<PAGE>   1

                                                                    EXHIBIT 13

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS


RESULTS OF OPERATIONS - FISCAL 1997 COMPARED
TO FISCAL 1996

For fiscal year 1997, consolidated sales of $2.3 billion increased 7.4% over
the $2.14 billion reported in fiscal 1996. Consolidated net income of $47.7
million was up 11.5% from the $42.8 million reported last year. On a per share
basis, earnings were $1.02 for fiscal 1997, an increase of 10.9% when compared
to $.92 reported in fiscal 1996. Fiscal 1997 consolidated operating profit
increased 14.1% due to record profitability at American & Efird.

      In fiscal 1997, the 11.5% increase in net income was achieved despite a
rise in the Company's effective income tax rate to 33% (31% in 1996), driven by
a combination of reduced tax benefits from Company owned life insurance
("COLI") and higher relative pre-tax income from operations. The favorable tax
attributes of COLI will continue to diminish as a result of 1996 federal tax
legislation which will phase out policy interest deductions by 1999.

HARRIS TEETER, INC. Sales advanced by 5% in fiscal 1997. In the supermarket
industry environment, where intense competition shows no signs of abating,
Harris Teeter sales for stores in operation in both periods were marginally
ahead by 0.1% in fiscal 1997, compared to 3.9% in fiscal 1996. Sales increases
were primarily due to an 8% expansion in store square footage over the course
of the year, increased advertising and promotion and the successful system-wide
rollout of the new customer loyalty card (the VIC Card) introduced in 1996.
Grocery sales grew by 4% and accounted for 36% of the sales increase. Dairy,
meat, produce and frozen products had sales increases ranging from 4% to 10%
and accounted for 44% of the sales increase. Operating profit fell by 6% to
$45.7 million in fiscal 1997, primarily as a result of expenses related to the
opening of a record number of new stores, as well as several major store
remodels during the year and higher fixed costs associated with those stores.
These costs were partially offset by greater sales volume and a favorable
product mix of higher margin items.

      At the end of fiscal 1997, 138 stores were in operation, compared to 134
a year ago. During the year, thirteen new stores were opened, five of which
were replacements, and four additional, less profitable stores were sold or
closed. During fiscal 1997, charges to a $5.3 million reserve established in
1993 for the closing of specified stores to be replaced, which stores have been
closed, totaled $1.3 million, for a cumulative total of $4.4 million for all
periods to date.

AMERICAN & EFIRD, INC. Sales increased 19% over fiscal 1996.
This sales growth was primarily due to the inclusion of a full year's sales
from the June 1996 acquisition of certain assets of Threads USA, moderate
additions to business with existing U.S. customers and an increase in foreign
sales. Further, sales growth was driven by good market conditions in most major
industries served by A&E, while during the prior year relative weakness in
thread sales was primarily related to weak apparel sales at retail. Sales
increases were primarily in industrial sewing thread, and consumer thread and
notions sales declined modestly. A&E believes that its ability to meet the
increasing demands of its customers for top-quality, high-performance
industrial thread in both the apparel and home furnishings markets provides an
opportunity for future growth. Operating profit advanced by 42% to $49.1
million in fiscal 1997 compared to $34.7 million in the prior year. Operating
profit was positively impacted by additional sales volume and the successful
integration of the Threads USA business into existing facilities, which
resulted in improved operating efficiency, by the renovation and upgrading of a
Threads USA manufacturing facility and by the improved performance in a number
of foreign operations.

      The integration of Threads USA is near completion, including the
consolidation of manufacturing and administrative operations, customer
conversion and sales force reorganization. A new customer support center is
also planned, and construction is expected to begin by early 1998.

      Sales by foreign operations made up 20% of A&E's total sales and 14% of
its operating profit. While foreign sales and profits were not material to the
Company's consolidated results of operations, they continued to build
significantly. NAFTA and the Caribbean Basin Initiative continued to drive
strong performances in Mexico and the Caribbean, due to the growth of apparel
manufacturing in Central and South America. The A&E majority-owned joint
venture in China also evidenced strong growth, and export sales continued to
expand. Slightly offsetting such improvements were weak financial results in
the Korean and Malaysian operations, due to poor economic conditions and
currency devaluation. Lastly, A&E has begun the process of establishing
operations in India.

RESULTS OF OPERATIONS - FISCAL 1996 COMPARED
TO FISCAL 1995

For fiscal year 1996, consolidated sales of $2.14 billion increased 6.6% over
the $2.01 billion reported in fiscal 1995.

                                      13
<PAGE>   2

Consolidated net income of $42.8 million was up 9% from the $39.3 million
reported in fiscal 1995. On a per share basis, earnings from continuing
operations were $.92 for fiscal 1996, an increase of 9.5% when compared to $.84
reported in fiscal 1995. The discontinued operations of the printing business
segment, the assets of which were sold in January 1996, generated no
significant earnings or loss during either fiscal year. Fiscal 1996
consolidated operating profit increased 8.4%, led by gains at Harris Teeter.

      On June 3, 1996, American & Efird completed the acquisition of certain
assets of Threads USA. The assets included the plants and equipment at four
manufacturing facilities in Gastonia, N.C. and the equipment at one
manufacturing facility in Puerto Rico.

HARRIS TEETER, INC. Sales in fiscal 1996 increased 7% over fiscal 1995. Sales
for stores in operation in both periods were ahead 3.9% compared to 6.5% in
1995. Sales increases were attributable to customer acceptance of larger,
new-format stores, strong feature plans, merchandising and advertising, strong
holiday sales and a 4% increase in store square footage during fiscal 1996.
Grocery sales were up 6%, which accounted for 43% of the sales increase. Dairy,
meat, produce and frozen products had sales increases ranging from 4% to 10%
and accounted for 38% of the sales increase. Operating profit showed an
improvement of 15% over 1995, derived mainly from higher sales volume, a
favorable product mix of higher gross margin items and continued control of
ongoing operating expenses. Pre-opening expenses associated with aggressive new
store openings and major remodels served to increase operating expenses in the
year. Several store prototypes of varying sizes were developed in 1996 in an
effort to enable efficient store sizing to specific markets, amenities to
customers and standardized, reduced construction costs.

      At the end of fiscal 1996, 134 stores were in operation, compared to 139
in 1995. During fiscal 1996, seven smaller stores in less urban markets were
sold at no significant gain or loss. Nine new larger stores were opened during
the year, four of which were replacement stores, and three additional smaller
stores were closed. Four of the stores closed in fiscal 1996 were closed under
a previously announced marketing strategy and related plan to replace a finite
number of smaller, less competitive stores in specified markets with larger
stores. A reserve of $5.3 million was established in fiscal 1993 for the direct
costs of these future store closings. Charges incurred in fiscal 1996 were $1.5
million and cumulatively, $3.1 million. The closings were substantially
completed by 1996 year end, except for the payment of future rents. Management
anticipates that the remaining charges to be incurred, primarily closed store
rents, will not materially effect the Company's operating results or its
financial position.

