiscal 2009, Harris Teeter realized a higher percentage of sales of its lower priced store brand products, which management believes negatively impacted comparable store sales. Store brand product penetration was 24.84% during the first half of fiscal 2009, an increase of 43 basis points over the prior year period. Both the average ticket size and the number of shopping visits were down during the first half of fiscal 2009 as compared to the prior year period; however, Harris Teeter experienced an average increase in active households of 1.15% per comparable store (based on VIC data), evidencing a growing customer base in those stores. Comparable store sales were also negatively impacted by the cannibalization created by Harris Teeter’s strategy of opening additional stores in its core markets that have a close proximity to existing stores. However, management expects these stores, and any similar new additions in the foreseeable future, to have a strategic benefit of enabling Harris Teeter to capture sales and expand market share as the markets it serves continue to grow.

For the first half of fiscal 2009, gross profit as a percent to sales declined 8 basis points from the prior year as a result of additional promotional activity designed to provide more value to Harris Teeter’s customers. Management continues to adjust Harris Teeter’s promotional spending programs in response to the changing purchasing habits of Harris Teeter’s customers. The decline in the gross profit margin was offset, in part, by management’s emphasis on distribution and manufacturing cost controls and decreasing fuel costs.

SG&A expenses, and its percent to sales, for the first half of fiscal 2009 increased from the prior year period as a result of incremental costs associated with Harris Teeter’s new store program (pre-opening costs and incremental start-up costs), increased credit and debit card fees and other occupancy costs. The increased costs were partially offset by improved labor management and additional cost controls in support departments. 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 $7.4 million (0.39% to sales) for the 26 weeks ended March 29, 2009, as compared to $7.8 million (0.44% to sales) for the 26 weeks ended March 30, 2008. Pre-opening costs fluctuate between periods depending on the new store opening schedule.

As a result of the sales and cost elements described above, operating profit declined slightly over the prior year period. Harris Teeter continues to concentrate on expanding within its core markets, which management believes have greater potential for improved returns on investment in the foreseeable future.

16


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 29, 2009 and March 30, 2008. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):

March 29, 2009 March 30, 2008
% to % to % Inc.
      Sales             Sales       (Dec.)
Net Sales $   126,635 100.00 $   162,647 100.00 (22.1)
Cost of Sales  104,269 82.34 127,625 78.47 (18.3)
Gross Profit  22,366 17.66 35,022 21.53 (36.1)
SG&A Expenses 28,037 22.14 35,502 21.83 (21.0)
Operating Profit (Loss) $ (5,671)   (4.48) $ (480)   (0.30)   n.m.

Net sales decreased 22.1% for the 26 weeks ended March 29, 2009, as compared to the prior year period. The decrease was driven primarily by sales declines between the comparable 26 week periods of fiscal 2009 and fiscal 2008 for all regions. Foreign sales accounted for approximately 55% of total A&E sales for the 26-week periods of both fiscal 2009 and fiscal 2008. 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 net sales, decreased during the 26 weeks ended March 29, 2009 from the prior year period primarily as a result of weak sales and poor overhead absorption in the U.S. operations and certain other foreign operations. The shifting of apparel production from the Americas to Asia has continued and management is focused on optimizing costs and manufacturing capacities in its domestic and foreign operations.

SG&A expenses during the first half of fiscal 2009 decreased from the prior year period; however SG&A expenses as a percent to sales increased primarily due to the decrease in sales that provide the leverage to offset fixed expenses. A&E has realized some SG&A expense reductions through the consolidation and rationalization of A&E's U.S. operations. Net profit from non-consolidated subsidiaries is recorded as a reduction to SG&A expenses and amounted to $1.8 million during the 26 weeks ended March 29, 2009, as compared to $0.9 million during the 26 weeks ended March 30, 2008. The increase in net profit from non-consolidated subsidiaries was driven primarily by A&E’s recent investments in Vardhman. As previously disclosed, SG&A expenses for the first half of fiscal 2008 included an expense reversal of approximately $0.9 million for costs associated with certain import duties levied against A&E’s operations in Mexico that had been previously accrued by A&E.

