UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark one)[ X
      ]
    
    ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the
      Fiscal Year Ended:September 30,
      2007OR[    ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For the
      transition period from __________ to __________**Commission File
      Number:****1-6905**


|**RUDDICK CORPORATION**                                     
|------------------------------------------------------------
|(Exact name of registrant as
      specified in its charter)

|North Carolina                  |  | 56-0905940            
|------------------------------- |  | ----------------------
|(State or other jurisdiction of |  | (I.R.S.
      Employer
|incorporation or organization)  |  | Identification Number)
|                               

| | **301
      S. Tryon St., Suite 1800, Charlotte, North Carolina** |  | 28202      | 
| | ----------------------------------------------------------------- |  | ---------- | 
| | (Address of principal executive offices)                          |  | (Zip Code) | 

Registrant's telephone number, including
area code:(704) 372-5404

Securities registered pursuant to
Section 12(b) of the Act:

|Title of each class:                           |  | Name of exchange on which
      registered:
|---------------------------------------------- |  | -------------------------------------------
|Common
      Stock                             |  | New York Stock
      Exchange, Inc.        
|Rights to
      Purchase Series A Junior       |  |                                            
|Participating Additional
      Preferred Stock |  | New York Stock
      Exchange, Inc.        

Securities registered pursuant to
Section 12(g) of the Act:None

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. YesXNo

Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes 
No X

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.Yes X
No

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):Large accelerated
filer XAccelerated
filer          
Non-accelerated filer

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

The
aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing price as of the last business
day of the registrants most recently completed second fiscal quarter, April 1,
2007, was $1,138,390,000. The registrant has no non-voting stock.

As of
November 21, 2007, the registrant had outstanding 48,343,163 shares of Common
Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part III:
Portions of the Definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the solicitation of proxies for the
Companys 2008 Annual Meeting of Shareholders to be held on February 21, 2008,
are incorporated by reference into Part III. (With the exception of those
portions which are specifically incorporated by reference in this Form 10-K, the
Proxy Statement is not deemed to be filed or incorporated by reference as part
of this report.)

---

RUDDICK CORPORATIONAND
CONSOLIDATED SUBSIDIARIES

FORM 10-K FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2007

TABLE OF CONTENTS

|PART I   |     |                                                                   
|-------- | --- | ------------------------------------------------------------------
|         |     |                                                                   
|Item     | 1.  | Business                                                          
|Item     | 1A. | Risk
      Factors                                                
|Item     | 1B. | Unresolved Staff Comments                                         
|Item     | 2.  | Properties                                                        
|Item     | 3.  | Legal Proceedings                                                 
|Item     | 4.  | Submission of
      Matters to a Vote of Security Holders         
|Item     | 4A. | Executive Officers of the Registrant                              
|        
|PART II  |     |                                                                   
|        
|Item     | 5.  | Market for Registrant's Common Equity, Related
      Shareholder  
|         |     | Matters and Issuer Purchases of Equity Securities                 
|Item     | 6.  | Selected
      Financial Data                                     
|Item     | 7.  | Management's Discussion and Analysis of Financial
      Condition 
|         |     | and Results of Operations                                         
|Item     | 7A. | Quantitative and
      Qualitative Disclosures about Market Risk  
|Item     | 8.  | Financial Statements and Supplementary Data                       
|Item     | 9.  | Changes in and
      Disagreements with Accountants on Accounting 
|         |     | and Financial
      Disclosure                                    
|Item     | 9A. | Controls and Procedures                                           
|Item     | 9B. | Other
      Information                                           
|        
|PART III |     |                                                                   
|        
|Item     | 10. | Directors and Executive Officers of the Registrant                
|Item     | 11. | Executive
      Compensation                                      
|Item     | 12. | Security Ownership of Certain Beneficial Owners and               
|         |     | Management and Related Shareholder Matters                        
|Item     | 13. | Certain
      Relationships and Related Transactions, and Director
|         |     | Independence                                                      
|Item     | 14. | Principal Accountant Fees and Services                            
|        
|PART IV  |     |                                                                   
|        
|Item     | 15. | Exhibits and Financial Statement Schedules                        

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PART I

Item 1.Business

Ruddick Corporation (the Company) is
a holding company which, through its wholly-owned subsidiaries, is engaged in
two primary businesses: Harris Teeter, Inc. (Harris Teeter) currently operates
a regional chain of supermarkets in seven southeastern states, and American
& Efird, Inc. (A&E) manufactures and distributes industrial sewing
thread, embroidery thread and technical textiles on a global basis.

At September 30, 2007, the Company and
its subsidiaries had total consolidated assets of $1,529,689,000 and had
approximately 24,800 employees. The principal executive office of the Company is
located at 301 S. Tryon Street, Suite 1800, Charlotte, North Carolina, 28202.

Ruddick Corporation, which is
incorporated under North Carolina law, was created in 1968 through the
consolidation of the predecessor companies of A&E and Ruddick Investment
Company. In 1969, the Company acquired Harris Teeter. Ruddick Investment Company
is not classified as a separate operating component of the Company due to its
limited operations and relative size to the consolidated group. Ruddick
Investment Company manages venture capital holdings in a limited number of
entities and has investments in various independently managed venture capital
investment funds. For information regarding the Companys investments, see the
Note entitled Summary of Significant Accounting Policies of the Notes to
Consolidated Financial Statements in Item 8 hereof.

The two primary businesses of the
Company, together with financial information and competitive aspects of such
businesses, are discussed separately below. For other information regarding
industry segments, see the Note entitled Industry Segment Information of the
Notes to Consolidated Financial Statements in Item 8 hereof.

The only foreign operations conducted
by the Company are through A&E. Neither of the two primary businesses would
be characterized as seasonal. The following analysis is based upon the Companys
operating locations for the fiscal periods and year end (in thousands):

2007
    
    2006
    
    2005Net Sales for the Fiscal Year:Domestic United States
    $
    3,454,198
    
    $
    3,089,776
    
    $
    2,796,321Foreign Countries
    
    185,010
    
    
    176,080
    
    
    168,334$
    3,639,208
    
    $
    3,265,856
    
    $
    2,964,655Net Long-Lived Assets at Fiscal Year End:Domestic United States
    $
    860,493
    
    $
    726,128
    
    $
    599,688Foreign Countries
    
    41,990
    
    
    42,748
    
    
    38,866$
    902,483
    
    $
    768,876
    
    $
    638,554


The Company employs sixteen people at
its corporate headquarters, including two executive officers who formulate and
implement overall corporate objectives and policies. The Companys employees
perform functions in a number of areas including finance, accounting, internal
audit, risk management, reporting, employee benefits and public and shareholder
relations. The Company assists its subsidiaries in developing long-range goals,
in strengthening management personnel and their operations and financing.
Management of each subsidiary is responsible for implementing operating policies
and reports to management of the Company.

Harris Teeter

As of September 30, 2007, Harris Teeter
operated 164 supermarkets located in North Carolina (123), Virginia (26), South
Carolina (9), Tennessee (3), Georgia (1), Florida (1) and Maryland (1). These
supermarkets offer a full assortment of groceries, produce, meat and seafood,
delicatessen items, bakery items, wines and non-food items such as health and
beauty care, and floral. In addition, Harris Teeter operated pharmacies in 97 of
their supermarkets as of September 30, 2007. Retail supermarket operations are
supported by two company-owned distribution centers and one company-owned dairy
production facility. Other than milk and ice cream produced by the company-owned
facility, Harris Teeter purchases most of the products it sells, including its
private label brands, from outside suppliers or directly from the manufacturers.
Harris Teeters sales constituted 91% of the Companys consolidated sales in
fiscal 2007 (89% in both fiscal 2006 and fiscal 2005).

1

---

The supermarket industry is highly
competitive. Harris Teeter competes with local, regional and national food
chains along with independent merchants. In addition to the more traditional
food stores, Harris Teeter also competes with discount retailers (including
supercenters that carry a full line of food items), many of which are larger in
terms of assets and sales. In the past several years, considerable consolidation
of competitors has taken place in the supermarket industry which has reduced the
number of local food chains and independent merchants. Additionally, some
discount supercenter operators, such as Wal-Mart and Target, are continuing to
expand and offer more items typically found in supermarket formats. As a result,
Harris Teeter is likely to compete with more, larger food chains in its markets.
Principal competitive factors include store location, price, service,
convenience, cleanliness, product quality and product variety. No one customer
or group of customers has a material effect upon the business of Harris Teeter.

As of September 30, 2007, Harris Teeter
employed approximately 9,900 full-time and 11,200 part-time individuals, none of
whom were represented by a union. Harris Teeter considers its employee relations
to be good.

American & Efird, Inc.

A&E is one of the worlds largest
global manufacturers and distributors of industrial sewing thread, embroidery
thread and technical textiles, produced from natural and synthetic fibers.
Manufacturers of apparel, automotive materials, home furnishings, medical
supplies and footwear rely on A&E industrial sewing thread to manufacture
their products. A&Es primary products are industrial sewing thread,
embroidery thread and technical textiles sold through its employed sales
representatives, commissioned agents and distributors. A&E also distributes
sewing supplies manufactured by other companies. A&E sales constituted 9% of
the Companys consolidated sales in fiscal 2007 (11% in both fiscal 2006 and
fiscal 2005).

A majority of A&Es sales are
industrial thread for use in apparel products. The apparel market is made up of
many categories servicing both genders and diverse age groups, including
jeanswear, underwear, menswear, womenswear, outerwear, intimate apparel,
workwear and childrenswear. A&E also manufactures industrial thread for use
in a wide variety of non-apparel products including home furnishings,
automotive, footwear, upholstered furniture, sporting goods, caps and hats,
gloves, leather products, medical products and tea bag strings.

Headquartered in Mt. Holly, North
Carolina, the company operated seven modern manufacturing facilities in North
Carolina and seven distribution centers strategically located in the United
States as of the fiscal year ended September 30, 2007. The manufacturing
facilities have been designed for flexibility and efficiency to accommodate
changing customer product demands.

A&E also has wholly-owned
operations in Canada, China, Colombia, Costa Rica, El Salvador, England,
Guatemala, Honduras, Hong Kong, Nicaragua, Italy, Mexico, Malaysia, The
Netherlands, Turkey, Poland and Slovenia; majority-owned joint ventures in China
(two), Dominican Republic and South Africa; minority interest in ventures with
ongoing operations in Bangladesh, Brazil and Sri Lanka; and a 50% ownership
interest in a joint venture in China. A&Es consolidated assets in these
foreign operations total approximately $152 million. Management expects to
continue to expand foreign production and distribution operations, through
acquisitions, joint ventures or new start-up operations.

The domestic order backlog, believed to
be firm, as of September 30, 2007, was approximately $11,576,000 versus
$12,925,000 at the end of the preceding fiscal year. The international order
backlog as of the end of fiscal 2007 was approximately $3,387,000 versus
$1,271,000 at the end of the preceding fiscal year. The majority of the domestic
and international order backlog was filled within five weeks of the fiscal 2007
year end. As of September 30, 2007, A&E had approximately 7,300 domestic and
7,300 international active customer accounts. In fiscal 2007, no single customer
accounted for more than 4% of A&Es total net sales, and the ten largest
customers accounted for approximately 15% of A&Es total net
sales.

A&E purchases cotton from farmers
and domestic cotton merchants. There is presently a sufficient supply of cotton
worldwide and in the domestic market. Synthetic fibers are bought from the
principal American synthetic fiber producers for domestic operations and from
the principal Asian and American synthetic fiber producers for operations in
China. There is currently an adequate supply of synthetic fiber for A&Es
global operations.

A&E has two patents issued. There
are no material licenses, franchises or concessions held by A&E. Research
and development expenditures were $487,000, $445,000, and $438,000 in fiscal
2007, 2006 and 2005, respectively, none of which were sponsored by customers.
Two full-time employees are currently engaged in this activity.

The industrial sewing thread industry
is highly competitive. A&E is one of the worlds largest manufacturers of
industrial sewing threads and also manufactures and distributes consumer sewing
thread, embroidery thread and technical textiles.

2

---

A&E competes globally with Coats
plc as well as regional producers and merchants in various markets served by
A&E.The key competitive factors are quality,
service and price. A&E competes with a number of large, well-established
companies, including Coats plc, in the industrial thread, embroidery thread and
technical textile markets.

A&E and its consolidated
subsidiaries employed approximately 3,700 individuals worldwide as of September
30, 2007. None of the domestic employees and an insignificant number of
employees of foreign operations are represented by a union. A&E considers
its employee relations to be good.

Available Information

The Companys Internet address iswww.ruddickcorp.com. The Company makes available, free of charge, on or through its website,
our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and beneficial
ownership reports on Forms 3, 4, and 5 as soon as reasonably practicable after
electronically filing such material with, or furnishing it to, the Securities
and Exchange Commission.

Item 1A.Risk Factors

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

All forward-looking statements, by
their nature, are subject to risks and uncertainties. Our actual future results
may differ materially from those set forth in our forward-looking statements. We
face risks that are inherent in the businesses and the market places in which
Harris Teeter and A&E operate. The following discussion sets forth certain
risks and uncertainties that we believe could cause actual future results to
differ materially from expected results. In addition to the factors discussed
below, other factors that might cause our future financial performance to vary
from that described in our forward-looking statements include: (i) changes in
federal, state or local laws or regulations; (ii) cost and stability of energy
sources; (iii) cost and availability of raw materials; (iv) managements ability
to predict accurately the adequacy of the Companys present liquidity to meet
future financial requirements; (v) continued solvency of any third parities on
leases the Company has guaranteed; (vi) managements ability to predict the
required contributions to the pension plans of the Company; (vii) changes in
labor and employee benefit costs, such as increased health care and other
insurance costs; (viii) ability to recruit, train and retain effective employees
and management in both of the Companys subsidiaries; (ix) the extent and speed
of successful execution of strategic initiatives; and (x) unexpected outcomes of
any legal proceedings arising in the normal course of business of the Company.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial also may impair our business operations and also could
cause actual results to differ materially from those included, contemplated or
implied by the forward-looking statements made in this report, and the reader
should not consider any of the above list of factors and the following
discussion to be a complete set of all potential risks or
uncertainties.

Risks Related to Harris Teeter

The Supermarket Industry is Highly
Competitive. The supermarket industry is
characterized by narrow profit margins and competes on price, location and
service. Harris Teeter faces increased competitive pressure in all of its
markets from existing competitors and from the threatened entry by one or more
major new competitors. The number and type of competitors faced by Harris Teeter
vary by location and include: traditional grocery retailers (both national and
regional), discount retailers such as supercenters and club and warehouse
stores, specialty supermarkets, drug stores, dollar stores, convenience stores
and restaurants. In addition, certain Harris Teeter supermarkets also compete
with local video stores, florists, book stores and pharmacies. Aggressive
supercenter expansion, increasing fragmentation of retail formats, entry of
non-traditional competitors and market consolidation have further contributed to
an increasingly competitive marketplace.

Additionally, increasingly competitive
markets have made it difficult generally for grocery store operators to achieve
comparable store sales gains. Because sales growth has been difficult to attain,
Harris Teeters competitors have attempted to maintain market share through
increased levels of promotional activities and discount pricing, creating a more
difficult environment in which to achieve consistent sales gains. Some of Harris
Teeters competitors have greater financial resources and could use these
resources to take measures which could adversely affect Harris Teeters competitive position. Accordingly, Harris Teeters business,
financial condition or results of operations could be adversely affected by
competitive factors, including product mix and pricing changes which may be made
in response to competition from existing or new competitors.

3

---

Harris Teeters Expansion Plans Are
Subject toRisk. Harris Teeter has spent, and
intends to continue to spend, significant capital and management resources on
the development and implementation of expansion and renovation plans. Harris
Teeters new store opening program has accelerated in recent years and involves
expanding the companys Washington, D.C. metro market area which incorporates
Northern Virginia, the District of Columbia, southern Maryland and coastal
Delaware. The successful implementation of Harris Teeters renovation and
expansion plans are subject to several factors including: the availability of
new, suitable locations on reasonable commercial terms, or at all; the success
of new stores, including those in new markets; managements ability to manage
expansion, including the effect on sales at existing stores when a new store is
opened nearby; the ability to secure any necessary financing; change in regional
and national economic conditions; and increasing competition or changes in the
competitive environment in Harris Teeters markets.

Harris Teeters new stores may
initially operate at a loss, depending on factors such as prevailing competition
and market position in the surrounding communities and the level of sales and
profit margins in existing stores may not be duplicated in new stores. Pursuing
a strategy of growth, renovation and expansion in light of current highly
competitive industry conditions could lead to a near-term decline in earnings as
a result of opening and operating a substantial number of new stores,
particularly with respect to stores in markets where Harris Teeter does not have
a significant presence. If Harris Teeters expansion and renovation plans are
unsuccessful, it could adversely affect Harris Teeters cash flow, business and
financial condition due to the significant amount of capital and management
resources invested.

Food Safety Issues Could Result in a
Loss of Consumer Confidence and Product Liability Claims.Harris Teeter could be adversely affected if consumers lose
confidence in the safety and quality of the food supply chain. These concerns
could cause shoppers to avoid purchasing certain products from Harris Teeter, or
to seek alternative sources of supply for their food needs, even if the basis
for the concern is not valid and/or is outside of the companys control. Adverse
publicity about these types of concerns, whether or not valid, could discourage
consumers from buying our products and any lost confidence on the part of our
customers would be difficult and costly to reestablish. As such, any issue
regarding the safety of any food items sold by Harris Teeter, regardless of the
cause, could have a substantial and adverse effect on the companys
operations.

Harris Teeters Geographic
Concentration May Expose it to Regional or Localized Downturns.Harris Teeter operates in the Southeastern United States, with
a strong concentration in North Carolina, Virginia and South Carolina. As a
result, Harris Teeters business is more susceptible to regional factors than
the operations of more geographically diversified competitors. These factors
include, among others, changes in the economy, weather conditions, demographics
and population. Although the Southeast region has experienced economic and
demographic growth over the past several years, a significant economic downturn
in the region could have a material adverse effect on Harris Teeters business,
financial condition or results of operations.

The Ownership and Development of
Real Estate May Subject Harris Teeter to Environmental Liability.Under applicable environmental laws, as an
owner or developer of real estate, Harris Teeter may be responsible for
remediation of environmental conditions that may be discovered and may be
subject to associated liabilities (including liabilities resulting from lawsuits
brought by private litigants) relating to Harris Teeter supermarkets and other
buildings and the land on which those building are situated, whether the
properties are leased or owned, and whether such environmental conditions, if in
existence, were created by Harris Teeter or by a prior owner or tenant. The
discovery of contamination from hazardous or toxic substances, or the failure to
properly remediate such contaminated property, may adversely affect Harris
Teeters ability to sell or rent real property or to borrow using real property
as collateral. Liabilities or costs resulting from noncompliance with current or
future applicable environmental laws or other claims relating to environmental
matters could have a material adverse effect on Harris Teeters business,
financial condition or results of operations.

Risks Related to A&E

A&E Operates in a Competitive
Global Industry.A&E competes on a global
basis with a large number of manufacturers in the highly competitive sewing
thread, embroidery thread and technical textile industries. Maintaining
A&Es competitive position may require substantial investments in product
development efforts, manufacturing facilities, distribution network and sales
and marketing activities. Competitive pressures may also result in decreased
demand for A&Es products or force A&E to lower its prices. Other
generally adverse economic and industry conditions, including a decline in
consumer demand for apparel products, could have a material adverse effect on
A&Es business.

4

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A&E may not Succeed at
Integrating Its Acquisitions.In recent
years, A&E has expanded its foreign production and distribution capacity by
acquiring other manufacturers, entering into joint ventures or starting new
businesses. Management expects A&E to continue this activity and expand
foreign production and distribution operations through acquisitions, joint
ventures or new start-up operations. The process of combining these acquisitions
with A&Es existing businesses involves risks. A&E will face challenges
in consolidating functions, integrating organizations, procedures, operations
and product lines in a timely and efficient manner and retaining key personnel.
Failure to successfully manage and integrate acquisitions, joint ventures or new
start-up businesses could lead to the potential loss of customers, the potential
loss of employees who may be vital to the new operations, the potential loss of
business opportunities or other adverse consequences that could affect A&Es
financial condition and results of operations. Even if integration occurs
successfully, failure of future acquisitions to achieve levels of anticipated
sales growth, profitability or productivity may adversely impact A&Es
financial condition and results of operations. Additionally, expansions
involving foreign markets may present other complexities that may require
additional attention from members of management. The diversion of management
attention and any difficulties encountered in the transition and integration
process could have a material adverse effect on A&Es revenues, level of
expenses and operating results.

A&E Has Substantial
International Operations.In fiscal 2007,
approximately 54% of A&Es net sales and a large portion of A&Es
production occurred outside the United States, primarily in Europe, Latin
America and Asia. A&Es corporate strategy includes the expansion and growth
of its international business on a worldwide basis. As a result, A&Es
operations are subject to various political, economic and other uncertainties,
including risks of restrictive taxation policies, changing political conditions
and governmental regulations. A&Es foreign operations also subjects A&E
to the risks inherent in currency translations. A&Es global operations make
it impossible to eliminate completely all foreign currency translation risks and
its impact on A&Es financial results.

A&E Has Raw Material Price
Volatility. The significant price volatility
of many of A&Es raw materials may result in increased production costs,
which A&E may not be able to pass on to its customers.A significant portion of
the raw materials A&E uses in manufacturing thread and technical textiles
are petroleum-based. The prices for petroleum and petroleum-related products are
volatile. While A&E at times in the past has been able to increase product
prices due to raw material increases, A&E generally is not able to
immediately raise product prices and may be unable to completely pass on
underlying cost increases to its customers. Additional raw material and energy
cost increases that A&E is not able to fully pass on to customers or the
loss of a large number of customers to competitors as a result of price
increases could have a material adverse effect on its business, financial
condition, results of operations or cash flows.

Other Risks

Our Self-Insurance Reserves are
Subject to Variability and Unpredictable External Factors.As discussed in more detail below in Managements Discussion
and Analysis of Financial Condition and Results of OperationsCritical
Accounting PoliciesSelf-insurance Reserves for Workers Compensation,
Healthcare and General Liability, the Company is primarily self-insured for
most U.S. workers compensation claims, healthcare claims and general liability
and automotive liability losses. Accordingly, the Company determines the
estimated reserve required for claims in each accounting period, which requires
that management determine estimates of the costs of claims incurred and accrue
for such expenses in the period in which the claims are incurred. The
liabilities that have been recorded for these claims represent our best estimate
of the ultimate obligations for reported claims plus those incurred but not
reported. Changes in legal trends and interpretations, variability in inflation
rates, changes in the nature and method of claims settlement, benefit level
changes due to changes in applicable laws, and changes in discount rates could
all affect ultimate settlements of claims or the assumptions underlying our
liability estimates, which could cause a material change for our self-insurance
liability reserves and impact earnings.

The Company may Incur Increased
Pension Expenses.The Company maintains
certain retirement benefit plans for substantially all domestic full-time
employees and a supplemental retirement benefit plan for certain selected
officers of the Company and its subsidiaries, including a qualified pension plan
which is a non-contributory, funded defined benefit plan and a non-qualified
supplemental pension plan for executives which is an unfunded, defined benefit
plan. The Company has frozen participation and benefit accruals under the
Company-sponsored defined benefit plan effective September 30, 2005 for all
participants, with certain transition benefits provided to those participants
that have achieved specified age and service levels on December 31, 2005;
however, at September 30, 2007, the Companys pension plans had accumulated
benefit obligations in excess of the fair value of plan assets. The amount of
any increase or decrease in our required contributions to our pension plans will
depend on government regulation, returns on plan assets and actuarial
assumptions regarding our future funding obligations. For more information,
refer to the Note entitled Employee Benefit Plans of the Notes to Consolidated
Financial Statements in Item 8 hereof.

5

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Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

The executive office of the Company is
located in a leased space of a downtown office tower at 301 S. Tryon Street,
Suite 1800, Charlotte, North Carolina, 28202.