AMERICAN & EFIRD, INC. Sales increased 4% over fiscal 1995. This increase was
achieved during a period of poor demand for thread due to weak retail sales of
apparel and home furnishings. Gradual improvement in U.S. market conditions was
evidenced toward the 1996 fiscal year end. The purchase of the assets of
Threads USA in the June quarter, by which A&E became the largest U.S.
industrial sewing thread company, contributed $24.8 million to the sales
increase although only four months of sales from this acquisition were
reflected in fiscal 1996. The sales increase was primarily due to industrial
sewing thread sales as consumer thread and notions sales recorded a modest
decline for the year. Operating profit of $34.7 million was slightly ahead of
1995. Utilizing sales from the Threads USA acquisition resulted in improved
operating schedules, which had a positive impact on operating profit for the
year. A&E responded to the weak domestic demand for thread by exercising tight
control of inventories and operating costs while improving quality and customer
service.

      Significant progress was achieved towards integrating Threads USA into
A&E and reducing costs in the Threads USA facilities. As of the 1996 fiscal
year end, A&E was continuing the process of integrating the Threads USA
operations into its own. The nature and location of product lines and
facilities of the two companies were enabling A&E to combine and streamline
manufacturing, reduce duplicative general and administrative expenses and
integrate the qualified, skilled workforce of Threads USA.

      Sales by foreign operations comprised 18% of A&E's total sales and 7% of
its operating profit. While not material to the Company's consolidated
financial results, foreign sales and operating profits increased over the 1995
fiscal year, with all foreign subsidiaries except Canada and Costa Rica
reporting improved earnings. NAFTA had stimulated growth of apparel
manufacturing in Central and South America. As a result, A&E subsidiaries in
Mexico, Costa Rica and the Dominican Republic displayed growth, and A&E's U.S.
production benefited from export growth. Additionally, A&E announced
commitments to establish future operations in China and India to enhance its
position in Asia.

                                      14
<PAGE>   3

OTHER EFFECTS ON RESULTS OF OPERATIONS

During the second fiscal 1996 quarter, the Company elected to begin paying
directly to its ESOP employee-shareholders the cash dividends on ESOP shares.
Favorable tax treatment of the ESOP dividend pass-through under the applicable
income tax statutes along with favorable tax attributes of COLI reduced the
effective income tax rate of the Company. The favorable tax attributes of COLI,
however, were significantly diminished as of January 1, 1996 as a result of
federal legislation which will phase out interest deductions on policy loans by
January 1, 1999.

      On January 23, 1996, certain assets of Jordan Graphics, Inc., a
subsidiary of the Company, were sold to The Reynolds and Reynolds Company. The
revenues of the discontinued operations for the fiscal year prior to the sale
were $17.3 million. The operating results for fiscal years 1996 and 1995 were
not significant. Substantially all the value of assets of Jordan was realized
during fiscal year 1996 by collection or sale. The disposition had no
significant impact on the consolidated earnings or the financial condition of
the Company. The business forms segment was reported as discontinued
operations.

      In fiscal 1996, Ruddick Investment Company, a subsidiary of the Company,
redefined its business, with major emphasis on the development of selected
sites for Harris Teeter stores. Venture capital investment holdings continue to
be managed but future equity investment will be limited. Due to continued
growth of the American & Efird and Harris Teeter businesses, Ruddick
Investment's relative size to the consolidated Company had declined. As a
result, Ruddick Investment is no longer considered an operating company.
Effective with the beginning of fiscal year 1996, and for all comparable
periods, the Harris Teeter retail site activities of Ruddick Investment are
assigned to the retail business segment for financial reporting; and other
activities, to the Parent Company as "other administrative expense."

CAPITAL RESOURCES AND LIQUIDITY

Ruddick Corporation is a holding company which, through its wholly-owned
subsidiaries, American & Efird, Inc. and Harris Teeter, Inc., is engaged in the
primary businesses of industrial sewing thread manufacture and distribution,
and regional supermarket operations, respectively. Ruddick has no material
independent operations, nor material assets, other than the investments in its
operating subsidiaries. Ruddick provides a variety of services to its
subsidiaries and is dependent upon income and upstream dividends from its
subsidiaries. There exist no material restrictions on such dividends, which are
determined as a percentage of net income of each subsidiary.

      The Company strives to achieve a goal of earning a 15% return on
beginning shareholders' equity. In fiscal 1997, the return on beginning equity
was 13.8%, compared to 13.5% in the prior year. At the same time, the Company
seeks to limit long-term debt such that it constitutes no more than 40% of
capital employed, which includes long-term debt and shareholders' equity. As of
the end of fiscal 1997, this percentage was 33.1%, a slight increase from last
year's 32.2%.

      The Company's principal source of liquidity has been revenue from
operations. The Company also has the ability to borrow up to an aggregate of
$100 million under established revolving lines of credit with three banks. The
maximum amount outstanding under these credit facilities during fiscal 1997 was
$100 million, and $33.9 million was outstanding at year end. The majority of
the borrowings under Ruddick's revolving credit facilities were used for
capital expenditures. Borrowings and repayments under these revolving credit
facilities are of the same nature as short-term credit lines; however, due to
the nature and terms of the agreements allowing up to five years for repayment,
all borrowings under these facilities are classified as long-term debt.

      On April 15, 1997, the Company executed unsecured 7.72% Senior Notes in
the amount of $50 million, due April 15, 2017, and an additional uncommitted
$50 million Private Shelf Facility with a major insurance company.
Subsequently, on July 15, 1997, the Company executed unsecured 7.55% Senior
Notes in the amount of $50 million due July 15, 2017, under the Private Shelf
Facility. Proceeds from these notes were used to repay an 8.57% Term Note and
reduce the amount borrowed under the revolving lines of credit, which
borrowings and term debt had been primarily undertaken for capital
expenditures. Under a separate Private Shelf Facility with the same major
insurance company dated March 1, 1996, the Company has uncommitted capacity to
borrow an additional $50 million.

      Working capital as of the fiscal years ended 1997, 1996 and 1995 was
$88.9 million, $65.1 million and $73.7 million, respectively. The increase of
$23.8 million in fiscal 1997 was primarily due to higher inventories and
accounts 

                                      15
<PAGE>   4

receivable related to the expansion of A&E's domestic and
international sales and due to higher pre-paid assets at Harris Teeter. The
current ratio was 1.4 at September 28, 1997 and 1.3 at September 29, 1996.

      Covenants in certain of the Company's long-term debt agreements limit the
total indebtedness that the Company may incur. The Company remains well within
such covenants. Management believes that the limit on indebtedness does not
significantly restrict the Company's liquidity and that such liquidity is
adequate to meet foreseeable requirements.

