HARRIS TEETER SUPERMARKETS, INC. 10-Q 2011
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
For the quarterly period ended: July 3, 2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
For the transition period from __________ to __________
Commission File Number: 1-6905
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TABLE OF CONTENTS
Item 1. Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEETS
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Description of Business
Ruddick Corporation (the "Company") is a holding company which, through its wholly-owned subsidiaries, is engaged in two primary businesses: Harris Teeter, Inc. ("Harris Teeter") operates a regional chain of supermarkets in eight states primarily in the southeastern and mid-Atlantic United States, and the District of Columbia; and American & Efird, Inc. ("A&E") manufactures and distributes industrial sewing thread, embroidery thread and technical textiles on a global basis.
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements include the accounts of Ruddick Corporation and subsidiaries, including its wholly-owned operating companies, Harris Teeter and A&E, collectively referred to herein as the Company. All material intercompany amounts have been eliminated.
In 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 2010 Annual Report on Form 10-K filed with the SEC on December 1, 2010 ("Company's 2010 Annual Report").
The Company's Consolidated Condensed Balance Sheet as of October 3, 2010 has been derived from the audited Consolidated Balance Sheet as of that date. The results of operations for the 13 and 39 weeks ended July 3, 2011 are not necessarily indicative of results for a full year.
The Company's quarterly reporting periods are generally 13 weeks and periodically consist of 14 weeks because the Company's fiscal year ends on the Sunday nearest to September 30. However, Harris Teeter's fiscal periods end on the Tuesday following the Company's fiscal period end.
The Company utilizes derivative financial instruments to hedge its exposure to changes in interest rates. All derivative financial instruments are recorded on the balance sheet at their respective fair value. The Company does not use financial instruments or derivatives for any trading or other speculative purposes.
Harris Teeter enters into purchase commitments for a portion of the fuel utilized in its distribution operations. Harris Teeter expects to take delivery of and to utilize these resources in a reasonable period of time and in the conduct of normal business. Accordingly, these fuel purchase commitments qualify as normal purchases. Harris Teeter also utilizes derivative financial instruments to hedge its exposure in the price variations of fuel.
Statements of Consolidated Cash Flows
A portion of the sales and operating costs of A&E's foreign operations are denominated in currencies other than the U.S. dollar. This creates an exposure to foreign currency exchange rates. The impact of changes in the relationship of other currencies to the U.S. dollar has historically not been significant, and such changes in the future are not expected to have a material impact on the Company's results of operations or cash flows.
New Accounting Standards
In June 2009, the Financial Accounting Standards Board issued a new standard that: changed the definition of a variable interest entity ("VIE"); contained new criteria for determining the primary beneficiary of a VIE; required enhanced disclosures to provide more information about a company's involvement in a VIE; and, increased the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. The adoption of this standard at the beginning of the fiscal 2011 had no impact on the Company's financial position, results of operations or cash flows.
To conform with classifications used in the current year, the financial statements for the prior year reflect certain reclassifications.
2. Industry Segment Information
As discussed above, the Company operates primarily in two businesses and evaluates the performance of these 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 39 weeks ended July 3, 2011 and June 27, 2010, respectively (in thousands):
3. Earnings Per Share ("EPS")
Basic EPS is based on the weighted average outstanding common shares. Diluted EPS is based on the weighted average outstanding common shares adjusted by the dilutive effect of potential common stock resulting from the operation of the Company's equity incentive plans.
The following table details the computation of EPS (in thousands except per share data):
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 147,000 performance shares for each of the periods ended July 3, 2011 and 140,000 performance shares for each of the periods ended June 27, 2010 were excluded from the computation of diluted shares.
4. Employee Benefit Plans
The Company maintains various retirement benefit plans for substantially all domestic full-time employees of the Company and its subsidiaries. These plans include the Ruddick Corporation Employees' Pension Plan ("Pension Plan"), which is a qualified non-contributory defined benefit plan, the Supplemental Executive Retirement Plan ("SERP"), which is a non-qualified supplemental defined benefit pension plan for certain executive officers and the Ruddick Retirement and Savings Plan ("Savings Plan") which is a defined contribution retirement plan. The following table summarizes the components of the net periodic pension expense for the Pension Plan and SERP (in thousands):
Expense related to the Savings Plan amounted to $6,113,000 and $5,527,000 for the 13 weeks and $16,630,000 and $15,786,000 for the 39 weeks ended July 3, 2011 and June 27, 2010, respectively.
