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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-K

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark one) |  |                                                                                                 
|[X]        |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the Fiscal Year Ended: September 28,
    2003                                               
|          
|[ ]        |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from                to                                            

Commission File Number: 1-6905

RUDDICK CORPORATION

(Exact name of registrant as specified in its
charter)


|                                                                                                            |  |                                                      
|----------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------
|North Carolina(State or other jurisdiction of
    incorporation or organization)                            |  | 56-0905940(I.R.S. Employer
    Identification Number)
|                                                                                                           
|301 S. Tryon St.,
    Suite 1800,
    Charlotte, North Carolina(Address of principal executive
    offices) |  | 28202(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 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 o

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.
x

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).
Yes x         No o

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,
March 28, 2003, was $420,559,218. The Registrant has no
non-voting stock.

As of December 1, 2003, the Registrant had
outstanding 46,281,164 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part III: Definitive Proxy Statement to be filed
with the Securities and Exchange Commission in connection with
the solicitation of proxies for the Companys 2004 Annual
Meeting of Shareholders to be held on February 19, 2004.
(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.)



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RUDDICK CORPORATION

AND CONSOLIDATED SUBSIDIARIES


FORM 10-K FOR THE FISCAL YEAR ENDED
SEPTEMBER 28, 2003

TABLE OF CONTENTS

| |           |  |  |                                                                                                    |  |  |    | 
| | --------- |  |  | -------------------------------------------------------------------------------------------------- |  |  | -- | 
| |           |  |  | Page                                                                                              
| |           |  |  |                                                                                                   
| | PART I    |  |  |                                                                                                    |  |  |    | 
| | Item  1.  |  |  | Business                                                                                           |  |  | 1  | 
| | Item  2.  |  |  | Properties                                                                                         |  |  | 3  | 
| | Item  3.  |  |  | Legal Proceedings                                                                                  |  |  | 4  | 
| | Item  4.  |  |  | Submission of Matters to a Vote of Security
    Holders                                            |  |  | 5  | 
| | Item  4A. |  |  | Executive Officers of the Registrant                                                               |  |  | 5  | 
| | PART II   |  |  |                                                                                                    |  |  |    | 
| | Item  5.  |  |  | Market for Registrants Common Equity and
    Related Shareholder Matters                          |  |  | 5  | 
| | Item  6.  |  |  | Selected Financial Data                                                                            |  |  | 6  | 
| | Item  7.  |  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |  |  | 7  | 
| | Item  7A. |  |  | Quantitative and Qualitative Disclosures about
    Market Risk                                     |  |  | 20 | 
| | Item  8.  |  |  | Financial Statements and Supplementary Data                                                        |  |  | 21 | 
| | Item  9.  |  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure           |  |  | 48 | 
| | Item  9A  |  |  | Controls and Procedures                                                                            |  |  | 48 | 
| | PART III  |  |  |                                                                                                    |  |  |    | 
| | Item  10. |  |  | Directors and Executive Officers of the Registrant                                                 |  |  | 48 | 
| | Item  11. |  |  | Executive Compensation                                                                             |  |  | 49 | 
| | Item  12. |  |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Shareholder Matters |  |  | 49 | 
| | Item  13. |  |  | Certain Relationships and Related Transactions                                                     |  |  | 50 | 
| | Item  14. |  |  | Principal Accountant Fees and Services                                                             |  |  | 50 | 
| | PART IV   |  |  |                                                                                                    |  |  |    | 
| | Item  15. |  |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                |  |  | 50 | 



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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) operates a regional chain of
supermarkets in six southeastern states and American &
Efird, Inc. (A&E) manufactures and distributes
industrial and consumer sewing thread on a global basis.

At September 28, 2003, the Company and its
subsidiaries had total consolidated assets of $1,067,203,000 and
had approximately 17,500 employees. The principal executive
offices of the Company are 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. As of the beginning of fiscal 1996, Ruddick Investment
Company ceased to be classified as an operating company of the
Company as its relative size to the consolidated Company
declined as compared to Harris Teeter and A&E. Ruddick
Investment Company continues to manage venture capital holdings
in a limited number of entities and has invested in various
independently managed venture capital investment funds. For
information regarding the Companys venture capital and
real estate holdings, 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 certain financial information and competitive
aspects of such businesses, are discussed separately below. For
certain 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:

|                                              |                        |                |           |           |  |      |           |           |  |   |           |           | 
|--------------------------------------------- | ---------------------- | -------------- | --------- | --------- |  | ---- | --------- | --------- |  | - | --------- | --------- | 
|                                              |                        | 2003           |           | 2002      |  | 2001
|                                              |                        |                |           |           |  |     
|                                              |                        |               
|                                              |                        | (in thousands)
|Net Sales for the Fiscal Year:                |                        |                |           |           |  |      |           |           |  |   |           |          
|                                              | Domestic United States |                | $         | 2,572,987 |  |      | $         | 2,506,805 |  |   | $         | 2,611,468 | 
|                                              | Foreign Countries      |                |           | 151,752   |  |      |           | 137,393   |  |   |           | 131,822   | 
|                                              |                        |                |           |           |  |      |           |           |  |   |           |          
|                                              |                        | $              | 2,724,739 |           |  | $    | 2,644,198 |           |  | $ | 2,743,290 |          
|                                              |                        |                |           |           |  |      |           |           |  |   |           |          
|Net Long-Lived Assets at Fiscal Year
    End: |                        |                |           |           |  |      |           |           |  |   |           |          
|                                              | Domestic United States |                | $         | 505,102   |  |      | $         | 511,562   |  |   | $         | 502,739   | 
|                                              | Foreign Countries      |                |           | 32,924    |  |      |           | 30,836    |  |   |           | 30,592    | 
|                                              |                        |                |           |           |  |      |           |           |  |   |           |          
|                                              |                        | $              | 538,026   |           |  | $    | 542,398   |           |  | $ | 533,331   |          
|                                              |                        |                |           |           |  |      |           |           |  |   |           |          

The Company employs fifteen 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 skills and in financing operations. Management of
each subsidiary is responsible for implementing operating
policies and reports to management of the Company.