      In fiscal 1997, capital expenditures were $115.3 million. In fiscal 1998,
capital expenditures are expected to be not more than $132 million. In order to
complete the integration of Threads USA and for further modernization and
expansion, American & Efird expects to spend $39 million. In the very
competitive southeastern U.S. grocery market, Harris Teeter has capital
expenditure plans totaling $93 million. The Harris Teeter estimates include the
fiscal 1998 opening of 12 new stores, one of which is a replacement, and three
additional stores are expected to be closed. New store locations include three
in Virginia, two in Atlanta, Georgia, one in Nashville, Tennessee, five in
North Carolina and one in Jacksonville, Florida, a new market for Harris Teeter
and its sixth state. The expansion that began in 1997 of Harris Teeter's two
distribution centers is expected to be completed in 1998. The total cost of the
project is still estimated at $40 to $45 million and Harris Teeter anticipates
spending approximately $25 million in fiscal 1998. Management expects that
internally generated funds, supplemented by available borrowing capacity, will
be adequate to finance such expenditures.

OTHER MATTERS

The Company has several initiatives underway for the improvement of information
systems, including the modification or conversion of Company computer systems
to provide for proper functioning beyond calendar year 1999. It is anticipated
that substantially all of these Year 2000 costs will be incurred during fiscal
1998 and 1999. The Company expects to complete its Year 2000 cost estimates by
mid-1998. Maintenance or modification costs will be expensed as incurred, while
the costs of new software will be capitalized and amortized over the software's
useful life. Management believes that resources are available to complete the
modification and conversion and that its costs will not materially effect the
Company's operating results or financial condition. Management believes that
the Year 2000 compliance will be completed well before the end of fiscal year
1999. It must be recognized, however, that failure to do so could have a
material adverse effect on the Company's future results of operations.

      During fiscal year 1996, the Company announced to its shareholders the
adoption of a Dividend Reinvestment and Stock Purchase Plan available to all
shareholders of record.

      The foregoing discussion contains some forward-looking statements about
the Company's financial condition and results of operations, which are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which reflect management's judgment only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events and circumstances that arise after the date hereof.

      Factors that might cause the Company's actual results to differ
materially from those anticipated in forward-looking statements include the
following:

- generally adverse economic and industry conditions, including a decline in
consumer demand for apparel products or significant changes in consumer food
preferences or eating habits,

- changes in the competitive environment, including increased competition in
the Company's primary geographic markets, the entry of new competitors and
consolidation in the supermarket industry,

- economic or political changes in the countries in which the Company operates
or adverse trade regulations,

- the passage of future tax legislation, if any, that could have an adverse
impact on the tax benefits of the ESOP dividends and COLI,

- management's ability to accurately predict the adequacy of the Company's
present liquidity to meet future requirements,

- changes in the Company's capital expenditures, new store openings and store
closings, and 

- non-availability of resources for the Company, or its suppliers
and customers, to complete their respective Year 2000 compliance effectively.

                                      16
<PAGE>   5
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                   September 28          September 29
(Dollars in thousands                                                                  1997                   1996   
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                    <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents                                                          $   17,150             $  21,033
Accounts Receivable, Less Allowance For Doubtful
     Accounts: 1997 - $2,005; 1996 - $1,398                                            77,852                70,809
Inventories                                                                           196,049               183,649
Other Current Assets                                                                   32,249                22,569
Net Assets of Discontinued Operations                                                      --                   413
---------------------------------------------------------------------------------------------------------------------------
     Total Current Assets                                                             323,300               298,473
---------------------------------------------------------------------------------------------------------------------------
PROPERTY
Land and Buildings                                                                    127,600               109,999
Machinery and Equipment                                                               522,627               462,102
Leasehold Improvements                                                                130,078               113,850
Assets Under Capital Leases                                                             1,920                 1,920
---------------------------------------------------------------------------------------------------------------------------
     Total, at Cost                                                                   782,225               687,871
Accumulated Depreciation and Amortization                                             315,666               277,304
---------------------------------------------------------------------------------------------------------------------------
     Property, Net                                                                    466,559               410,567
---------------------------------------------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Investments                                                                            27,529                29,841
Other Assets                                                                           67,855                62,821
---------------------------------------------------------------------------------------------------------------------------
     Total Assets                                                                  $  885,243             $ 801,702
===========================================================================================================================


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable                                                                      $    8,100             $   7,118
Current Portion of Long-term Debt                                                         575                 5,247
Dividends Payable                                                                       3,727                 3,252
Accounts Payable                                                                      139,085               134,780
Federal and State Income Taxes                                                          5,758                 1,945
Accrued Compensation                                                                   28,349                34,677
Accrued Interest                                                                       21,217                20,530
Other Accrued Liabilities                                                              27,596                25,790
---------------------------------------------------------------------------------------------------------------------------
     Total Current Liabilities                                                        234,407               233,339
---------------------------------------------------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
Long-term Debt                                                                        189,919               159,188
Deferred Income Taxes                                                                  52,447                43,598
Other Liabilities                                                                      23,376                18,721
Minority Interest                                                                       4,587                    --
---------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
---------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Common Stock - Shares Outstanding:
     1997 - 46,599,301; 1996 - 46,461,290                                              56,779                55,599
Retained Earnings                                                                     326,488               293,654
Cumulative Translation Adjustments                                                     (2,760)               (2,397)
---------------------------------------------------------------------------------------------------------------------------
     Shareholders' Equity                                                             380,507               346,856
---------------------------------------------------------------------------------------------------------------------------
     Total Liabilities and Shareholders' Equity                                    $  885,243             $ 801,702
===========================================================================================================================
</TABLE>

The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.

                                      17
<PAGE>   6

Statements of Consolidated Income and Retained Earnings

<TABLE>
<CAPTION>
                                                                             For the Fiscal Years Ended,
                                                           ----------------------------------------------------------------
                                                           September 28          September 29             October 1
(Dollars in thousands, except per share data)                   1997                  1996                   1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                   <C>                    <C>
Net Sales                                                  $  2,300,089           $ 2,142,501           $ 2,009,776
---------------------------------------------------------------------------------------------------------------------------
Cost of Sales                                                 1,667,858             1,561,098             1,483,859
Selling, General and Administrative Expenses                    537,395               498,260               449,189
---------------------------------------------------------------------------------------------------------------------------
Operating Profit                                                 94,836                83,143                76,728
---------------------------------------------------------------------------------------------------------------------------
Net Interest Expense                                             14,558                12,155                10,480
Other Administrative Expense, Net                                 8,976                 8,979                 6,991
---------------------------------------------------------------------------------------------------------------------------
Income Before Taxes                                              71,302                62,009                59,257
Taxes                                                            23,571                19,207                19,990
---------------------------------------------------------------------------------------------------------------------------
Net Income                                                       47,731                42,802                39,267
Retained Earnings at Beginning of Fiscal Year                   293,654               262,921               235,219
Common Dividend: 1997 - $.32 a share;
     1996 - $.26 a share; 1995 - $.25 a share                    14,897                12,069                11,565
---------------------------------------------------------------------------------------------------------------------------
 Retained Earnings at End of Fiscal Year                   $    326,488           $   293,654           $   262,921
===========================================================================================================================
 Net Income Per Share                                            $ 1.02                 $ .92                 $ .84
===========================================================================================================================
</TABLE>

The accompanying notes to consolidated financial statements are an integral
part of these statements.