Harris Teeter owns its principal
offices near Charlotte, North Carolina, a 517,000 square foot distribution
facility east of Charlotte, a 913,000 square foot distribution facility in
Greensboro, North Carolina, and a 90,500 square foot dairy processing plant in
High Point, North Carolina. Both distribution facilities contain dry grocery
warehousing space and refrigerated storage for perishable goods. In addition,
the Greensboro facility has frozen goods storage and a single pick facility for
health and beauty care products and other general merchandise. Harris Teeter
operates its retail stores primarily from leased properties. As of September 30,
2007, Harris Teeter held title to the land and buildings of approximately 4% of
its supermarkets. The remaining supermarkets are either leased in their entirety
or the building is owned and situated on leased land. In addition, Harris Teeter
holds interest in properties that are under development for store sites. In
future years the proportion of store development and store ownership may
increase. Harris Teeters supermarkets range in size from approximately 16,000
square feet to 73,000 square feet, with an average size of approximately 46,000
square feet. The following table sets forth selected statistics with respect to
Harris Teeter stores for each of the last three fiscal years:

2007
    
    2006
    
    2005Stores Open at Period End
    
    164
    
    
    152
    
    
    145Average Weekly
      Net Sales Per Store*
    $
    402,982
    
    $
    380,812
    
    $
    358,699Average Square Footage Per Store at Period End
    
    46,197
    
    
    44,535
    
    
    43,060Average Square
      Footage Per New Store OpenedDuring Period
    
    51,737
    
    
    51,607
    
    
    50,742Total Square Footage at Period End
    
    7,576,302
    
    
    6,769,245
    
    
    6,243,635*
    Computed on the basis of
      aggregate sales of stores open for a full
year.


A&E's principal offices, seven
domestic manufacturing plants and one distribution center are all owned by
A&E and are all located in North Carolina. Domestic manufacturing and
related warehouse facilities have an aggregate of 1,778,027 square feet of floor
space. A&E has a domestic dyeing production capacity of approximately
27,000,000 pounds per year. Capacities are based on 168 hours of operations per
week. In addition, A&E leases six distribution centers scattered throughout
its domestic markets with an aggregate of 184,935 square feet of floor space.

Through consolidated subsidiaries,
A&E also owns eight international manufacturing and/or distribution
facilities with an aggregate of 878,461 square feet of floor space. A&E also
leases another 25 international manufacturing and/or distribution facilities
with an aggregate of 623,545 square feet of floor space. The foreign
consolidated subsidiaries engaged in manufacturing have a dyeing production
capacity of approximately 27,460,000 pounds per year. Capacities are based on
168 hours of operations per week. In addition to its consolidated subsidiaries,
A&E also has minority interests in various joint ventures and a 50%
ownership interest in a joint venture in China.

The Company believes its facilities and
those of its operating subsidiaries are adequate for its current operations and
expected growth for the foreseeable future.

Item 3.Legal Proceedings

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

6

---

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

Not applicable.

Item 4A.Executive Officers of the Registrant

The following list contains the name,
age, positions and offices held and period served in such positions or offices
for each of the executive officers of the Registrant.

Thomas W. Dickson, age 52, is the Chairman of the Board of Directors, President
and Chief Executive Officer of the Company, and has been Chairman of the Board
of Directors since March 2006 and President and principal executive officer
since February 1997. Prior to that time, he served as Executive Vice President
of the Company from February 1996 to February 1997. Prior to that time, from
February 1994 to February 1996 he served as President of, and from February 1991
to February 1994 he served as Executive Vice President of, American & Efird,
Inc.

John B.
Woodlief, age 57, is the Vice President 
Finance and Chief Financial Officer of the Company, and has been the Vice
President  Finance and principal financial officer of the Company since
November 1999. Prior to that time, he served as a partner in
PricewaterhouseCoopers since 1998 and a partner in Price Waterhouse from 1985 to
1998. He served as Managing Partner of the Charlotte, North Carolina office of
Price Waterhouse and PricewaterhouseCoopers from January of 1997 to June of
1999. He joined Price Waterhouse in 1972.

Frederick
J. Morganthall, II, age 56, was elected
President of Harris Teeter on October 30, 1997. Prior to that time, and
beginning in October 1996, he served as Executive Vice President of Harris
Teeter. He was also Harris Teeters Senior Vice President of Operations from
October 1995 to October 1996, Vice President of Operations from April 1994 to
October 1995 and Vice President of Sales and Distribution from October 1992 to
April 1994.

Fred A.
Jackson, age 57, has been President of
A&E since August 1996. Prior to that time, and beginning in January 1996, he
served as Executive Vice President of A&E. He was also A&Es Senior Vice
President - Industrial Thread Sales from October 1993 to January
1996.

The executive officers of the Company
and its subsidiaries are elected annually by their respective Boards of
Directors. Thomas W. Dickson is the son of R. Stuart Dickson and the nephew of
Alan T. Dickson, each of whom are directors of the Company. No other executive
officer has a family relationship as close as first cousin with any other
executive officer or director or nominee for director.

7

---

PART II

Item 5.Market for Registrant's Common Equity, Related Shareholder
Matters and Issuer Purchases of Equity Securities

Information regarding the principal
market for the Companys common stock (the Common Stock), number of
shareholders of record, market price information per share of Common Stock and
dividends declared per share of Common Stock for each quarterly period in fiscal
2007 and 2006 is set forth below.

The Common Stock is listed on the New
York Stock Exchange. As of November 21, 2007, there were 4,890 holders of record
of Common Stock.

Quarterly Information

First
    
    **Second**
    
    Third
    
    Fourth**Quarter**
    
    **Quarter**
    
    **Quarter**
    
    **Quarter**Fiscal 2007Dividend Per
      Share
    $
    0.11
    
    $
    0.11
    
    $
    0.11
    
    $
    0.11Market Price Per ShareHigh
    
    28.91
    
    
    30.50
    
    
    32.39
    
    
    37.28Low
    
    25.20
    
    
    26.30
    
    
    29.53
    
    
    27.53Fiscal 2006Dividend Per
      Share
    $
    0.11
    
    $
    0.11
    
    $
    0.11
    
    $
    0.11Market Price Per ShareHigh
    
    23.94
    
    
    24.75
    
    
    24.83
    
    
    26.50Low
    
    19.28
    
    
    20.84
    
    
    21.93
    
    
    22.40


The Company expects to continue paying
dividends on a quarterly basis which is at the discretion of the Board of
Directors and subject to legal and contractual requirements. Information
regarding restrictions on the ability of the Company to pay cash dividends is
set forth in "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Capital Resources and Liquidity" in Item 7 hereof.

Equity Compensation Plan Information

The following table provides
information as of September 30, 2007 regarding the number of shares of Common
Stock that may be issued under the Companys equity compensation
plans.

|                                |                                  |                                     | Number of
      securities remaining     
|------------------------------- | -------------------------------- | ----------------------------------- | -----------------------------------------
|                                | Number of
      securities to be | Weighted-average exercise           | available for
      future issuance under
|                                | issued upon
      exercise of    | price of
      outstanding options, | equity
      compensation plans          
|                                | outstanding
      options,       | warrants and
      rights           | (excluding
      securities              
|                                | warrants and
      rights        |                                     | reflected in
      column (a))           
|Plan category                   | (a) (1)                          | (b) (2)                             | (c)                                      
|Equity compensation plans       |                                  |                                     |                                          
|approved by security            |                                  |                                     |                                          
|holders                         | 809,006                          | $ 16.01                             | 1,894,940                                
|Equity
      compensation plans |                                  |                                     |                                          
|not approved by
      security  |                                  |                                     |                                          
|holders                         | -0-                              | -0-                                 | -0-                                      
|Total                           | 809,006                          | $ 16.01                             | 1,894,940                                

|(1) |  | Includes grants of
      78,344 performance shares outstanding as of September 30, 2007. Excludes
      105,316 shares of Common Stock that are deliverable in connection with the
      105,316 stock units outstanding under the Ruddick Corporation Director
      Deferral Plan (the Deferral Plan) that have been accumulated in a rabbi
      trust for the purpose of funding distributions from the Deferral Plan.
      Does not include any shares of restricted stock that were outstanding as
      of September 30, 2007 since these shares are already outstanding and do
      not represent potential dilution. For more information on the Companys
      restricted stock and performance share grants, see the Note entitled
      Stock Options and Stock Awards of the Notes to Consolidated Financial
      Statements in Item 8 hereof.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(2) |  | The weighted
      average exercise price does not take into account performance share awards
      or restricted stock units outstanding as of September 30,
      2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

8

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Comparison of Total Cumulative
Shareholder Return for Five-Year Period Ending September 30, 2007

The following graph presents a
comparison of the yearly percentage change in the Companys cumulative total
shareholders return on Common Stock with the (i) Standard & Poors 500
Index, (ii) Standard & Poors Midcap 400 Index, (iii) Standard & Poors
Food Retail Index, and (iv) Standard & Poors Apparel, Accessories &
Luxury Goods Index for the five-year period ended September 30, 2007.

Comparison of Five-Year Cumulative Total
Return*Among Ruddick Corporation and Cetain Indices**



|                                        | 9/02   | 9/03   | 9/04   | 9/05   | 9/06   | 9/07  
|--------------------------------------- | ------ | ------ | ------ | ------ | ------ | ------
|Ruddick Corporation                     | 100.00 | 104.89 | 135.41 | 162.00 | 186.46 | 243.83
|S&P
      500                           | 100.00 | 124.40 | 141.65 | 159.01 | 176.17 | 205.13
|S&P Midcap 400                          | 100.00 | 126.81 | 149.07 | 182.10 | 194.05 | 230.45
|S&P Food
      Retail                   | 100.00 | 105.47 | 98.87  | 124.03 | 128.74 | 146.43
|S&P Apparel, Accessories & Luxury Goods | 100.00 | 112.67 | 136.79 | 163.52 | 184.76 | 211.25

* $100 invested on 9/30/02 in stock or
index, including reinvestment of dividends.

** The Company utilizes two indices,
rather than a single index, for its peer group comparison: Standard & Poors
Food Retail Index and Standard & Poors Apparel, Accessories & Luxury
Goods Index. The Company believes that the separate presentation of these
indices more accurately corresponds to the Companys primary lines of
business.

9

---

Issuer Purchases of Equity
Securities

The following table summarizes the
Companys purchases of its common stock during the quarter ended September 30,
2007.

|                        |                       |                     | Total Number
      of     | Maximum
      Number    
|----------------------- | --------------------- | ------------------- | ------------------------- | ------------------------
|                        |                       |                     | Shares
      Purchased as | of Shares that
      May
|                        |                       |                     | Part of
      Publicly    | Yet Be
      Purchased  
|                        | Total Number
      of | Average
      Price | Announced
      Plans or  | Under the
      Plans or
|Period                  | Shares Purchased      | Paid per Share      | Programs (1)              | Programs                
|July 2, 2007 to         |                       |                     |                           |                         
|August 5, 2007          | - 0 -                 | n.a.                | - 0 -                     | 3,072,069               
|August 6, 2007
      to |                       |                     |                           |                         
|September 2,
      2007 | - 0
      -           | n.a.                | - 0
      -               | 3,072,069               
|September 3, 2007 to    |                       |                     |                           |                         
|September 30, 2007      | - 0 -                 | n.a.                | - 0 -                     | 3,072,069               
|                       
|Total                   | - 0 -                 | n.a.                | - 0 -                     | 3,072,069               

|(1) |  | In February 1996, the Company
      announced the adoption of a stock buyback program, authorizing, at
      managements discretion, the Company to purchase and retire up to
      4,639,989 shares, 10% of the then-outstanding shares of the Companys
      common stock, for the purpose of preventing dilution as a result of the
      operation of the Companys comprehensive stock option and awards plans.
      The stock purchases are effected from time to time pursuant to this
      authorization. As of September 30, 2007, the Company had purchased
      1,567,920 shares under this authorization. No shares were purchased under
      this authorization during the quarter ended September 30, 2007. The stock
      purchase plan has no set expiration or termination
  date.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 6.Selected Financial Data (dollars in thousands, except per
share data)

|                            | 2007        |  | 2006        |  | 2005        |  | 2004        |  | 2003       
|--------------------------- | ----------- |  | ----------- |  | ----------- |  | ----------- |  | -----------
|Net sales                   | $ 3,639,208 |  | $ 3,265,856 |  | $ 2,964,655 |  | $ 2,868,597 |  | $ 2,724,739
|Operating
      profit      | 148,174     |  | 123,069     |  | 115,260     |  | 112,414     |  | 102,112    
|Net income                  | 80,688      |  | 72,336      |  | 68,598      |  | 64,659      |  | 59,882     
|Net income per
      share  |             |  |             |  |             |  |             |  |            
|Basic                       | 1.69        |  | 1.53        |  | 1.45        |  | 1.39        |  | 1.29       
|Diluted                     | 1.68        |  | 1.52        |  | 1.44        |  | 1.38        |  | 1.29       
|Dividend per share          | 0.44        |  | 0.44        |  | 0.44        |  | 0.40        |  | 0.36       
|Total
      assets          | 1,529,689   |  | 1,362,936   |  | 1,203,640   |  | 1,109,097   |  | 1,065,022  
|Long-term debt -- including |             |  |             |  |             |  |             |  |            
|current
      portion       | 264,392     |  | 237,731     |  | 163,445     |  | 166,287     |  | 189,095    
|Shareholders'
      equity  | 736,610     |  | 670,517     |  | 608,942     |  | 549,710     |  | 495,265    
|Book value per share        | 15.31       |  | 14.10       |  | 12.82       |  | 11.76       |  | 10.71      

Note: The Companys fiscal year ends on
the Sunday nearest to September 30. Fiscal years 2007, 2006, 2005 and 2003
includes the 52 weeks ended September 30, 2007, October 1, 2006, October 2, 2005
and September 28, 2003. Fiscal year 2004 includes the 53 weeks ended October 3,
2004.

10

---

Item 7.Management's Discussion and Analysis of Financial Condition
and Results of Operations

This Managements Discussion and
Analysis of Financial Condition and Results of Operations includes
forward-looking statements. We have based these forward-looking statements on
our current plans, expectations and beliefs about future events. In light of the
risks, uncertainties and assumptions discussed under Item 1A Risk Factors of
this Annual Report on Form 10-K and other factors discussed in this section,
there are risks that our actual experience will differ materially from the
expectations and beliefs reflected in the forward-looking statements in this
section and throughout this report. For more information regarding what
constitutes a forward-looking statement, please refer to Risk Factors in Item
1A hereof.

Overview

The Company operates primarily in two
business segments through two wholly owned subsidiaries: retail grocery
(including real estate and store development activities)  Harris Teeter, and
industrial sewing thread (textile primarily), including embroidery thread and
technical textiles  American & Efird. Harris Teeter operates a regional
chain of supermarkets in the Southeastern United States. American & Efird
globally manufactures and distributes sewing thread for the apparel and other
markets, embroidery thread and technical textiles. The Company evaluates the
performance of its two businesses utilizing various measures which are based on
operating profit.

During fiscal 2007, Harris Teeters
market environment continued to be highly competitive, characterized by
competition from other traditional grocery retailers, as well as other
competitors including, but not limited to, discount retailers such as
supercenters and club and warehouse store, specialty supermarkets and drug
stores. Generally, the markets in the southeastern United States continued to
experience new store opening activity and aggressive feature pricing by
competitors. In response, Harris Teeter utilizes information gathered from
various sources, including its Very Important Customer ("VIC") loyalty card
program, and works with suppliers to deliver effective retail pricing and
targeted promotional spending programs that drive customer traffic and create
value for Harris Teeter customers. In addition, Harris Teeter differentiates
itself from its competitors with its product assortment, variety and focus on
customer service. These efforts have resulted in overall gains in market share
within Harris Teeters primary markets. As previously disclosed, Harris Teeter
has accelerated its new store opening program that was initiated in fiscal 2005
with the purchase of six stores from Winn-Dixie. The accelerated new store
activity has utilized the Companys excess cash, required borrowings under the
Companys line of credit facility and resulted in higher pre-opening and
incremental start-up costs. During fiscal 2007 Harris Teeter opened 19 new
stores, as compared to 16 new stores and 10 new stores during fiscal 2006 and
fiscal 2005, respectively.

Business conditions for A&Es
customers in the textile and apparel industry remain challenging in the Americas
due to the continued shift of apparel sourcing outside the Americas.
Additionally, A&E continues to face increased operating costs and highly
competitive pricing in its markets. In response, A&E has focused on
strategic initiatives that enhance its global footprint and diversify its
product lines. A&E has completed or continues to make good progress towards
the integration and consolidation of the strategic investments made since late
fiscal 2004, including its 2006 acquisition of TSP Tovarna Sukancev in Trakov
d.d. (TSP). A&E also continues to make progress in China by expanding its
sales and distribution capabilities to take advantage of the manufacturing
capacity that has been acquired over the last few years. Sales of premium
apparel and non-apparel threads continue to increase in China along with
A&Es expanding customer base in this key market.

Results of Operations

Rental Costs Incurred during a
Construction Period

On October 6, 2005, the FASB issued
Staff Position (FSP) FAS 13-1, Accounting for Rental Costs Incurred during a
Construction Period. The FSP generally applies to leases of land or pad leases,
including cold dark shells where the Company assumes responsibility for store
and site construction. Harris Teeters construction period typically extends for
six to nine months. Under this FSP, rental costs that are incurred during the
construction period are recognized as rental expense. Prior to the beginning of
the second quarter of fiscal 2006, the Company capitalized such costs during the
construction period. As required by FAS 13-1, the Company ceased capitalization
of construction period rents effective January 2, 2006. Although the guidance
permits retrospective application to prior periods, the Company did not restate
prior periods due to the relatively small percentage of land leases in those
periods. Construction period rent required to be expensed as a non-cash charge
is included with the pre-opening costs in the discussion of segment operations
under the caption Harris Teeter, Retail Grocery Segment below.

11

---

Lease Accounting Correction

On February 7, 2005, the Office of the
Chief Accountant of the Securities and Exchange Commission issued a letter to
the American Institute of Certified Public Accountants expressing its views
regarding certain operating lease-related accounting issues and their
application under generally accepted accounting principles in the United States
(GAAP). In light of this letter, the Companys management initiated a review
of its lease accounting and determined that its then-current method of
accounting for rent holidays required a revision to the Companys accounting
policies. Historically, the Company recognized lease expense when the store
opened on a level basis over the term of the lease. The Company now levels the
lease expense from the date it takes possession and control of the property.
The extended period includes the pre-opening construction or fixturing activity
period that is considered rent holidays. Lease expense incurred during the
construction period was previously capitalized as part of the store construction
costs until the second quarter of fiscal 2006 (refer to discussion above).

As a result of this change, the Company
recorded a non-cash cumulative charge of $2.9 million ($1.8 million after tax
benefits) in the second quarter of fiscal 2005. The adjustment did not impact
historical net cash flows nor the timing of the payments under the related
leases. The revised lease accounting policy did not have a material effect on
diluted earnings per share. Prior years financial statements were not restated
since the impact of this issue was immaterial to the Companys previously
reported financial position, results of operations and cash flows.

Consolidated Overview

The following table sets forth the
operating profit components by each of the Company's business segments and for
the holding company ("Corporate") for the 52 weeks ended September 30, 2007
(fiscal 2007), October 1, 2006 (fiscal 2006), and October 2, 2005 (fiscal 2005).
The table also sets forth each of the segments net sales as a percent to total
net sales, the net income components as a percent to total net sales and the
percentage increase or decrease of such components over the prior year (in
thousands):

|                         |   | Fiscal 2007 |  |        | Fiscal 2006 |   |           | Fiscal 2005 |        | % Inc. (Dec.)
|------------------------ | - | ----------- |  | ------ | ----------- | - | --------- | ----------- | ------ | -------------
|                         |   |             |  | % to   |             |   |           |             | % to   |              
|                         |   |             |  | Total  |             |   |           |             | Total  |              
|Net Sales                |   |             |  |        |             |   |           |             |        |              
|Harris Teeter            | $ | 3,299,377   |  | 90.7   |             | $ | 2,922,679 |             | 89.5   |              
|American & Efird         |   | 339,831     |  | 9.3    |             |   | 343,177   |             | 10.5   |              
|Total                    | $ | 3,639,208   |  | 100.0  |             | $ | 3,265,856 |             | 100.0  |              
|                        
|                         |   |             |  | % to   |             |   |           |             | % to   |              
|                         |   |             |  | Sales  |             |   |           |             | Sales  |              
|Gross Profit             |   |             |  |        |             |   |           |             |        |              
|Harris Teeter            | $ | 1,021,739   |  | 28.07  |             | $ | 897,637   |             | 27.49  |              
|American & Efird         |   | 74,608      |  | 2.05   |             |   | 74,285    |             | 2.27   |              
|Total                    |   | 1,096,347   |  | 30.12  |             |   | 971,922   |             | 29.76  |              
|                        
|SG&A Expenses            |   |             |  |        |             |   |           |             |        |              
|Harris Teeter            |   | 867,656     |  | 23.84  |             |   | 770,000   |             | 23.58  |              
|American & Efird         |   | 73,184      |  | 2.01   |             |   | 72,706    |             | 2.22   |              
|Corporate                |   | 7,333       |  | 0.20   |             |   | 6,147     |             | 0.19   |              
|Total                    |   | 948,173     |  | 26.05  |             |   | 848,853   |             | 25.99  |              
|                        
|Operating Profit (Loss)  |   |             |  |        |             |   |           |             |        |              
|Harris Teeter            |   | 154,083     |  | 4.23   |             |   | 127,637   |             | 3.91   |              
|American & Efird         |   | 1,424       |  | 0.04   |             |   | 1,579     |             | 0.05   |              
|Corporate                |   | (7,333)     |  | (0.20) |             |   | (6,147)   |             | (0.19) |              
|Total                    |   | 148,174     |  | 4.07   |             |   | 123,069   |             | 3.77   |              
|                        
|Other Expense, net       |   | 17,683      |  | 0.48   |             |   | 9,672     |             | 0.30   |              
|Income Tax
      Expense |   | 49,803      |  | 1.37   |             |   | 41,061    |             | 1.26   |              
|Net Income               | $ | 80,688      |  | 2.22   |             | $ | 72,336    |             | 2.21   |              

12

---

Consolidated net sales increased 11.4%
in fiscal 2007 and 10.2% in fiscal 2006 when compared to prior years as a result
of strong sales gains at Harris Teeter. The fiscal 2007 increase was partially
offset by a sales decline at A&E. Over the past several years, A&E has
pursued a global expansion strategy along with the diversification of their
product lines. These actions have resulted in an increase in foreign sales;
however, the percentage of foreign sales to consolidated net sales has declined
during these periods as a result of the sales mix between the operating
subsidiaries. Foreign sales for fiscal 2007 represented 5.1% of the consolidated
sales of the Company, compared to 5.4% for fiscal 2006 and 5.7% for fiscal 2005.
Refer to the discussion of segment operations under the captions Harris Teeter,
Retail Grocery Segment and American & Efird, Industrial Thread Segment
for a further analysis of the segment operating results.

The increase in gross profit as a
percent to sales for fiscal 2007 resulted primarily from improved gross profit
margins at Harris Teeter, although A&E also realized improved gross profit
as a percent to its sales for fiscal 2007. The gross profit margin increase for
fiscal 2006 was driven by a gross profit margin improvement at Harris Teeter
that was offset, in part, by a gross profit margin decline at A&E from
fiscal 2005 to fiscal 2006. Refer to the discussion of segment operations under
the captions Harris Teeter, Retail Grocery Segment and American & Efird,
Industrial Thread Segment for a further analysis of the segment operating
results.