Harris Teeter

As of September 28, 2003, Harris Teeter
operated 140 supermarkets located in North Carolina (110),
Virginia (13), South Carolina (9), Georgia (1),
Tennessee (4) and Florida (3). These supermarkets
offer a

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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. Several
locations also have pharmacies. Retail supermarket operations
are supported by two company-owned distribution centers and one
company-owned dairy production facility. Harris Teeter produces
primarily milk and ice cream products, but buys most of the
products it sells, including its private label brands, from
outside suppliers or directly from the manufacturers. Harris
Teeters sales constituted 89% of the Companys
consolidated sales in fiscal 2003 (89% in 2002 and 88% in 2001).


The supermarket industry is highly competitive.
Harris Teeter competes with local, regional and national food
chains and discount supercenters, many of which are larger in
terms of assets and sales, as well as with independent
merchants. In the past several years, considerable consolidation
of competitors has taken place in the supermarket industry and
this trend is expected to continue. Additionally, some discount
supercenter operators, such as Wal-Mart, 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.

At September 28, 2003, Harris Teeter
employed approximately 7,600 full-time and 6,900 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 a leading manufacturer and distributor
of sewing thread, produced from natural and synthetic fibers,
for worldwide industrial and consumer markets. Manufacturers of
apparel, automotive materials, home furnishings, medical
supplies and footwear rely on A&E industrial sewing thread
to manufacture their products. The company sells primarily
industrial sewing thread products through A&Es
employed sales representatives, commissioned agents and
distributors. A&E also distributes sewing supplies
manufactured by other companies. A&E sales constituted 11%
of the Companys consolidated sales in fiscal 2003 (11% in
2002 and 12% in 2001).

Over 70% 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 nine modern manufacturing facilities in
North Carolina as of the fiscal year ended September 28,
2003. As previously announced, the company plans to close its
Maiden, North Carolina thread yarn spinning plant in December
2003. The manufacturing facilities have been designed for
flexibility and efficiency to accommodate changing customer
product demands. In addition to manufacturing, A&E operates
ten distribution centers in the United States.

A&E also has wholly-owned operations in
Canada, China, Costa Rica, El Salvador, England, Guatemala,
Honduras, Hong Kong, Nicaragua, Italy, Mexico, Malaysia and
Poland, majority-owned joint ventures in China, Dominican
Republic, Haiti, and the Netherlands and minority interest in
ventures with ongoing operations in Bangladesh, Estonia,
Mauritius, Portugal, Slovakia, South Africa 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 $117 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 28, 2003 was approximately $7,656,000
versus $8,785,000 at the end of the preceding fiscal year. The
majority of the order backlog is expected to be filled within
three weeks of the fiscal year end. The international order
backlog as of the end of fiscal year 2003 was approximately
$2,117,000 versus $1,322,000 at the end of the preceding fiscal
year. A&E has approxi-

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mately 7,200 domestic and 5,000 international
customer accounts which are active. In fiscal 2003, no single
customer accounted for more than 6% of A&Es total net
sales, and the ten largest customers accounted for 21% 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 principal Asian
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 three patents issued. There are no
material licenses, franchises, or concessions held by A&E.
Research and development expenditures were $435,000, $490,000,
and $432,000 in fiscal 2003, 2002 and 2001, 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. A&Es principal
North American competition includes Coats American, Inc. and
imports sold primarily through distributors. Globally, A&E
competes with Coats plc as well as regional producers and
merchants in various foreign markets served by A&E. The key
competitive factors are quality, service, and price. In the
consumer thread market, A&E competes with a number of large,
well-established companies, including Coats American, Inc.

A&E and its subsidiaries employed
approximately 3,000 individuals worldwide as of
September 28, 2003. 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 is
www.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 2.     Properties

The executive offices of the Company are 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 and other general
merchandise. The Company believes its facilities are adequate
for its current operations and expected growth for the
foreseeable future. Harris Teeter operates its retail stores
primarily from leased properties. As of September 28, 2003,
Harris Teeter held title to the land and buildings of 4% of the
companys supermarkets and held title to the buildings on
leased land of an additional 1% of the companys
supermarkets. Harris Teeters supermarkets range in size
from approximately 12,000 square feet to 70,000 square feet,
with an

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average size of approximately 41,000 square feet.
The following table sets forth selected statistics with respect
to Harris Teeter stores for each of the last three fiscal years:


|                                                              |  |      |           |      |  |      |           |  |  |   |           | 
|------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                                              |  | 2003 |           | 2002 |  | 2001
|                                                              |  |      |           |      |  |     
|Stores Open at End of Period                                  |  |      | 140       |      |  |      | 143       |  |  |   | 137       | 
|Average Weekly Net Sales Per Store*                           |  | $    | 334,561   |      |  | $    | 320,262   |  |  | $ | 312,519   | 
|Average Square Footage Per Store                              |  |      | 41,043    |      |  |      | 40,774    |  |  |   | 40,447    | 
|Average Square Footage Per New Store Opened
    During Period |  |      | 40,128    |      |  |      | 38,408    |  |  |   | 36,743    | 
|Total Square Footage at End of Period                         |  |      | 5,785,946 |      |  |      | 5,830,698 |  |  |   | 5,541,229 | 



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|  |                                                                             
|- | ----------------------------------------------------------------------------
|* | Computed on the basis of aggregate sales of
    stores open for a full year.

A&Es principal offices, nine 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 1,933,749 square feet of floor space. A&E has the
capacity to produce annually approximately 40,000,000 pounds of
industrial sewing thread and has a dyeing capacity of
approximately 33,650,000 pounds per year. Capacities are based
on 168 hours of operations per week. In addition, A&E leases
nine distribution centers scattered throughout its domestic
markets with an aggregate of 254,472 square feet of floor space.

Through consolidated subsidiaries, A&E also
owns six international manufacturing and/or distribution
facilities with an aggregate of 748,924 square feet of floor
space. A&E leases another 23 international facilities
with an aggregate of 583,763 square feet of floor space. The
foreign subsidiaries engaged in manufacturing have a sewing
thread dyeing capacity of approximately 22,370,000 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.