                                      18
<PAGE>   7

STATEMENTS OF CONSOLIDATED CASH FLOWS

<TABLE>
<CAPTION>
                                                                             For the Fiscal Years Ended,
                                                            --------------------------------------------------------
(Dollars in thousands)                                      September 28          September 29            October 1 
                                                                1997                  1996                  1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                   <C>                    <C>      
CASH FLOW FROM OPERATING ACTIVITIES                                       
Net Income                                                    $  47,731              $ 42,802              $ 39,267 
Non-cash Items Included in Net Income                                      
    Depreciation and Amortization                                58,723                51,226                44,648 
    Deferred Taxes                                                6,133                 6,863                  (215)
    Restructuring Charge                                         (1,298)               (1,512)               (1,480)
    Other, Net                                                    4,459                   (49)                2,526 
Decrease (Increase) in Accounts Receivable                       (7,043)              (12,903)               (2,634)
Decrease (Increase) in Inventories                              (12,400)               (6,254)               (2,881)
Decrease (Increase) in Other Current Assets                      (6,965)               11,466               (13,903)
Increase (Decrease) in Current Liabilities                        5,742                11,874                37,860 
-------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                        95,082               103,513               103,188 
-------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Discontinued Activities                        413                12,650                 2,538 
-------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES                                                       
Capital Expenditures                                           (115,299)             (123,280)              (98,205)
Cash Proceeds from Sale of Property                               1,038                 4,127                   126 
COLI, Net                                                        (2,883)               (9,098)               (9,345)
Other, Net                                                        5,492               (10,668)                1,985 
-------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities                          (111,652)             (138,919)             (105,439)
-------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES                                                        
Proceeds from Long-term Borrowings                               87,650                44,950                25,777 
Payments of Principal on Long-term Debt                         (61,493)               (8,285)               (5,408)
Dividends Paid                                                  (14,897)              (12,069)              (11,565)
Other, Net                                                        1,014                   234                (4,663)
-------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                        12,274                24,830                 4,141 
-------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents                 (3,883)                2,074                 4,428 
Cash and Cash Equivalents at Beginning of Year                   21,033                18,959                14,531 
-------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year                      $  17,150              $ 21,033              $ 18,959 
===================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                             
CASH PAID DURING THE YEAR FOR:                                                 
Interest                                                      $  13,937              $ 11,201              $ 11,357 
Income Taxes                                                  $  13,725              $ 11,056              $ 23,959 
-------------------------------------------------------------------------------------------------------------------
</TABLE>                                                                        

The accompanying notes to consolidated financial statements are an integral
part of these statements.

                                      19
<PAGE>   8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Ruddick Corporation and its wholly owned operating companies, American & Efird,
Inc. and Harris Teeter, Inc., and in fiscal 1996 and 1995, Jordan Graphics,
Inc. (disposed in 1996), 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.

CASH EQUIVALENTS
For purposes of the statements of consolidated cash flows, the Company
considers all highly liquid cash investments purchased with a maturity of three
months or less to be cash equivalents.

INVENTORIES
Inventories are valued at the lower of cost or market with the cost of
substantially all inventories being determined using the last-in, first-out
(LIFO) method. The LIFO cost of such inventories was $20,949,000 and
$19,047,000 less than the first-in, first-out (FIFO) cost method at September
28, 1997 and September 29, 1996, respectively.

PROPERTY AND DEPRECIATION
Property is at cost and is depreciated, using principally the straight-line
method, over the following useful lives:
-------------------------------------------------------------------------------
Land improvements                                10-40 years
Buildings                                        10-50 years
Machinery and equipment                           3-15 years
-------------------------------------------------------------------------------
Leasehold improvements are depreciated over the lesser of the estimated useful
life or the remaining term of the lease. Assets under capital leases are
amortized on a straight-line basis over the lesser of 20 years or the lease
term. Maintenance and repairs are charged against income when incurred.
Expenditures for major renewals, replacements and betterments are added to
property. The cost and the related accumulated depreciation of assets retired
are eliminated from the accounts; gains or losses on disposal are added to or
deducted from income. Property categories include $35,635,000 and $17,963,000
undepreciated construction in progress at September 28, 1997 and September 29,
1996, respectively.

INVESTMENTS
The Company holds a financial position in certain shopping centers in which
Harris Teeter, Inc., is an anchor tenant. Additionally it makes loans to and
equity investments in a number of emerging growth companies, as well as
selected publicly traded companies. Real estate and financial investments are
carried at the lower of cost or market. In management's opinion, the net
aggregate carrying value of financial instruments of $8,435,000 and $7,335,000
held for investment approximated their aggregate fair values at September 28,
1997 and September 29, 1996, respectively.

OTHER ASSETS
Other assets include cash surrender value of Company owned life insurance
(COLI), investment in unconsolidated foreign subsidiaries and various
acquisition costs. The cash surrender value of life insurance is recorded net
of policy loans. The net life insurance expense, including interest expense of
$18,490,000 in 1997, $18,564,000 in 1996, and $12,845,000 in 1995, is included
in other administrative expense in the statements of consolidated income and
retained earnings. Acquisition costs allocated to other assets, including
favorable lease rights and goodwill, are being amortized over 10-15 years.

                                      20
<PAGE>   9

FAIR VALUE OF FINANCIAL INSTRUMENTS
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 recorded amount of fixed rate obligations approximates
their fair value based on borrowing rates currently available to the Company
for loans with similar terms and maturities.

ADVERTISING
Costs incurred to produce media advertising are expensed in the period in which
the advertising first takes place. All other advertising costs are also
expensed when incurred. Cooperative advertising income from vendors is recorded
in the period in which the related expense is incurred. Net advertising
expenses of $15,555,000, $12,839,000, and $13,224,000 were included in the
Company's results of operations for fiscal 1997, 1996 and 1995, respectively.

INCOME TAXES
Ruddick and its subsidiaries file a consolidated federal income tax return. Tax
credits are recorded as a reduction of federal income taxes in the years in
which they are utilized. Deferred tax liabilities or assets at the end of each
period are determined using the tax rate expected to be in effect when taxes
are actually paid or recovered. Accordingly, income tax expense will increase
or decrease in the same period in which a change in tax rates is enacted.

PER SHARE AMOUNTS
Primary and fully diluted net income per share amounts were determined based on
the weighted average number of shares of common stock and common stock
equivalents (non-cumulative, voting $.56 convertible preference stock and stock
options) outstanding. The weighted average primary shares outstanding were
46,832,409 in 1997, 46,618,950 in 1996, and 46,536,346 in 1995. Common stock
equivalents had no material effect on the per share amounts in 1997, 1996 and
1995.

DISCONTINUED OPERATIONS
In fiscal 1996, the assets of Jordan Graphics, Inc., the business forms
segment, were sold. The revenues of the discontinued operation were $17,293,000
(16 weeks), and $60,991,000, in fiscal 1996 and 1995, respectively. Operating
profits were $123,000 and $336,000 for the same respective periods and
applicable taxes were $47,000 and $151,000, respectively.

USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ from those estimates.

