Ruddick Corporation : Harris Teeter Supermarkets, Inc. Reports Results for the Second Quarter of Fiscal 2012

Harris Teeter Supermarkets, Inc. Reports Results for the Second Quarter of Fiscal 2012

CHARLOTTE, N.C.--(BUSINESS WIRE)--Harris Teeter Supermarkets, Inc. (NYSE:HTSI) (the "Company") today reported that sales for the second quarter of fiscal 2012 ended April 1, 2012 increased by 6.7% to $1.12 billion from $1.05 billion in the second quarter of fiscal 2011. For the 26 weeks ended April 1, 2012, sales increased by 7.6% to $2.24 billion from $2.08 billion for the comparable period of fiscal 2011. The increase in sales for the quarter and 26-week period was driven by an increase in comparable store sales and sales from new stores, partially offset by store closings. Comparable store sales increased by 3.91% for the quarter, and 4.62% for the 26-week period ended April 1, 2012, from the respective comparable periods of fiscal 2011. During the first half of fiscal 2012, the Company opened three new stores and closed one store. Since the end of the second quarter of fiscal 2011, the Company has opened six new stores and closed two stores, for a net addition of four stores. The Company operated 206 stores as of the end of the second quarter of fiscal 2012.

As previously disclosed, the Company sold all of its ownership interest in its wholly-owned industrial thread manufacturing company American & Efird, Inc. ("A&E") on November 7, 2011. As such, A&E's results of operations and financial position are reported as discontinued operations.

The Company reported net earnings of $30.3 million for the second quarter of fiscal 2012, compared to net earnings of $29.9 million for the second quarter of fiscal 2011. Net earnings for the second quarter of fiscal 2012 was comprised of earnings from continuing operations of $30.5 million, or $0.62 per diluted share, and a loss from discontinued operations of $0.2 million. Net earnings for the second quarter of fiscal 2011 was comprised of earnings from continuing operations of $26.2 million, or $0.54 per diluted share, and earnings from discontinued operations of $3.7 million.

Net earnings for the 26 weeks ended April 1, 2012 totaled $43.9 million and was comprised of earnings from continuing operations of $56.3 million, or $1.15 per diluted share and a loss from discontinued operations of $12.4 million. Net earnings for the 26 weeks ended April 3, 2011 totaled $68.0 million and was comprised of earnings from continuing operations of $60.6 million, or $1.24 per diluted share, and earnings from discontinued operations of $7.4 million. Earnings from continuing operations for fiscal 2012 was favorably impacted by a reversal of accrued interest amounting to $1.3 million that was associated with a reduction of the Company's unrecognized tax liabilities. Fiscal 2011 earnings from continuing operations included a pre-tax gain of $19.5 million ($10.3 million after tax or $0.21 per diluted share) from the sale of the Company's interest in a foreign investment.

Operating profit in the second quarter of fiscal 2012 increased by 10.1% to $52.5 million (4.68% of sales) from $47.7 million (4.54% of sales) in the first quarter of fiscal 2011. For the 26 weeks ended April 1, 2012, operating profit increased by 10.4% to $98.7 million (4.41% of sales) from $89.5 million (4.30% of sales) in the comparable period of fiscal 2011. The increase in operating profit was driven by increased gross profit that was offset, in part by increases in selling, general and administrative ("SG&A") expenses.

Gross profit in the second quarter of fiscal 2012 increased by 8.4% to $343.6 million (30.66% of sales) from $317.1 million (30.19% of sales) in the second quarter of fiscal 2011. For the 26 weeks ended April 1, 2012, gross profit increased by 7.5% to $670.4 million (29.93% of sales) from $623.5 million (29.94% of sales) in the same period of fiscal 2011. The LIFO charge for the second quarter of fiscal 2012 was $2.3 million (0.20% of sales) as compared to $4.8 million (0.46% of sales) in the second quarter of fiscal 2011. The LIFO charge for the first half of fiscal 2012 was $5.9 million (0.26% of sales) as compared to $5.3 million (0.26% of sales) for the first half of fiscal 2011.

SG&A expenses for the second quarter and first half of fiscal 2012 increased from the respective prior year periods as a result of incremental store growth and its impact on associated operational costs. On a percent of sales basis, SG&A expenses increased by 32 basis points during the quarter and decreased 13 basis points for the 26 weeks ended April 1, 2012, as compared to the comparable periods of the prior year. The Company's emphasis on cost controls and improved labor management has been effective in offsetting a portion of the increases in health and welfare costs, pension expense and other fringe benefit costs, as well as increased costs associated with the Company's store remodeling program.