As previously disclosed in the Notes to the Consolidated Financial Statements in the Company's 2010 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. Based on the actuarial calculations, the Company was not required to make a contribution to the Pension Plan in fiscal 2011; however, the Company has contributed a total of $50 million during the 39 weeks ended July 3, 2011.
Contributions to the SERP are equal to the benefit payments made during the year. The Company has contributed $924,000 during the 39 weeks ended July 3, 2011, and anticipates contributing approximately $308,000 more for expected future benefit payments during the remainder of fiscal 2011.
5. Equity Incentive Plans
The Company maintains 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. In February 2011 the Company's shareholders approved the Ruddick Corporation 2011 Incentive Compensation Plan which replaced the prior stock option and award plans
and reserves for issuance 2.6 million shares of common stock pursuant thereto. As previously disclosed, the Company's Board of Directors have approved stock awards in lieu of stock options since 2004, except for automatic grants of options to new non-employee directors.
A summary of the status of the Company's stock awards as of July 3, 2011 and June 27, 2010, changes during the 39-week periods ending on those dates and the weighted average grant-date fair value (WAGFV) is presented below (shares in thousands):
The total fair value of stock awards vested during the 39 weeks ended July 3, 2011 and June 27, 2010 was $5,388,000 and $4,572,000, respectively.
The stock awards are being expensed over the employees' five-year vesting service period in accordance with the graded vesting schedule. Compensation expense related to restricted awards amounted to $2,015,000 and $1,563,000 for the 13 weeks and $6,014,000 and $4,419,000 for the 39 weeks ended July 3, 2011 and June 27, 2010, respectively. Unamortized expense related to these awards as of July 3, 2011 amounted to $13,006,000 and have a weighted average recognition period of 1.88 years.
A summary of the status of the Company's stock option plans as of July 3, 2011 and June 27, 2010, changes during the 39-week periods ending on those dates and related weighted average exercise price is presented below (shares in thousands):
As of July 3, 2011, all outstanding stock options were exercisable and the price per share ranged from $14.39 to $35.24. The total cash received from stock options exercised for the exercise price and related tax deductions is included in the Consolidated Condensed Statements of Equity and Comprehensive Income. The Company has historically issued new shares to satisfy the stock options exercised.
The aggregate intrinsic value of stock options as of July 3, 2011 and June 27, 2010, and stock options exercised during the periods ending on those dates is presented below (in thousands):
There were no stock options granted or compensation costs related to stock options during the first 39-week periods of fiscal 2011 or 2010.
The following table summarizes the components of inventories as of the balance sheet dates (in thousands):
Goodwill is recorded by A&E. A fair value-based impairment test of the net book value of goodwill is performed annually or at an interim basis if certain events or circumstances indicate that an impairment loss may have occurred. The annual review was conducted in the first quarter of fiscal 2011, resulting in no goodwill impairment charge being required.
8. Intangible Assets
The following table summarizes the carrying amount of intangible assets as of the balance sheet dates (in thousands):
Acquired favorable operating leases and scripts 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 $496,000 and $612,000 for the 13 weeks and $1,472,000 and $1,816,000 for the 39 weeks ended July 3, 2011 and June 27, 2010, respectively. Intangible assets have remaining useful lives from 1 year to 45 years. Projected amortization expense for intangible assets existing as of July 3, 2011 is: $541,000 for the remainder of fiscal 2011 and $1,935,000, $1,840,000, $1,732,000 and $1,423,000 for fiscal years 2012, 2013, 2014 and 2015, respectively.
9. Derivative Financial Instruments
The Company maintains two separate three-year interest rate swap agreements with an aggregate notional amount of $80 million. The swap agreements effectively fixed the interest rate on $80 million of the Company's term loan, of which $40 million is at 1.81% and $40 million is at 1.80%, excluding the applicable margin and associated fees. Both interest rate swaps were designated as cash flow hedges.