RECLASSIFICATIONS
To conform with classifications adopted in the current year, the financial
statements and related notes for prior years reflect certain reclassifications,
which have no effect on net income.

NEW ACCOUNTING STANDARDS
LONG-LIVED ASSETS: Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," requires accounting adjustments and disclosures relative to
impairments of tangible and intangible long-lived assets. At September 28,
1997, the carrying values of the Company's long-lived assets and intangibles
were recoverable in all material respects and no adjustments or disclosures are
required.

                                      21
<PAGE>   10

STOCK OPTIONS: Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," encourages, but does not require,
companies to record compensation cost for stock option plans at fair value of
the options. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25. Accordingly, compensation cost of stock
options is measured as the excess, if any, of the market price of the Company's
stock at the date of the grant over the option exercise price and is charged to
operations over the vesting period. Income tax benefits attributable to stock
options exercised are credited to capital stock.

EARNINGS PER SHARE: Statement of Financial Accounting Standards No. 128,
"Earnings per Share" will be effective for the Company's 1998 fiscal year. This
new standard requires dual presentation of basic and diluted net income per
share on the face of the statement of consolidated income and requires a
reconciliation of the numerators and denominators of the respective
calculations. Management believes that basic and diluted net income per share
will not differ materially from the current calculations of primary and fully
diluted net income per share for the Company.

LEASES

The Company leases certain equipment under agreements expiring during the next
five years. Harris Teeter leases most of its stores under leases that expire
during the next 21 years. It is expected that such leases will be renewed by
exercising options or replaced by leases of other properties. Most store leases
provide for additional rentals based on sales, and certain store facilities are
sublet under leases expiring during the next eight years. Rent expenses were as
follows:

<TABLE>
<CAPTION>
(In thousands)                          1997         1996          1995
-------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>
OPERATING LEASES:
Minimum                               $52,327      $43,282      $36,111
Contingent                                941        1,175        1,277
-------------------------------------------------------------------------------
 Total                                $53,268      $44,457      $37,388
-------------------------------------------------------------------------------
</TABLE>


Future minimum lease commitments at September 28, 1997 (excluding leases
assigned or expected to be assigned - see below) were as follows:

<TABLE>
<CAPTION>
(In thousands)                                                    Capital Leases     Operating Leases
--------------------------------------------------------------------------------------------------------
<S>                                                               <C>                <C>
1998                                                                 $   268           $  57,398
1999                                                                     268              55,752
2000                                                                     268              53,709
2001                                                                     268              51,151
2002                                                                     268              49,602
Later years                                                              209             517,184
--------------------------------------------------------------------------------------------------------
Total minimum lease payments                                         $ 1,549           $ 784,796
--------------------------------------------------------------------------------------------------------
Less amount representing interest
(Store premises, 6.75%-10.25%, store equipment, 8%-15%)                  756
--------------------------------------------------------------------------------------------------------
Present value of minimum lease obligations                               793
Less current portion                                                     113
--------------------------------------------------------------------------------------------------------
Long-term capital lease obligations                                  $   680
--------------------------------------------------------------------------------------------------------
Total minimum sublease rentals to be received
under noncancelable subleases                                                          $   2,753
--------------------------------------------------------------------------------------------------------
</TABLE>

                                      22
<PAGE>   11

In connection with the closing of certain store locations, Harris Teeter has
assigned leases to other merchants with recourse. These leases expire over the
next 12 years and the future minimum lease payments of $11,532,000 over this
period have been assumed by these merchants. In addition, Harris Teeter leases
certain store locations which are not currently in use but are expected to be
assigned to other merchants. These leases expire over the next 20 years and the
future minimum lease payments related to these locations total $35,665,000
(approximating $3,222,000 per year for each of the next five years).

LONG-TERM DEBT

Long-term debt at September 28, 1997 and September 29, 1996 was as follows:

<TABLE>
<CAPTION>
(In thousands)                                                                 1997                   1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                    <C>             
6.48% Senior Note due $7,143 annually March, 2005 through 2011              $   50,000             $  50,000
7.72% Senior Note due April, 2017                                               50,000                    --
7.55% Senior Note due July, 2017                                                50,000                    --
Revolving line of credit, variable rate, due February 2002                      33,900                48,600
8.57% Term Note - Repaid in 1997                                                    --                50,167
Industrial revenue bond, variable rate, due November 2000                        2,500                 2,500
Obligations under capital leases and other                                       4,094                13,168
--------------------------------------------------------------------------------------------------------------------
      Total                                                                    190,494               164,435
--------------------------------------------------------------------------------------------------------------------
      Less current portion                                                         575                 5,247
--------------------------------------------------------------------------------------------------------------------
      Total long-term debt                                                  $  189,919             $ 159,188
--------------------------------------------------------------------------------------------------------------------
</TABLE>

Long-term debt maturities, excluding obligations under capital leases, in each
of the next five fiscal years are as follows: 1998 - $462,000; 1999 - $484,000;
2000 - $367,000; 2001 - $2,746,000; 2002 - $126,000. Additionally in fiscal
2002, the revolving line of credit with three banks ($33,900,000 as of
September 28, 1997) would mature; however, management expects to obtain the one
year extension of term upon receipt of the mutual consent of lenders under the
"evergreen" provisions of the loan agreement.

In fiscal 1996, the Company executed an unsecured $50,000,000 6.48% Senior
Promissory Note due March 1, 2011, and a non-committed $50,000,000 Private
Shelf Facility with a major insurance company. As of September 28, 1997, no
commitments had been initiated under the Private Shelf Facility.

In fiscal 1997, the Company executed an unsecured $50,000,000 7.72% Senior
Promissory Note due April 15, 2017 and an unsecured $50,000,000 7.55% Senior
Promissory Note due July 15, 2017, with the same major insurance company.
Proceeds from the Notes were used to repay the 8.57% Term Note and reduce the
amount borrowed under the revolving line of credit. During 1997 and 1996, the
maximum outstanding borrowing under the revolving line of credit for both years
was $100,000,000 and the average for the 364 days outstanding was $70,942,000
and $70,562,000, respectively. The daily weighted average interest rate (a
variable rate related to the current published CD rate) was 6.1% (5.9%) and a
commitment fee of .15% (.125%) of the unused line was charged during 1997
(1996).

Various loan agreements provide, among other things, for maintenance of minimum
levels of consolidated shareholders' equity. At September 28, 1997,
consolidated tangible net worth exceeded by $73,312,000 the balance which,
under the most restrictive provisions, must be maintained through September 27,
1998. The requirement shall increase annually by 40% of consolidated net income
for such year.

Total interest expense on long-term debt was $14,615,000, $12,748,000, and
$10,649,000 in 1997, 1996 and 1995, respectively.

                                      23
<PAGE>   12

CAPITAL STOCK

The capital stock of the Company authorized at September 28, 1997 was 1,000,000
shares of Additional Preferred, 4,000,000 shares of Preference-noncumulative
$.56 convertible, voting ($10 liquidation value), and 75,000,000 shares of
Common.