Selling, general & administrative
(SG&A) expenses as a percent to sales increased in fiscal 2007 and fiscal
2006 as a result of increased operating costs at both subsidiaries. The
increased operating costs at the subsidiaries in fiscal 2006 were offset, in
part, by lower operating expenses at Corporate. As previously disclosed,
Corporate SG&A expenses for fiscal 2006 included income of $2.2 million for
life insurance proceeds and a pre-tax charge of $1.5 million related to new
Supplemental Executive Retirement Plans. Refer to the discussion of segment
operations under the caption Harris Teeter, Retail Grocery Segment and
American & Efird, Industrial Thread Segment for a further analysis of the
segment operating results.

Other expense, net includes interest
expense, interest income, investment gains and losses, and minority interest.
Net interest expense (interest expense less interest income) increased $3.9
million in fiscal 2007 over fiscal 2006 and $3.4 million in fiscal 2006 over
fiscal 2005. The increase for both periods resulted from increased borrowings
under the Companys credit facility, and lower interest income due to the
utilization of the Companys temporary investment portfolio during fiscal 2006.
Fiscal 2006 and fiscal 2005 include investment gains of $4.0 million and $2.2
million, respectively related to the sale of real estate investments held by
Corporate.

The effective consolidated income tax
rate for fiscal 2007 was 38.2% as compared to 36.2% for fiscal 2006 and fiscal
2005. The effective tax rates for fiscal 2006 and fiscal 2005 were lower
primarily due to tax savings associated with non-taxable life insurance
proceeds.

Net income after income taxes in fiscal
2007 was $80.7 million, or $1.68 per diluted share, as compared to $72.3
million, or $1.52 per diluted share in fiscal 2006 and $68.6 million, or $1.44
per diluted share in fiscal 2005.

Harris Teeter, Retail Grocery
Segment

The following table sets forth the
consolidated operating profit components for the Company's Harris Teeter
supermarket subsidiary for fiscal years 2007, 2006, and 2005. The table also
sets forth the percent to sales and the percentage increase or decrease over the
prior year (in thousands):

|                    | Fiscal 2007 |           | Fiscal 2006 |        | Fiscal 2005 |   | % Inc. (Dec.)
|------------------- | ----------- | --------- | ----------- | ------ | ----------- | - | -------------
|                    |             |           | % to        |        |             |   | % to         
|                    |             |           | Sales       |        |             |   | Sales        
|Net Sales           | $           | 3,299,377 |             | 100.00 |             | $ | 2,922,679    
|Cost of
      Sales |             | 2,277,638 |             | 69.03  |             |   | 2,025,042    
|Gross Profit        |             | 1,021,739 |             | 30.97  |             |   | 897,637      
|SG&A
      Expenses |             | 867,656   |             | 26.30  |             |   | 770,000      
|Operating Profit    | $           | 154,083   |             | 4.67   |             | $ | 127,637      

Sales increased 12.9% in fiscal 2007
over fiscal 2006 and 10.5% in fiscal 2006 over fiscal 2005 as a result of new
store activity and comparable store sales gains. During fiscal 2007, the company
opened 19 new stores (two of which were replacements) and closed 7 stores.
During fiscal 2006 the company opened 16 new stores (three of which were
replacements and 6 of which were acquired from Winn-Dixie in fiscal 2005) and
closed or divested 9 stores, and during fiscal 2005 the company opened 10 new
stores and closed 3 stores. The company did not open any replacement stores in
fiscal 2005. The increase in sales from new stores exceeded the loss of sales
from closed stores by $230.1 million in fiscal 2007, $199.4 million in fiscal
2006 and $55.5 million in fiscal 2005. Comparable store sales (see definition
below) increased 4.87% ($136.4 million) for fiscal 2007 as compared to increases
of 3.20% ($81.8 million) for fiscal 2006 and 3.00% ($73.5 million) for fiscal
2005. The increase in comparable store sales in fiscal 2007 was driven by higher
customer counts and higher average transaction size and the increase in fiscal
2006 was driven by higher average transaction size. Comparable store sales are
negatively impacted by the companys strategy of opening additional stores in
its core markets that have proximity to existing stores. Management expects
these close proximity stores, and any similar new additions in the foreseeable
future, to have a strategic benefit of enabling Harris Teeter to capture sales
and expand market share as the markets it serves continue to grow.

13

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Harris Teeter considers its reporting
of comparable store sales growth to be effective in determining core sales
growth in times of changes in the number of stores in operation, their locations
and their sizes. While there is no standard industry definition of "comparable
store sales," Harris Teeter has been consistently applying the following
definition. Comparable store sales are computed using corresponding calendar
weeks to account for the occasional extra week included in a fiscal year. A new
store must be in operation for 14 months before it enters into the calculation
of comparable store sales. A closed store is removed from the calculation in the
month in which its closure is announced. A new store opening within an
approximate two-mile radius of an existing store with the intention of closing
the existing store is included as a replacement store in the comparable store
sales measurement as if it were the same store, but only if, in fact, the
existing store is concurrently closed. Sales increases resulting from existing
comparable stores that are expanded in size are included in the calculations of
comparable store sales. Comparable store sales for fiscal 2005 was computed on a
52-week basis by subtracting one week of sales from the fiscal 2004 (a 53-week
year) period.

Gross profit for fiscal 2007 and 2006
continued to improve as a result of changes in Harris Teeters market mix and
effective retail pricing and targeted promotional spending programs. Harris
Teeter has also realized benefits from the continued emphasis the company places
on distribution and store level productivity efforts, private label branding,
assortment and product mix, in addition to volume increases and increased
productivity in the dairy production facility.

SG&A expenses as a percent to sales
for fiscal 2007 decreased from fiscal 2006, as a result of the leverage created
through sales gains that apply against fixed costs. Fiscal 2006 SG&A
expenses as a percent to sales increased from fiscal 2005, primarily as a result
of increased new store pre-opening costs along with required reserves and other
costs associated with store closings and other expenses incurred in connection
with the 2005 Winn-Dixie store acquisition. Pre-Opening costs consist of
pre-opening rent, labor and associated fringe benefits and recruiting and
relocations costs incurred prior to a new store opening and amounted to $17.9
million (0.54% of sales) in fiscal 2007, $15.8 million (0.54% of sales) in
fiscal 2006 and $3.3 million (0.13% of sales) in fiscal 2005. Costs associated
with the 2005 Winn-Dixie store acquisition amounted to $2.3 million (0.08% of
sales) in fiscal 2006. The sales increases along with continued emphasis on
operational efficiencies and cost controls have provided the leverage to
partially offset the incremental costs associated with the companys new store
program (pre-opening costs and incremental start-up costs) and increased
associate benefit costs, credit and debit card fees and occupancy costs. As
previously disclosed, SG&A expense for fiscal 2005 included a charge of $2.9
million (0.11% to sales) for a lease accounting correction that related to rent
holidays.

The improvements in operating profit as
a percent to sales in each of fiscal 2007 and fiscal 2006 resulted from the
sales and cost elements described above. The company continues to concentrate on
its core markets, which management believes have greater potential for improved
returns on investment in the foreseeable future. The company had 164 stores in
operation at September 30, 2007, compared to 152 stores at October 1, 2006 and
145 stores at October 2, 2005.

American & Efird, Industrial
Thread Segment

The following table sets forth the
consolidated operating profit components for the Company's American & Efird
textile subsidiary for fiscal years 2007, 2006 and 2005. The table also sets
forth the percent to sales and the percentage increase or decrease over the
prior year (in thousands):

|                    | Fiscal 2007 |         | Fiscal
      2006 |        | Fiscal 2005 |   | % Inc. (Dec.)
|------------------- | ----------- | ------- | ----------------- | ------ | ----------- | - | -------------
|                    |             |         | % to              |        |             |   | % to         
|                    |             |         | Sales             |        |             |   | Sales        
|Net Sales           | $           | 339,831 |                   | 100.00 |             | $ | 343,177      
|Cost of
      Sales |             | 265,223 |                   | 78.05  |             |   | 268,892      
|Gross Profit        |             | 74,608  |                   | 21.95  |             |   | 74,285       
|SG&A
      Expenses |             | 73,184  |                   | 21.53  |             |   | 72,706       
|Operating Profit    | $           | 1,424   |                   | 0.42   |             | $ | 1,579        

Sales decreased 1.0% in fiscal 2007
from fiscal 2006 and increased 7.4% in fiscal 2006 from fiscal 2005. The fiscal
2007 sales decrease was partially offset by sales gains attributable to the
fiscal 2006 acquisition of TSP and obtaining a majority ownership interest in
two joint ventures in South Africa, resulting in the consolidation of those
entities. Fiscal 2006 sales increases resulted from the expansion of A&Es
global operations through the fiscal 2006 acquisitions and acquiring Jimei
Spinning Company in the fourth quarter of fiscal 2005, Robison-Anton Textile Co.
in the fourth quarter of fiscal 2005 and Ludlow Textiles Company, Inc. in the
second quarter of fiscal 2005.

14

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Foreign sales for fiscal 2007 accounted
for approximately 54% of total A&E sales as compared to approximately 51% in
fiscal 2006 and 53% in fiscal 2005. Foreign sales continue to be a significant
factor of total A&E sales, as a result of the shifting global production of
its customers and A&E's strategy of increasing its presence in such global
markets. Management recognizes that a major challenge facing A&E is the
geographic shift of its customer base and, as a result, the company will
continue to pursue business acquisitions that will diversify its product lines
and build upon its global footprint by way of joint ventures and other
investments.

Gross profit as a percent to net sales
increased in fiscal 2007 from fiscal 2006 primarily as a result of improved
operating schedules in several of the companys foreign operations. The increase
in fiscal 2007 was partially offset by $448,000 of severance costs associated
with the consolidation of the operations of two of A&Es manufacturing
facilities in Pennsylvania into A&Es North Carolina operations. The
production from one North Carolina manufacturing facility was consolidated into
the remaining North Carolina operations, but there were no layoffs as a result.
Gross profit as a percent to sales decreased in fiscal 2006 from fiscal 2005,
primarily as a result of weak manufacturing operating schedules for apparel
related thread products in the Americas, costs incurred to integrate acquired
businesses and $559,000 of severance costs recorded in fiscal 2006 for a
voluntary early retirement program that was offered to certain U.S. associates.
The shifting of apparel production from the Americas to Asia has continued and
Management continues to focus on optimizing costs and manufacturing capacities
through the integration of acquired businesses in its domestic and foreign
operations.

SG&A expenses increased slightly in
fiscal 2007 from fiscal 2006. During fiscal 2007, incremental costs associated
with the integration of acquired businesses and other cost increases were
offset, in part, by a gain realized from the disposal of assets utilized in
A&Es U.S. operations. SG&A expenses for fiscal 2007 included $378,000
of severance and impairment costs associated with the consolidation of A&Es
U.S. operations. SG&A expenses as a percent to sales in fiscal 2006
decreased from fiscal 2005 as a result of the leverage created through sales
gains that apply against fixed costs. SG&A expenses for fiscal 2006 included
$294,000 of severance costs for the voluntary early retirement program discussed
above.

The decrease in A&Es operating
profit for fiscal 2007 as compared to fiscal 2006 and fiscal 2005 resulted from
a challenging retail apparel environment in may parts of the world and its
impact on A&Es gross profit discussed above. A&E continued to realize
increased sales and improved operating profits in its Asian operations during
fiscal 2007 and fiscal 2006.

Outlook

Harris Teeters improvement in
operating performance over the last several years and financial position
provides the flexibility to expand its store development program that includes
new and replacement stores along with the remodeling and expansion of existing
stores.Harris Teeter plans to open 15 new stores (2 of which will be
replacements for existing stores) and complete 8 major remodels (5 of which will
be expanded in size) during fiscal 2008. The new store opening program for
fiscal 2008 is expected to result in a 9.1% increase in retail square footage as
compared to an 11.9% increase in fiscal 2007. The annual number of new store
openings planned for fiscal year 2009 and thereafter are expected to be similar
to that of fiscal 2008. The Company routinely evaluates its existing store
operations in regards to its overall business strategy and from time to time
will close or divest older or underperforming stores.

Harris Teeters new store program for fiscal 2008
calls for 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 consistent execution of productivity
initiatives implemented at under-performing stores, controls over waste,
implementation of operating efficiencies that will offset the continued rising
costs for health care and bank card fees, and effective merchandising strategies
will dictate the pace at which Harris Teeters margins could improve. Also,
pre-opening and incremental start-up costs associated with the record number of
new stores opened in fiscal 2007 and planned for fiscal 2008 could prove
challenging. Promotional costs to drive sales in the presently intense
competitive environment could negatively impact operating margins and net income
in future periods. The intense competitive environment for supermarkets is
expected to continue in the foreseeable future.

A&E has been able to diversify its customer
base, product mix and geographical locations through acquisitions and joint
venture agreements completed in recent years. In addition, A&E continues to
increase its investment in China to support the rapidly growing apparel
production in Asia. A&E will find it difficult to generate significant
improvements in profitability in the absence of a more favorable retail
environment. A&E management continues to focus on providing best-in-class
service to its customers and expanding its product lines throughout A&Es
global supply chain.

15

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The Companys management is cautious in
its expectations for fiscal 2008 given the complex factors currently impacting
sales and costs at both subsidiaries. Further operating improvement will be
dependent on the Companys ability to offset increased health care and
incremental costs associated with Harris Teeters new store program with
additional operating efficiencies, and to effectively execute the Companys
strategic expansion plans.

Capital Resources and Liquidity

The Company is a holding company which, through
its wholly-owned operating subsidiaries, Harris Teeter and A&E, is engaged
in the primary businesses of retail grocery and the manufacturing and
distribution of industrial thread, technical textiles and embroidery thread,
respectively. The Company has no material independent operations, nor material
assets, other than the investments in its operating subsidiaries, as well as
investments in certain fixed assets, cash equivalents and life insurance
contracts to support corporate-wide operations and benefit programs. The Company
provides a variety of services to its subsidiaries and is dependent upon income
and upstream dividends from its operating subsidiaries. There are no
restrictions on the subsidiary dividends, which have historically been
determined as a percentage of net income of each subsidiary.

The Company's principal source of liquidity has
been cash generated from operating activities and borrowings available under the
Companys revolving credit facility. As of September 30, 2007 the Company had
current liquidity (cash and cash equivalents) of $26.7 million compared to $29.2
million at October 1, 2006. During fiscal 2007, the net cash provided by
operating activities was $212.6 million, compared to $159.7 million during
fiscal 2006 and $146.4 million during fiscal 2005. Investing activities during
fiscal 2007 required net cash of $204.8 million compared to $229.2 million
during fiscal 2006 and $134.5 million during fiscal 2005. Increased capital
spending during fiscal 2006 was partially offset by the liquidation of $12.9
million of temporary investments and was financed by cash provided by operating
activities along with borrowings under the Companys revolving line of credit.
Financing activity includes $21.1 million for the payment of dividends in fiscal
2007 compared to $20.9 million in fiscal 2006 and $20.8 million in fiscal
2005.

During fiscal 2007, consolidated capital
expenditures totaled $219.9 million. Harris Teeter capital expenditures were
$205.5 million in fiscal 2007 compared to $210.3 million in fiscal 2006 and
$115.4 million in fiscal 2005. A&E's capital expenditures were $7.7 million
during fiscal 2007 compared to $7.6 million in fiscal 2006 and $13.6 million in
fiscal 2005. During fiscal 2007, Harris Teeter had a net return of $14.4 million
($24.2 million received from property investment sales and partnership
distributions less $9.8 million additional investments) in connection with the
development of certain of its new stores. Fiscal 2008 consolidated capital
expenditures are planned to total approximately $214 million, consisting of $202
million for Harris Teeter and $12 million for A&E. Harris Teeter anticipates
that its capital for new store growth and store remodels will be applied in its
existing markets in fiscal 2008 as well as the foreseeable future. A&E
expects to target further expansion of global operations. Such capital
investment is expected to be financed by internally generated funds, liquid
assets and borrowings under the Companys revolving line of credit.

On June 7, 2006, the Company and seven banks
entered into a revolving line of credit (Credit Agreement) that provides for
financing up to $350 million, with an optional increase of up to $100 million
with the consent of the lenders, through its termination date on June 7, 2011.
The Credit Agreement also includes two annual extension options of one year each
if granted by the banks. The amount which may be borrowed from time to time and
the interest rate on any outstanding borrowings are each dependent on a leverage
factor. The leverage factor is based on a ratio of rent-adjusted consolidated
funded debt divided by earnings before interest, taxes, depreciation,
amortization and operating rents, as set forth in the Credit Agreement. The more
significant of the financial covenants which the Company must meet during the
term of the Credit Agreement include a maximum leverage ratio and a minimum
fixed charge coverage ratio. As of September 30, 2007, the Company was in
compliance with all financial covenants of the Credit Agreement and $91.0
million of borrowings were outstanding under this facility. Issued letters of
credit reduce the amount available for borrowings under the Credit Agreement and
amounted to $23.2 million as of September 30, 2007. In addition to the $235.8
million of borrowings available under the Credit Agreement as of September 30,
2007, the Company has the capacity to borrow up to an aggregate amount of $41.6
million from two major U.S. life insurance companies utilizing certain insurance
assets as collateral. In the normal course of business, the Company will
continue to evaluate other financing opportunities based on the Companys needs
and market conditions.

Covenants in certain of the Company's long-term
debt agreements limit the total indebtedness that the Company may incur.
Management believes that the limit on indebtedness does not significantly
restrict the Company's ability to meet future liquidity requirements.

16

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Contractual Obligations and Commercial
Commitments

The Company has assumed various financial
obligations and commitments in the normal course of its operations and financing
activities. Financial obligations are considered to represent known future cash
payments that the Company is required to make under existing contractual
arrangements, such as debt and lease agreements. Management expects that cash
provided by operations and other sources of liquidity, such as the Companys
Credit Agreement, will be sufficient to meet these obligations on a short and
long-term basis. The following table represents the scheduled maturities of the
Companys contractual obligations as of September 30, 2007 (in thousands):

|                                                     |       |           | Less than |   |           |  |           |         | More than
|---------------------------------------------------- | ----- | --------- | --------- | - | --------- |  | --------- | ------- | ---------
|                                                     | Total |           | 1 Year    |   | 1-3 Years |  | 3-5 Years |         | 5 Years  
|Long-Term
      Debt(1)                              | $     | 225,065   |           | $ | 8,263     |  | $         | 17,594  |          
|Operating Leases(1) (2)                              |       | 1,376,321 |           |   | 81,296    |  |           | 178,722 |          
|Capital
      Lease Obligations(1) (2)               |       | 39,327    |           |   | 272       |  |           | 1,329   |          
|Purchase Obligations 
      Fixed Assets            |       | 72,991    |           |   | 70,991    |  |           | 2,000   |          
|Purchase
      Obligations  Inventory               |       | 787       |           |   | 787       |  |           | -       |          
|Purchase Obligations 
      Service Contracts/Other |       | 19,833    |           |   | 8,596     |  |           | 9,764   |          
|Other(3)                                             |       | 17,981    |           |   | 1,557     |  |           | 3,200   |          
|Total Contractual Cash
      Obligations             | $     | 1,752,305 |           | $ | 171,762   |  | $         | 212,609 |          

|(1) |  | For a more detailed description
      of the obligations refer to the Notes entitled Leases and Long-Term
      Debt of the Notes to Consolidated Financial Statements in Item 8
      hereof.                                                                                                                                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents the minimum rents
      payable and includes leases associated with closed stores. The obligations
      related to the closed store leases are discussed below. Amounts are not
      offset by expected sublease income and do not include various contingent
      liabilities associated with assigned leases as discussed
  below.
|   
|(3) |  | Represents the projected cash
      payments associated with certain deferred compensation contracts. The net
      present value of these obligations is recorded by the Company and included
      with other long-term liabilities in the Companys consolidated balance
      sheets.                                                         

In connection with the closing of certain store
locations, Harris Teeter has assigned leases to several other merchants with
recourse. These leases expire over the next 14 years, and the future minimum
lease payments of approximately $66.9 million, in the aggregate, over that
future period have been assumed by these merchants. In the highly unlikely
event, in management's opinion based on the current operations and credit
worthiness of the assignees, that all such contingent obligations would be
payable by Harris Teeter, the approximate aggregate amounts due by year would be
as follows: $9.2 million in fiscal 2008 (29 stores), $8.4 million in fiscal 2009
(28 stores), $7.4 million in fiscal 2010 (22 stores), $7.0 million in fiscal
2011 (18 stores), $6.4 million in fiscal 2012 (16 stores) and $28.5 million in
aggregate during all remaining years thereafter.

The Company utilizes various standby letters of
credit and bonds as required from time to time by certain programs, most
significantly for self-insured programs such as workers compensation and various
casualty insurance. These letters of credit and bonds do not represent
additional obligations of the Company since the underlying liabilities are
recorded as insurance reserves and included with other current liabilities on
the Companys consolidated balance sheets. In addition, the Company occasionally
utilizes documentary letters of credit for the purchase of merchandise in the
normal course of business. Issued and outstanding letters of credit totaled
$23.2 million at September 30, 2007.

Off Balance Sheet Arrangements

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

Critical Accounting Policies

The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions about future events that affect the reported
amounts of assets, liabilities, revenues and expenses and the disclosures of
contingent assets and liabilities. Future events and their effects cannot be
determined with absolute certainty. Therefore, managements determination of
estimates and judgments about the carrying values of assets and liabilities
requires the exercise of judgment in the selection and application of
assumptions based on various factors including historical experience, current
and expected economic conditions and other factors believed to be reasonable
under the circumstances. Actual results could differ from those estimates. The
Company constantly reviews the relevant, significant factors and makes
adjustments where the facts and circumstances dictate.

17

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Management has identified the following accounting
policies as the most critical in the preparation of the Companys financial
statements because they involve the most difficult, subjective or complex
judgments about the effect of matters that are inherently uncertain.

Vendor Rebates, Credits and Promotional
Allowances

Consistent with standard practices in the retail
industry, Harris Teeter receives allowances from vendors through a variety of
programs and arrangements. Given the highly promotional nature of the retail
supermarket industry, the allowances are generally intended to defray the costs
of promotion, advertising and selling the vendors products. Examples of such
arrangements include, but are not limited to, promotional, markdown and rebate
allowances; cooperative advertising funds; volume allowances; store opening
discounts and support; and slotting, stocking and display allowances. The amount
of such allowances may be determined on the basis of (1) a fixed dollar amount
negotiated with the vendor, (2) an amount per unit purchased or as a percentage
of total purchases from the vendor, or (3) amounts based on sales to the
customer, number of stores, in-store displays or advertising. The proper
recognition and timing of accounting for these items are significant to the
reporting of the results of operations of the Company. The Company applies the
authoritative guidance of SEC Staff Accounting Bulletin No. 104 (SAB No. 104)
Revenue Recognition, Emerging
Issues Task Force Issue No. 02-16 (EITF 02-16) Accounting by a Customer (Including a Reseller) for Certain
Considerations Received from a Vendor, and other
authoritative guidance as appropriate. Under SAB No. 104, revenue recognition
requires, as a prerequisite, the completion of the earnings process and its
realization or assurance of realizability. Vendor rebates, credits and other
promotional allowances that relate to Harris Teeters buying and merchandising
activities, including lump-sum payments associated with long-term contracts, are
recorded as a component of cost of sales as they are earned, the recognition of
which is determined in accordance with the underlying agreement with the vendor,
the authoritative guidance and completion of the earning process. Portions of
vendor allowances that are refundable to the vendor, in whole or in part, by the
nature of the provisions of the contract are deferred from recognition until
realization is reasonably assured.

Harris Teeters practices are in accordance with
EITF 02-16 and are based on the premise that the accounting for these vendor
allowances should follow the economic substance of the underlying transactions,
which is evidenced by the agreement with the vendor as long as the allowance is
distinguishable from the merchandise purchase. Consistent with this premise,
Harris Teeter recognizes allowances when the purpose for which the vendor funds
were intended and committed to be used has been fulfilled and a cost has been
incurred by the retailer. Thus, it is the Companys policy to recognize the
vendor allowance consistent with the timing of the recognition of the expense
that the allowance is intended to reimburse and to determine the accounting
classification consistent with the economic substance of the underlying
transaction. Where the Company provides an identifiable benefit or service to
the vendor apart from the purchase of merchandise, that transaction is recorded
separately. For example, co-operative advertising allowances are accounted for
as a reduction of advertising expense in the period in which the advertising
cost is incurred. If the advertising allowance exceeds the cost of advertising,
then the excess is recorded against the cost of sales in the period in which the
related expense is recognized.