In the third quarter of fiscal 2010, Harris Teeter entered into a series of purchased call options and written put options in order to limit the price variability in fuel purchases. The options effectively established the purchase price for 168,000 gallons of fuel at $2.09 to $2.60 per gallon and the purchase of 588,000 gallons between $2.12 and $2.60 per gallon, excluding shipping, handling and taxes. The options expired on October 31, 2010 and were deemed to be net purchase options which were designated as a cash flow hedge.
In the first quarter of fiscal 2011, Harris Teeter entered into a series of purchased call options and written put options in order to limit the price variability in fuel purchases. The options effectively established the purchase price for 1,092,000 gallons of fuel at $1.95 to $2.56 per gallon, excluding shipping, handling and taxes. The options expired on April 30, 2011 and were deemed to be net purchase options which were designated as a cash flow hedge.
In the second quarter of fiscal 2011, Harris Teeter entered into a series of purchased call options and written put options in order to limit the price variability in fuel purchases. The options effectively established the purchase price for 1,344,000 gallons of fuel at $2.43 to $2.80 per gallon, excluding shipping, handling and taxes. The options expire on November 30, 2011 and are deemed to be net purchase options which are designated as a cash flow hedge.
The following tables present the required fair value quantitative disclosures, on a combined basis, for the Company's financial instruments, designated as cash flow hedges (in thousands):
There were no transfers into or out of Level 1 and Level 2 fair-value measurements during the periods ended July 3, 2011.
The pre-tax unrealized gain (loss) associated with the cash flow hedges for the reporting periods of fiscal 2011 and 2010 is as follows (in thousands):
10. Financial Instruments
Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash equivalents and receivables. The Company limits the amount of credit exposure to each individual financial institution and places its temporary cash into investments of high credit quality. Concentrations of credit risk with respect to receivables are limited due to their dispersion across various companies and geographies.
The carrying amounts for certain of the Company's financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and other accrued liabilities approximate fair value because of their short maturities. The fair value of variable interest debt approximates its carrying amount. The estimated fair value of the Company's senior notes due at various dates through 2017 (which accounts for 95% of the Company's fixed interest debt obligations) is computed based on borrowing rates currently available to the Company for loans with similar terms and maturities. The estimated fair value of the Company's senior notes and its carrying amount outstanding as of the balance sheet dates is as follows (in thousands):
11. Commitments and Contingencies
The Company is involved in various lawsuits and environmental matters arising in the normal course of business. Management believes that such matters will not have a material effect on the financial condition, results of operations or cash flows of the Company.
In connection with the closing of certain store locations, Harris Teeter has assigned leases to several other sub-tenants with recourse. These various leases expire over the next ten years and the future minimum lease payments totaling $36,728,000 over this period have been assumed by the other sub-tenants.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The Company operates primarily in two business segments through two wholly owned subsidiaries: retail grocery (including related real estate and store development activities) - operated by Harris Teeter; and industrial sewing thread (textile primarily), including embroidery thread and technical textiles - operated by A&E. Harris Teeter is a regional supermarket chain operating primarily in the southeastern and mid-Atlantic United States, 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 over the past few years has motivated changes in the consumption habits of the retail consumer which continues to impact the financial results of both operating subsidiaries. Economic uncertainty, tumultuous market conditions and low levels of consumer confidence has created changes in the type of products purchased by Harris Teeter customers and increased the competitive environment in Harris Teeter's primary markets. Harris Teeter competes with other traditional grocery retailers, as well as other retail outlets including, but not limited to, discount retailers such as "neighborhood or supercenters" and "club and warehouse stores," specialty supermarkets and drug stores. Generally, Harris Teeter's markets continue to experience new store opening activity and increased feature pricing or everyday low prices by competitors. In response, Harris Teeter utilizes information gathered from various sources, including its Very Important Customer ("VIC") loyalty card program, and works with suppliers to deliver effective retail pricing and targeted promotional spending programs that drive customer traffic and create value for Harris Teeter customers. In addition, Harris Teeter differentiates itself from its competitors with its product selection, assortment and variety, and its focus on customer service.