SG&A expenses included new store pre-opening costs of $1.4 million (0.13% of sales) and $1.9 million (0.18% of sales) in the second quarter of fiscal 2012 and fiscal 2011, respectively. Pre-opening costs for the 26-week periods ended April 1, 2012 and April 3, 2011 were $2.8 million (0.13% of sales) and $3.9 million (0.18% of sales), respectively. New store pre-opening costs fluctuate between reporting periods depending on the new store opening schedule and market location.

The pre-tax loss from discontinued operations for the 26 weeks ended April 1, 2012 amounted to $18.3 million, $12.4 million after tax benefits or $0.25 per diluted share. As disclosed last year, the Company expected to incur additional non-cash charges for the settlement of pension liabilities and other employee benefits in connection with the sale of A&E. Accordingly, the Company recorded non-cash charges of $26.3 million ($12.9 million after tax) during the first half of fiscal 2012 that related to these anticipated costs. The majority of these losses resulted from adjustments for the recognition of a pro-rata share of the pension plan's accumulated unrecognized net actuarial losses that was previously included in Accumulated Other Comprehensive Income and the impact from allocating existing plan assets under pension regulations and was based upon preliminary actuarial estimates. Actuarial valuations and the final purchase price allocation are not expected to be finalized until the Company's third quarter of fiscal 2012 and could result in additional adjustments.

Thomas W. Dickson, Chairman of the Board and Chief Executive Officer stated, "We are very pleased with our results for the quarter. Our pricing and promotional strategies continue to be effective in driving unit sales, customer visits and increasing market share. Our operating profit margin improvement for the year was driven by the reduction in our selling, general and administrative expense margin realized through the leverage created from the additional sales and our emphasis on cost controls. We believe these positive results are a result of our continuing commitment to our customers to deliver outstanding values and excellent customer service."

The Company's operating performance and strong financial position provides the flexibility to continue with its store development program for new and replacement stores along with the remodeling and expansion of existing stores. Capital expenditures for fiscal 2012 are planned to total approximately $215 million. During the remainder of fiscal 2012, the Company plans to open four new stores and complete major remodels on ten stores, five of which will be expanded in size. The remaining store openings for fiscal 2012 are expected to include three in the third quarter (one of which is a replacement for a store closed in the first quarter) and one in the fourth quarter. The new store development program for fiscal 2012 is expected to result in a 3.9% increase in retail square footage, as compared to a 3.2% increase in fiscal 2011. The Company routinely evaluates its existing store operations in regards to its overall business strategy and from time to time will close or divest underperforming stores.

The Company's capital expenditure plans entail the continued expansion of its 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.

The Company's management remains cautious in its expectations for the remainder of fiscal 2012 due to the current economic environment and its impact on the Company's customers. The Company will continue to refine its merchandising strategies to respond to the changing shopping demands. The retail grocery market remains intensely competitive, and any operating improvement will be dependent on the Company's ability to increase its market share and to effectively execute the Company's strategic expansion plans.

This news release may contain forward-looking statements that involve uncertainties. A discussion of various important factors that could cause results to differ materially from those expressed in such forward-looking statements is shown in reports filed by the Company with the Securities and Exchange Commission and include: generally adverse economic and industry conditions; changes in the competitive environment; economic or political changes; changes in federal, state or local regulations affecting the Company; the passage of future tax legislation, or any negative regulatory or judicial position which prevails; management's ability to predict the adequacy of the Company's liquidity to meet future requirements; volatility of financial and credit markets which would affect access to capital for the Company; changes in the Company's expansion plans and their effect on store openings, closings and other investments; the ability to predict the required contributions to the Company's pension and other retirement plans; the Company's requirement to impair recorded long-lived assets; the cost and availability of energy and raw materials; the continued solvency of third parties on leases that the Company guarantees; the Company's ability to recruit, train and retain effective employees; changes in labor and employer benefits costs, such as increased health care and other insurance costs; the Company's ability to successfully integrate the operations of acquired businesses; the extent and speed of successful execution of strategic initiatives; and, unexpected outcomes of any legal proceedings arising in the normal course of business. Other factors not identified above could cause actual results to differ materially from those included, contemplated or implied by the forward-looking statements made in this news release.

Harris Teeter Supermarkets, Inc. operates a leading regional supermarket chain in eight states primarily in the southeastern and mid-Atlantic United States, and the District of Columbia.

Selected information regarding Harris Teeter Supermarkets, Inc. and its subsidiaries follows. For more information on Harris Teeter Supermarkets, Inc., visit our web site at: www.harristeeter.com.