A&E’s operating loss for the first half of fiscal 2009 resulted from a challenging automotive and retail apparel environment in many parts of the world and its impact on A&E’s customers. Although A&E has significantly reduced expenses, it was not enough to offset the decline in sales and reduced operating schedules. Management at A&E intends to continue to reduce expenses at its U.S. operations and certain foreign operations to more closely match sales volumes.

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 12 new stores (1 of which will replace an existing store) and complete the major remodeling on 1 additional store, which will be expanded in size, during the remainder of fiscal 2009. The new store development program for fiscal 2009 is expected to result in a 9.3% increase in retail square footage as compared to an 8.5% increase in fiscal 2008. Due to the current economic environment, Harris Teeter has reduced or delayed the number of new store openings originally planned for the current year, as well as for fiscal 2010 and beyond. 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 2009 are presently estimated at approximately $212 million. Harris Teeter’s anticipated capital expenditures for fiscal 2010 are currently estimated at approximately $150 million, 29% less than fiscal 2009, and includes 15 new store openings (2 of which will replace existing stores). The new store program 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.

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To support Harris Teeter’s growing store base in Virginia, Maryland and Washington, D.C., the Company recently identified a site for a new distribution center outside of Fredericksburg, VA. Pending satisfactory due diligence, Harris Teeter anticipates construction in fiscal years 2011 and 2012 with an opening sometime in fiscal 2012. The estimated cost for the facility and equipment is approximately $100 million. The addition of this facility will result in significant transportation expense savings.

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. A&E will find it difficult to generate significant improvements in profitability in the absence of a more favorable automotive and retail environment. If economic conditions continue to decline beyond current expectations and an improvement in conditions for the U.S. operations cannot be reasonably projected to improve, then there could be a non-cash impairment charge for goodwill recorded by A&E. 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 continues to evaluate ways to further rationalize A&E’s U.S. 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 the remainder of fiscal 2009 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 as a result of the challenging economic environment. The retail grocery market remains intensely competitive and the textile and apparel environment faces additional challenges during this recessionary period. Further operating improvement will be dependent on the Company’s ability to increase Harris Teeter’s market share, rationalize A&E’s operations, 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 fixed assets, cash equivalents 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 upstream dividends from its operating subsidiaries. There are no restrictions on the subsidiary dividends, which have historically been determined as a percentage of net income of each subsidiary.

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 29, 2009, net cash provided by operating activities was $112.6 million, or $29.8 million greater than the comparable period last year. Investing activities during the 26 weeks ended March 29, 2009 required net cash of $119.9 million, up $2.1 million from the comparable prior year period. Financing activities during the 26 weeks ended March 29, 2009 provided $8.4 million of cash and included a $24.2 million increase in borrowings under the Company’s credit facility.

During the 26 weeks ended March 29, 2009, consolidated capital expenditures totaled $110.0 million and were comprised of $108.7 million for Harris Teeter and $1.3 million for A&E. During this same period, Harris Teeter made an additional net investment of $0.2 million ($3.3 million additional investments less $3.1 million received from property investment sales and partnership distributions) in connection with the development of certain of its new stores. Additionally, A&E invested an additional $8.7 million in Vardhman and an additional $0.7 million in its joint venture in Brazil.

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Fiscal 2009 consolidated capital expenditures are expected to total approximately $216 million, consisting of approximately $212 million for Harris Teeter and approximately $4 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 2009 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 29, 2009, the Company was in compliance with all financial covenants of the credit agreement and $53.2 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 $26.1 million as of March 29, 2009. In addition to the $270.7 million of borrowings available under the Revolving Credit Facility as of March 29, 2009, the Company has the capacity to borrow up to an aggregate amount of $44.5 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 29, 2009, 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 28, 2008, as disclosed in the table under the heading “Contractual Obligations and Commercial Commitments” in the Company's 2008 Annual Report.

In connection with the closing of certain store locations, Harris Teeter has assigned leases to several other merchants with recourse. These leases expire over the next 13 years, and the future minimum lease payments of approximately $55.4 million, in the aggregate, over that future period have been assumed by these merchants. 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: $4.2 million for the remainder of fiscal 2009 (26 stores), $8.0 million in fiscal 2010 (26 stores), $7.6 million in fiscal 2011 (22 stores), $7.2 million in fiscal 2012 (21 stores), $6.1 million in fiscal 2013 (17 stores) and $22.3 million in 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 $26.1 million at March 29, 2009.