Harris Teeter has continued with its planned new store development program. Since the end of the third quarter of fiscal 2010, Harris Teeter has opened six new stores (one of which replaced an existing store) and closed one store, for a net addition of five stores. Harris Teeter operated 204 stores as of the end of the third quarter of fiscal 2011. Much of Harris Teeter's new store growth is focused on expanding its Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. During the first quarter of fiscal 2011, Harris Teeter acquired 350,000 square feet of additional distribution capacity that is contiguous to its existing distribution facility in Greensboro, North Carolina. This represents an approximate 22% increase in the square footage of Harris Teeter's existing distribution facilities and was acquired to meet the company's continued growth.
Business conditions improved for A&E's customers in the retail apparel and non-apparel sectors which resulted in increased sales for A&E during fiscal 2011 as compared to fiscal 2010. During the first nine months of fiscal 2011, A&E's customers continued to experience favorable business conditions and A&E realized sales increases over the prior year. As previously disclosed, apparel production in the Americas has declined over the past several years due to the shift of apparel sourcing from the Americas to other regions of the world, predominately Asia. It has been estimated by the U.S. Department of Commerce Office of Textiles and Apparel that Asia and the Indian sub-continent accounted for approximately 69% of the apparel imports into the U.S. in 2006, 73% in 2007, 74% in 2008, 78% in 2009, 78% in 2010 and 77% for the first five months in 2011. This has greatly impacted A&E's operations in the Americas. In response to the shifting of apparel sourcing, A&E's strategic plans have included: the expansion of its operations in the Asian markets; the expansion of product lines beyond apparel sewing thread; and, the consolidation of its U.S. manufacturing operations.
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. A&E has also 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. A&E continues to expand the manufacturing and distribution of non-apparel products throughout its global operations.
During the first quarter of fiscal 2011, A&E increased its ownership interest in Hilos A&E Dominicana, Ltd. from 63% to 100% and sold its 100% ownership interest in its operating subsidiary in South Africa. A&E will continue to participate in the South African market through a licensing arrangement. A&E continues to face increased operating costs and highly competitive pricing in its markets. Management at A&E intends to continue to minimize expenses at its U.S. operations and certain foreign operations, and focus on its strategic plans to become more Asian centric.
The following table sets forth the operating profit components by each of the Company's business segments and for the holding company ("Corporate") for the 13 weeks ended July 3, 2011 and June 27, 2010. 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):
As set forth in the table above, the increase in consolidated net sales of $89 million from the third quarter of fiscal 2010 was attributable to sales increases at both Harris Teeter and A&E when compared to the prior year. A&E's foreign sales represented 4.0% of the consolidated net sales in the third fiscal quarters of 2011 and 2010. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.
The gross profit increase in the third quarter of fiscal 2011 over the prior year period was driven by improved gross profit at both Harris Teeter and A&E. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.
Selling, general & administrative ("SG&A") expenses as a percent to sales decreased when compared to the prior year period, primarily as a result of the leverage created through sales gains that apply against fixed costs. The decrease was offset, in part, by increased SG&A expenses at Corporate. The increase in Corporate SG&A expenses (net of the gain on the exchange of the Corporate aircraft discussed below) was due, in part, to increased costs associated with certain benefit programs and increased expenses (primarily depreciation) associated with the corporate aircraft. As previously disclosed, Corporate SG&A expenses included a pre-tax gain of $2.1 million recorded in the third quarter of fiscal 2010 in connection with the exchange
of one of the Company's corporate aircraft. Refer to the discussion of segment operations under the captions "Harris Teeter, Retail Grocery Segment" and "American & Efird, Industrial Thread Segment" for a further analysis of the segment operating results.
Other expense, net includes interest expense, interest income and investment gains and losses. Net interest expense (interest expense less interest income) was relatively flat with the prior year period. Increased interest associated with capital leases was offset by lower interest on debt borrowings due to lower average outstanding borrowings in the third quarter of fiscal 2011, as compared to the third quarter of fiscal 2010.
The effective consolidated income tax rate for the third quarter of fiscal 2011 was 37.5%, as compared to 35.2% in the prior year period. The consolidated income tax rate for fiscal 2011 increased over the prior year as a result of additional foreign taxes paid in connection with gains realized in the first quarter of fiscal 2011 on the sale of the Company's interest in a foreign investment. In addition, income tax expense for the third quarter of fiscal 2010 included a benefit of approximately $870,000 for a write-off of stock recorded by A&E.