Item 3.     Legal
Proceedings

The Company has previously been identified as a
potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act with
respect to releases or threatened releases of hazardous
substances, pollutants and contaminants at the Leonard Chemical
Company site (the Site) in Rock Hill, South
Carolina. The Companys potential liability is based on the
alleged disposal of waste material at this Superfund site by
Pargo, Inc. Pargo, Inc. was a wholly owned subsidiary of the
Company from 1969 to 1972. The Company and 14 other parties
previously entered into an Administrative Order on Consent
(AOC) with the United States Environmental
Protection Agency (USEPA) for the performance of a
remedial investigation/ feasibility study at the Site. Under the
interim allocation of costs agreed to by the parties to the AOC,
the Companys share was 1.155% of the total cost. The work
required under the AOC has now been completed and USEPA has
issued a Record of Decision detailing how the Site is to be
remediated.

The Company received a Special Notice Letter for
Remedial Design/ Remedial Action dated April 22, 2002, from
the United States Environmental Protection Agency, Region 4
(the EPA), identifying it as a potentially liable
party at the Site. The Special Notice Letter demanded payment of
past response costs incurred by the EPA in the amount of
$151,838 and invited the Company to submit a good faith offer to
conduct the remedial design/ remedial action at the Site. The
EPA did not provide an estimated cost to conduct the remedial
design/ remedial action. Ruddick has denied any potential
liability at the Site and has communicated this denial of
liability in writing to the EPA. The Company understands that
the EPA has settled this matter with a group of responsible
parties who have agreed to conduct the remedial design/ remedial
action. As of the date hereof, the Company has not received a
response from the EPA as to its denial of liability or any
indication from the EPA or the group of settling parties that
either group intends to take further action against the Company.
In light of the foregoing, the Company does not anticipate any
further action with respect to this matter. The Company will
continue to aggressively deny any allegations of liability as to
the Site. The Company does not believe that this matter will
have a material effect on its business or financial condition.

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The Company and its subsidiaries are involved in
various matters from time to time in connection with their
operations, including various lawsuits, 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 business or financial condition.

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 48, is the President and Chief Executive Officer of the
Company and has been the President and principal executive
officer of the Company since February 1997. Prior to that time,
and beginning in February 1996, he served as Executive Vice
President of the Company. He also served as A&Es
President from February 1994 to August 1996 and Executive Vice
President from 1991 to 1994.

John B. Woodlief,age 53, 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 beginning in January of
1997. He joined Price Waterhouse in 1972.

Frederick J. Morganthall,
II,age 52, 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
53, 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
with any other executive officer or director or nominee for
director as close as first cousin.

PART II

Item 5.     Market
for Registrants Common Equity and Related Shareholder
Matters

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 2003 and 2002 is set
forth below. The Common Stock is listed on the New York Stock
Exchange. As of December 1, 2003, there were
5,686 holders of record of Common Stock.

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Quarterly Information

|                       |      |         |      |         |  |         |      |         |  |   |      |       |  |   |      |       | 
|---------------------- | ---- | ------- | ---- | ------- |  | ------- | ---- | ------- |  | - | ---- | ----- |  | - | ---- | ----- | 
|                       |      | First   |      | Second  |  | Third   |      | Fourth 
|                       |      | Quarter |      | Quarter |  | Quarter |      | Quarter
|                       |      |         |      |         |  |         |      |        
|Fiscal 2003            |      |         |      |         |  |         |      |         |  |   |      |       |  |   |      |      
|Dividend Per Share     |      | $       | 0.09 |         |  | $       | 0.09 |         |  | $ | 0.09 |       |  | $ | 0.09 |      
|Market Price Per Share |      |         |      |         |  |         |      |         |  |   |      |       |  |   |      |      
|                       | High |         |      | 15.70   |  |         |      | 14.11   |  |   |      | 15.90 |  |   |      | 16.97 | 
|                       | Low  |         |      | 13.90   |  |         |      | 12.09   |  |   |      | 12.58 |  |   |      | 15.67 | 
|Fiscal 2002            |      |         |      |         |  |         |      |         |  |   |      |       |  |   |      |      
|Dividend Per Share     |      |         | 0.09 |         |  |         | 0.09 |         |  |   | 0.09 |       |  |   | 0.09 |      
|Market Price Per Share |      |         |      |         |  |         |      |         |  |   |      |       |  |   |      |      
|                       | High |         |      | 16.98   |  |         |      | 17.41   |  |   |      | 17.59 |  |   |      | 17.97 | 
|                       | Low  |         |      | 14.45   |  |         |      | 15.12   |  |   |      | 15.30 |  |   |      | 15.00 | 

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.

Item 6.     Selected
Financial Data

|                                               |         |                                               |           |         |  |         |           |      |  |      |           |       |   |   |           |      |  |   |           |      | 
|---------------------------------------------- | ------- | --------------------------------------------- | --------- | ------- |  | ------- | --------- | ---- |  | ---- | --------- | ----- | - | - | --------- | ---- |  | - | --------- | ---- | 
|                                               |         | 2003(1)                                       |           | 2002(1) |  | 2001(1) |           | 2000 |  | 1999
|                                               |         |                                               |           |         |  |         |           |      |  |     
|                                               |         |                                              
|                                               |         | (Dollars in thousands, except per share data)
|Net sales                                      |         | $                                             | 2,724,739 |         |  | $       | 2,644,198 |      |  | $    | 2,743,290 |       |   | $ | 2,692,091 |      |  | $ | 2,634,289 |     
|Total operating profit(2)                      |         |                                               | 102,112   |         |  |         | 93,802    |      |  |      | 48,702    |       |   |   | 99,446    |      |  |   | 96,548    |     
|Net income (loss)                              |         |                                               | 59,882    |         |  |         | 51,983    |      |  |      | (727      | )     |   |   | 51,002    |      |  |   | 50,714    |     
|Net income (loss) per share                    |         |                                               |           |         |  |         |           |      |  |      |           |       |   |   |           |      |  |   |           |     
|                                               | Basic   |                                               |           | 1.29    |  |         |           | 1.12 |  |      |           | (0.02 | ) |   |           | 1.10 |  |   |           | 1.09 | 
|                                               | Diluted |                                               |           | 1.29    |  |         |           | 1.12 |  |      |           | (0.02 | ) |   |           | 1.10 |  |   |           | 1.08 | 
|Dividend per share                             |         |                                               | 0.36      |         |  |         | 0.36      |      |  |      | 0.36      |       |   |   | 0.36      |      |  |   | 0.33      |     
|Total assets                                   |         |                                               | 1,067,203 |         |  |         | 1,038,947 |      |  |      | 939,988   |       |   |   | 1,021,018 |      |  |   | 970,114   |     
|Long-term debt  including current
    portion |         |                                               | 189,095   |         |  |         | 185,892   |      |  |      | 157,113   |       |   |   | 227,940   |      |  |   | 198,961   |     
|Shareholders equity                           |         |                                               | 495,265   |         |  |         | 457,688   |      |  |      | 445,353   |       |   |   | 473,005   |      |  |   | 443,683   |     
|Book value per share                           |         |                                               | 10.71     |         |  |         | 9.85      |      |  |      | 9.61      |       |   |   | 10.23     |      |  |   | 9.55      |     