Harris Teeter Supermarkets, Inc.
Consolidated Condensed Statements of Earnings
(in thousands, except per share data)
(unaudited)
		13 Weeks Ended												26 Weeks Ended
		April 1, 2012						April 3, 2011						April 1, 2012						April 3, 2011
Sales		$	1,120,379		100.00	%		$	1,050,146		100.00	%		$	2,239,945		100.00	%		$	2,082,427		100.00	%
Cost of Sales			776,822		69.34	%			733,070		69.81	%			1,569,568		70.07	%			1,458,928		70.06	%
Gross Profit			343,557		30.66	%			317,076		30.19	%			670,377		29.93	%			623,499		29.94	%
Selling, General and Administrative
Expenses:
Harris Teeter			288,004		25.71	%			266,605		25.39	%			565,993		25.27	%			528,129		25.36	%
Corporate			3,067		0.27	%			2,815		0.27	%			5,636		0.25	%			5,915		0.28	%
Total			291,071		25.98	%			269,420		25.66	%			571,629		25.52	%			534,044		25.65	%
Operating Profit			52,486		4.68	%			47,656		4.54	%			98,748		4.41	%			89,455		4.30	%
Other Expense (Income):
Interest expense			3,334		0.30	%			5,069		0.48	%			8,072		0.36	%			9,529		0.46	%
Interest income			(34	)	0.00	%			(33	)	0.00	%			(82	)	0.00	%			(56	)	0.00	%
Net investment loss (gain)			-		0.00	%			114		0.01	%			-		0.00	%			(19,392	)	-0.93	%
Total			3,300		0.29	%			5,150		0.49	%			7,990		0.36	%			(9,919	)	-0.48	%
Earnings From Continuing Operations
Before Income Taxes			49,186		4.39	%			42,506		4.05	%			90,758		4.05	%			99,374		4.77	%
Income Tax Expense			18,730		1.67	%			16,333		1.56	%			34,486		1.54	%			38,795		1.86	%
Earnings from Continuing
Operations, Net of Income Taxes			30,456		2.72	%			26,173		2.49	%			56,272		2.51	%			60,579		2.91	%
Earnings (Loss) from Operations of
Discontinued Operations			(344	)					6,504						(18,344	)					12,094
Income Tax (Benefit) Expense			(142	)					2,771						(5,985	)					4,634
Earnings (Loss) from Discontinued
Operations, Net of Income Taxes			(202	)					3,733						(12,359	)					7,460
Net Earnings		$	30,254					$	29,906					$	43,913					$	68,039
Net Earnings (Loss) Per Share - Basic:
Continuing Operations		$	0.62					$	0.54					$	1.16					$	1.25
Discontinued Operations			-						0.08						(0.25	)					0.15
Total		$	0.62					$	0.62					$	0.90					$	1.40
Net Earnings (Loss) Per Share - Diluted:
Continuing Operations		$	0.62					$	0.54					$	1.15					$	1.24
Discontinued Operations			-						0.08						(0.25	)					0.15
Total		$	0.62					$	0.61					$	0.90					$	1.39
Weighted Average Number of Shares of
Common Stock Outstanding:
Basic			48,780						48,481						48,714						48,446
Diluted			49,034						48,818						49,016						48,806
Dividends Declared Per Common Share		$	0.14					$	0.13					$	0.27					$	0.26
Effective Tax Rate on Continuing Operations			38.1	%					38.4	%					38.0	%					39.0	%

Harris Teeter Supermarkets, Inc.
Consolidated Condensed Balance Sheets
(in thousands)
(unaudited)
	April 1,				October 2,				April 3,
	2012				2011				2011
Assets
Current Assets:
Cash and Cash Equivalents	$	232,476			$	164,479			$	64,010
Accounts Receivable, Net		52,784				47,088				51,115
Refundable Income Taxes		10,042				15,055				-
Inventories		290,659				287,137				270,068
Deferred Income Taxes		5,023				1,321				828
Prepaid Expenses and Other Current Assets		26,772				24,576				24,675
Current Assets of Discontinued Operations		-				220,017				270,739
Total Current Assets		617,756				759,673				681,435
Property, Net		1,040,048				1,019,468				1,009,195
Investments		104,735				112,556				113,478
Intangible Assets		13,073				13,609				13,602
Other Long-Term Assets		82,440				79,118				78,814
Total Assets	$	1,858,052			$	1,984,424			$	1,896,524
Liabilities and Shareholders' Equity
Current Liabilities:
Current Portion of Long-Term Debt and Capital Lease Obligations	$	4,137			$	3,902			$	4,093
Accounts Payable		246,032				252,859				213,980
Income Taxes Payable		-				-				2,196
Accrued Compensation		57,072				63,236				51,568
Other Current Liabilities		79,410				87,805				72,413
Current Liabilities of Discontinued Operations		-				71,571				68,469
Total Current Liabilities		386,651				479,373				412,719
Long-Term Debt and Capital Lease Obligations		210,702				283,428				285,880
Deferred Income Taxes		23,175				19,674				3,497
Pension Liabilities		104,459				113,617				126,553
Other Long-Term Liabilities		111,397				113,250				111,785
Shareholders' 'Equity:
Common Stock		107,940				104,211				99,644
Retained Earnings		1,015,140				984,535				974,106
Accumulated Other Comprehensive Loss		(101,412	)			(100,423	)			(105,470	)
Accumulated Other Comprehensive Loss of Discontinued Operations		-				(19,048	)			(17,939	)
Total Shareholders' Equity of Harris Teeter Supermarkets, Inc.		1,021,668				969,275				950,341
Noncontrolling Interest of Discontinued Operations		-				5,807				5,749
Total Shareholders' Equity		1,021,668				975,082				956,090
Total Liabilities and Shareholders' Equity	$	1,858,052			$	1,984,424			$	1,896,524