Although the Company currently expects to have no required contribution to its Pension Plan during fiscal 2009, it currently anticipates contributing an additional $7.0 million in the third fiscal quarter in order to increase the funding level in the plan. The actual contribution will be determined based on the final actuarial calculations, plan asset performance, possible changes in law and other factors.

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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 2008 Annual Report. There have been no material changes to any of the critical accounting policies contained therein.

New Accounting Standards

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) is a revision of SFAS No. 141 that requires most identifiable assets, liabilities, noncontrolling interest, and goodwill acquired in a business combination to be recorded at “full fair value.” This new standard applies to all business combinations, including combinations among mutual entities and combinations by contract alone. SFAS No. 141(R) becomes effective for the Company’s 2010 fiscal year beginning on September 28, 2009 and will be applied to business combinations occurring after the effective date.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” SFAS No. 160 requires noncontrolling interest (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. This new standard applies to the accounting for noncontrolling interest and transactions with noncontrolling interest holders in consolidated financial statements and will become effective for the Company’s 2010 fiscal year beginning on September 28, 2009. The Company is continuing to evaluate the impact of SFAS No. 160 on its consolidated financial statements.

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 2008 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.

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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;
  • 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.

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. 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 2008 Annual Report except for the Company entering into a three-year interest rate swap agreement with a notional amount of $40 million to effectively fix the interest rate on $40 million of the Company’s term loan at 1.81%, excluding the applicable margin and associated fees.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. As of March 29, 2009, 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.

21


(b) Changes in internal control over financial reporting. During the Company’s second quarter of fiscal 2009, 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 2008 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 29, 2009.

The following table summarizes the Company’s purchases of its common stock during the quarter ended March 29, 2009.

Total Number of Maximum Number
Total Average Shares Purchased as of Shares that May
Number of Price Part of Publicly Yet Be Purchased
Shares Paid per Announced Plans or Under the Plans or
Period Purchased       Share       Programs (1)       Programs
December 29, 2008 to February 1, 2009 - 0 - n.a. - 0 -   2,822,469
February 2, 2009 to March 1, 2009 - 0 -   n.a.   - 0 - 2,822,469
March 2, 2009 to March 29, 2009 - 0 - n.a. - 0 - 2,822,469
Total - 0 - n.a. - 0 - 2,822,469

      (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 29, 2009, the Company had purchased 1,817,520 shares under this authorization and no shares were purchased during the quarter ended March 29, 2009. The stock buyback program has no set expiration or termination date.

Item 3. Defaults Upon Senior Securities

None

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Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders of Ruddick Corporation was held on February 19, 2009 (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 eleven directors for one-year terms to expire in 2010. There was no solicitation in opposition to the nominees as listed in the proxy statement, and all such nominees were elected. The following information is furnished with respect to each director elected at the meeting:

Director Elected at Annual Meeting           Shares Voted for Election           Shares Withholding Authority 
For a one-year term:     
John R. Belk  39,181,662  180,041 
John P. Derham Cato  39,168,747  192,956 
Alan T. Dickson  39,181,290  180,413 
Thomas W. Dickson  39,163,634  198,069 
James E. S. Hynes  39,175,362  186,341 
Anna Spangler Nelson  39,187,285  174,418 
Bailey W. Patrick    39,312,791  48,912 
Robert H. Spilman, Jr.  38,801,924  559,779 
Harold C. Stowe  39,187,187  174,516 
Isaiah Tidwell  39,312,866  48,837 
William C. Warden, Jr.  39,312,963    48,740 

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 September 27, 2009 with 39,056,894 shares voting for the ratification, 283,221 shares voting against the ratification and 21,585 shares abstaining.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit   
Number           Description of Exhibit 
10.1 First Amendment to the Ruddick Corporation Director Deferral Plan.*
 
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.
 
* Indicates management contract or compensatory plan required to be filed as an Exhibit.

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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: May 1, 2009  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. Sequential
(per Item 601 of Reg. S-K) Description of Exhibit   Page No.
10.1 First Amendment to the Ruddick Corporation Director Deferral Plan.
 
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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