There are numerous types of rebates and allowances
in the retail industry. The Companys accounting practices with regard to some
of the more typical arrangements are discussed as follows. Vendor allowances for
price markdowns are credited to the cost of sales during the period in which the
related markdown was taken and charged to the cost of sales. Slotting and
stocking allowances received from a vendor to ensure that its products are
carried or to introduce a new product at the Companys stores are recorded as a
reduction of cost of sales over the period covered by the agreement with the
vendor based on the estimated inventory turns of the merchandise to which the
allowance applies. Display allowances are recognized as a reduction of cost of
sales in the period earned in accordance with the vendor agreement based on the
estimated inventory turns of the merchandise to which the allowance applies.
Volume rebates by the vendor in the form of a reduction of the purchase price of
the merchandise reduce the cost of sales when the related merchandise is sold.
Generally, volume rebates under a structured purchase program with allowances
awarded based on the level of purchases are recognized, when realization is
assured, as a reduction in the cost of sales in the appropriate monthly period
based on the actual level of purchases in the period relative to the total
purchase commitment and adjusted for the estimated inventory turns of the
merchandise. Some of these typical vendor rebate, credit and promotional
allowance arrangements require that the Company make assumptions and judgments
regarding, for example, the likelihood of attaining specified levels of
purchases or selling specified volumes of products, the duration of carrying a
specified product and the estimation of inventory turns. The Company constantly
reviews the relevant, significant factors and makes adjustments where the facts
and circumstances dictate.

18

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Inventory Valuation

The inventories of the Companys operating
subsidiaries are valued at the lower of cost or market with the cost of
substantially all domestic U.S. inventories being determined using the last-in,
first-out (LIFO) method. Foreign inventories and limited categories of domestic
inventories are valued on the weighted average and on the first-in, first-out
(FIFO) cost methods. LIFO assumes that the last costs in are the ones that
should be used to measure the cost of goods sold, leaving the earlier costs
residing in the ending inventory valuation. The Company uses the link chain
method of computing dollar value LIFO whereby the base year values of beginning
and ending inventories are determined using a cumulative price index. The
Company generates an estimated internal index to link current costs to the
original costs of the base years in which the company adopted LIFO. The
Companys determination of the LIFO index is driven by the change in current
year costs as well as the change in inventory quantities on hand. Under the LIFO
valuation method at Harris Teeter, all retail store inventories are initially
stated at estimated cost as calculated by the Retail Inventory Method (RIM).
Under RIM, the valuation of inventories at cost and the resulting gross margins
are calculated by applying a calculated cost-to-retail ratio to the retail value
of inventories. RIM is an averaging method that has been widely used in the
retail industry due to its practicality. Inherent in the RIM calculation are
certain significant management judgments and estimates, including markups,
markdowns, lost inventory (shrinkage) percentages and the purity and similarity
of inventory sub-categories as to their relative inventory turns, gross margins
and on hand quantities. These judgments and estimates significantly impact the
ending inventory valuation at cost as well as gross margin. Management believes
that the Companys RIM provides an inventory valuation which reasonably
approximates cost and results in carrying the inventory at the lower of cost or
market. Management does not believe that the likelihood is significant that
materially higher LIFO reserves are required given its current expectations of
on-hand inventory quantities and costs.

The proper valuation of inventory also requires
management to estimate the net realizable value of the Companys obsolete and
slow-moving inventory at the end of each period. Management bases its net
realizable values upon many factors including historical recovery rates, the
aging of inventories on hand, the inventory movement of specific products and
the current economic conditions. When management has determined inventory to be
obsolete or slow moving, the inventory is reduced to its net realizable value by
recording an obsolescence reserve. Given the Companys experiences in selling
obsolete and slow-moving inventory, management believes that the amounts of the
obsolescence reserves to the carrying values of its inventories are materially
adequate.

With regard to the proper valuations of
inventories, management reviews its judgments, assumptions and other relevant,
significant factors on a routine basis and makes adjustments where the facts and
circumstances dictate.

Self-insurance Reserves for Workers
Compensation, Healthcare and General Liability

The Company is primarily self-insured for most
U.S. workers compensation claims, healthcare claims and general liability and
automotive liability losses. The Company has purchased insurance coverages in
order to establish certain limits to its exposure on a per claim
basis.

Actual U.S. workers compensation claims, and
general liability and automotive liability losses, are reported to the Company
by third party administrators. The third party administrators also report
initial estimates of related loss reserves. The open claims and initial loss
reserves are subjected to examination by the Companys risk management and
accounting management utilizing a consistent methodology which involves various
assumptions, judgment and other factors. Such factors include but are not
limited to the probability of settlement, the amount at which settlement can be
achieved, the probable duration of the claim, the cost development pattern of
the claim and the applicable cost development factor. The Company determines the
estimated reserve required for U.S. worker compensation claims in each
accounting period. This requires that management determine estimates of the
costs of claims incurred and accrue for such expenses in the period in which the
claims are incurred. Management estimates the ultimate cost for claims incurred
based on actual claims, reviewed for the status and probabilities associated
with potential settlement and then adjusts them by development factors from
published insurance industry sources. In fiscal 2005, the Company began
measuring the liabilities associated with claims for workers compensation,
general liability and automotive liability at Harris Teeter through the use of
actuarial methods to project an estimate of ultimate cost for claims incurred.
The estimated cost for claims incurred are discounted to present values using a
discount rate representing a return on high-quality fixed income securities with
an average maturity equal to the average payout of the related liability. Harris
Teeter liabilities represent approximately 94% of the total Company
self-insurance reserves for workers compensation, general liability and
automotive liability claims. The Company constantly reviews the relevant,
significant factors and makes adjustments where the facts and circumstances
dictate. Management does not believe the likelihood is significant that existing
worker compensation claims, general liability claims and automotive liability
claims will be settled for materially higher amounts than those
accrued.

19

---

The variety of healthcare plans
available to employees are primarily self-insured, although some locations have
insured health maintenance organization plans. The Company records an accrual
for the estimated amount of self-insured healthcare claims incurred by all
participants but not yet reported (IBNR) by applying a development factor to the
reported claims amount. The most significant factors which impact on the
determination of the required accrual are the historical pattern of the
timeliness of claims processing, changes in the nature or types of benefit
plans, changes in the plan benefit designs, employer-employee cost sharing
factors, and medical trends and inflation. These reserves are recorded based on
historical experience and industry trends, which are continually monitored, and
accruals are adjusted when warranted by changes in facts and circumstances. The
Company believes that the total healthcare cost accruals are reasonable and
adequate to cover future payments on pre-existing claims.

Impairment of Long-lived Assets and
Closed Store Obligations

The Company assesses its long-lived
assets for possible impairment whenever events or changes in circumstances
indicate the carrying value of an asset may not be recoverable. Recoverability
is measured by a comparison of the carrying amount to the net non-discounted
cash flows expected to be generated by the asset. An impairment loss is
recognized for any excess of net book value over the estimated fair value of the
asset impaired. The fair value is estimated based on expected future cash
flows.

The value of property and equipment
associated with closed stores and facilities is adjusted to reflect recoverable
values based on the Company's prior history of disposing of similar assets and
current economic conditions. Management continually reviews its fair value
estimates and records impairment charges for assets held for sale when
management determines, based on new information which it believes to be
reliable, that such charges are appropriate.

The results of impairment tests are
subject to management's estimates and assumptions of projected cash flows and
operating results. The Company believes that, based on current conditions,
materially different reported results are not likely to result from long-lived
asset impairments. However, a change in assumptions or market conditions could
result in a change in estimated future cash flows and the likelihood of
materially different reported results.

The Company records liabilities for
closed stores that are under long-term lease agreements. The liability
represents an estimate of the present value of the remaining non-cancelable
lease payments after the anticipated closing date, net of estimated subtenant
income. The closed store liabilities usually are paid over the lease terms
associated with the closed stores, unless settled earlier. Harris Teeter
management estimates the subtenant income and future cash flows based on its
historical experience and knowledge of (1) the market in which the store is
located, (2) the results of its previous efforts to dispose of similar assets
and (3) the current economic conditions. The actual cost of disposition for
these leases is affected by specific real estate markets, inflation rates and
general economic conditions and may differ significantly from those assumed and
estimated.

Store closings generally are completed
within one year after the decision to close. Adjustments to closed store
liabilities primarily relate to changes in subtenants and actual costs differing
from original estimates. Adjustments are made for changes in estimates in the
period in which the change becomes known. Any excess store closing liability
remaining upon settlement of the obligation is reversed to income in the period
that such settlement is determined. The Company constantly reviews the relevant,
significant factors used in its estimates and makes adjustments where the facts
and circumstances dictate.

Retirement Plans and Post-Retirement
Benefit Plans

The Company maintains certain
retirement benefit plans for substantially all domestic full-time employees and
supplemental retirement benefit plans for certain selected directors and
officers of the Company and its subsidiaries. Employees in foreign subsidiaries
participate to varying degrees in local pension plans, which, in the aggregate,
are not significant. The qualified pension plan is a non-contributory, funded
defined benefit plan, while the non-qualified supplemental retirement benefit
plans are unfunded, defined benefit plans. The Companys current funding policy
for its qualified pension plan is to contribute annually the amount required by
regulatory authorities to meet minimum funding requirements and an amount to
increase the funding ratios over future years to a level determined by its
actuaries to be effective in reducing the volatility of contributions.

The Company has certain deferred
compensation arrangements which allow or allowed in prior years its directors,
officers and selected key management personnel to forego the receipt of earned
compensation for specified periods of time. The Company may also, from time to
time, make discretionary annual contributions into the Director Deferral Plan on
behalf of its outside directors. These plans are unfunded, except for a
directors compensation deferral plan and a flexible deferral plan for
executives which utilize a rabbi trust to hold assets designated to pay the
respective liabilities. For further disclosures regarding the Companys pension
and deferred compensation plans, see the Note entitled Employee Benefit Plans
of the Notes to Consolidated Financial Statements in Item 8 hereof.

20

---

The Company maintains a post-retirement healthcare
plan for retirees whose sum of age and years of service equal at least 75 at
retirement. The plan continues coverage from early retirement date until the
earlier date of eligibility for Medicare or any other employers medical plan.
The Company requires that the retiree pay the estimated full cost of the
coverage. The Company also provides a $5,000 post-retirement mortality benefit
to a small number of retirees under a prior plan. The obligations and expenses
associated with each of these benefit plans are not material.

The determination of the Companys obligation and
expense for pension, deferred compensation and other post-retirement benefits is
dependent on certain assumptions selected by management and used by the Company
and its actuaries in calculating such amounts. The more significant of those
assumptions applicable to the qualified pension plan include the discount rate,
the expected long-term rate of return on plan assets, the rates of increase in
future compensation and the rates of future employee turnover. Those assumptions
also apply to determinations of the obligations and expense of the following
plans, except as noted: (1) supplemental pension  no funded assets to be
measured, and (2) deferred compensation arrangement and post-retirement
mortality benefit  no funded assets to be measured and no dependency on future
rates of compensation or turnover.

In accordance with generally accepted accounting
principles, actual results that differ from managements assumptions are
accumulated and amortized over future periods and, therefore, generally affect
the Companys recognized expense and recorded obligation in such future periods.
While management believes that its selections of values for the various
assumptions are appropriate, significant differences in actual experience or
significant changes in the assumptions may materially affect pension and other
post-retirement obligations and future expense.

Recent Accounting Standards

In June 2006, the FASB issued Interpretation
(FIN) No. 48, Accounting for Uncertainty in Income Taxesan interpretation of
FASB Statement No. 109. FIN No. 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return, and provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. FIN No. 48 becomes effective for
the Company beginning in the first quarter of fiscal 2008. The Company has not
finalized its assessment of the potential impact of adopting FIN No. 48, but
currently it is not expected to have a material effect on the Companys
financial position, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157,
"Fair Value Measurements." SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. SFAS No. 157 does not
require any new fair value measurements. This new standard becomes effective for
the Companys 2009 fiscal year beginning on September 29, 2008. The Company
continues to evaluate the impact of SFAS No. 157 on its consolidated financial
statements, but at this time does not expect the potential impact of adopting
this standard to have a material effect on the Companys financial position,
results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding
an amendment of FASB Statement No. 115. SFAS No. 159 permits companies to
measure many financial instruments and certain other items at fair value at
specified election dates. Unrealized gains and losses on these items will be
reported in earnings at each subsequent reporting date. The fair value option
may be applied instrument by instrument (with a few exceptions), is irrevocable
and is applied only to entire instruments and not to portions of instruments.
This new standard becomes effective for the Companys 2009 fiscal year beginning
on September 29, 2008. The Company continues to evaluate the impact of SFAS No.
159 on its consolidated financial statements.

21

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Item 7A.Quantitative and Qualitative Disclosures about Market Risk

The Company is subject to interest rate risk on
its fixed interest rate debt obligations. Generally, the fair value of debt with
a fixed interest rate will increase as interest rates fall, and the fair value
will decrease as interest rates rise. As of September 30, 2007, the Company had
no significant foreign exchange exposure and no significant outstanding
derivative transactions.

The table below presents principal cash flows and
related weighted average interest rates by expected maturity dates for the
Companys significant fixed interest rate debt obligations ($128.6 million of
Senior Notes due at various dates through 2017):

|                                     | 2008    | 2009    | 2010    | 2011    | 2012 | Thereafter | Total     | Fair Value
|------------------------------------ | ------- | ------- | ------- | ------- | ---- | ---------- | --------- | ----------
|Fixed rate debt obligations          | $ 7,143 | $ 7,143 | $ 7,143 | $ 7,142 | $ -  | $ 100,000  | $ 128,571 | $ 146,136 
|Weighted average interest
      rate | 6.48%   | 6.48%   | 6.48%   | 6.48%   | -    | 7.64%      | 7.38%     |           

For a more detail description of fair value, refer
to the Note entitled Financial Instruments of the Notes to Consolidated
Financial Statements in Item 8 hereof.

22

---

Item 8.Financial Statements and Supplementary Data

RUDDICK
CORPORATION AND CONSOLIDATED SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL
STATEMENTS AND SCHEDULE

|                                                                                                 | Page
|------------------------------------------------------------------------------------------------ | ----
|Reports
      of Independent Registered Public Accounting Firm                                   | 24  
|                                                                                                 |     
|Consolidated Balance Sheets, September 30, 2007 and October 1,
      2006                        | 26  
|                                                                                                 |     
|Statements of
      Consolidated Income for the fiscal years ended September 30,
    2007,       |     
|October 1, 2006
      and October 2, 2005                                                        | 27  
|                                                                                                 |     
|Statements of
      Consolidated Shareholders Equity and Comprehensive Income for
    the       |     
|fiscal years ended
      September 30, 2007, October 1, 2006 and October 2, 2005                 | 28  
|                                                                                                 |     
|Statements of
      Consolidated Cash Flows for the fiscal years ended September 30,
      2007, |     
|October 1, 2006
      and October 2, 2005                                                        | 29  
|                                                                                                 |     
|Notes
      to Consolidated Financial Statements                                                 | 30  
|                                                                                                 |     
|Schedule I-
      Valuation and Qualifying Accounts and Reserves for the
    fiscal              |     
|years ended
      September 30, 2007, October 1, 2006 and October 2, 2005                        | S-1 

23

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Report of Independent Registered Public
Accounting Firm

The Board of Directors and Shareholders
Ruddick Corporation:

We have audited the accompanying consolidated
balance sheets of Ruddick Corporation and subsidiaries (the Company) as of
September 30, 2007 and October 1, 2006, and the related consolidated statements
of income, shareholders equity and comprehensive income, and cash flows for
each of the years in the three-year period ended September 30, 2007. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule valuation and qualifying accounts
and reserves for each of the years in the three-year period ended September 30,
2007. These consolidated financial statements and financial statement schedule
are the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.

We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
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 consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of the Company as of September 30, 2007 and October 1, 2006,
and the results of its operations and its cash flows for each of the years in
the three-year period ended September 30, 2007, in conformity with U.S.
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of September 30, 2007,
based on criteria established inInternal Control -
Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated November 28, 2007 expressed an unqualified opinion on the effectiveness of
the Companys internal control over financial reporting.

As discussed in the Summary of Significant
Accounting Policies, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004), "Share-Based Payment" effective October 3,
2005, and Financial Accounting Standards Board Staff Position 13-1, "Accounting
for Rental Costs Incurred During a Construction Period" effective January 2,
2006. Additionally, the Company adopted the provisions of the Financial
Accounting Standards Boards Statement of Financial Accounting Standards No.
158, Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans as of September 30, 2007.

KPMG LLPCharlotte, North
Carolina November 28, 2007

24

---

Report of Independent Registered Public
Accounting Firm

The Board of Directors and Shareholders
Ruddick Corporation:

We have audited management's assessment, included
in the accompanying Managements Annual Report on Internal Controls over
Financial Reporting that Ruddick Corporation and subsidiaries (the Company)
maintained effective internal control over financial reporting as of September
30, 2007, based on criteria established inInternal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO)."The Companys
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Companys
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, evaluating
management's assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A company's internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, management's assessment that the
Company maintained effective internal control over financial reporting as of
September 30, 2007, is fairly stated, in all material respects, based
oncriteria established inInternal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).Also, in our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of September 30, 2007, based on criteria
established inInternal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO)."

We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
accompanying consolidated balance sheets of Ruddick Corporation and subsidiaries
as of September 30, 2007 and October 1, 2006, and the related consolidated
statements of income, shareholders equity and comprehensive income, and cash
flows for each of the years in the three-year period ended September 30, 2007,
and our report dated November 28, 2007 expressed an unqualified opinion on those
consolidated financial statements.

KPMG LLPCharlotte, North
Carolina November 28, 2007

25

---

CONSOLIDATED BALANCE SHEETSRUDDICK CORPORATION AND
SUBSIDIARIES(dollars in
thousands)

|                                                                                       | September
      30, |           | October
      1,
|-------------------------------------------------------------------------------------- | ------------------- | --------- | ----------------
|                                                                                       | 2007                |           | 2006            
|ASSETS                                                                                 |                     |           |                 
|Current Assets                                                                         |                     |           |                 
|Cash and Cash
      Equivalents                                                        | $                   | 26,747    |                 
|Accounts Receivable, Net of Allowance For Doubtful Accounts of
      $3,962 and $3,719 |                     | 92,998    |                 
|Refundable
      Income Taxes                                                          |                     | 6,796     |                 
|Inventories                                                                            |                     | 295,662   |                 
|Deferred Income
      Taxes                                                            |                     | 9,775     |                 
|Prepaid Expenses
      and Other Current Assets                                        |                     | 24,286    |                 
|Total Current Assets                                                                   |                     | 456,264   |                 
|Property                                                                               |                     |           |                 
|Land                                                                                   |                     | 27,358    |                 
|Buildings and Improvements                                                             |                     | 219,701   |                 
|Machinery and
      Equipment                                                          |                     | 872,705   |                 
|Leasehold
      Improvements                                                           |                     | 518,056   |                 
|Total, at Cost                                                                         |                     | 1,637,820 |                 
|Accumulated
      Depreciation and Amortization                                        |                     | 770,184   |                 
|Property, Net                                                                          |                     | 867,636   |                 
|Investments                                                                            |                     | 100,736   |                 
|Goodwill                                                                               |                     | 8,169     |                 
|Intangible Assets                                                                      |                     | 27,617    |                 
|Other Long-Term Assets                                                                 |                     | 69,267    |                 
|Total Assets                                                                           | $                   | 1,529,689 |                 
|                                                                                      
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                   |                     |           |                 
|Current Liabilities                                                                    |                     |           |                 
|Notes
      Payable                                                                    | $                   | 11,694    |                 
|Current Portion of Long-Term Debt and Capital Lease
      Obligations                  |                     | 8,535     |                 
|Accounts
      Payable                                                                 |                     | 227,493   |                 
|Accrued Compensation                                                                   |                     | 57,352    |                 
|Other Current
      Liabilities                                                        |                     | 77,696    |                 
|Total Current Liabilities                                                              |                     | 382,770   |                 
|Long-Term
      Debt and Capital Lease Obligations                                     |                     | 255,857   |                 
|Deferred Income
      Taxes                                                            |                     | 870       |                 
|Pension
      Liabilities                                                              |                     | 64,162    |                 
|Other Long-Term
      Liabilities                                                      |                     | 83,696    |                 
|Minority
      Interest                                                                |                     | 5,724     |                 
|Commitments and
      Contingencies                                                    |                     | -         |                 
|Shareholders' Equity                                                                   |                     |           |                 
|Common Stock,
      no par value - Shares Outstanding: 2007  48,127,252;              |                     |           |                 
|2006  47,557,894                                                                      |                     | 81,677    |                 
|Retained
      Earnings                                                                |                     | 693,992   |                 
|Accumulated
      Other Comprehensive Income (Loss), Net of Income Taxes               |                     | (39,059)  |                 
|Total
      Shareholders' Equity                                                       |                     | 736,610   |                 
|Total
      Liabilities and Shareholders' Equity                                       | $                   | 1,529,689 |                 

See Notes to Consolidated Financial Statements

26

---

STATEMENTS OF CONSOLIDATED
INCOMERUDDICK CORPORATION AND SUBSIDIARIES(dollars in thousands, except
per share data)

|                                                                     | 52
      Weeks Ended |           | 52
      Weeks Ended |   | 52
      Weeks Ended
|-------------------------------------------------------------------- | -------------------- | --------- | -------------------- | - | --------------------
|                                                                     | September 30,        |           | October 1,           |   | October 2,          
|                                                                     | 2007                 |           | 2006                 |   | 2005                
|Net Sales                                                            | $                    | 3,639,208 |                      | $ | 3,265,856           
|Cost of
      Sales                                                  |                      | 2,542,861 |                      |   | 2,293,934           
|Selling, General and
      Administrative Expenses                   |                      | 948,173   |                      |   | 848,853             
|Operating Profit                                                     |                      | 148,174   |                      |   | 123,069             
|Interest Expense                                                     |                      | 17,654    |                      |   | 14,125              
|Interest
      Income                                                |                      | (307)     |                      |   | (630)               
|Net Investment Gain                                                  |                      | (228)     |                      |   | (4,447)             
|Minority Interest                                                    |                      | 564       |                      |   | 624                 
|Income Before Taxes                                                  |                      | 130,491   |                      |   | 113,397             
|Income Tax Expense                                                   |                      | 49,803    |                      |   | 41,061              
|Net Income                                                           | $                    | 80,688    |                      | $ | 72,336              
|                                                                    
|Net Income Per Share:                                                |                      |           |                      |   |                     
|Basic                                                                | $                    | 1.69      |                      | $ | 1.53                
|Diluted                                                              | $                    | 1.68      |                      | $ | 1.52                
|                                                                    
|Weighted Average Number of Shares of Common Stock
      Outstanding: |                      |           |                      |   |                     
|Basic                                                                |                      | 47,605    |                      |   | 47,233              
|Diluted                                                              |                      | 48,139    |                      |   | 47,687              