Changes in shares issued and outstanding and in shareholders' equity accounts
other than retained earnings are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                  Common
(In thousands except share amounts)                                                  Shares                  Amount
<S>                                                                                <C>                    <C>
-------------------------------------------------------------------------------------------------------------------  
BALANCE AT OCTOBER 2, 1994                                                         46,352,214             $  57,620
-------------------------------------------------------------------------------------------------------------------
Shares issued under exercised stock options                                           704,052                 3,639
Shares purchased and retired                                                         (682,600)               (6,952)
Tax effect of disqualifying option stocks                                                  --                   471
Other                                                                                      --                    38
-------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 1, 1995                                                         46,373,666             $  54,816
-------------------------------------------------------------------------------------------------------------------
Shares issued under exercised stock options                                            94,424                   661
Tax effect of disqualifying option stocks                                                  --                   117
Other                                                                                  (6,800)                    5
-------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 29, 1996                                                      46,461,290             $  55,599
-------------------------------------------------------------------------------------------------------------------
Shares issued under exercised stock options                                           138,011                 1,008
Tax effect of disqualifying option stocks                                                  --                   106
Other                                                                                      --                    66
-------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 28, 1997                                                      46,599,301             $  56,779
-------------------------------------------------------------------------------------------------------------------
</TABLE>

During fiscal 1995, the Company declared a two-for-one split of the common stock
effected in the form of a 100% stock dividend.  All common stock and per share
data included in the consolidated financial statements and footnotes have been
restated to reflect the stock split.

One preferred share purchase right is attached to each outstanding share of
common stock, which rights expire on November 15, 2000. Each right entitles the
holder to purchase one four-hundredth of a share of a new Series A Junior
Participating Additional Preferred Stock at $26.25. The rights will become
exercisable only under certain circumstances related to a person or group
acquiring or offering to acquire a substantial portion of the Company's common
stock. If certain additional events then occur, each right would entitle the
rightholder to acquire common stock of the Company, or in some cases of an
acquiring entity, having a value equal to twice the exercise price. Under
certain circumstances the Board of Directors may exchange all or part of the
outstanding rights at an exchange ratio per right of one share of common stock,
or one four-hundredth of a share of Series A Junior Participating Additional
Preferred Stock, or may redeem each right at a price of $.0025. There are
200,000 shares of Series A Junior Participating Additional Preferred Stock
reserved for issuance upon exercise of the rights.

STOCK OPTIONS

At September 28, 1997, the Company has 1982, 1988, 1993 and 1995 incentive
stock option plans which authorized options for 4,000,000 shares of common
stock. Under the plans, the Company has granted to officers and management
personnel stock options which become exercisable in installments of 20% per
year at each of the first through fifth anniversaries from

                                      24
<PAGE>   13

grant date and which expire seven years from grant date. Additionally under the
1995 plan, the Company grants a single, one-time option of 10,000 shares,
generally vested immediately, to each of its outside directors. Under each of
the plans the exercise price of each option shall be no less than the market
price of the Company's stock on the date of grant and an option's maximum term
is ten years. At the discretion of the Company, under certain plans a stock
appreciation right may be granted and exercised in lieu of the exercise of the
related option (which is then forfeited). Under the plans, as of September 28,
1997, the Company may grant additional options for the purchase of 859,600
shares.

A summary of the status of the Company's stock option plans as of September 28,
1997, September 29, 1996 and October 1, 1995, changes during the years ending
on those dates and related weighted average exercise price is presented below:

<TABLE>
<CAPTION>
(Shares in thousands)                                          1997                  1996                  1995
---------------------------------------------------------------------------------------------------------------------------
                                                          Shares  Price         Shares  Price        Shares   Price
                                                        -------------------------------------------------------------------
<S>                                                     <C>      <C>          <C>       <C>         <C>       <C>       
Outstanding at beginning of year                        1,116    $ 10.40        696     $ 9.07      1,364     $ 7.11
Granted                                                   120      13.45        573      11.50        124       9.72
Exercised                                                (181)      9.05        (97)      7.21       (757)      5.59
Forfeited                                                 (44)     10.64        (56)     10.81        (35)     10.03
---------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year                               1,011     10.99      1,116      10.40        696       9.07
---------------------------------------------------------------------------------------------------------------------------
Options exercisable at year-end                            422   $ 10.29        368     $ 9.14        404     $ 8.20
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following  table  summarizes  options  outstanding  and options 
exercisable  as of September 28, 1997, and the related weighted average
remaining contractual life (years) and weighted average exercise price (shares
in thousands):

<TABLE>
<CAPTION>
                                           Options Outstanding                            Options Exercisable
                                -------------------------------------------------------------------------------------------
                                    Shares            Remaining                           Shares
Option Price per Share            Outstanding           Life             Price          Exercisable         Price
-----------------------         -------------------------------------------------------------------------------------------
<S>        <C>  <C>             <C>                   <C>              <C>              <C>                <C>           
 $ 5.23    to   $  8.13                84               0.7            $  6.99               84            $  6.99
   9.16    to     11.44               743               4.4              10.98              249              10.68
  11.94    to     14.38               184               7.0              12.88               89              12.34
-----------------------          ------------------------------------------------------------------------------------------
$  5.23    to   $ 14.38             1,011               4.6            $ 10.99              422            $ 10.29
-----------------------          ------------------------------------------------------------------------------------------
</TABLE>

The weighted average fair value at date of grant for options granted during
fiscal 1997 and 1996 was $3.82 and $2.95 per option, respectively. The fair
value of options at date of grant was estimated using the Black-Scholes model
with the following weighted average assumptions:

<TABLE>
<CAPTION> 
                                                                                        1997                1996
---------------------------------------------------------------------------------------------------------------------------
 <S>                                                                                    <C>                 <C>
 Expected life (years)                                                                   4.9                  5.0
 Risk-free interest rate                                                                 5.91%                5.74%
 Volatility                                                                             28.65%               26.01%
 Dividend yield                                                                          2.10%                2.40%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

 The Company has adopted the disclosure-only provisions of Statement of
 Financial Accounting Standards No. 123, "Accounting for Stock-Based
 Compensation." Accordingly, no compensation cost has been recognized for the
 stock options granted in 1997 or 1996. Had compensation cost been determined
 based on the fair value at the grant date consistent with the provisions of
 this statement, the Company's pro forma net income and net income per share
 would have been as follows:

<TABLE>
<CAPTION>
(In thousands, except per share data)                                                 1997                   1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                    <C>
Net income    - as reported                                                         $ 47,731               $42,802
              - pro forma                                                             47,381                42,375   
Net income per share   - as reported                                                $   1.02               $   .92
                       - pro forma                                                      1.01                   .91
</TABLE>

                                      25
<PAGE>   14

The pro forma effect on net income for 1997 and 1996 is not representative of
the pro forma effect on net income in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to fiscal year 1996.