Harris Teeter Supermarkets, Inc.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(unaudited)
		26 Weeks Ended
		April 1,				April 3,
		2012				2011
Cash Flow From Operating Activities:
Net Earnings		$	43,913			$	68,039
Loss (Earnings) from Discontinued Operations			12,359				(7,460	)
Non-Cash Items Included in Net Income
Depreciation and Amortization			66,885				63,652
Deferred Income Taxes			2,153				146
Net Gain on Sale of Property and Investments			(162	)			(19,343	)
Share-Based Compensation			3,808				3,999
Other, Net			(2,020	)			(1,350	)
Changes in Operating Accounts Providing (Utilizing) Cash
Accounts Receivable			(5,696	)			(3,242	)
Inventories			(3,522	)			1,957
Prepaid Expenses and Other Current Assets			(1,304	)			4,268
Accounts Payable			(10,055	)			3,105
Other Current Liabilities			(8,439	)			1,043
Other Long-Term Operating Accounts			(30,191	)			(32,571	)
Net Cash Used by Operating Activities of Discontinued Operations			-				(576	)
Net Cash Provided by Operating Activities			67,729				81,667
Investing Activities:
Capital Expenditures			(70,393	)			(71,553	)
Purchase of Other Investments			(591	)			(14,402	)
Proceeds from Sale of Property and Investments			170,418				50,297
Investments in Company-Owned Life Insurance			(611	)			(1,073	)
Other, Net			(28	)			(127	)
Net Cash Used by Investing Activities of Discontinued Operations			-				(1,285	)
Net Cash Provided (Used) by Investing Activities			98,795				(38,143	)
Financing Activities:
Payments on Long-Term Debt and Capital Lease Obligations			(81,357	)			(28,267	)
Dividends Paid			(13,308	)			(12,776	)
Proceeds from Stock Issued			314				360
Share-Based Compensation Tax Benefits			1,838				762
Shares Effectively Purchased and Retired for Withholding Taxes			(5,129	)			(2,485	)
Other, Net			(885	)			70
Net Cash Used by Financing Activities of Discontinued Operations			-				(570	)
Net Cash Used by Financing Activities			(98,527	)			(42,906	)
Increase in Cash and Cash Equivalents			67,997				618
Effect of Foreign Currency Fluctuations on Cash of Discontinued Operations			-				81
Cash and Cash Equivalents at Beginning of Period			164,479				73,612
Cash and Cash Equivalents at End of Period		$	232,476			$	74,311
Cash and Cash Equivalents of Continuing Operations		$	232,476			$	64,010
Cash and Cash Equivalents of Discontinued Operations			-			$	10,301
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest, Net of Amounts Capitalized		$	9,357			$	9,701
Income Taxes			21,716				20,767
Non-Cash Activity:
Assets Acquired Under Capital Leases			8,866				12,144
Note Received in Connection with Sale of Investments			-				2,855

Harris Teeter Supermarkets, Inc.
Other Statistics
			13 Weeks Ended						26 Weeks Ended
			April 1,		April 3,				April 1,		April 3,
			2012		2011				2012		2011
Comparable Store Sales Increase			3.91	%	1.42	%			4.62	%	1.81	%
Store Brand Penetration Based on Units			24.15	%	24.48	%			24.25	%	24.08	%
Store Brand Penetration Based on Sales			24.98	%	24.38	%			25.24	%	24.40	%
Store Count
Beginning number of stores			206		201				204		199
Opened during the period			-		2				3		4
Closed during the period			-		(1	)			(1	)	(1	)
Stores in operation at end of period			206		202				206		202

Definition of Comparable Store Sales:
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 measure 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.

Contacts

Harris Teeter Supermarkets, Inc.
John B. Woodlief, 704-372-5404
Executive Vice President
and Chief Financial Officer

Partner Area