See Notes to Consolidated Financial
Statements

27

---

STATEMENTS OF CONSOLIDATED
SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOMERUDDICK CORPORATION AND
SUBSIDIARIES(dollars in thousands,
except share and per share amounts)

|                                       | Common
      Stock |  |        |         |          |   | Accumulated Other |  | Total         |          |              
|-------------------------------------- | ------------------ |  | ------ | ------- | -------- | - | ----------------- |  | ------------- | -------- | -------------
|                                       | Shares             |  | Common |         | Retained |   | Comprehensive     |  | Shareholders' |          | Comprehensive
|                                       | (No Par Value)     |  | Stock  |         | Earnings |   | Income (Loss)     |  | Equity        |          | Income       
|Balance at October 3, 2004             | 46,730,758         |  | $      | 56,634  |          | $ | 535,188           |  | $             | (42,112) |              
|Exercise of
      stock options,       |                    |  |        |         |          |   |                   |  |               |          |              
|including tax benefits of $1,399       | 684,911            |  |        | 12,976  |          |   | -                 |  |               | -        |              
|Directors' stock plan                  | -                  |  |        | 24      |          |   | -                 |  |               | -        |              
|Restricted Stock
      Awards          | 73,310             |  |        | 924     |          |   | -                 |  |               | -        |              
|Net earnings                           | -                  |  |        | -       |          |   | 68,598            |  |               | -        |              
|Dividends ($0.44
      a share)        | -                  |  |        | -       |          |   | (20,833)          |  |               | -        |              
|Foreign currency translation           |                    |  |        |         |          |   |                   |  |               |          |              
|adjustment (net of $52 for tax)        | -                  |  |        | -       |          |   | -                 |  |               | 486      |              
|Pension
      liability adjustment     |                    |  |        |         |          |   |                   |  |               |          |              
|(net of tax benefit of $2,157)         | -                  |  |        | -       |          |   | -                 |  |               | (2,943)  |              
|                                      
|Balance at October 2, 2005             | 47,488,979         |  |        | 70,558  |          |   | 582,953           |  |               | (44,569) |              
|Exercise of
      stock options,       |                    |  |        |         |          |   |                   |  |               |          |              
|including tax benefits of $914         | 313,814            |  |        | 5,597   |          |   | -                 |  |               | -        |              
|Directors' stock plan                  | -                  |  |        | 2       |          |   | -                 |  |               | -        |              
|Share-Based
      Compensation         | 153,692            |  |        | 2,545   |          |   | -                 |  |               | -        |              
|Shares effectively purchased and       |                    |  |        |         |          |   |                   |  |               |          |              
|retired for withholding taxes          | (3,591)            |  |        | (74)    |          |   | -                 |  |               | -        |              
|Shares purchased
      and retired     | (395,000)          |  |        | (7,899) |          |   | -                 |  |               | -        |              
|Net earnings                           | -                  |  |        | -       |          |   | 72,336            |  |               | -        |              
|Dividends ($0.
      44 a share)       | -                  |  |        | -       |          |   | (20,867)          |  |               | -        |              
|Foreign currency translation           |                    |  |        |         |          |   |                   |  |               |          |              
|adjustment (net of $216 for tax)       | -                  |  |        | -       |          |   | -                 |  |               | 1,301    |              
|Pension
      liability adjustment     |                    |  |        |         |          |   |                   |  |               |          |              
|(net of $5,668 for tax)                | -                  |  |        | -       |          |   | -                 |  |               | 8,634    |              
|                                      
|Balance at October 1, 2006             | 47,557,894         |  |        | 70,729  |          |   | 634,422           |  |               | (34,634) |              
|Exercise of
      stock options,       |                    |  |        |         |          |   |                   |  |               |          |              
|including tax benefits of
      $1,820 | 400,262            |  |        | 7,531   |          |   | -                 |  |               | -        |              
|Directors' stock plan                  | -                  |  |        | 1       |          |   | -                 |  |               | -        |              
|Share-Based
      Compensation         | 184,365            |  |        | 3,853   |          |   | -                 |  |               | -        |              
|Shares effectively purchased and       |                    |  |        |         |          |   |                   |  |               |          |              
|retired for
      withholding taxes    | (15,269)           |  |        | (437)   |          |   | -                 |  |               | -        |              
|Net
      earnings                     | -                  |  |        | -       |          |   | 80,688            |  |               | -        |              
|Dividends ($0.44 a share)              | -                  |  |        | -       |          |   | (21,118)          |  |               | -        |              
|Foreign currency
      translation     |                    |  |        |         |          |   |                   |  |               |          |              
|adjustment (net of $298 for tax)       | -                  |  |        | -       |          |   | -                 |  |               | 3,617    |              
|Pension liability adjustment           |                    |  |        |         |          |   |                   |  |               |          |              
|(net of $10,774 for tax)               | -                  |  |        | -       |          |   | -                 |  |               | 16,881   |              
|Impact of SFAS
      158 Adoption      |                    |  |        |         |          |   |                   |  |               |          |              
|(net of tax benefit of $16,072)        | -                  |  |        | -       |          |   | -                 |  |               | (24,923) |              
|                                      
|Balance at September 30, 2007          | 48,127,252         |  | $      | 81,677  |          | $ | 693,992           |  | $             | (39,059) |              

See Notes to Consolidated Financial
Statements

28

---

STATEMENTS OF CONSOLIDATED CASH
FLOWSRUDDICK CORPORATION AND SUBSIDIARIES(dollars in
thousands)

|                                                                        | 52 Weeks Ended |           | 52 Weeks Ended |   | 52 Weeks Ended
|----------------------------------------------------------------------- | -------------- | --------- | -------------- | - | --------------
|                                                                        | September 30,  |           | October 1,     |   | October 2,    
|                                                                        | 2007           |           | 2006           |   | 2005          
|CASH FLOW FROM OPERATING ACTIVITIES:                                    |                |           |                |   |               
|Net
      Income                                                        | $              | 80,688    |                | $ | 72,336        
|Non-Cash Items Included in Net Income:                                  |                |           |                |   |               
|Depreciation and Amortization                                           |                | 100,798   |                |   | 88,910        
|Deferred Taxes                                                          |                | (3,108)   |                |   | (8,353)       
|Net Gain on Property Sales                                              |                | (2,432)   |                |   | (1,811)       
|Impairment Losses                                                       |                | 618       |                |   | 2,603         
|Share-Based Compensation                                                |                | 3,853     |                |   | 2,471         
|Other, Net                                                              |                | (2,649)   |                |   | 2,067         
|Changes in
      Operating Accounts Providing (Utilizing) Cash:         |                |           |                |   |               
|Accounts Receivable                                                     |                | (2,588)   |                |   | (7,804)       
|Inventories                                                             |                | (28,213)  |                |   | (15,840)      
|Prepaid Expenses and Other Current Assets                               |                | 303       |                |   | (1,717)       
|Accounts Payable                                                        |                | 40,132    |                |   | 20,520        
|Other Current Liabilities                                               |                | 13,054    |                |   | 7,045         
|Other Long-Term Operating Accounts                                      |                | 11,662    |                |   | (1,689)       
|Other, Net                                                              |                | 500       |                |   | 1,000         
|Net Cash Provided by Operating
      Activities                         |                | 212,618   |                |   | 159,738       
|                                                                       
|INVESTING ACTIVITIES:                                                   |                |           |                |   |               
|Capital
      Expenditures                                              |                | (219,903) |                |   | (218,536)     
|Purchase of Other Investments                                           |                | (9,835)   |                |   | (47,771)      
|Acquired
      Favorable Leases                                         |                | -         |                |   | (1,695)       
|Cash Proceeds from Sale of Property and Partnership
      Distributions |                | 27,546    |                |   | 28,477        
|Proceeds from
      Sale of Temporary Investments                       |                | -         |                |   | 16,859        
|Purchase of Temporary Investments                                       |                | -         |                |   | (3,930)       
|Company-Owned
      Life Insurance, Net                                 |                | (1,881)   |                |   | 191           
|Other, Net                                                              |                | (735)     |                |   | (2,797)       
|Net Cash Used in Investing
      Activities                             |                | (204,808) |                |   | (229,202)     
|                                                                       
|FINANCING ACTIVITIES:                                                   |                |           |                |   |               
|Net Proceeds
      from (Payments on) Short-Term Debt Borrowings        |                | 750       |                |   | (812)         
|Net Proceeds from Revolver Borrowings                                   |                | 10,200    |                |   | 80,800        
|Proceeds from
      Long-Term Borrowings                                |                | 319       |                |   | 2,639         
|Payments on Long-Term Debt and Capital Leases                           |                | (8,387)   |                |   | (9,447)       
|Dividends
      Paid                                                    |                | (21,118)  |                |   | (20,867)      
|Proceeds from Stock Issued                                              |                | 5,711     |                |   | 4,683         
|Share-Based
      Compensation Tax Benefits                             |                | 1,820     |                |   | 914           
|Purchase and Retirement of Common Stock                                 |                | -         |                |   | (7,899)       
|Other, Net                                                              |                | (210)     |                |   | (544)         
|Net Cash (Used in) Provided by
      Financing Activities               |                | (10,915)  |                |   | 49,467        
|(Decrease) Increase in Cash and Cash Equivalents                        |                | (3,105)   |                |   | (19,997)      
|Effect of Foreign Currency Fluctuations on Cash                         |                | 664       |                |   | -             
|Cash and Cash Equivalents at Beginning
      of Year                    |                | 29,188    |                |   | 49,185        
|Cash and Cash Equivalents at End
      of Year                          | $              | 26,747    |                | $ | 29,188        

See Notes to Consolidated Financial
Statements

29

---

RUDDICK CORPORATION AND
SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Principles of
ConsolidationThe accompanying
consolidated financial statements include the accounts of Ruddick Corporation
and subsidiaries, including its wholly owned operating companies, Harris Teeter,
Inc. and American & Efird, Inc., 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.

The Company reviews its investments in
entities to determine if such entities are deemed to be variable interest
entities (VIEs) as defined by FIN 46 and FIN 46-R. The Company will consolidate
those VIEs in which the Company is the primary beneficiary of the entity. As of
the fiscal year ended on September 30, 2007, the Company concluded that it does
not have any VIEs that required consolidation.

Fiscal YearThe Company's fiscal year ends on the Sunday nearest to
September 30. However, the Companys Harris Teeter subsidiarys fiscal periods
end on the Tuesday following the Companys fiscal period end. Fiscal years 2007,
2006 and 2005 include the 52 weeks ended September 30, 2007 (October 2, 2007 for
Harris Teeter), October 1, 2006 (October 3, 2006 for Harris Teeter) and October
2, 2005 (October 4, 2005 for Harris Teeter), respectively.

Use of EstimatesThe 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.

Cash and Cash
EquivalentsFor 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.

Temporary
InvestmentsThe Company has historically
invested in various municipal and tax-exempt bonds and other similar investments
in order to enhance its return on excess cash. The Company selected specific
investments based on certain criteria, which include, but are not limited to,
suitable liquidity and credit quality requirements.

InventoriesThe Companys inventories are valued at the lower of cost or
market with the cost of substantially all domestic U.S. inventories being
determined using the last-in, first-out (LIFO) method. Foreign inventories and
limited categories of domestic inventories are valued on the weighted average
and on the first-in, first-out (FIFO) cost methods. Under the LIFO valuation
method at Harris Teeter, all retail store inventories are initially stated at
estimated cost as calculated by the Retail Inventory Method (RIM). Under RIM,
the valuation of inventories at cost and the resulting gross margins are
calculated by applying a calculated cost-to-retail ratio to the retail value of
inventories. LIFO indices are developed approximately one month prior to year
end except for inventory held at Harris Teeters distribution facilities which
are developed at year end. The annual LIFO measurement is achieved by applying
the indices to the actual inventory on hand as of year end.

Vendor Rebates, Credits and
Promotional AllowancesConsistent with
standard practices in the retail industry, Harris Teeter receives allowances
from vendors through a variety of programs and arrangements. These allowances
are generally intended to defray the costs of promotion, advertising and selling
the vendors products. Vendor rebates, credits and other promotional allowances
that relate to Harris Teeters buying and merchandising activities, including
lump-sum payments associated with long-term contracts, are recorded as a
component of cost of sales as they are earned, the recognition of which is
determined in accordance with the underlying agreement with the vendor, the
authoritative guidance and completion of the earning process. Portions of vendor
allowances that are refundable to the vendor, in whole or in part, by the nature
of the provisions of the contract are deferred from recognition until
realization is reasonably assured.

30

---

Harris Teeter recognizes allowances
when the purpose for which the vendor funds were intended and committed to
be used has been fulfilled and a cost has been
incurred by the retailer. Thus, it is the Companys policy to recognize the
vendor allowance consistent with the timing of the recognition of the expense
that the allowance is intended to reimburse and to determine the accounting
classification consistent with the economic substance of the underlying
transaction. Where the Company provides an identifiable benefit or service to
the vendor apart from the purchase of merchandise, that transaction is recorded
separately. For example, co-operative advertising allowances are accounted for
as a reduction of advertising expense in the period in which the advertising
cost is incurred. If the advertising allowance exceeds the cost of advertising,
then the excess is recorded against the cost of sales in the period in which the
related expense is recognized.

Vendor allowances for price markdowns
are credited to the cost of sales during the period in which the related
markdown was taken and charged to the cost of sales. Slotting and stocking
allowances received from a vendor to ensure that its products are carried or to
introduce a new product at the Companys stores are recorded as a reduction of
cost of sales over the period covered by the agreement with the vendor based on
the estimated inventory turns of the merchandise to which the allowance applies.
Display allowances are recognized as a reduction of cost of sales in the period
earned in accordance with the vendor agreement. Volume rebates by the vendor in
the form of a reduction of the purchase price of the merchandise reduce the cost
of sales when the related merchandise is sold. Generally, volume rebates under a
structured purchase program with allowances awarded based on the level of
purchases are recognized, when realization is assured, as a reduction in the
cost of sales in the appropriate monthly period based on the actual level of
purchases in the period relative to the total purchase commitment and adjusted
for the estimated inventory turns of the merchandise.

Property and
DepreciationProperty is recorded at cost
and is depreciated, using principally the straight-line method, over the
following useful lives:

Land improvements
    10-40 yearsBuildings
    15-40
      yearsMachinery 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 the estimated useful life 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 with
gains or losses on disposal being added to or deducted from income. Property
categories include $57,889,000 and $72,765,000 of accumulated costs for
construction in progress at September 30, 2007 and October 1, 2006,
respectively.

Impairment of Long-lived Assets and
Closed Store ObligationsIn accordance
with Statement of Financial Accounting Standards (SFAS) No. 144 Impairment of
Long-Lived Assets, the Company assesses its long-lived assets for possible
impairment whenever events or changes in circumstances indicate the carrying
value of an asset may not be recoverable. Recoverability is measured by a
comparison of the carrying amount to the net non-discounted cash flows expected
to be generated by the asset. An impairment loss is recognized for any excess of
net book value over the estimated fair value of the asset impaired, and recorded
as an offset to the asset value. The fair value is estimated based on expected
future cash flows or third party valuations, if available.

The value of property and equipment
associated with closed stores and facilities is adjusted to reflect recoverable
values based on the Company's prior history of disposing of similar assets and
current economic conditions. Management continually reviews its fair value
estimates and records impairment charges for assets held for sale when
management determines, based on new information which it believes to be
reliable, that such charges are appropriate.

The Company records liabilities for
closed stores that are under long-term lease agreements. The liability
represents an estimate of the present value of the remaining non-cancelable
lease payments after the anticipated closing date, net of estimated subtenant
income. The closed store liabilities usually are paid over the lease terms
associated with the closed stores, unless settled earlier. Harris Teeter
management estimates the subtenant income and future cash flows based on its
historical experience and knowledge of (1) the market in which the store is
located, (2) the results of its previous efforts to dispose of similar assets
and (3) the current economic conditions.

31

---

InvestmentsThe Companys Harris Teeter subsidiary invests in certain real
estate development projects, with a managing partner or partners, in which
Harris Teeter either operates or plans to operate a supermarket. American &
Efird has investments in various non-consolidated foreign entities in which they
hold a minority interest and a 50% ownership interest in a joint venture in
China. These investments, depending on the state of development, are accounted
for either under the equity method of accounting or at cost. The Company
continues to hold certain equity investments in a few emerging growth companies
as a result of investments made in certain venture capital funds during prior
years. Real estate and other investments are carried at the lower of cost or
market and are periodically reviewed for potential impairment in accordance SFAS
No. 144 Accounting for the Impairment or Disposal of Long-Lived
Assets.

Goodwill and Other
IntangiblesIn accordance with SFAS No.
142, Goodwill and Other Intangible Assets, goodwill and certain other
intangibles with indefinite lives are no longer amortized, but instead are
tested for impairment at least annually, or more frequently, if circumstances
indicate a potential impairment. Intangible assets with finite, measurable lives
continue to be amortized over their respective useful lives until they reach
their estimated residual values, and are reviewed for impairment in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets.

Self-InsuranceThe Company is self-insured for most U.S. workers
compensation claims, healthcare claims, and general liability and automotive
liability losses. The Company has purchased insurance coverage in order to
establish certain limits to its exposure on a per claim basis. The Company
determines the estimated reserve required for U.S. worker compensation claims,
general liability and automotive liability by first analyzing the costs of
claims incurred and then adjusts such estimates by development factors from
published insurance industry sources. The Company measures the cost associated
with workers compensation claims, and general liability and automotive
liability losses at Harris Teeter based upon a projection of the ultimate cost
for claims incurred. The estimated total expected costs of claims includes an
estimate for claims incurred but not reported (IBNR) and is discounted to
present values using a discount rate representing a return on high-quality fixed
income securities with an average maturity equal to the average payout of the
related liability.

The Company records an accrual for the
estimated amount of self-insured healthcare IBNR claims. These reserves are
recorded based on historical experience and industry trends, which are
continually monitored, and accruals are adjusted when warranted by changes in
facts and circumstances.

Deferred RentThe Company recognizes rent holidays, including the period of
time the Company has access prior to the store opening, which typically includes
construction and fixturing activity, and rent escalations on a straight-line
basis over the term of the lease. The deferred rent amount is included in Other
Long-Term Liabilities on the Companys Consolidated Balance Sheets. In
accordance with Financial Accounting Standards Board Staff Position 13-1,
Accounting for Rental Costs Incurred during a Construction Period, the Company
began expensing construction period rent as incurred as of the beginning of the
second quarter of fiscal 2006.

DerivativesThe Company does not enter into derivative financial
instruments for trading purposes. Derivative instruments (including certain
derivative instruments embedded in other contracts) entered into in the normal
course of business were not significant during any of the periods
presented.

Revenue
RecognitionThe Company recognizes revenue
from retail operations at the point of sale to its customers and from
manufacturing operations at the point of shipment to its customers, based on
shipping terms.

Cost of SalesThe major components of cost of sales in the retail
supermarket segment are (a) the cost of products sold determined under the
Retail Inventory Method (see "Inventories above) reduced by purchase cash
discounts and vendor purchase allowances and
rebates, (b) the cost of various sales promotional activities reduced by vendor
promotional allowances, and reduced by cooperative advertising allowances to the
extent an advertising allowance exceeds the cost of the advertising, (c) the
cost of product waste, including, but not limited to, physical waste and theft,
(d) the cost of product distribution, including warehousing, freight and
delivery, and (e) any charges, or credits, associated with LIFO reserves and
reserves for obsolete and slow moving inventories. Additionally, the costs of
production of product sold by the dairy operation to outsiders are included in
cost of sales in the period in which the sales are recognized in
revenues.

32

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The major components of cost of sales
in the textile manufacturing and distribution segment are (a) the materials
and supplies, labor costs and overhead costs
associated with the manufactured products sold, (b) the purchased cost of
products bought for resale, (c) any charges, or credits, associated with LIFO
reserves and reserves for obsolete and slow moving inventories, (d) the freight
costs incurred to deliver the products to the customer from the point of sale,
and (e) all other costs required to be classified as cost of sales under
authoritative accounting pronouncements.

Selling, General and Administrative
ExpensesThe major components of selling,
general and administrative expenses in the retail supermarket segment are (a)
the costs associated with store operations, including store labor and training,
fringe benefits and incentive compensation, supplies and maintenance, regional
and district management and store support, store rent and other occupancy costs,
property management and similar costs, (b) advertising costs, (c) shipping and
handling costs, excluding freight, warehousing and distribution costs, (d)
merchandising and purchasing department staffing, supplies and associated costs,
(e) customer service and support, and (f) the costs of maintaining general and
administrative support functions, including, but not limited to, personnel
administration, finance and accounting, treasury, credit, information systems,
marketing, and environmental, health and safety, based on appropriate
classification under generally accepted accounting principles.

The major components of selling,
general and administrative expenses in the textile manufacturing and
distribution segment are (a) the costs of maintaining a sales force, including
compensation, incentive compensation, benefits, office and occupancy costs,
travel and all other costs of the sales force, (b) shipping and handling costs,
excluding freight, (c) the costs of advertising, customer service, sales support
and other similar costs, and (d) the costs of maintaining general and
administrative support functions, including, but not limited to, personnel
administration, finance and accounting, treasury, credit, information systems,
training, marketing, and environmental, health and safety, to the extent that
such overhead activities are not allocable to indirect manufacturing costs in
cost of sales under generally accepted accounting principles.

The major components of selling,
general and administrative expenses in the corporate segment are (a) the costs
associated with a portion of compensation and benefits of holding company
employees, and (b) certain other costs that are not related to the operating
companies.

AdvertisingCosts 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 and
amounted to $1,635,000, $1,745,000 and $1,464,000 in fiscal 2007, 2006 and 2005,
respectively. Net advertising expenses of $24,486,000, $23,311,000, and
$22,906,000 were included in the Company's results of operations for fiscal
2007, 2006 and 2005, respectively.

Foreign CurrencyAssets and liabilities of foreign operations (if applicable)
are translated at the current exchange rates as of the end of the accounting
period, and revenues and expenses are translated using average exchange rates.
The resulting translation adjustments are net of income taxes and accumulated as
a component of other comprehensive income in shareholders equity.

Income TaxesThe Company and its subsidiaries file a consolidated federal
income tax return. Tax credits are recorded as a reduction of income taxes in
the years in which they are generated. 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. A valuation allowance is established for deferred tax assets for which
realization is not reasonably assured.

Earnings Per Share
(EPS)Basic EPS is based on the weighted
average outstanding common shares. Diluted EPS is based on the weighted average
outstanding common shares adjusted by the dilutive effect of potential common
stock equivalents resulting from the operation of the Companys comprehensive
stock option and awards plans.

Stock Options and Stock
AwardsThe Company adopted SFAS 123R as of
the beginning of the first quarter of fiscal 2006 utilizing the modified
prospective method which requires fair-value accounting for all share-based
payments to employees for new awards and previously granted awards that were not
vested as of the adoption date. The Company previously measured compensation
expense using the intrinsic value method of accounting prescribed under APB 25
as permitted by SFAS 123 and SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. Under the intrinsic value method,
compensation expense was measured and recorded as the excess, if any, of the
market value at the date of grant over the exercise price. Since the exercise
price of the stock options were equal to the market price at the date of grant, expense has only been recorded for restricted stock
awards in prior years. In accordance with the modified prospective method of
transition, results for prior years have not been restated to reflect this
change. Compensation expense for stock awards are based on the grant date fair
value and are expensed ratably over their vesting period, resulting in more
expense in the early years. Income tax benefits attributable to stock options
exercised are credited to capital stock.

33

---

Other Comprehensive
IncomeOther comprehensive income refers
to revenues, expenses, gains and losses that are not included in net earnings
but rather are recorded directly in shareholders equity. The accumulated
components of other comprehensive income, net of taxes at September 30, 2007
were accumulated net losses for minimum pension liabilities of $44,382,000,
accumulated net losses for postemployment liabilities of $68,000 and accumulated
net gains for foreign currency translation adjustments of $5,391,000.

New Accounting
StandardsIn June 2006, the FASB issued
Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109. FIN No. 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return, and
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. FIN No. 48 becomes
effective for the Company beginning in the first quarter of fiscal 2008. The
Company has not finalized its assessment of the potential impact of adopting FIN
No. 48, but currently it is not expected to have a material effect on the
Companys financial position, results of operations or cash flows.

In September 2006, the FASB issued SFAS
No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes
a framework for measuring fair value in generally accepted accounting
principles, and expands disclosures about fair value measurements. SFAS No. 157
does not require any new fair value measurements. SFAS No. 157 becomes effective
for the Companys 2009 fiscal year beginning on September 29, 2008. The Company
continues to evaluate the impact of SFAS No. 157 on its consolidated financial
statements, but at this time does not expect the potential impact of adopting
this standard to have a material effect on the Companys financial position,
results of operations or cash flows.