INCOME TAXES

The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
(In thousands)                                                 1997                   1996                   1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                    <C>                   <C>
CURRENT
Federal                                                      $ 12,803               $10,556               $ 15,995
State and other                                                 4,687                 2,486                  3,983
---------------------------------------------------------------------------------------------------------------------------
                                                               17,490                13,042                 19,978
---------------------------------------------------------------------------------------------------------------------------
DEFERRED
Federal                                                         5,034                 5,196                   (151)
State and other                                                 1,047                   969                    163
---------------------------------------------------------------------------------------------------------------------------
                                                                6,081                 6,165                     12
---------------------------------------------------------------------------------------------------------------------------
Provision for income taxes                                   $ 23,571               $19,207               $ 19,990
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Income from foreign operations before income taxes in fiscal 1997, 1996, and
1995 was $4,520,000, $1,390,000, and $560,000, respectively.

Income tax expense differed from an amount computed by applying the statutory
tax rates to pre-tax income as follows:

<TABLE>
<CAPTION>
(In thousands)                                                  1997                    1996                 1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                    <C>                   <C>
 Income tax on pre-tax income at the statutory
     federal rate of 35%                                      $  24,956              $ 21,703              $ 20,740
 Increase (decrease) attributable to:
     State and other income taxes, net of federal
         income tax benefit                                       3,265                 1,806                 2,841
     COLI                                                        (3,528)               (4,261)               (3,646)
     Other items, net                                            (1,122)                  (41)                   55
---------------------------------------------------------------------------------------------------------------------------
Income tax expense                                            $  23,571              $ 19,207              $ 19,990
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The tax effects of temporary differences giving rise to the Company's
consolidated deferred tax liability at September 28, 1997 and September 29,
1996 are as follows:

<TABLE>
<CAPTION>
(In thousands)                                                                          1997                  1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                    <C>
DEFERRED TAX ASSETS
Employee benefits                                                                  $    6,485             $   6,215
Reserves not currently deductible                                                       6,888                 6,426
Other                                                                                   3,256                 1,836
---------------------------------------------------------------------------------------------------------------------------
Total deferred tax assets                                                          $   16,629             $  14,477
---------------------------------------------------------------------------------------------------------------------------

DEFERRED TAX LIABILITIES
Property, plant and equipment                                                      $  (52,300)            $ (46,996)
Other capitalized costs                                                                (3,747)               (3,094)
Other                                                                                  (8,410)               (6,134)
---------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities                                                     $  (64,457)            $ (56,224)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       26
<PAGE>   15
INDUSTRY SEGMENT INFORMATION

The Company operates primarily in two businesses: industrial thread (textile
primarily) - American & Efird, and retail grocery (including the real estate
and store development activities of the Company) - Harris Teeter. American &
Efird manufactures sewing thread for the apparel and other markets. Harris
Teeter operates a regional chain of supermarkets.

Summarized information for fiscal 1997, 1996 and 1995 is as follows:

<TABLE>
<CAPTION>
                                                  Industrial           Retail           
(In millions)                                       Thread            Grocery (1)          Corporate (2)    Consolidated
---------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>                    <C>             <C>
1997
Net Sales                                           $368.9            $1,931.2                             $2,300.1
---------------------------------------------------------------------------------------------------------------------------
Gross Profit                                         106.8               525.4                                632.2
---------------------------------------------------------------------------------------------------------------------------
Operating Profit                                      49.1                45.7                                 94.8
---------------------------------------------------------------------------------------------------------------------------
Assets Employed at Year End                         $299.7            $  521.7              $ 63.8         $  885.2
Depreciation and Amortization                         15.4                42.5                 0.8             58.7
Capital Expenditures                                  28.9                86.2                 0.2            115.3


1996
Net Sales                                           $309.5            $1,833.0                             $2,142.5
---------------------------------------------------------------------------------------------------------------------------
Gross Profit                                          89.0               492.4                                581.4
---------------------------------------------------------------------------------------------------------------------------
Operating Profit                                      34.7                48.4                                 83.1
---------------------------------------------------------------------------------------------------------------------------
Assets Employed at Year End                         $263.5            $  476.9              $ 61.3         $  801.7
Depreciation and Amortization                         12.3                37.6                 1.3             51.2
Capital Expenditures                                  35.6(3)             83.2                 4.5            123.3


1995
Net Sales                                           $298.0            $1,711.8                             $2,009.8
---------------------------------------------------------------------------------------------------------------------------
Gross Profit                                          82.9               443.0                                525.9
---------------------------------------------------------------------------------------------------------------------------
Operating Profit                                      34.6                42.1                                 76.7
---------------------------------------------------------------------------------------------------------------------------
Assets Employed at Year End                         $214.1            $  437.2              $ 64.0         $  715.3
Depreciation and Amortization                         11.3                31.7                 1.6             44.6
Capital Expenditures                                  16.4                81.4                 0.4             98.2
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Retail Grocery Assets Employed include $18,714,000, $22,131,000 and
      $19,080,000 in 1997, 1996 and 1995, respectively, related to store
      investment activities of the Company for the development of retail sites.

(2)   Corporate Assets Employed include the net cash surrender value of Company
      owned life insurance and the net assets of discontinued operations.

(3)   Includes the purchase of certain assets of Threads USA.

COMMITMENTS AND CONTINGENCIES

Substantially all domestic full-time employees of the Company and its
subsidiaries participate in non-contributory defined benefit pension plans.
Employees in foreign subsidiaries participate to varying degrees in local
pension plans, which, in the aggregate, are not significant. Employee
retirement benefits are a function of both the years of service and
compensation for a specified period of time before retirement. The Company's
current funding policy is to contribute annually the minimum amount required by
regulatory authorities.

                                      27
                            
<PAGE>   16

The following table sets forth the defined benefit plans' funded status and
amounts recognized in the Company's consolidated balance sheets at September
28, 1997 and September 29, 1996:

<TABLE>
<CAPTION>
(In thousands)                                                                          1997                   1996        
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                   <C>
Actuarial present value of benefit obligations:
Vested benefits                                                                     $  82,676             $  71,585
Nonvested benefits                                                                      3,677                 2,934
---------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations                                                        86,353                74,519
Effect of projected future compensation levels                                         23,838                19,612
---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations                                                         110,191                94,131
Plans' assets at fair market value                                                     92,611                72,642
---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations in excess of plans' assets                              (17,580)              (21,489)
Unrecognized net asset at September 30, 1985, net of
     amortization, being amortized over 15-20 years                                     1,541                 1,935
Unrecognized net loss due to past experience
     different from assumptions made                                                  (14,215)              (12,412)
---------------------------------------------------------------------------------------------------------------------------
Unfunded accrued pension cost                                                       $  (4,906)            $ (11,012)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The plans' assets consist primarily of U. S. government securities, corporate
bonds, cash equivalents and domestic equities, all managed by two banks. The
contribution payable at September 28, 1997 and September 29, 1996, required to
be paid by due date of the federal income tax return, was $1,462,000 and
$6,986,000, respectively.

In 1997 (1996), a 7.5% (8%) weighted average discount rate and 5% (5%) rate of
increase in future payroll costs were used in determining the actuarial present
value of the projected benefit obligations. The expected long-term rate of
return on assets was 8% for both years.