---



|    |                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reference is made to Item 7,
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Results of
    Operations  Exit and Impairment Costs and Tax
    Settlement which describes certain exit and impairment
    costs as follows:



| |   |                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Fiscal 2003  Net pre-tax charges of
    $580,000 ($360,000 after income tax benefits, or $0.01 per
    diluted share) related to asset impairments.                                                                                                                                                                      
|
| |  | Fiscal 2002  Net pre-tax charges of
    $7,113,000 ($4,394,000 after income tax benefits, or $0.09 per
    diluted share) related to asset impairments and other exit costs.                                                                                                                                             
|
| |  | Fiscal 2001  Net pre-tax charges of
    $47,140,000 ($28,655,000 after income tax benefits, or $0.62 per
    diluted share) related to asset impairments and other exit costs
    and $20 million of additional income taxes ($0.43 per
    diluted share) related to a settlement with the Internal Revenue
    Service.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | For purposes of reporting in the Statements
    of Consolidated Income and Retained Earnings, the Company
    has reclassified certain corporate administrative expenses of
    the holding company from Other Expense (Income) to
    Selling, General and Administrative Expenses for the
    current and prior years presented. The reclassification had the
    effect of reducing consolidated operating profit by
    $5.1 million, $7.5 million, $4.7 million,
    $7.2 million and $7.5 million for fiscal 2003, 2002,
    2001, 2000 and 1999,

6



---



##### 



| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | respectively. The reclassification had no effect
    on consolidated net sales, net income, net income per share or
    the financial position of the Company.

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

The Company operates primarily in two business
segments: retail grocery (including the real estate and store
development activities of the company)  Harris
Teeter, and industrial thread (textile primarily) 
American & Efird. Harris Teeter operates a regional chain of
supermarkets. American & Efird primarily manufactures sewing
thread for the apparel and other markets. The Company evaluates
performance of its two businesses utilizing various measures
which are based on operating profit.

Results of Operations



| |                                                 
| | ------------------------------------------------
| | Exit and Impairment Costs and Tax
    Settlement

The results for fiscal years 2003, 2002 and 2001
included certain exit and impairment charges associated with the
Companys strategic initiatives to improve future
operations. In addition, the results for fiscal 2001 contained a
$20.0 million tax charge for the settlement of a tax issue
with the Internal Revenue Service (IRS). A summary of these
events is as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Fiscal 2003: In the fourth quarter of fiscal 2003
    a $580,000 pre-tax charge ($360,000 after tax benefits, or $0.01
    per diluted share) was recorded for the previously announced
    planned closing of A&Es thread yarn spinning plant in
    Maiden, North Carolina, which is expected to occur in December
    2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Fiscal 2002: In the third quarter of fiscal 2002,
    the Company realized $710,000 ($431,000 after income taxes, or
    $0.01 per diluted share) of credits related to favorable
    experience of actual charges incurred compared to costs
    originally estimated and recorded in fiscal 2001 for the sale of
    26 Harris Teeter stores. Additionally, the Company recorded in
    fiscal 2002, $7.8 million of pre-tax exit and impairment
    charges ($4.8 million after tax benefits, or $0.10 per
    diluted share), related to the consolidation of two industrial
    thread dyeing and finishing operations at A&E.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Fiscal 2001: During fiscal 2001 the Company
    recorded pre-tax charges of $45.0 million
    ($27.4 million after tax benefits, or $0.59 per diluted
    share) for impairment and exit costs related to the sale of
    26 Harris Teeter stores. The pre-tax charge was composed of
    $32.4 million related to asset impairments,
    $3.4 million related to inventory adjustments (recorded in
    cost of sales) and $9.2 million related to other exit
    costs, which included lease liability costs ($5.8 million),
    severance and personnel costs ($1.8 million) and other
    costs ($1.6 million). In the third quarter of fiscal 2001,
    the Company also recorded a pre-tax charge of $2.1 million
    ($1.3 million after tax benefits, or $0.03 per diluted
    share) primarily for the impairment of an A&E spinning
    facility which was closed in fiscal 2001. Results for fiscal
    2001 also included a $20.0 million tax charge ($0.43 per
    diluted share) reflecting the terms of settlement with the IRS
    for income tax exposure related to the disallowance of
    deductions for a corporate owned life insurance program.

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 28, 2003 (fiscal
2003), 52 weeks ended September 29, 2002 (fiscal 2002)
and 52 weeks ended September 30, 2001 (fiscal

7



---



##### 



2001). The table also sets forth the
segments 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:


|          |                  |                |   |             |           |             |  |               |       |  |   |           |           |       |  |       |       |  |   |           |           |  |  |      |       |  |  |      |     |  |  |      |      |  
|--------- | ---------------- | -------------- | - | ----------- | --------- | ----------- |  | ------------- | ----- |  | - | --------- | --------- | ----- |  | ----- | ----- |  | - | --------- | --------- |  |  | ---- | ----- |  |  | ---- | --- |  |  | ---- | ---- | -
|          |                  |                |   |             |           |             |  |              
|          |                  | Fiscal 2003    |   | Fiscal 2002 |           | Fiscal 2001 |  | % Inc. (Dec.)
|          |                  |                |   |             |           |             |  |              
|          |                  |                |   | % to        |           |             |  | % to          |       |  |   | % to      |           | 03 vs |  | 02 vs
|          |                  |                |   | Total       |           |             |  | Total         |       |  |   | Total     |           | 02    |  | 01   
|          |                  |                |   |             |           |             |  |               |       |  |   |           |           |       |  |      
|          |                  |               
|          |                  | (in thousands)
|Net Sales |                  |                |   |             |           |             |  |               |       |  |   |           |           |       |  |       |       |  |   |           |           |  |  |      |       |  |  |      |     |  |  |     
|          | Harris Teeter    |                | $ | 2,431,632   |           |             |  | 89.2          |       |  | $ | 2,349,650 |           |       |  | 88.9  |       |  | $ | 2,416,799 |           |  |  | 88.1 |       |  |  | 3.5  |     |  |  | (2.8 | )   
|          | American & Efird |                |   | 293,107     |           |             |  | 10.8          |       |  |   | 294,548   |           |       |  | 11.1  |       |  |   | 326,491   |           |  |  | 11.9 |       |  |  | (0.5 | )   |  |  | (9.8 | )   
|          |                  |                |   |             |           |             |  |               |       |  |   |           |           |       |  |       |       |  |   |           |           |  |  |      |       |  |  |      |     |  |  |     
|          |                  | Total          |   | $           | 2,724,739 |             |  |               | 100.0 |  |   | $         | 2,644,198 |       |  |       | 100.0 |  |   | $         | 2,743,290 |  |  |      | 100.0 |  |  |      | 3.0 |  |  |      | (3.6 | )
|          |                  |                |   |             |           |             |  |               |       |  |   |           |           |       |  |       |       |  |   |           |           |  |  |      |       |  |  |      |     |  |  |     

|                                  |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |       |      |  
|--------------------------------- | ---------------- | ----- | ------ | ------- | ------- |  | ---- | ----- | ----- | - | ------ | ------- | ------- |  | ---- | ----- | ----- | - | ------ | ------- | ------- |  | ----- | ----- | ----- |  | ----- | ----- | ---- |  | ----- | ----- | ---- | -
|                                  |                  |       |        | % to    |         |  |      | % to  |       |   |        | % to    |         |  |      |      
|                                  |                  |       |        | Sales   |         |  |      | Sales |       |   |        | Sales   |         |  |      |      
|                                  |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |      
|Gross Profit                      |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|                                  | Harris Teeter    |       | $      | 703,178 |         |  |      | 25.81 |       |   | $      | 677,668 |         |  |      | 25.63 |       |   | $      | 675,935 |         |  |       | 24.64 |       |  |       | 3.8   |      |  |       | 0.3   |     
|                                  | American & Efird |       |        | 73,888  |         |  |      | 2.71  |       |   |        | 77,151  |         |  |      | 2.92  |       |   |        | 82,600  |         |  |       | 3.01  |       |  |       | (4.2  | )    |  |       | (6.6  | )   
|                                  |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|                                  |                  | Total |        |         | 777,066 |  |      |       | 28.52 |   |        |         | 754,819 |  |      |       | 28.55 |   |        |         | 758,535 |  |       |       | 27.65 |  |       |       | 2.9  |  |       |       | (0.5 | )
|SG&A Expenses                     |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|                                  | Harris Teeter    |       |        | 609,556 |         |  |      | 22.37 |       |   |        | 589,605 |         |  |      | 22.30 |       |   |        | 602,548 |         |  |       | 21.96 |       |  |       | 3.4   |      |  |       | (2.1  | )   
|                                  | American & Efird |       |        | 59,684  |         |  |      | 2.19  |       |   |        | 56,833  |         |  |      | 2.15  |       |   |        | 58,860  |         |  |       | 2.15  |       |  |       | 5.0   |      |  |       | (3.4  | )   
|                                  | Corporate        |       |        | 5,134   |         |  |      | 0.19  |       |   |        | 7,466   |         |  |      | 0.28  |       |   |        | 4,735   |         |  |       | 0.17  |       |  |       | (31.2 | )    |  |       | 57.7  |     
|                                  |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|                                  |                  | Total |        |         | 674,374 |  |      |       | 24.75 |   |        |         | 653,904 |  |      |       | 24.73 |   |        |         | 666,143 |  |       |       | 24.28 |  |       |       | 3.1  |  |       |       | (1.8 | )
|Exit & Impairment Chgs. (Credits) |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|                                  | Harris Teeter    |       |        |        |         |  |      |      |       |   |        | (710    | )       |  |      | (0.03 | )     |   |        | 41,585  |         |  |       | 1.52  |       |  |       | n.a.  |      |  |       | n.a.  |     
|                                  | American & Efird |       |        | 580     |         |  |      | 0.02  |       |   |        | 7,823   |         |  |      | 0.30  |       |   |        | 2,105   |         |  |       | 0.08  |       |  |       | n.a.  |      |  |       | n.a.  |     
|                                  |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|                                  |                  | Total |        |         | 580     |  |      |       | 0.02  |   |        |         | 7,113   |  |      |       | 0.27  |   |        |         | 43,690  |  |       |       | 1.60  |  |       |       | n.a. |  |       |       | n.a. |  
|Operating Profit (Loss)           |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|                                  | Harris Teeter    |       |        | 93,622  |         |  |      | 3.44  |       |   |        | 88,773  |         |  |      | 3.36  |       |   |        | 31,802  |         |  |       | 1.16  |       |  |       | 5.5   |      |  |       | 179.1 |     
|                                  | American & Efird |       |        | 13,624  |         |  |      | 0.50  |       |   |        | 12,495  |         |  |      | 0.47  |       |   |        | 21,635  |         |  |       | 0.79  |       |  |       | 9.0   |      |  |       | (42.2 | )   
|                                  | Corporate        |       |        | (5,134  | )       |  |      | (0.19 | )     |   |        | (7,466  | )       |  |      | (0.28 | )     |   |        | (4,735  | )       |  |       | (0.17 | )     |  |       | 31.2  |      |  |       | (57.7 | )   
|                                  |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|                                  |                  | Total |        |         | 102,112 |  |      |       | 3.75  |   |        |         | 93,802  |  |      |       | 3.55  |   |        |         | 48,702  |  |       |       | 1.78  |  |       |       | 8.9  |  |       |       | 92.6 |  
|Other Exp. (Inc.), net            |                  |       | 10,020 |         |         |  | 0.37 |       |       |   | 12,210 |         |         |  | 0.46 |       |       |   | 17,689 |         |         |  | 0.64  |       |       |  | (17.9 | )     |      |  | (31.0 | )    
|Income Tax Expense                |                  |       | 32,210 |         |         |  | 1.18 |       |       |   | 29,609 |         |         |  | 1.12 |       |       |   | 31,740 |         |         |  | 1.16  |       |       |  | 8.8   |       |      |  | (6.7  | )    
|                                  |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      
|Net Income (Loss)                 |                  | $     | 59,882 |         |         |  | 2.20 |       |       | $ | 51,983 |         |         |  | 1.97 |       |       | $ | (727   | )       |         |  | (0.03 | )     |       |  | 15.2  |       |      |  | n.a.  |      
|                                  |                  |       |        |         |         |  |      |       |       |   |        |         |         |  |      |       |       |   |        |         |         |  |       |       |       |  |       |       |      |  |       |      