In February 2007, the FASB issued SFAS
No. 159, The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an amendment of FASB Statement No. 115. SFAS No. 159
permits companies to measure many financial instruments and certain other items
at fair value at specified election dates. Unrealized gains and losses on these
items will be reported in earnings at each subsequent reporting date. The fair
value option may be applied instrument by instrument (with a few exceptions), is
irrevocable and is applied only to entire instruments and not to portions of
instruments. This new standard becomes effective for the Companys 2009 fiscal
year beginning on September 29, 2008. The Company continues to evaluate the
impact of SFAS No. 159 on its consolidated financial statements.

INVENTORIES

Inventories are valued at the lower of
cost or market with the cost of substantially all domestic U.S. inventories
being determined using the last-in, first-out (LIFO) method. The LIFO cost of
such inventories was $22,175,000 and $20,514,000 less than the first-in,
first-out (FIFO) cost method at September 30, 2007 and October 1, 2006,
respectively. Foreign inventories and limited categories of domestic
inventories, totaling $72,616,000 for fiscal 2007 and $66,186,000 for fiscal
2006, are valued on the weighted average and on the FIFO cost methods. At
September 30, 2007 (October 1, 2006) the value of finished goods inventory was
$264,375,000 ($234,492,000), work in progress was $6,504,000 ($7,443,000) and
raw materials and supplies were $24,783,000 ($23,768,000).

COMPANY OWNED LIFE INSURANCE
(COLI)

The Company has purchased life
insurance policies to fund its obligations under certain benefit plans for
officers, key employees and directors. The cash surrender value of these
policies is recorded net of policy loans and included with other long-term
assets in the Companys consolidated balance sheets. The cash value of the
Companys life insurance policies were $52,055,000 at September 30, 2007 and
$47,950,000 at October 1, 2006, and no policy loans were outstanding at either
date.

34

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GOODWILL

Goodwill is recorded by the Companys
American & Efird textile subsidiary. In accordance with SFAS No. 142,
Goodwill and Other Intangible Assets, the Company
conducts an annual review during the first fiscal quarter to determine if there
exits any impairment of goodwill. There has been no goodwill impairment charge
required for the periods presented.

INTANGIBLE ASSETS

The carrying amount of intangible
assets at September 30, 2007 and October 1, 2006 was as follows (in
thousands):

|                                                                            | 2007 |         | 2006
|--------------------------------------------------------------------------- | ---- | ------- | ----
|Non-Amortizing Intangible Assets  Pension related intangible
      assets: |      |         |     
|Harris Teeter                                                               | $    | -       |     
|American & Efird                                                            |      | -       |     
|Corporate                                                                   |      | -       |     
|Total non-amortizing
      intangibles                                      |      | -       |     
|                                                                           
|Amortizing Intangible Assets:                                               |      |         |     
|Acquired favorable operating leases                                         |      | 17,034  |     
|Customer lists                                                              |      | 5,534   |     
|Land use rights  foreign operations                                        |      | 4,179   |     
|Non-compete agreements                                                      |      | 4,286   |     
|Trademarks, licenses and other                                              |      | 2,554   |     
|Total amortizing intangibles                                                |      | 33,587  |     
|Accumulated amortization                                                    |      | (5,970) |     
|Total amortizing intangibles, net
      of accumulated amortization         |      | 27,617  |     
|                                                                           
|Total intangible assets, net of accumulated amortization                    | $    | 27,617  |     

Acquired favorable operating leases are
recorded at Harris Teeter. All other amortizing intangible assets are recorded
by American & Efird. Amortization expense for intangible assets was
$2,619,000, $2,281,000 and $765,000 in fiscal years 2007, 2006, and 2005,
respectively. Amortizing intangible assets have remaining useful lives from one
year to 48 years. Projected amortization expense for intangible assets existing
as of September 30, 2007 is: $2,602,000, $2,519,000, $2,286,000, $1,848,000 and
$1,570,000 for fiscal years 2008, 2009, 2010, 2011 and 2012,
respectively.

LEASES

The Company leases certain equipment
under agreements expiring during the next 6 years. Harris Teeter leases most of
its stores under leases that expire during the next 25 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 11 years. Certain leases also contain rent escalation clauses (step rents)
that require additional rental amounts in the later years of the
term.

Rent expense for the fiscal years was
as follows (in thousands):

|                                | 2007 |        | 2006 |   | 2005  
|------------------------------- | ---- | ------ | ---- | - | ------
|Minimum, net of sublease income | $    | 84,106 |      | $ | 79,281
|Contingent                      |      | 1,597  |      |   | 1,471 
|Total                           | $    | 85,703 |      | $ | 80,752

35

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Future minimum lease commitments
(excluding leases assigned - see below) and total minimum sublease rentalincome to be received under non-cancelable
subleases at September 30, 2007 were as follows (in thousands):

|                                                                             | Operating |           |           |   | Capital 
|---------------------------------------------------------------------------- | --------- | --------- | --------- | - | --------
|Fiscal Year                                                                  | Leases    |           | Subleases |   | Leases  
|2008                                                                         | $         | 81,296    |           | $ | (2,455) 
|2009                                                                         |           | 88,072    |           |   | (2,242) 
|2010                                                                         |           | 90,650    |           |   | (2,105) 
|2011                                                                         |           | 89,474    |           |   | (1,844) 
|2012                                                                         |           | 88,021    |           |   | (1,698) 
|Later years                                                                  |           | 938,808   |           |   | (5,205) 
|Total minimum lease obligations
      (receivables)                          | $         | 1,376,321 |           | $ | (15,549)
|Amount representing interest                                                 |           |           |           |   |         
|Present value of net minimum
      obligation (included with long-term debt) |           |           |           |   |         

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 14 years and the future minimum
lease payments totaling $66,946,000 over this period have been assumed by these
merchants.

LONG-TERM DEBT

Long-term debt at September 30, 2007
and October 1, 2006 was as follows (in thousands):

|                                                          | 2007 |         | 2006
|--------------------------------------------------------- | ---- | ------- | ----
|6.48% Senior Note due $7,143 annually through April, 2011 | $    | 28,572  |     
|7.72% Senior
      Note due April, 2017                   |      | 50,000  |     
|7.55% Senior Note due July, 2017                          |      | 50,000  |     
|Revolving Line
      of Credit, variable interest         |      | 91,000  |     
|Capital lease obligations                                 |      | 39,327  |     
|Other obligations                                         |      | 5,493   |     
|Total                                                     |      | 264,392 |     
|Less current portion                                      |      | 8,535   |     
|Total long-term debt                                      | $    | 255,857 |     

Long-term debt maturities (including
capital lease obligations) in each of the next five fiscal years are as follows:
2008 - $8,535,000; 2009 - $8,192,000; 2010 - $ 10,731,000; 2011 - $ 99,167,000;
2012 - $ 1,117,000.

On June 7, 2006, the Company and seven
banks entered into a revolving line of credit (Credit Agreement) that provides
for financing up to $350 million, with an optional increase of up to $100
million with the consent of the lenders, through its termination date on June 7,
2011. The Credit Agreement also includes two annual extension options of one
year each if granted by the banks. The amount which may be borrowed from time to
time and the interest rate on any outstanding borrowings are each dependent on a
leverage factor. The leverage factor is based on a ratio of rent-adjusted
consolidated funded debt divided by earnings before interest, taxes,
depreciation, amortization and operating rents, as set forth in the Credit
Agreement. The more significant of the financial covenants which the Company
must meet during the term of the Credit Agreement include a maximum leverage
ratio and a minimum fixed charge coverage ratio. As of September 30, 2007, the
Company was in compliance with all financial covenants of the Credit Agreement.
The Company is charged a variable commitment fee based on the unused balance net
of trade and standby letters of credit which were $23,216,000 at September 30,
2007. The commitment fee rate based on the net unused balance was 0.120%, 0.120%
and 0.225% for fiscal 2007, 2006 and 2005, respectively.

Total interest expense, net of amounts
capitalized, on debt and capital lease obligations was $17,654,000, $14,125,000
and $12,950,000 for fiscal 2007, 2006 and 2005, respectively. Capitalized
interest amounted to $2,318,000 and $1,083,000 for fiscal 2007 and 2006,
respectively.

36

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FINANCIAL INSTRUMENTS

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

The carrying amounts for certain of the
Company's financial instruments, including cash and cash equivalents, accounts
and notes receivable, accounts payable and other accrued liabilities approximate
fair value because of their short maturities. The fair value of variable
interest debt is equal to its carrying amount. The estimated fair value of the
Companys significant fixed interest debt obligations (Senior Notes due at
various dates through 2017) outstanding as of September 30, 2007 was
$146,136,000 as compared to its carrying amount of $128,572,000. This estimated
fair value is computed based on borrowing rates currently available to the
Company for loans with similar terms and maturities.

CAPITAL STOCK

The capital stock of the Company
authorized at September 30, 2007 was 75,000,000 shares of no par value Common
Stock, 4,000,000 shares of Preference Stock (non-cumulative voting $0.56
convertible, $10 liquidation value), and 1,000,000 shares of Additional
Preferred Stock. No shares of Preference Stock or Additional Preferred Stock
were issued or outstanding at September 30, 2007.

One preferred share purchase right is
attached to each outstanding share of common stock, which rights expire on
November 16, 2010. Each right entitles the holder to purchase one one-hundredth
of a share of a new Series A Junior Participating Additional Preferred Stock for
$60. 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 extinguish the rights by
exchanging one share of common stock or an equivalent security for each
qualifying right or may redeem each right at a price of $0.01. There are 600,000
shares of Series A Junior Participating Additional Preferred Stock reserved for
issuance upon exercise of the rights.

The Board of Directors adopted a stock
buyback program in 1996, authorizing, at managements discretion, the Company to
purchase and retire up to 10% of the then outstanding shares of the Companys
common stock for the purpose of preventing dilution as a result of the operation
of the Companys comprehensive stock option and awards plans. During fiscal
2006, the Company purchased and retired 395,000 shares at a total cost of
$7,899,000, or an average price of $20.00 per share pursuant to this plan. There
were no stock purchases during fiscal 2007 or fiscal 2005.

STOCK OPTIONS AND STOCK AWARDS

At September 30, 2007, the Company has
1993, 1995, 1997, 2000 and 2002 equity incentive plans, which were approved by
the Companys shareholders and authorized the issuance of 5,500,000 shares of
common stock pursuant thereto. Under certain stock option plans, the Company has
granted incentive stock options to employees or nonqualified stock options to
employees and outside directors. The Companys incentive stock options generally
become exercisable in installments of 20% per year at each of the first through
fifth anniversaries from grant date and expire seven years from grant date and
nonqualified stock options expire ten years from grant date. Historically and
pursuant to the terms of certain plans, the Company grants a single, one-time
nonqualified stock option of 10,000 shares, generally vested immediately, to
each of its outside directors at the time of their initial election to the
Board. Under each of the stock option plans, the exercise price of each stock
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). Certain of the plans also allow the Company to grant stock awards
such as restricted stock. Under the plans, as of September 30, 2007 the Company
may grant additional options or stock awards for the purchase of 1,513,000
shares.

Beginning in November 2004, the Board
of Directors began approving stock awards in lieu of stock options. Historically
these awards were apportioned 50% as a fixed award of restricted stock
(restricted from sale or transfer until vesting over a five-year period of
continued employment) and 50% as performance share awards, based on the
attainment of certain performance targets for the ensuing fiscal year. If the
fiscal year performance targets are met, the performance shares are subsequently
issued as restricted stock and vest over four years of continued
employment.

37

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A summary of the status of the
Company's restricted stock awards as of September 30, 2007, October 1, 2006
and October 2, 2005, changes during the periods
ending on those dates and weighted average grant-date fair value (WAGFV) is
presented below (shares in thousands):

|Stock Awards                      | September 30, 2007 |  | October 1, 2006 |       | October 2, 2005
|--------------------------------- | ------------------ |  | --------------- | ----- | ---------------
|                                  | Shares             |  | WAGFV           |       | Shares         
|Non-vested at beginning of period | 325                |  | $               | 20.92 |                
|Granted                           | 269                |  |                 | 28.63 |                
|Vested                            | (50)               |  |                 | 21.55 |                
|Forfeited                         | (67)               |  |                 | 21.09 |                
|Non-vested at end of period       | 477                |  |                 | 25.17 |                

The stock awards are being expensed
ratably over the employees five-year requisite service period in accordance
with the graded vesting schedule, resulting in more expense being recognized in
the early years. Compensation expense related to restricted awards amounted to
$3,529,000, $1,901,000 and $924,000 for fiscal years 2007, 2006 and 2005,
respectively. The remaining unamortized expense as of September 30, 2007 is
$6,002,000, with a weighted average recognition period of 1.96 years.

In December 2004, the FASB issued SFAS
No. 123R, "Share-Based Payment" (SFAS 123R) as a replacement to SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS 123). SFAS 123R supersedes APB
No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations, which allowed companies to use the intrinsic method of valuing
share-based payment transactions. SFAS 123R requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
financial statements based on the fair-value method as defined in SFAS
123.

The Company adopted SFAS 123R as of the
beginning of the first quarter of fiscal 2006 utilizing the modified prospective
method which requires fair-value accounting for all share-based payments to
employees for new awards and previously granted awards that were not vested as
of the adoption date. The Company previously measured compensation expense using
the intrinsic value method of accounting prescribed under APB 25 as permitted by
SFAS 123 and SFAS No. 148, Accounting for Stock-Based Compensation  Transition
and Disclosure. Under the intrinsic value method, compensation expense was
measured and recorded as the excess, if any, of the market value at the date of
grant over the exercise price. Since the exercise price of the stock options
were equal to the market price at the date of grant, expense has only been
recorded for restricted stock awards in prior years. In accordance with the
modified prospective method of transition, results for prior years have not been
restated to reflect this change.

Compensation expense related to stock
options amounted to $324,000 and $645,000 for fiscal years 2007 and 2006,
respectively. The fiscal 2006 expense was recorded in connection with the
adoption of SFAS 123R and related to stock options that were not fully vested at
the beginning of the fiscal year. The fair value of the stock options was
estimated at the date of grant using the Black-Scholes option pricing model. The
Company used historical data to estimate the expected life, volatility and
expected forfeitures of the stock option value. The risk-free rate was based on
the U.S. Treasury rate in effect at the time of grant. No new options have been
issued in fiscal years 2007, 2006 or 2005.

As previously discussed, no
compensation cost was recognized in fiscal 2005 for the stock options granted in
fiscal 2004 and prior years. Had compensation cost been determined based on the
fair value at the grant date consistent with the provisions of SFAS 123, the
Company's pro forma net income and basic and diluted net income per share would
have been as follows (in thousands, except per share data):

|                                                                               | 2005
|------------------------------------------------------------------------------ | ----
|Net Income - as
      reported                                                 | $   
|Deduct: Total stock-based employee compensation expense determined
      under |     
|the fair value based method, net of
      taxes                                |     
|Net Income - proforma                                                          | $   
|                                                                              
|Net Income Per Share -                                                         |     
|Basic                                                                          |     
|                                                                               |     
|Diluted                                                                        |     
|                                                                               |     

38

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A summary of the status of the
Company's stock option plans as of September 30, 2007, October 1, 2006, andOctober 2, 2005, changes during the years ending
on those dates and related weighted average exercise price is presented below
(shares in thousands):

|                                      | 2007   |  | 2006  |       | 2005  
|------------------------------------- | ------ |  | ----- | ----- | ------
|Stock Options                         | Shares |  | Price |       | Shares
|Outstanding at beginning of year      | 1,179  |  | $     | 15.82 |       
|Exercised                             | (440)  |  |       | 15.50 |       
|Forfeited                             | (7)    |  |       | 16.40 |       
|Expired                               | (1)    |  |       | 15.83 |       
|Outstanding at end of year            | 731    |  | $     | 16.01 |       
|Vested and expected to vest           | 728    |  | $     | 16.01 |       
|Options exercisable at year
      end | 447    |  | $     | 15.85 |       

The total intrinsic value of stock
options exercised during the fiscal years 2007, 2006 and 2005 was $6,178,000,
$2,589,000 and $3,926,000, respectively. The total cash received from these
exercises for the exercise price and related tax deductions is included in the
Statements of Consolidated Shareholders Equity and Comprehensive Income. The
aggregate intrinsic value of outstanding options as of September 30, 2007,
October 1, 2006 and October 2, 2005 was $12,923,000, $12,288,000 and
$11,445,000, respectively. The aggregate intrinsic value of vested and expected
to vest options as of September 30, 2007, October 1, 2006 and October 2, 2005
was $12,874,000, $12,195,000 and $11,292,000, respectively. The aggregate
intrinsic value of options exercisable as of September 30, 2007, October 1, 2006
and October 2, 2005 was $7,984,000, $6,512,000 and $4,635,000, respectively. The
Company has historically issued new shares to satisfy the stock option
exercises.

The following table summarizes options
outstanding and options exercisable as of September 30, 2007, and the related
weighted average remaining contractual life (years) and weighted average
exercise price (shares in thousands):

|                       | Options Outstanding |    | Options Exercisable
|---------------------- | ------------------- | -- | -------------------
|                       | Shares              |    | Remaining          
|Option Price per Share | Outstanding         |    | Life               
|$                      | 11.50               | to | $                  
|                       | 15.58               | to |                    
|                       | 16.83               | to |                    
|$                      | 11.50               | to | $                  

INCOME TAXES

The provision for income taxes
consisted of the following (in thousands):

|                           | 2007 |         | 2006 |   | 2005   
|-------------------------- | ---- | ------- | ---- | - | -------
|CURRENT                    |      |         |      |   |        
|Federal                    | $    | 44,147  |      | $ | 40,842 
|State and other            |      | 8,764   |      |   | 8,572  
|                           |      | 52,911  |      |   | 49,414 
|DEFERRED                   |      |         |      |   |        
|Federal                    |      | (3,550) |      |   | (5,906)
|State and other            |      | 442     |      |   | (2,447)
|                           |      | (3,108) |      |   | (8,353)
|Provision for income taxes | $    | 49,803  |      | $ | 41,061 

Income from foreign operations before
income taxes in fiscal years 2007, 2006 and 2005 was $2,868,000, $4,040,000 and
$3,998,000, respectively. Income taxes provided for income from foreign
operations in fiscal years 2007, 2006 and 2005 was $425,000, $422,000 and
$826,000, respectively, including the minority interest in such taxes.

39

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Income tax expense differed from an
amount computed by applying the statutory tax rates to pre-tax income asfollows (in thousands):

|                                                                                                                                                                                                                  | 2007 |         | 2006 |      | 2005    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------- | ---- | ---- | --------
|Income tax on pre-tax income at the statutory                                                                                                                                                                     |      |         |      |      |         
|federal rate of 35%                                                                                                                                                                                               | $    | 45,672  |      | $    | 39,689  
|Increase (decrease) attributable to:                                                                                                                                                                              |      |         |      |      |         
|State and other income taxes, net of federal income tax
      benefit                                                                                                                                             |      | 5,933   |      |      | 4,885   
|Employee Stock Ownership Plan (ESOP)                                                                                                                                                                              |      | (1,010) |      |      | (1,127) 
|COLI                                                                                                                                                                                                              |      | (1,081) |      |      | (1,721) 
|Other
      items, net                                                                                                                                                                                            |      | 289     |      |      | (665)   
|Income tax expense                                                                                                                                                                                                | $    | 49,803  |      | $    | 41,061  
|                                                                                                                                                                                                                 
|The tax effects of temporary
      differences giving rise to the Company's consolidated deferred tax assets
      and liabilities at September 30, 2007 and October 1, 2006 are as follows
      (in thousands):
|                                                                                                                                                                                                                 
|                                                                                                                                                                                                                  |      |         |      | 2007 |         
|Deferred Tax Assets:                                                                                                                                                                                              |      |         |      |      |         
|Employee benefits                                                                                                                                                                                                 |      |         |      | $    | 34,032  
|Reserves not currently deductible                                                                                                                                                                                 |      |         |      |      | 14,405  
|Vendor allowances                                                                                                                                                                                                 |      |         |      |      | 6,610   
|Rent obligations                                                                                                                                                                                                  |      |         |      |      | 19,752  
|Other                                                                                                                                                                                                             |      |         |      |      | 2,793   
|Total deferred tax
      assets                                                                                                                                                                                   |      |         |      | $    | 77,592  
|                                                                                                                                                                                                                 
|Deferred Tax Liabilities:                                                                                                                                                                                         |      |         |      |      |         
|Property, plant and equipment                                                                                                                                                                                     |      |         |      | $    | (52,388)
|Undistributed earnings on foreign
      subsidiaries                                                                                                                                                              |      |         |      |      | (3,470) 
|Inventories                                                                                                                                                                                                       |      |         |      |      | (8,518) 
|Other                                                                                                                                                                                                             |      |         |      |      | (4,311) 
|Total deferred tax
      liabilities                                                                                                                                                                              |      |         |      | $    | (68,687)

As of September 30, 2007, the Company
had approximately $6,257,000 of state and $2,416,000 of foreign cumulative net
operating loss carryforwards, respectively. The state net operating losses will
begin to expire in fiscal 2022 and the foreign net operating losses began to
expire in fiscal 2007. A valuation allowance of $1,436,000 and $739,000 is
included with net long-term deferred income taxes as of September 30, 2007 and
October 1, 2006, respectively. The allowance was developed based upon the
uncertainty of the realization of certain state and foreign deferred tax assets
related to net operating losses and other foreign tax items. Although
realization is not assured for the remaining deferred tax assets, it is
considered more likely than not the deferred tax assets will be realized through
future taxable earnings.

Undistributed earnings of the Company's
foreign subsidiaries amount to approximately $19.5 million at September 30,
2007. Of those earnings, approximately $10.6 million are considered to be
indefinitely reinvested and accordingly, no provision for U.S. federal and state
income taxes is required to be provided thereon. If those earnings were
distributed, the Company would be subject to U.S. federal taxes and withholding
taxes payable to the various foreign countries of approximately $4.5 million
(less any applicable U.S. foreign tax credits).

Dividends of $6.4 million were
distributed during fiscal 2005 to take advantage of the temporary tax benefit of
a dividend received deduction on the repatriation of cash dividends from foreign
subsidiaries under the American Jobs Creation Act of 2004. A dividend received
deduction of $5.5 million was recognized as part of the fiscal 2005 tax
provision calculation. Income tax had not been previously provided on the
majority of these undistributed foreign earnings paid as dividends since they
were considered permanently invested and thus required no tax provision. The
fiscal year 2005 net impact of providing tax on the foreign earnings and
receiving the dividend received deduction was not significant.

40

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INDUSTRY SEGMENT INFORMATION

The Company operates primarily in two
businesses: retail grocery (including the real estate and store development
activities of the Company) - Harris Teeter and industrial thread (textile
primarily), including technical textiles and embroidery thread - American &
Efird. Harris Teeter operates a regional chain of supermarkets in the
southeastern United States. American & Efird manufactures and distributes
sewing thread for the apparel and other markets, technical textiles and
embroidery thread throughout their global operations. The Company evaluates
performance of its two businesses utilizing various measures which are based on
operating profit.