As a result of the items discussed above, consolidated net earnings of the Company for the third quarter of fiscal 2011 increased by $3.2 million, or 11.2%, over the prior year period and earnings per diluted share increased by 11.9% to $0.66 per share in fiscal 2011 from $0.59 per share in fiscal 2010.
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 July 3, 2011 and June 27, 2010. The table also sets forth the percent to sales and the percentage increase or decrease over the prior year (in thousands):
Net sales increased by 8.1% in the third quarter of fiscal 2011, as compared to the prior year period. The increase in net sales was attributable to an increase in comparable store sales, incremental new store sales and a one week shift in the fiscal year which resulted in the reporting of the July Fourth Holiday sales in the third fiscal quarter of 2011 as compared to the fourth quarter of fiscal 2010. Comparable store sales (see definition below) increased 4.37% ($43.8 million) in the third quarter of fiscal 2011, as compared to a decrease of 0.68% ($6.4 million) in the third quarter of fiscal 2010. The increase in sales from new stores exceeded the loss of sales from closed stores by $33.8 million for the comparable periods. For purposes of computing comparable store sales, the July Fourth Holiday sales were included in the third fiscal quarters for both fiscal 2011 and 2010; however, the Easter Holiday sales were included in the third fiscal quarter of 2011 and the second fiscal quarter of 2010. Management estimated that the Easter Holiday shift positively impacted the comparable stores sales calculation by approximately 79 basis points for the quarter. Comparable store sales have been negatively impacted, to some extent, by the cannibalization created by strategically opening stores in key major markets that have a close proximity to existing stores. Management believes that Harris Teeter's strategy of opening additional stores within close proximity to existing stores, and any similar new additions in the foreseeable future, have a strategic benefit of enabling Harris Teeter to capture sales and expand market share as the markets it serves continue to grow. Based on the continued increase in sales of Harris Teeter's premium and specialty products and certain discretionary items during the third quarter of fiscal 2011, management believes that consumer confidence may have rebounded to some degree. During the third quarter of fiscal 2011 Harris Teeter experienced an increase in customer visits, number of items sold and the average basket size, all adjusted for the shift in holidays. In addition, Harris Teeter experienced average increases in active households per comparable store (based on VIC data) of 1.69% (1.34% adjusted for the Easter Holiday shift) for the third quarter of fiscal 2011, evidencing a continued growing customer base in those stores. Store brand penetration based on units sold was 23.07% in the third quarter of fiscal 2011, as compared to 23.46% in the third quarter of fiscal 2010.
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 for the third quarter of fiscal 2011 declined 28 basis points from the prior year. The decrease was driven by an increased LIFO charge recorded in fiscal 2011. As a percent to sales, the increase in the LIFO charge for the third quarter of fiscal 2011 of $5.9 million (0.54% of sales) over the prior year charge of zero exceeded the decrease in the gross profit margin between the respective quarters, evidencing Harris Teeter's ability to pass along most of the cost inflation created by increased commodity prices. Increased vendor participation in promotions along with continued cost control initiatives in the area of waste and distribution offset the decrease in the gross profit margin created by the LIFO charge.
SG&A expenses for the third quarter of fiscal 2011 increased from the prior year period as a result of incremental store growth and its impact on associated operational costs such as labor, credit and debit card fees, rent and other occupancy costs. However, SG&A expenses as a percent to sales decreased 65 basis points in the third quarter of fiscal 2011 from the third quarter of fiscal 2010, as a result of the leverage created through sales gains that apply against fixed costs, along with improved labor management and other cost control initiatives that more than offset cost increases in debit and credit card fees and remodel expense. The increase in SG&A expenses (excluding advertising and support department costs) over the previous year for stores opened during fiscal 2010 and fiscal 2011 amounted to $9.9 million, which accounted for 71% of the $14.0 million increase in total SG&A expenses. Even though store labor and associated benefit costs increased from the third quarter of fiscal 2010 to the third quarter of fiscal 2011 by $5.7 million, driven by Harris Teeter's new store growth, there was a 43 basis point reduction in these costs as a percent to sales. Advertising and support department costs increased by $2.3 million between the third quarter of fiscal 2010 and the third quarter of fiscal 2011, representing a 2 basis point increase on a percent to sales basis. Pre-opening costs, included with SG&A expenses, consist of rent, labor and associated fringe benefits, and recruiting and relocation c