Consolidated sales increased 3.0% in fiscal 2003
as compared to fiscal 2002 due primarily to sales increases in
the Harris Teeter supermarket subsidiary resulting from new
store sales and comparable store sales increases. The fiscal
2003 net increase was offset to some extent by sales declines at
the Companys American & Efird
(A&E) textile subsidiary as weak business
conditions continued during fiscal 2003. The 3.6% decrease in
consolidated sales in fiscal 2002 as compared to fiscal 2001
resulted from the displacement of supermarket sales by 26 Harris
Teeter stores that were divested in July 2001 and sales declines
in fiscal 2002 at A&E due to weak business conditions. New
Harris Teeter supermarkets opened in fiscal 2002 partially
offset the sales reductions associated with the divested and
closed stores. Foreign sales have become an increasing
proportion of total net sales as a result of A&Es
strategy of pursuing global expansion over the past several
years. Foreign sales for fiscal 2003 represented 5.6% of the
consolidated sales of the Company compared to 5.2% for fiscal
2002 and 4.8% for fiscal 2001. 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.

8



---



##### 



Gross profit as a percent to sales decreased
slightly for fiscal 2003 resulting primarily from lower gross
profit realization at the A&E subsidiary due to weaker
manufacturing running schedules in the U.S., plus the continued
pressure resulting from price competition and rising raw
materials costs. Gross profit as a percent to sales for the
Harris Teeter subsidiary improved slightly in fiscal 2003 as a
result of the companys effective promotional initiatives.
The increase in gross profit as a percent to sales in fiscal
2002 resulted from improvements in gross margin at both
subsidiaries subsequent to actions taken in fiscal 2001 to
improve efficiencies through plant closings and the divestiture
of Harris Teeter stores that were in non-core markets. 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 in fiscal
2003 was relatively consistent with fiscal 2002. Fixed costs
leverage created by sales increases at Harris Teeter and cost
reductions at Corporate offset expense margin increases at
A&E. The increase in SG&A expenses as a percent to sales
in fiscal 2002 was driven primarily from reduced fixed cost
leverage resulting from decreased sales at both subsidiaries and
cost increases at Corporate. 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. The fiscal 2002 increase in SG&A expense at
Corporate resulted primarily from adjustments recorded in fiscal
2002 for the lowering of rates used to discount benefit
liabilities.

Consolidated operating profit increased in fiscal
2003 and 2002 as a result of the sales and cost elements
described above and the previously discussed exit and impairment
costs recorded in prior years.

Included in Other Expense (Income), net is
interest expense, interest income, investment gains and losses,
and minority interest. The decrease in fiscal 2003 resulted
primarily from the recognition of $1.5 million of
investment gains associated with liquidating proceeds received
in the fourth quarter of fiscal 2003. The fiscal 2002 decrease
resulted primarily from lower net interest expense of
$2.7 million and the fact that fiscal 2001 included
investment losses of $2.4 million.

The effective income tax rate was 35.0% in fiscal
2003 as compared to 36.3% in fiscal 2002 and 37.9% in fiscal
2001 (after adjusting for the previously discussed
$20.0 million IRS settlement charge recorded in fiscal
2001). The lower rate in fiscal 2003 resulted from the favorable
settlement with the IRS of matters relating to prior years and
certain tax savings associated with non-taxable life insurance
proceeds recorded in fiscal 2003 and 2002.

Net income after income taxes in fiscal 2003 was
$59.9 million, or $1.29 per basic and diluted share
compared to $52.0 million, or $1.12 per basic and diluted
share in fiscal 2002 and a net loss of $0.7 million, or
$0.02 per basic and diluted share in fiscal 2001. As discussed
in the Exit and Impairment Costs and Tax
Settlementsection above, fiscal 2003 included a
net pre-tax exit and impairment charge of $580,000 ($360,000
after tax benefits, or $0.01 per diluted share), fiscal 2002
included net pre-tax exit and impairment charges of $7,113,000
($4,394,000 after income tax benefits, or $0.09 per diluted
share), and fiscal 2001 included net pre-tax impairment and
related charges of $47,140,000 ($28,655,000 after income tax
benefits) and $20 million of additional income taxes (total
fiscal 2001 impact of $1.05 per diluted share).



| |                                          
| | -----------------------------------------
| | Harris Teeter, Retail Grocery
    Segment

The following table sets forth the consolidated
operating profit components for the Companys Harris Teeter
supermarket subsidiary for the 52 weeks ended
September 28, 2003 (fiscal 2003), 52 weeks ended

9



---



##### 



September 29, 2002 (fiscal 2002) and
52 weeks ended September 30, 2001 (fiscal 2001). The
table also sets forth the percent to sales and the percentage
increase or decrease over the prior year:


|                                  |  |                |           |             |  |             |        |               |  |   |           |       |  |       |        |       |  |   |           |  |  |  |        |  |  |  |      |  |  |  |       |  
|--------------------------------- |  | -------------- | --------- | ----------- |  | ----------- | ------ | ------------- |  | - | --------- | ----- |  | ----- | ------ | ----- |  | - | --------- |  |  |  | ------ |  |  |  | ---- |  |  |  | ----- | -
|                                  |  |                |           |             |  |             |        |              
|                                  |  | Fiscal 2003    |           | Fiscal 2002 |  | Fiscal 2001 |        | % Inc. (Dec.)
|                                  |  |                |           |             |  |             |        |              
|                                  |  |                |           | % to        |  |             |        | % to          |  |   |           | % to  |  | 03 vs |        | 02 vs
|                                  |  |                |           | Sales       |  |             |        | Sales         |  |   |           | Sales |  | 02    |        | 01   
|                                  |  |                |           |             |  |             |        |               |  |   |           |       |  |       |        |      
|                                  |  |               
|                                  |  | (In thousands)
|Net Sales                         |  | $              | 2,431,632 |             |  |             | 100.00 |               |  | $ | 2,349,650 |       |  |       | 100.00 |       |  | $ | 2,416,799 |  |  |  | 100.00 |  |  |  | 3.5  |  |  |  | (2.8  | )
|Cost of Sales                     |  |                | 1,728,454 |             |  |             | 71.08  |               |  |   | 1,671,982 |       |  |       | 71.16  |       |  |   | 1,740,864 |  |  |  | 72.03  |  |  |  | 3.4  |  |  |  | (4.0  | )
|                                  |  |                |           |             |  |             |        |               |  |   |           |       |  |       |        |       |  |   |           |  |  |  |        |  |  |  |      |  |  |  |       |  
|Gross Profit                      |  |                | 703,178   |             |  |             | 28.92  |               |  |   | 677,668   |       |  |       | 28.84  |       |  |   | 675,935   |  |  |  | 27.97  |  |  |  | 3.8  |  |  |  | 0.3   |  
|SG&A Expenses                     |  |                | 609,556   |             |  |             | 25.07  |               |  |   | 589,605   |       |  |       | 25.09  |       |  |   | 602,548   |  |  |  | 24.93  |  |  |  | 3.4  |  |  |  | (2.1  | )
|Exit & Impairment Chgs. (Credits) |  |                |          |             |  |             |       |               |  |   | (710      | )     |  |       | (0.03  | )     |  |   | 41,585    |  |  |  | 1.72   |  |  |  | n.a. |  |  |  | n.a.  |  
|                                  |  |                |           |             |  |             |        |               |  |   |           |       |  |       |        |       |  |   |           |  |  |  |        |  |  |  |      |  |  |  |       |  
|Operating Profit                  |  | $              | 93,622    |             |  |             | 3.85   |               |  | $ | 88,773    |       |  |       | 3.78   |       |  | $ | 31,802    |  |  |  | 1.32   |  |  |  | 5.5  |  |  |  | 179.1 |  
|                                  |  |                |           |             |  |             |        |               |  |   |           |       |  |       |        |       |  |   |           |  |  |  |        |  |  |  |      |  |  |  |       |  

Sales increased 3.5% in fiscal 2003 as compared
to fiscal 2002 as a result of sales from new stores and
comparable store sales increases. The 2.8% decrease in sales in
fiscal 2002 as compared to fiscal 2001 resulted primarily from
the displacement of supermarket sales by the 26 stores that were
divested in July 2001 and was partially offset by sales from new
stores. During fiscal 2003 the company opened 4 stores and
closed 7 stores. During fiscal 2002 the company opened 12 stores
and closed 6 stores. During fiscal 2001 the company opened 9
stores (including 1 replacement) and closed or sold 28 stores,
26 of which were divested in connection with the companys
decision to exit certain non-core markets. Comparable store
sales (see definition below) increased 0.98%
($22.0 million) for fiscal 2003 as compared to a decrease
of 0.15% ($3.2 million) for fiscal 2002 and an increase of
1.77% ($39.4 million) for fiscal 2001. The 26 stores
divested on July 9, 2001 generated sales of
$207.1 million during the 40-week period of fiscal 2001.
The comparable store sales increase in fiscal 2003 was achieved
despite the intensely competitive market facing Harris Teeter as
well as the continued weak economic environment during this
period. Additionally, comparable store sales continue to be
negatively impacted by the companys strategy of opening
additional stores in its core markets that have proximity to
several existing stores. Management expects these close
proximity stores, and any similar new additions in the
foreseeable future, to have a strategic benefit of enabling the
company to capture sales and expand market share as the markets
they serve continue to grow. The market environment for
supermarkets in the southeastern U.S. continued to be
highly competitive, characterized by continuing competition from
other supermarkets as well as other retailers such as
supercenters, club and warehouse stores, and drug stores, and
the currently weak economic environment. Generally, the markets
in the region continued to experience new store opening activity
and aggressive feature pricing by competitors. In response,
Harris Teeter continued its aggressive promotional activities.
The company utilizes customer data obtained from the Very
Important Customer (VIC) loyalty card program to
help develop customized merchandising and promotional programs
to drive customer traffic in its markets.

The company 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. 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. Expansions of the size of existing
comparable stores are included in the calculations of comparable
store sales.

Gross profit as a percent to sales for fiscal
2003 improved slightly over fiscal 2002 as a result of the
companys continued effective retail pricing and
promotional spending along with continued waste control. High
fuel costs experienced in the transportation of goods to the
store during fiscal 2003 was offset by

10



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##### 



efficiencies obtained in the dairy operations as
a result of the prior years consolidation. The improvement
in gross profit as a percent to sales for fiscal 2002 over
fiscal 2001 was primarily driven by the divestiture of stores in
non-core markets and better waste control. As previously
discussed, fiscal 2001 cost of sales included a
$3.4 million (0.14% to sales) inventory charge related to
the 26 stores divested in July 2001.


Selling, general & administrative (SG&A)
expense as a percent to sales for fiscal 2003 as compared to
fiscal 2002 declined slightly due primarily to reduced fixed
store closing costs. Sales increases during fiscal 2003 provided
the leverage to offset increased fringe benefit costs driven
largely by increased pension expense and, to a lesser extent,
the shift in sales to more labor intensive departments, such as
pharmacy and freshly prepared foods. The increase in SG&A
expense as a percent to sales for fiscal 2002 as compared to
fiscal 2001 was due primarily to increased fringe benefit costs,
credit card processing fees, and underperforming store closing
costs, and was offset, in part, by the operational efficiencies
gained from the divestiture or closing of less productive stores.