Pension expense for defined benefit plans for fiscal 1997, 1996, and 1995
included the following components:

<TABLE>
<CAPTION>
(In thousands)                                                  1997                   1996                   1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                    <C>                   <C>              
Benefits earned by employees                                  $  4,464               $ 4,033               $ 3,835
Interest on projected benefit obligations                        7,789                 7,135                 6,608
Actual return on plan assets                                   (11,560)               (4,635)               (7,134)
Net amortization and deferral                                    5,356                (1,143)                1,873
---------------------------------------------------------------------------------------------------------------------------
Net pension expense                                           $  6,049               $ 5,390               $ 5,182
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Company also has an Employee Stock Ownership Plan (ESOP), a profit-sharing
plan and certain other plans. Expenses under these plans were as follows:

<TABLE>
<CAPTION>
(In thousands)                                                  1997                   1996                   1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                    <C>                   <C>
ESOP                                                          $ 8,733                $ 7,866               $ 7,651
---------------------------------------------------------------------------------------------------------------------------
Profit-sharing                                                  3,098                  1,699                 1,652
---------------------------------------------------------------------------------------------------------------------------
Other                                                           2,517                  2,266                 2,061
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Company is involved in various lawsuits and environmental and patent
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.

See "Leases" for additional commitments and contingencies.


                                      28
<PAGE>   17

QUARTERLY INFORMATION (UNAUDITED)

The following table sets forth certain financial information, the high and low
sales prices and dividends declared for the common stock for the periods
indicated. The Company's common stock is listed and traded on the New York
Stock Exchange. As of September 28, 1997, there were 1,599 holders of record of
common stock.

<TABLE>
<CAPTION>
                                           First               Second                 Third                  Fourth
(In millions, except per share data)     Quarter               Quarter              Quarter                 Quarter
---------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                  <C>                   <C>                    <C>
1997 OPERATING RESULTS
Net Sales                                $ 574.1              $  563.9              $  579.8               $ 582.3
Net Income                                  11.6                  11.2                  13.0                  11.9
Net Income Per Share                         .25                   .24                   .28                   .25
Dividend Per Share                           .08                   .08                   .08                   .08
Market Price Per Share
     High                                 13 7/8                17 3/4                16 3/4                16 5/8
     Low                                  12 3/8                13 1/4                14                    14    
---------------------------------------------------------------------------------------------------------------------------

1996 OPERATING RESULTS
Net Sales                                $ 529.7                $522.3                $532.6               $ 557.9
Net Income                                   8.1                   9.5                  13.6                  11.6
Net Income Per Share                         .17                   .21                   .29                   .25
Dividend Per Share                           .06                   .06                   .07                   .07
Market Price Per Share
     High                                 14 1/8                13 1/4                15 1/4                14    
     Low                                   9 5/8                10 5/8                12 1/4                11 1/4
</TABLE>



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF RUDDICK CORPORATION:
We have audited the accompanying consolidated balance sheets of Ruddick
Corporation (a North Carolina corporation) and subsidiaries as of September 28,
1997, and September 29, 1996, and the related statements of consolidated income
and retained earnings and consolidated cash flows for each of the three years
in the period ended September 28, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ruddick
Corporation and subsidiaries as of September 28, 1997 and September 29, 1996,
and the results of their operations and their cash flows for each of three
years in the period ended September 28, 1997 in conformity with generally
accepted accounting principles.

Charlotte, North Carolina                                /s/ARTHUR ANDERSEN LLP
October 22, 1997

                                      29
<PAGE>   18


ELEVEN-YEAR FINANCIAL AND OPERATING SUMMARY

<TABLE>
<CAPTION>
                                                    1997                1996               1995                  1994
                                                    ----                ----               ----                  ----
<S>                                             <C>                  <C>                <C>                 <C>
Net Sales
   American & Efird                             $   368,877          $  309,459         $  297,963          $  277,016
   Harris Teeter                                  1,931,212           1,833,042          1,711,813           1,578,880
----------------------------------------------------------------------------------------------------------------------
     Total Net Sales                            $ 2,300,089          $2,142,501         $2,009,776          $1,855,896
----------------------------------------------------------------------------------------------------------------------
Operating Profit
   American & Efird                             $    49,165          $   34,684         $   34,614          $   26,916
   Harris Teeter                                     45,671              48,459             42,114              37,032
----------------------------------------------------------------------------------------------------------------------
     Total Operating Profit                     $    94,836          $   83,143         $   76,728          $   63,948
----------------------------------------------------------------------------------------------------------------------
Net Income                                      $    47,731          $   42,802         $   39,267          $   31,811
Net Income Per Share                                   1.02                 .92                .84                 .67
Common Dividend                                         .32                 .26                .25                 .22
----------------------------------------------------------------------------------------------------------------------
Earnings Before Interest, Taxes,
   Depreciation and Amortization                $   144,583          $  125,390         $  114,385          $   99,166
----------------------------------------------------------------------------------------------------------------------
Shareholders' Equity                            $   380,507          $  346,856         $  316,236          $  291,209
Percent Return on Beginning Equity                     13.8%               13.5%              13.5%               11.6%
Book Value Per Share                            $      8.17          $     7.47         $     6.82          $     6.28
----------------------------------------------------------------------------------------------------------------------
Capital Expenditures
   American & Efird                             $    28,878          $   35,605(2)      $   16,359          $   20,416
   Harris Teeter                                     86,237              83,204             81,447              46,349
   Corporate                                            184               4,471                399                  35
----------------------------------------------------------------------------------------------------------------------
     Total Capital Expenditures                 $   115,299          $  123,280         $   98,205          $   66,800
----------------------------------------------------------------------------------------------------------------------
Working Capital                                 $    88,893          $   65,134         $   73,741          $   93,387
Total Assets                                    $   885,243          $  801,702         $  715,318          $  634,599
Long-Term Debt - Including Current Portion      $   190,494          $  164,435         $  128,952          $  109,567
Long-Term Debt as a Percent of Capital Employed        33.4%               32.2%              29.0%               27.3%
Number of Employees                                  19,700              20,100             19,850              18,610
Number of Beneficial Shareholders
   Including Employee/Owners                         19,100              16,700             14,500              14,100
Common Shares Outstanding                        46,599,301          46,461,290         46,373,666          46,352,214
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  53-week year

(2)  Includes purchase of assets of Threads USA

                                      30
<PAGE>   19

<TABLE>
<CAPTION>
          1993(1)    
---------------------
       <S>           <C>
       $   264,814   
         1,412,315   
---------------------
       $ 1,677,129   
---------------------

       $    30,551   
            29,845   
---------------------
       $    60,396   
---------------------
       $    33,873   
               .71   
               .21   
---------------------

       $    97,490   
---------------------
       $   274,740   
              13.3%  
       $      5.87   
---------------------

       $    19,433   
            33,683   
                27   
---------------------
       $    53,143   
---------------------
       $   103,191   
       $   580,807   
       $   104,173   
              27.5%  
            17,120   
 
            14,600   
        46,036,146   
---------------------
</TABLE>

                                       31