Summarized financial information for
fiscal years 2007, 2006 and 2005 is as follows (in millions):

|                                    |  | Industrial |       | Retail  |   |               |  |              |       | 
|----------------------------------- |  | ---------- | ----- | ------- | - | ------------- |  | ------------ | ----- | 
|                                    |  | Thread     |       | Grocery |   | Corporate (1) |  | Consolidated
|2007                                |  |            |       |         |   |               |  |              |       | 
|Net Sales                           |  | $          | 339.8 |         | $ | 3,299.4       |  |              |       | 
|Gross Profit                        |  |            | 74.6  |         |   | 1,021.7       |  |              |       | 
|Operating Profit
      (Loss)       |  |            | 1.4   |         |   | 154.1         |  | $            | (7.3) | 
|Assets Employed at Year End         |  |            | 284.3 |         |   | 1,150.5       |  |              | 94.9  | 
|Depreciation and
      Amortization |  |            | 19.1  |         |   | 81.1          |  |              | 0.6   | 
|Capital Expenditures                |  |            | 7.7   |         |   | 205.5         |  |              | 6.7   | 
|                                   
|2006                               
|Net Sales                           |  | $          | 343.2 |         | $ | 2,922.7       |  |              |       | 
|Gross Profit                        |  |            | 74.3  |         |   | 897.6         |  |              |       | 
|Operating Profit
      (Loss)       |  |            | 1.6   |         |   | 127.6         |  | $            | (6.1) | 
|Assets Employed at Year End         |  |            | 297.1 |         |   | 980.1         |  |              | 85.7  | 
|Depreciation and
      Amortization |  |            | 18.1  |         |   | 69.6          |  |              | 1.2   | 
|Capital Expenditures                |  |            | 7.6   |         |   | 210.3         |  |              | 0.6   | 
|                                   
|2005                               
|Net Sales                           |  | $          | 319.7 |         | $ | 2,645.0       |  |              |       | 
|Gross Profit                        |  |            | 78.2  |         |   | 787.9         |  |              |       | 
|Operating Profit
      (Loss)       |  |            | 9.0   |         |   | 113.6         |  | $            | (7.3) | 
|Assets Employed at Year End         |  |            | 286.0 |         |   | 793.8         |  |              | 123.8 | 
|Depreciation and
      Amortization |  |            | 16.9  |         |   | 59.6          |  |              | 1.4   | 
|Capital Expenditures                |  |            | 13.6  |         |   | 115.4         |  |              | -     | 

|(1) |  | Corporate Operating Profit (Loss)
      includes a portion of compensation and benefits of holding company
      employees and certain other costs that are not related to the operating
      companies. Operating profit of the operating companies include all direct
      expenses and the common expenses incurred by the holding company on behalf
      of its operating subsidiaries. Corporate Assets Employed include property,
      equipment, cash and investment assets, and net cash surrender value of
      Company-owned life insurance.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Geographic information for the
Companys fiscal years is based on the operating locations where the items were
produced or distributed as follows (in thousands):

|                                               |  | 2007 |           | 2006 |   | 2005     
|---------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|Net Revenues  Domestic United States          |  | $    | 3,454,198 |      | $ | 3,089,776
|Net Revenues  Foreign                         |  |      | 185,010   |      |   | 176,080  
|                                               |  | $    | 3,639,208 |      | $ | 3,265,856
|                                              
|Net Long-Lived Assets  Domestic United States |  | $    | 860,493   |      | $ | 726,128  
|Net Long-Lived Assets  Foreign                |  |      | 41,990    |      |   | 42,748   
|                                               |  | $    | 902,483   |      | $ | 768,876  

41

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EMPLOYEE BENEFIT
PLANS

The Company maintains certain
retirement benefit plans for substantially all domestic full-time employees and
supplemental retirement benefit plans for certain selected officers of the
Company and its subsidiaries. There is a qualified pension plan which is a
non-contributory, funded defined benefit plan and a non-qualified supplemental
pension plan for executives which is an unfunded, defined benefit plan. The
Companys Board of Directors approved changes to the Companys retirement plans
which generally became effective on October 1, 2005. Changes included the
freezing of participation and benefit accruals under the Company-sponsored
defined benefit plan effective September 30, 2005 for all participants, with
certain transition benefits provided to those participants that have achieved
specified age and service levels on December 31, 2005. Other changes included
the freezing of participation in and the cessation of Company contributions
after December 31, 2005, to the Companys Employee Stock Ownership Plan
(ESOP). In addition, enhancements were made to the Companys defined
contribution plan that includes additional Company contributions to individual
employee accounts. As a result of these changes, participants in the ESOP as of
September 30, 2005 became fully vested in their ESOP account balances. The
Company believes that the changes will result in better predictability of
expenses in future years as well as result in expense reductions compared to
what is expected to occur under the plans before the changes.

Substantially all domestic full-time
employees of the Company and its subsidiaries participated in a non-contributory
defined benefit pension plan prior to October 1, 2005, depending upon meeting
eligibility criteria. Employees in foreign subsidiaries participate to varying
degrees in local pension plans, which, in the aggregate, are not significant.
The Company also has an unfunded, non-qualified supplemental executive
retirement plan for certain officers. Employee retirement benefits under the
various plans 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
for its qualified pension plan is to contribute annually the amount required by
regulatory authorities to meet minimum funding requirements and an amount to
increase the funding ratios over future years to a level determined by its
actuaries to be effective in reducing the volatility of
contributions.

The Company adopted FASB Statement No.
158, Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans as of the end of fiscal 2007. SFAS No. 158 required the Company to
recognize the funded status of its defined benefit pension plans based on the
projected benefit obligation and measure the benefit obligation for
postretirement benefit plans based on the accumulated benefit obligation. The
adoption of the new standard effectively increased pension and other long-term
liabilities by $40.3 million, reduced shareholders equity (increased
accumulated other comprehensive income (loss)) by $24.9 million, increased
deferred tax benefits by $16.1 million and reduced intangible assets by $0.7
million. However, due to an increase in discount rates from September 30, 2006
to September 30, 2007 and actual returns for pension assets exceeding the
expected rate of return, the actual increase in pension liabilities and
reduction in equity was $13.4 million and $8.0 million, respectively.

The Company uses September
30thas
the measurement date for its Company-sponsored defined benefit pension plan. The
following table sets forth the change in benefit obligation and plan assets, as
well as the defined benefit plans' funded status and amounts recognized in the
Company's consolidated balance sheets at September 30, 2007 and October 1, 2006
for the Company-sponsored defined benefit pension plans (both funded pension and
unfunded supplemental plan) (in thousands):

|                                                |  | Pension
      Plan |          | Supplemental
      Plan
|----------------------------------------------- |  | ------------------ | -------- | -----------------------
|                                                |  | 2007               |          | 2006                   
|Change in benefit obligation:                   |  |                    |          |                        
|Benefit obligation at the beginning of year     |  | $                  | 285,400  |                        
|Service cost                                    |  |                    | 2,040    |                        
|Interest cost                                   |  |                    | 16,157   |                        
|Plan
      change                               |  |                    | -        |                        
|Actuarial (Gain) loss                           |  |                    | (13,504) |                        
|Curtailment (gain)/loss                         |  |                    | -        |                        
|Special Termination Benefits                    |  |                    | -        |                        
|Benefits paid                                   |  |                    | (9,942)  |                        
|Pension benefit obligation at end of
      year |  | $                  | 280,151  |                        

42

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|                                                      |  | Pension Plan |          | Supplemental
  Plan
|----------------------------------------------------- |  | ------------ | -------- | -------------------
|                                                      |  | 2007         |          | 2006               
|Change in plan assets:                                |  |              |          |                    
|Fair value of assets at the beginning of year         |  | $            | 221,205  |                    
|Actual return on plan assets                          |  |              | 31,229   |                    
|Employer contribution                                 |  |              | 7,500    |                    
|Benefits paid                                         |  |              | (9,942)  |                    
|Non-investment expenses                               |  |              | (1,799)  |                    
|Fair value of assets at end of
      year             |  |              | 248,193  |                    
|Funded
      status                                   |  |              | (31,958) |                    
|Unrecognized net actuarial loss                       |  |              | 62,856   |                    
|Unrecognized prior service cost                       |  |              | 728      |                    
|Prepaid (accrued) benefit
      cost                  |  | $            | 31,626   |                    
|                                                     
|Amounts recognized in the Consolidated Balance Sheets |  |              |          |                    
|consist of:                                           |  |              |          |                    
|Accrued benefit liability                             |  | $            | (31,958) |                    
|Intangible pension asset                              |  |              | -        |                    
|Accumulated other comprehensive income                |  |              | 63,584   |                    
|Net amount recognized                                 |  | $            | 31,626   |                    

The Companys pension plans had
accumulated benefit obligations in excess of the fair value of plan assets.
Selected information concerning these plans is a follows (in thousands):

|                                     |  | Pension
      Plan |         | Supplemental
      Plan
|------------------------------------ |  | ------------------ | ------- | -----------------------
|                                     |  | 2007               |         | 2006                   
|Projected benefit obligation         |  | $                  | 280,150 |                        
|Accumulated
      benefit obligation |  |                    | 249,314 |                        
|Fair value of plan assets            |  |                    | 248,193 |                        

A minimum pension liability adjustment
is required when the accumulated benefit obligation exceeds the fair value of
plan assets and accrued pension liabilities. This adjustment also requires the
elimination of any previously recorded pension assets. The minimum liability
adjustment, less allowable intangible assets, net of tax benefit, is reported as
a component of other comprehensive income and included in the Statements of
Consolidated Shareholders Equity and Comprehensive Income.

Net periodic pension expense for
defined benefit plans for fiscal years 2007, 2006 and 2005 included the
following components (in thousands):

|Pension Plan                             |  | 2007 |          | 2006 |   | 2005    
|---------------------------------------- |  | ---- | -------- | ---- | - | --------
|Service cost                             |  | $    | 2,040    |      | $ | 1,562   
|Interest
      cost                      |  |      | 16,157   |      |   | 15,514  
|Expected return on plan assets           |  |      | (17,335) |      |   | (16,019)
|Amortization of
      prior service cost |  |      | 220      |      |   | 198     
|Recognized net actuarial
      loss      |  |      | 6,971    |      |   | 8,316   
|Net periodic pension expense             |  | $    | 8,053    |      | $ | 9,571   
|                                        
|Supplemental
      Plan                 
|Service
      cost                       |  | $    | 800      |      | $ | 880     
|Interest cost                            |  |      | 1,741    |      |   | 1,604   
|Amortization of
      prior service cost |  |      | 109      |      |   | 140     
|Recognized net actuarial
      loss      |  |      | 767      |      |   | 752     
|Net periodic pension expense             |  | $    | 3,417    |      | $ | 3,376   

43

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Net periodic pension expense for
defined benefit plans is determined using assumptions as of the beginning of
each year. The projected benefit obligation and related funded status are
determined using assumptions as of the end of each year. The following table
summarizes the assumptions utilized:

|                                                                     |  | 2007         |  | 2006         |  | 2005        
|-------------------------------------------------------------------- |  | ------------ |  | ------------ |  | ------------
|Weighted Average Discount Rate (both Plans)  End of Year            |  | 6.25%        |  | 5.75%        |  | 5.50%       
|Rate of Increase
      in Future Payroll Costs:                      |  |              |  |              |  |             
|Pension Plan                                                         |  | 3.0% - 8.0%* |  | 3.0% - 8.0%* |  | 4.0% - 8.0%*
|Supplemental Plan                                                    |  | 6.0%         |  | 6.0%         |  | 6.0%        
|Assumed Long-Term Rate of Return on Assets (Pension Plan
      only) |  | 8.25%        |  | 8.25%        |  | 8.25%       

| | * |  | Rate varies by age, higher rates
      are associated with lower aged participants.
| | - |  | -----------------------------------------------------------------------------------

Discount rates are based on the
expected timing and amounts of the expected employer paid benefits and are
established by reference to the Moodys AA Corporate Bond annualized yield with
durations similar to the pension liabilities. Expected long-term return on plan
assets is estimated by asset class and is generally based on historical returns,
volatilities and risk premiums. Based upon the plans asset allocation,
composite return percentiles are developed upon which the plans expected
long-term is based.

The supplemental plan is unfunded, with
benefit payments being made from the Companys general assets. Assets of the
pension plan are invested in directed trusts. Assets in the directed trusts as
of the fiscal year end were invested as follows:

|Asset Class                                 |  | 2007  |  | 2006 
|------------------------------------------- |  | ----- |  | -----
|Fixed income                                |  | 25.8% |  | 30.0%
|Large cap
      domestic equities           |  | 31.5  |  | 30.1 
|Small cap domestic equities                 |  | 11.6  |  | 11.3 
|International
      equities                |  | 8.4   |  | 7.0  
|Tactical asset allocation fund              |  | 11.6  |  | 11.2 
|Alternative
      Investments  Real Estate |  | 4.0   |  | 3.7  
|Alternative Investments  Hedge Funds       |  | 4.5   |  | 4.6  
|Guaranteed
      investment contracts       |  | 0.7   |  | 0.7  
|Cash equivalents                            |  | 1.9   |  | 1.4  
|                                            |  | 100%  |  | 100% 

Investments in the pension trust are
overseen by the Retirement Plan Committee which is made up of officers of the
Company and directors. The plan assets are split into two segments: the
Strategic Allocation segment over which the Committee retains responsibility for
directing and monitoring asset allocation, and the Tactical Allocation segment
which is directed by an advisor selected by the Committee.

The Company has developed an Investment
Policy Statement based on the need to satisfy the long-term liabilities of the
Companys pension plan. The Company seeks to maximize return with reasonable and
prudent levels of risk. Risk management is accomplished through diversification
across asset classes, multiple investment manager portfolios and both general
and portfolio-specific investment guidelines. Asset guidelines for the Strategic
Allocation segment are:

|Asset Class                                        |  | Minimum
      Exposure |  | Target |  | Maximum
      Exposure
|-------------------------------------------------- |  | ---------------------- |  | ------ |  | ----------------------
|Investment grade fixed income and cash equivalents |  | 30.0%                  |  | 40.0%  |  | 50.0%                 
|Domestic
      equities:                           |  | 25.0                   |  | 40.0   |  | 55.0                  
|Large cap value                                    |  | 3.0                    |  | 9.0    |  | 20.0                  
|Large cap growth                                   |  | 3.0                    |  | 9.0    |  | 20.0                  
|Large cap core                                     |  | 3.0                    |  | 10.0   |  | 20.0                  
|Small cap value                                    |  | 0.0                    |  | 6.0    |  | 12.0                  
|Small cap growth                                   |  | 0.0                    |  | 6.0    |  | 12.0                  
|International
      equities:                      |  | 5.0                    |  | 10.0   |  | 15.0                  
|International growth                               |  | 0.0                    |  | 5.0    |  | 10.0                  
|International value                                |  | 0.0                    |  | 5.0    |  | 10.0                  
|Alternative Investments:                           |  | 0.0                    |  | 10.0   |  | 20.0                  
|Real Estate                                        |  | 0.0                    |  | 5.0    |  | 10.0                  
|Hedge Funds                                        |  | 0.0                    |  | 5.0    |  | 10.0                  

44

---

Managers are expected to generate a
total return consistent with their philosophy, offer protection in down markets
and achieve a rate of return which ranks in the top 40% of a universe of
similarly managed portfolios and outperforms a target index, net of expenses,
over rolling three year periods.

The Investment Policy Statement
contains the following guidelines:


| |  | Categorical restrictions such as limiting the
      average weighted duration of fixed income investments, limiting the
      aggregate amount of American Depository Receipts (ADRs), no direct foreign
      currency speculation, limited foreign exchange contracts, and limiting the
      use of derivatives;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Portfolio restrictions that address such
      things as investment restrictions, proxy voting, and brokerage
      arrangements; and                                                                                                                                                                              
| |  | Asset class restrictions that address such
      things as single security or sector concentration, capitalization limits
      and minimum quality standards.                                                                                                                                                     

Since the Companys supplemental plan
is unfunded, the contributions to this plan is equal to the benefit payments
made during the year. The Company expects to contribute $7.5 million for the
pension plan and approximately $1.3 million for the supplemental plan during
fiscal 2008.

The following benefit payments, which
reflect expected future service, as appropriate, are expected to be paid by the
Companys defined benefit pension plans (in thousands):

|                      | Pension Plan |        | Supplemental Plan
|--------------------- | ------------ | ------ | -----------------
|2008                  | $            | 10,433 |                  
|2009                  |              | 11,181 |                  
|2010                  |              | 11,962 |                  
|2011                  |              | 12,768 |                  
|2012                  |              | 13,585 |                  
|Years
      2013-2017 |              | 79,594 |                  

The Company continues to maintain an
ESOP even though participation has been frozen and the Company has ceased any
further contributions as previously discussed. Under the ESOP the Company
provided cash contributions, as determined by the Board of Directors, to a trust
for the purpose of purchasing shares of the Company's common stock on the open
market. Such contributions were based on the Companys net income for the fiscal
year as a percentage of average shareholders equity. The total amount
contributed was comprised of a base contribution of 1.5% of participants
eligible compensation and an additional contribution of up to 3.5% of eligible
compensation. At September 30, 2007, approximately 13% of the Company's common
shares outstanding were owned by employees as participants in the ESOP. The
Companys final contribution to this plan was made in December 2005.

The Company also sponsors the Ruddick
Retirement and Savings Plan which is a defined contribution retirement plan that
was authorized for the purpose of providing retirement benefits for employees of
the Company. The Ruddick Retirement and Savings Plan is a salary deferral plan
pursuant to Section 401(k) of the Internal Revenue Code. The Company provides a
matching contribution based on the amount of eligible compensation contributed
by the associate. As previously mentioned, the Company implemented enhancements
to this plan to include additional contributions to individual accounts based on
age and years of service.

The Company has certain deferred
compensation arrangements which allow, or allowed in prior years, its directors,
officers and selected key management personnel to forego the receipt of earned
compensation for specified periods of time. These arrangements include (1) a
directors compensation deferral plan, funded in a rabbi trust, the benefit and
payment under such plan being made in the Companys common stock that has
historically been purchased on the open market, (2) a key management deferral
plan, unfunded, the benefit liability under such plan determined on the basis of
the performance of selected market investment indices, and (3) other
compensation deferral arrangements, unfunded and only available to directors and
select key management in prior years, the benefit liability for which is
determined based on fixed rates of interest.

In prior years the Companys textile
subsidiary maintained a profit sharing plan, the American and Efird, Inc.
Employees Profit Sharing Plan (the A&E Plan), for most of its domestic
employees. American & Efird provided discretionary cash contributions, as
determined by its management and board based on annual profitability measures,
to a trust for the benefit of the participants, who may elect to withdraw such
benefit at any time. On March 1, 2005, the A&E Plan merged with the Ruddick
Retirement and Savings Plan.

45

---

Expenses under the defined
contribution, as well as the ESOP, profit sharing, deferred compensation and
other plans,were as follows (in thousands):

2007
    
    2006
    
    2005Defined contribution
    
    $
    18,350
    
    $
    16,864
    
    $
    2,443ESOP
    
    
    -
    
    
    -
    
    
    8,156Profit sharing and other
    
    
    1,679
    
    
    3,159
    
    
    2,011


COMPUTATION OF EARNINGS PER SHARE
(EPS)

The following table details the
computation of EPS for fiscal 2007, 2006 and 2005 (in thousands except per share
data):

|                                                     |  | 2007 |        | 2006 |   | 2005   
|---------------------------------------------------- |  | ---- | ------ | ---- | - | -------
|Basic EPS:                                           |  |      |        |      |   |        
|Net income                                           |  | $    | 80,688 |      | $ | 72,336 
|Weighted average
      common shares outstanding     |  |      | 47,605 |      |   | 47,233 
|Basic EPS                                            |  | $    | 1.69   |      | $ | 1.53   
|                                                    
|Diluted EPS:                                         |  |      |        |      |   |        
|Net income                                           |  | $    | 80,688 |      | $ | 72,336 
|Weighted average
      common shares outstanding     |  |      | 47,605 |      |   | 47,233 
|Potential common share
      equivalents             |  |      | 534    |      |   | 454    
|Weighted average
      common shares outstanding     |  |      | 48,139 |      |   | 47,687 
|Diluted EPS                                          |  | $    | 1.68   |      | $ | 1.52   
|                                                    
|Calculation of potential common share equivalents:   |  |      |        |      |   |        
|Options to purchase potential
      common shares    |  |      | 920    |      |   | 1,354  
|Weighted shares
      outstanding  stock awards     |  |      | 345    |      |   | 204    
|Potential common shares
      assumed purchased      |  |      | (731)  |      |   | (1,104)
|Potential common
      share equivalents             |  |      | 534    |      |   | 454    
|                                                    
|Calculation of potential common shares assumed       |  |      |        |      |   |        
|purchased with
      potential proceeds:             |  |      |        |      |   |        
|Potential proceeds from
      exercise of options to |  |      |        |      |   |        
|purchase common shares                               |  | $    | 16,032 |      | $ | 22,557 
|Weighted
      unamortized expense  stock awards    |  |      | 5,650  |      |   | 2,937  
|                                                     |  | $    | 21,682 |      | $ | 25,494 
|Common stock
      price used under the treasury     |  |      |        |      |   |        
|stock method                                         |  | $    | 29.67  |      | $ | 23.09  
|Potential common shares
      assumed purchased      |  |      | 731    |      |   | 1,104  

Restricted shares that are based on
performance are excluded from the calculation of potential common share
equivalents until the performance criteria are met. Accordingly, the impact of
114,393, 99,349 and 64,448 performance shares for the fiscal years 2007, 2006
and 2005, respectively, were excluded from the computation of diluted shares.
All outstanding stock options were included in the calculation of potential
common share equivalents for the fiscal years 2007, 2006 and 2005.

COMMITMENTS AND CONTINGENCIES

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" above in this Item 8 for
additional commitments and contingencies.

46

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STATEMENTS OF CONSOLIDATED CASH
FLOWS

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

The following table sets forth selected
cash payments and non-cash activity for fiscal years 2007, 2006 and 2005 (in
thousands):

|                                     |  | 2007 |        | 2006 |   | 2005  
|------------------------------------ |  | ---- | ------ | ---- | - | ------
|Cash paid during the year for:       |  |      |        |      |   |       
|Interest, Net of Amounts Capitalized |  | $    | 17,295 |      | $ | 15,402
|Income Taxes                         |  |      | 52,384 |      |   | 60,536
|Non-cash
      activity:             |  |      |        |      |   |       
|Assets Acquired under Capital Leases |  |      | 23,207 |      |   | -     

QUARTERLY INFORMATION (UNAUDITED)

The Companys stock is listed and
traded on the New York Stock Exchange. 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 (in millions, except per share
data):

|                         |  | First   |       | Second  |   | Third   |  | Fourth  |       | Fiscal
|------------------------ |  | ------- | ----- | ------- | - | ------- |  | ------- | ----- | ------
|                         |  | Quarter |       | Quarter |   | Quarter |  | Quarter |       | Year  
|2007 Operating Results   |  |         |       |         |   |         |  |         |       |       
|Net Sales                |  | $       | 880.8 |         | $ | 891.8   |  | $       | 923.0 |       
|Gross Profit             |  |         | 261.4 |         |   | 269.9   |  |         | 281.5 |       
|Net
      Income         |  |         | 18.3  |         |   | 20.0    |  |         | 21.2  |       
|Net Income Per Share:    |  |         |       |         |   |         |  |         |       |       
|Basic                    |  |         | 0.39  |         |   | 0.42    |  |         | 0.44  |       
|Diluted                  |  |         | 0.38  |         |   | 0.42    |  |         | 0.44  |       
|Dividend Per
      Share |  |         | 0.11  |         |   | 0.11    |  |         | 0.11  |       
|Market Price Per Share:  |  |         |       |         |   |         |  |         |       |       
|High                     |  |         | 28.91 |         |   | 30.50   |  |         | 32.39 |       
|Low                      |  |         | 25.20 |         |   | 26.30   |  |         | 29.53 |       
|                        
|2006 Operating Results   |  |         |       |         |   |         |  |         |       |       
|Net Sales                |  | $       | 796.7 |         | $ | 800.7   |  | $       | 830.2 |       
|Gross Profit             |  |         | 230.8 |         |   | 241.6   |  |         | 247.1 |       
|Net
      Income         |  |         | 16.9  |         |   | 19.7    |  |         | 17.8  |       
|Net Income Per Share:    |  |         |       |         |   |         |  |         |       |       
|Basic                    |  |         | 0.36  |         |   | 0.42    |  |         | 0.38  |       
|Diluted                  |  |         | 0.36  |         |   | 0.42    |  |         | 0.37  |       
|Dividend Per
      Share |  |         | 0.11  |         |   | 0.11    |  |         | 0.11  |       
|Market Price Per Share:  |  |         |       |         |   |         |  |         |       |       
|High                     |  |         | 23.94 |         |   | 24.75   |  |         | 24.83 |       
|Low                      |  |         | 19.28 |         |   | 20.84   |  |         | 21.93 |       

47

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Item 9.Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

None

Item 9A.Controls and Procedures

(a)Evaluation of disclosure controls and procedures. As of September 30, 2007, an evaluation of the effectiveness
of the Companys disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934,
as amended (the Exchange Act)) was performed under the supervision and with
the participation of the Companys management, including the Chief Executive
Officer and Chief Financial Officer. Based on that evaluation, the Companys
Chief Executive Officer and Chief Financial Officer have concluded that the
Companys disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in its reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities Exchange Commission
rules and forms.

(b)Managements annual report on internal control over financial
reporting.Management of the Company is
responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) promulgated
under the Exchange Act). The Companys internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The
Companys internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Companys assets that could have a
material effect on the financial statements.

Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Management assessed the effectiveness
of the Companys internal control over financial reporting as of September 30,
2007, based on the framework set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) inInternal Control-Integrated Framework.
Based on that assessment, management concluded that, as of September 30, 2007,
the Companys internal control over financial reporting is effective based on
the criteria established inInternal
Control-Integrated Framework.

(c)Attestation report of the registered public accounting firm.Managements assessment of the effectiveness of
the Companys internal control over financial reporting as of September 30, 2007
has been audited by KPMG, LLP, an independent registered public accounting firm.
Their report, which appears in Item 8, Financial Statement and Supplementary
Data included herein, expresses unqualified opinions on managements assessment
and on the effectiveness of the Companys internal control over financial
reporting as of September 30, 2007.

(d)Changes in internal control over financial reporting. During the Companys fourth fiscal quarter of 2007, there
has been no change in the Companys internal controls over financial reporting
that has materially affected, or is reasonably likely to materially affect, the
Companys internal controls over financial reporting.

Item 9B.Other Information

None

48

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PART III

Item 10.Directors and Executive Officers of the
Registrant

For information regarding executive
officers, refer to Executive Officers of the Registrant in Item 4A hereof.
Other information required by this item is incorporated herein by reference to
the sections entitled "Election of Directors," Corporate Governance Matters
and Section 16(a) Beneficial Ownership Reporting Compliance in the Company's
Proxy Statement to be filed with the Securities and Exchange Commission with
respect to the Company's 2008 Annual Meeting of Shareholders (the "2008 Proxy
Statement").

Code of Ethics and Code of Business
Conduct and EthicsThe Company has adopted
a written Code of Ethics (the Code of Ethics) that applies to our Chairman of
the Board, President and Chief Executive Officer, Vice President-Finance and
Chief Financial Officer and our Vice President and Treasurer. The Company has
also adopted a Code of Business Conduct and Ethics (the Code of Conduct) that
applies to all employees, officers and directors of the Company as well as any
subsidiary company officers that are executive officers of the Company. Each of
our operating subsidiaries maintains a code of ethics tailored to their
businesses. The Code of Ethics and Code of Conduct are available on the
Companys website, www.ruddickcorp.com, under the Corporate Governance
caption, and print copies are available to any shareholder that requests a copy.
Any such requests should be directed to: Ruddick Corporation, 301 South Tryon
Street, Suite 1800, Charlotte, North Carolina 28202, Attention: Corporate
Secretary. Any amendments to the Code of Ethics or Code of Conduct, or any
waivers of the Code of Ethics, or any waiver of the Code of Conduct for
directors or executive officers, will be disclosed on the Companys website
promptly following the date of such amendment or waiver. Information on the
Companys website, however, does not form a part of this Form 10-K.

Corporate Governance Guidelines and
Committee ChartersIn furtherance of its
longstanding goal of providing effective governance of the Companys business
and affairs for the benefit of shareholders, the Board of Directors of the
Company has approved Corporate Governance Guidelines. The Guidelines contain
general principles regarding the functions of the Companys Board of Directors.
The Guidelines are available on the Companys website referenced above and print
copies are available to any shareholder that requests a copy. In addition,
committee charters for the Companys Audit Committee, Compensation Committee and
Corporate Governance and Nominating Committee are also included on the Companys
website and print copies are available to any shareholder that requests a copy
in accordance with the procedures set forth above.

Item 11.Executive Compensation

The information required by this item
is incorporated herein by reference to the sections entitled Election of
Directors -Directors' Fees and Attendance, Compensation Committee Interlocks
and Insider Participation, Report of the Compensation Committee,
"Compensation Discussion and Analysis and Section 16(a) Beneficial Ownership
Reporting Compliance in the 2008 Proxy Statement.

Item 12.Security Ownership of Certain Beneficial Owners and Management
and Related Shareholder Matters

The information required by this item
is incorporated herein by reference to the sections entitled Principal
Shareholders and Election of Directors-Beneficial Ownership of Company Stock
in the 2008 Proxy Statement and Equity Compensation Plan Information in Item 5
hereof.

Item 13.Certain Relationships and Related Transactions, and Director
Independence

The information required by this item
is incorporated herein by reference to the section entitled Transactions with
Related Persons and Certain Control Person and Election of Directors 
Corporate Governance Matters in the 2008 Proxy Statement.

Item 14.Principal Accountant Fees and Services

The information required by this item
is incorporated herein by reference to the section entitled Selection of
Independent Registered Public Accounting Firm in the 2008 Proxy Statement.

49

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PART IV

Item 15.Exhibits and Financial Statement Schedules

|(a) |  | The
      following documents are filed as part of this report: | Page
|--- |  | --------------------------------------------------------------- | ----
|    |  |                                                                 |     
|    |  | (1)                                                             |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  | (2)                                                             |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  |                                                                 |     
|    |  | (3)                                                             |     
|    |  |                                                                 |     

|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3.1*    |  | Restated Articles
      of Incorporation of the Company, dated December 14, 2000, incorporated
      herein by reference to Exhibit 3.1 of the registrants Annual Report on
      Form 10-K for the fiscal year ended October 1, 2000 (Commission File No.
      1-6905).                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.2*    |  | Amended and
      Restated Bylaws of the Company, incorporated herein by reference to
      Exhibit 3.2 of the registrants Quarterly Report on Form 10-Q for the
      quarterly period ended December 29, 2002 (Commission File No.
      1-6905).                                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4.1*    |  | $50,000,000 6.48%
      Series A Senior Notes due March 1, 2011 and $50,000,000 Private Shelf
      Facility dated March 1, 1996 between Ruddick Corporation and The
      Prudential Insurance Company of America, incorporated herein by reference
      to Exhibit 4.1 of the registrants Quarterly Report on Form 10-Q for the
      quarterly period ended March 31, 1996 (Commission File No.
    1-6905).                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4.2*    |  | $50,000,000 7.55%
      Senior Series B Notes due July 15, 2017 and $50,000,000 7.72% Series B
      Senior Notes due April 15, 2017 under the Note Purchase and Private Shelf
      Agreement dated April 15, 1997 between Ruddick Corporation and The
      Prudential Insurance Company of America, incorporated herein by reference
      to Exhibit 4.3 of the registrants Annual Report on Form 10-K for the
      fiscal year period ended September 28, 1997 (Commission File No.
      1-6905).

50

---

|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.3*    |  | Credit Agreement,
      dated June 7, 2006, among Ruddick Corporation as Borrower, Wachovia Bank,
      National Association, Branch Banking and Trust Company, Regions Bank, RBC
      Centura, Bank of America, N.A., Harris N.A. and JPMorgan Chase Bank, N.A.
      as Lenders and Wachovia Bank, National Association, as administrative
      agent for the Lenders, incorporated herein by reference to Exhibit 10.1 of
      the registrants Current Report on Form 8-K dated June 7, 2006 (Commission
      File No. 1-6905).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  | The Company has
      other long-term debt but has not filed the instruments evidencing such
      debt as part of Exhibit 4 as none of such instruments authorize the
      issuance of debt exceeding 10 percent of the total consolidated assets of
      the Company. The Company agrees to furnish a copy of each such agreement
      to the Commission upon
request.                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.1*   |  | Supplemental
      Executive Retirement Plan of Ruddick Corporation, as amended and restated,
      incorporated herein by reference to Exhibit 10.3 of the registrants
      Annual Report on Form 10-K for the fiscal year ended September 30, 1990
      (Commission File No. 1-6905).**                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.2*   |  | Resolutions
      adopted by the Board of Directors of the Company and the Plan's
      Administrative Committee with respect to benefits payable under the
      Company's Supplemental Executive Retirement Plan to Alan T. Dickson and R. Stuart Dickson, incorporated herein by
      reference to Exhibit 10.3 of the registrants Annual Report on Form 10-K
      for the fiscal year ended September 29, 1991 (Commission File No.
      1-6905).**                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.3*   |  | Deferred
      Compensation Plan for Key Employees of Ruddick Corporation and
      subsidiaries, as amended and restated, incorporated herein by reference to
      Exhibit 10.5 of the registrants Annual Report on Form 10-K for the fiscal
      year ended September 30, 1990 (Commission File No. 1-6905).**                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.4*   |  | 1993 Incentive
      Stock Option and Stock Appreciation Rights Plan, incorporated herein by
      reference to Exhibit 10.7 of the registrants Annual Report on Form 10-K
      for the fiscal year ended October 3, 1993 (Commission File No.
      1-6905).**                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.5*   |  | Description of the
      Ruddick Corporation Long Term Key Management Incentive Program,
      incorporated herein by reference to Exhibit 10.7 of the registrants
      Annual Report on Form 10-K for the fiscal year ended September 29, 1991
      (Commission File No. 1-6905).**                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.6*   |  | Ruddick
      Corporation Irrevocable Trust for the Benefit of Participants in the Long
      Term Key Management Incentive Program, incorporated herein by reference to
      Exhibit 10.9 of the registrant's Annual Report on Form 10-K for the fiscal
      year ended September 30, 1990 (Commission File No. 1-6905).**                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.7*   |  | Rights Agreement
      dated November 16, 2000 by and between the Company and First Union
      National Bank, incorporated herein by reference to Exhibit 10.9 of the
      registrants Annual Report on Form 10-K for the fiscal year ended October
      1, 2000 (Commission File No. 1-6905).                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.8*   |  | Ruddick
      Corporation Senior Officers Insurance Program Plan Document and Summary
      Plan Description, incorporated herein by reference to Exhibit 10.10 of the
      registrants Annual Report on Form 10-K for the fiscal year ended
      September 27, 1992 (Commission File No. 1-6905).**                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.9*   |  | Ruddick
      Corporation 1995 Comprehensive Stock Option Plan (the 1995 Plan),
      incorporated herein by reference to Exhibit 10.1 of the registrants
      Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996
      (Commission File No. 1-6905).**                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.10*  |  | Ruddick
      Corporation 1997 Comprehensive Stock Option and Award Plan (the 1997
      Plan), incorporated herein by reference to Exhibit 10.1 of the
      registrants Quarterly Report on Form 10-Q for the quarterly period ended
      December 28, 1997 (Commission File No. 1-6905).**                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.11*  |  | Ruddick
      Corporation Director Deferral Plan, incorporated herein by reference to
      Exhibit 10.2 of the registrants Quarterly Report on Form 10-Q for the
      quarterly period ended March 29, 1998 (Commission File No.
      1-6905).**                                                                                                                                                                                                                                                                                   

51

---

|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                
|10.12*  |  | Ruddick
      Corporation Senior Officers Insurance Program, incorporated herein by
      reference to Exhibit 10.3 of the registrants Quarterly Report on Form
      10-Q for the quarterly period ended March 29, 1998 (Commission File No.
      1-6905).**                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.13*  |  | Ruddick Corporation 2000 Comprehensive Stock Option and Award Plan
      (the 2000 Plan), incorporated herein by reference to Exhibit 10.1 of the
      registrants Quarterly Report on Form 10-Q for the quarterly period ended
      April 1, 2001 (Commission File No. 1-6905).**                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.14*  |  | Description of
      retirement arrangement between the Company and each of Alan T. Dickson and
      R. Stuart Dickson effective May 1, 2002, incorporated herein by reference
      to Exhibit 10.1 of the registrants Quarterly Report on Form 10-Q for the
      quarterly period ended June 30, 2002 (Commission File No.
    1-6905).**        
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.15*  |  | Ruddick Corporation Flexible Deferral Plan, incorporated herein by
      reference to Exhibit 10.22 of the registrants Annual Report on Form 10-K
      for the fiscal year ended September 29, 2002 (Commission File No.
      1-6905).**                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.16*  |  | Ruddick
      Corporation 2002 Comprehensive Stock Option and Award Plan (the 2002
      Plan), incorporated herein by reference to Exhibit 10.1 of the
      Registrants Quarterly Report on Form 10-Q for the quarterly period ended
      March 30, 2003 (Commission File No. 1-6905).**                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.17*  |  | Form of Ruddick
      Corporation Non-Employee Director Nonqualified Stock Option Agreement for
      use in connection with the 1995 Plan, 1997 Plan, 2000 Plan and 2002 Plan,
      incorporated herein by reference to Exhibit 10.1 to the Companys Current
      Report on Form 8-K dated November 17, 2004 (Commission File No.
      1-6905).**
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.18*  |  | Form of Ruddick
      Corporation Incentive Stock Option Award Agreement for use in connection
      with the 1995 Plan, 1997 Plan, 2000 Plan and 2002 Plan, incorporated
      herein by reference to Exhibit 10.2 to the Companys Current Report on
      Form 8-K dated November 17, 2004 (Commission File No.
  1-6905).**                       
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.19*  |  | Form of Ruddick
      Corporation Nonqualified Stock Option Agreement for use in connection with
      the 1995 Plan, 1997 Plan, 2000 Plan and 2002 Plan, incorporated herein by
      reference to Exhibit 10.3 to the Companys Current Report on Form 8-K
      dated November 17, 2004 (Commission File No. 1-6905).**                            
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.20*  |  | Form of Ruddick
      Corporation Restricted Stock Award Agreement for use in connection with
      the 1997 Plan, 2000 Plan and 2002 Plan, incorporated herein by reference
      to Exhibit 10.4 to the Companys Current Report on Form 8-K dated November
      17, 2004 (Commission File No. 1-6905).**                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.21*  |  | Summary of
      Executive Bonus Plan, incorporated by reference to Exhibit 10.26 of the
      registrants Annual Report on Form 10-K for the fiscal year ended October
      3, 2004 (Commission File No. 1-6905).**                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.22*  |  | Ruddick
      Corporation Director Deferral Plan, incorporated herein by reference to
      Exhibit 10.1 of the registrants Current Report on Form 8-K dated February
      16, 2006 (Commission File No. 1-6905).**                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.23*  |  | Ruddick
      Corporation Supplemental Executive Retirement Plan for the benefit of Alan
      T. Dickson effective March 31, 2006, incorporated herein by reference to
      Exhibit 10.1 of the registrants Current Report on Form 8-K dated March
      31, 2006 (Commission File No. 1-6905).**                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.24*  |  | Ruddick
      Corporation Supplemental Executive Retirement Plan for the benefit of R.
      Stuart Dickson effective March 31, 2006, incorporated herein by reference
      to Exhibit 10.2 of the registrants Current Report on Form 8-K dated March
      31, 2006 (Commission File No. 1-6905).**                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                       
|10.25*  |  | Ruddick
      Corporation Cash Incentive Plan, incorporated herein by reference to
      Exhibit 10.1 of the registrants Current Report on Form 8-K dated February
      15, 2007 (Commission File No. 1-6905).**                                                                                                                                    

52

---

|Exhibit |  |                                                                                                                                                                                                                                                                                                                 
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                          
|10.26*  |  | Addendum to the
      Ruddick Corporation 2002 Comprehensive Stock Option and Award Plan,
      incorporated herein by reference to Exhibit 10.2 of the registrants
      Current Report on Form 8-K dated February 15, 2007 (Commission File No.
      1-6905).**                                             
|        |  |                                                                                                                                                                                                                                                                                                                 
|10.27*  |  | Change-in-Control and Severance Agreement dated September 19, 2007
      between the registrant and Mr. Tomas W. Dickson, incorporated herein by
      reference to Exhibit 10.1 of the registrants Current Report on Form 8-K
      dated September 19, 2007 (Commission File No.
  1-6905).**                
|        |  |                                                                                                                                                                                                                                                                                                                 
|10.28*  |  | Change-in-Control
      and Severance Agreement dated September 19, 2007 between the registrant
      and Mr. John B. Woodlief, incorporated herein by reference to Exhibit 10.2
      of the registrants Current Report on Form 8-K dated September 19, 2007
      (Commission File No. 1-6905).**            
|        |  |                                                                                                                                                                                                                                                                                                                 
|10.29*  |  | Change-in-Control and Severance Agreement dated September 19, 2007
      between the registrant and Mr. Frederick J. Morganthall, II, incorporated
      herein by reference to Exhibit 10.3 of the registrants Current Report on
      Form 8-K dated September 19, 2007 (Commission File No.
      1-6905).**
|        |  |                                                                                                                                                                                                                                                                                                                 
|10.30*  |  | Change-in-Control
      and Severance Agreement dated September 19, 2007 between the registrant
      and Mr. Fred A. Jackson, incorporated herein by reference to Exhibit 10.4
      of the registrants Current Report on Form 8-K dated September 19, 2007
      (Commission File No. 1-6905).**             
|        |  |                                                                                                                                                                                                                                                                                                                 
|10.31*  |  | Ruddick
      Supplemental Executive Retirement Plan, Amendment No. 2 dated September
      19, 2007, incorporated herein by reference to Exhibit 10.5 of the
      registrants Current Report on Form 8-K dated September 19, 2007
      (Commission File No. 1-6905).**                                      
|        |  |                                                                                                                                                                                                                                                                                                                 
|10.32+  |  | Summary of
      Non-Employee Director Compensation.                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                 
|21+     |  | List of
      Subsidiaries of the Company.                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                 
|23+     |  | Consent of
      Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                 
|31.1+   |  | Certification of
      Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                 
|31.2+   |  | Certification of
      Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                 
|32.1+   |  | Certification of
      Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                 
|32.2+   |  | Certification of
      Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.                                                                                                                                                

____________________

|*   |  | Incorporated by
      reference.                                                                  
|--- |  | --------------------------------------------------------------------------------------------------
|**  |  | Indicates
      management contract or compensatory plan required to be filed as an
      Exhibit.
|+   |  | Indicates
      exhibits filed herewith and follow the signature pages.                           
|    |  |                                                                                                   
|(b) |  | Exhibits                                                                                          
|    |  |                                                                                                   
|    |  | See (a )(3)
      above.                                                                          
|    |  |                                                                                                   
|(c) |  | Financial
      Statement Schedules                                                               
|    |  |                                                                                                   
|    |  | See (a) (2)
      above.                                                                          

53

---

SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

|                               |     | RUDDICK CORPORATION                 
|------------------------------ | --- | ------------------------------------
|                               |     | (Registrant)                        
|                              
|                              
|Dated: November
      28, 2007 | By: | /s/ THOMAS W.
      DICKSON         
|                               |     | Thomas
      W. Dickson,            
|                               |     | Chairman of the Board, President and
|                               |     | Chief
      Executive Officer       

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

|Name                       |  |                                                       | Title |                         | Date
|-------------------------- |  | ----------------------------------------------------- | ----- | ----------------------- | ----
|/s/ THOMAS W. DICKSON      |  | Chairman of the
      Board , President and           |       | November 28,
      2007
|Thomas W. Dickson          |  | Chief Executive
      Officer and Director            |       |                        
|                           |  | (Principal
      Executive Officer)                   |       |                        
|                          
|/s/ JOHN B. WOODLIEF       |  | Vice President 
      Finance and Chief              |       | November 28,
      2007
|John B. Woodlief           |  | Financial
      Officer (Principal Financial Officer) |       |                        
|                          
|/s/ RONALD H. VOLGER       |  | Vice President
      and Treasurer                    |       | November 28,
      2007
|Ronald H. Volger           |  | (Principal
      Accounting Officer)                  |       |                        
|                          
|/s/ JOHN R. BELK           |  | Director                                              |       | November 28,
      2007
|John R. Belk               |  |                                                       |       |                        
|                          
|/s/ EDWIN B. BORDEN, JR.   |  | Director                                              |       | November 28,
      2007
|Edwin B. Borden, Jr.       |  |                                                       |       |                        
|                          
|/s/ JOHN P. DERHAM CATO    |  | Director                                              |       | November 28,
      2007
|John P. Derham Cato        |  |                                                       |       |                        
|                          
|/s/ ALAN T. DICKSON        |  | Director                                              |       | November 28,
      2007
|Alan T. Dickson            |  |                                                       |       |                        
|                          
|/s/ R. STUART DICKSON      |  | Director                                              |       | November 28,
      2007
|R. Stuart Dickson          |  |                                                       |       |                        
|                          
|                           |  | Director                                              |       |                        
|James E. S. Hynes          |  |                                                       |       |                        
|                          
|/s/ ANNA S. NELSON         |  | Director                                              |       | November 28,
      2007
|Anna S. Nelson             |  |                                                       |       |                        
|                          
|/s/ BAILEY W. PATRICK      |  | Director                                              |       | November 28,
      2007
|Bailey W. Patrick          |  |                                                       |       |                        
|                          
|/s/ ROBERT H. SPILMAN, JR. |  | Director                                              |       | November 28,
      2007
|Robert H. Spilman, Jr.     |  |                                                       |       |                        
|                          
|/s/  HAROLD C. STOWE       |  | Director                                              |       | November 28,
      2007
|Harold C. Stowe            |  |                                                       |       |                        
|                          
|/s/ ISAIAH TIDWELL         |  | Director                                              |       | November 28,
      2007
|Isaiah Tidwell             |  |                                                       |       |                        

54

---

SCHEDULE I

RUDDICK CORPORATION AND SUBSIDIARIESVALUATION AND QUALIFYING ACCOUNTS AND RESERVESFor the Fiscal Years EndedSeptember 30, 2007, October 1, 2006and October 2, 2005(in thousands)

|COLUMN
      A                        |  | COLUMN B       |       | COLUMN C   |   | COLUMN D   |  | COLUMN E 
|------------------------------------- |  | -------------- | ----- | ---------- | - | ---------- |  | ---------
|                                      |  |                |       | ADDITIONS  |   |            |  |          
|                                      |  | BALANCE        |       | CHARGED TO |   |            |  |          
|                                      |  | AT BEGINNING   |       | COSTS AND  |   |            |  |          
|DESCRIPTION                           |  | OF FISCAL YEAR |       | EXPENSES   |   | DEDUCTIONS |  | OF PERIOD
|Fiscal Year Ended October 2, 2005:    |  |                |       |            |   |            |  |          
|Reserves deducted from assets         |  |                |       |            |   |            |  |          
|to
      which they apply -           |  |                |       |            |   |            |  |          
|Allowance For Doubtful Accounts       |  | $              | 3,170 |            | $ | 1,741      |  | $        
|Reserves
      For Exit Costs         |  | $              | 138   |            | $ | -          |  | $        
|                                     
|Fiscal Year Ended October 1, 2006:    |  |                |       |            |   |            |  |          
|Reserves deducted from assets         |  |                |       |            |   |            |  |          
|to
      which they apply -           |  |                |       |            |   |            |  |          
|Allowance For Doubtful Accounts       |  | $              | 4,131 |            | $ | 731        |  | $        
|                                     
|Fiscal Year Ended September 30, 2007: |  |                |       |            |   |            |  |          
|Reserves deducted from assets         |  |                |       |            |   |            |  |          
|to
      which they apply -           |  |                |       |            |   |            |  |          
|Allowance For Doubtful Accounts       |  | $              | 3,719 |            | $ | 971        |  | $        

____________________*Represents
accounts receivable balances written off as uncollectible, less
recoveries.

S-1

---