The improvements in operating profit as a percent
to sales for fiscal 2003 and 2002 resulted from the sales and
cost elements described above. The improvement in fiscal 2003
was offset, in part, by $710,000 of credits recorded in fiscal
2002 related to the previously discussed 26 store divestitures
in 2001. A significant part of the fiscal 2002 improvement
resulted from $45.0 million of impairment and exit costs
recorded in fiscal 2001 related to the 26 stores divested
in 2001. 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 140 stores in operation at September 28, 2003,
compared to 143 stores at September 29, 2002 and 137 stores
at September 30, 2001. The company currently plans to open
six to seven new stores in fiscal 2004 and ten to twelve new
stores in fiscal 2005. On a routine basis Harris Teeter
periodically reviews its business strategy and evaluates its
existing store operations, and may from time to time close or
divest older or under-performing stores. It is presently
anticipated that store closings related to replacement
properties and lease expirations for fiscal 2004 will be
slightly less than that experienced in fiscal 2003.



| |                                                
| | -----------------------------------------------
| | American & Efird, Industrial Thread
    Segment

The following table sets forth the consolidated
operating profit components for the Companys
American & Efird textile subsidiary for the
52 weeks ended September 28, 2003 (fiscal 2003),
52 weeks ended September 29, 2002 (fiscal 2002) and
52 weeks ended September 30, 2001 (fiscal 2001). The
table also sets forth the percent to sales and the percentage
increase or decrease over the prior year:

|                                 |  |                |         |             |  |             |        |               |  |   |         |       |  |       |        |       |  |   |         |  |  |  |        |  |  |  |      |   |  |  |       |  
|-------------------------------- |  | -------------- | ------- | ----------- |  | ----------- | ------ | ------------- |  | - | ------- | ----- |  | ----- | ------ | ----- |  | - | ------- |  |  |  | ------ |  |  |  | ---- | - |  |  | ----- | -
|                                 |  |                |         |             |  |             |        |              
|                                 |  | Fiscal 2003    |         | Fiscal 2002 |  | Fiscal 2001 |        | % Inc. (Dec.)
|                                 |  |                |         |             |  |             |        |              
|                                 |  |                |         | % to        |  |             |        | % to          |  |   |         | % to  |  | 03 vs |        | 02 vs
|                                 |  |                |         | Sales       |  |             |        | Sales         |  |   |         | Sales |  | 02    |        | 01   
|                                 |  |                |         |             |  |             |        |               |  |   |         |       |  |       |        |      
|                                 |  |               
|                                 |  | (in thousands)
|Net Sales                        |  | $              | 293,107 |             |  |             | 100.00 |               |  | $ | 294,548 |       |  |       | 100.00 |       |  | $ | 326,491 |  |  |  | 100.00 |  |  |  | (0.5 | ) |  |  | (9.8  | )
|Cost of Sales                    |  |                | 219,219 |             |  |             | 74.79  |               |  |   | 217,397 |       |  |       | 73.81  |       |  |   | 243,891 |  |  |  | 74.70  |  |  |  | 0.8  |   |  |  | (10.9 | )
|                                 |  |                |         |             |  |             |        |               |  |   |         |       |  |       |        |       |  |   |         |  |  |  |        |  |  |  |      |   |  |  |       |  
|Gross Profit                     |  |                | 73,888  |             |  |             | 25.21  |               |  |   | 77,151  |       |  |       | 26.19  |       |  |   | 82,600  |  |  |  | 25.30  |  |  |  | (4.2 | ) |  |  | (6.6  | )
|SG&A Expenses                    |  |                | 59,684  |             |  |             | 20.36  |               |  |   | 56,833  |       |  |       | 19.29  |       |  |   | 58,860  |  |  |  | 18.03  |  |  |  | 5.0  |   |  |  | (3.4  | )
|Exit & Impairment Chgs (Credits) |  |                | 580     |             |  |             | 0.20   |               |  |   | 7,823   |       |  |       | 2.66   |       |  |   | 2,105   |  |  |  | 0.64   |  |  |  | n.a  |   |  |  | n.a.  |  
|                                 |  |                |         |             |  |             |        |               |  |   |         |       |  |       |        |       |  |   |         |  |  |  |        |  |  |  |      |   |  |  |       |  
|Operating Profit                 |  | $              | 13,624  |             |  |             | 4.65   |               |  | $ | 12,495  |       |  |       | 4.24   |       |  | $ | 21,635  |  |  |  | 6.63   |  |  |  | 9.0  |   |  |  | (42.2 | )
|                                 |  |                |         |             |  |             |        |               |  |   |         |       |  |       |        |       |  |   |         |  |  |  |        |  |  |  |      |   |  |  |       |  

Sales decreased 0.5% in fiscal 2003 as compared
to fiscal 2002 as a result of a 10.1% decline in U.S. sales
offset by a 10.5% increase in foreign sales. The 9.8% sales
decrease in fiscal 2002 as compared to fiscal 2001 resulted from
a 19.3% decline in U.S. sales offset by a 4.2% increase in
foreign sales. The U.S. sales decline represents a
continuation of the trend of customers shifting buying and
production out of the United States. Business conditions for
A&Es customers in the U.S. textile and apparel
industry in general remained extremely challenging due to the
continued rise in imports that has forced many of A&Es
U.S. customers to close their plants or shift their
production out of the U.S. Additionally, A&E continues to
face highly

11



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competitive pricing in its markets. A&E
management expects business conditions to remain challenging
throughout fiscal 2004. The company continues to proactively
address these challenges by managing production schedules,
growing its non-apparel thread business and expanding the
companys presence in foreign markets.


Foreign sales for fiscal 2003 accounted for
approximately 52% of total A&E sales as compared to
approximately 47% in fiscal 2002 and approximately 40% in fiscal
2001. Foreign sales have become an increasing proportion of
total A&E sales over recent years 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 its global expansion by way of
joint ventures and other investments.

Gross profit as a percent to sales decreased in
fiscal 2003 primarily due to the continued pressure caused by
weaker manufacturing running schedules in the U.S., price
competition and rising raw materials costs. The improvement in
gross profit as a percent to sales in fiscal 2002 resulted from
cost reduction initiatives and manufacturing consolidations that
management implemented in fiscal 2001 and early fiscal 2002.
Management continues to focus on optimizing costs and
manufacturing capacities at its domestic and foreign operations.

Selling, general and administrative (SG&A)
costs as a percent to sales increased in fiscal 2003 primarily
as a result of higher distribution costs. SG&A expenses
declined $2.0 million from fiscal 2001 to fiscal 2002,
however these expenses as a percent to sales increased in fiscal
2002 because the percentage reduction in expense was not enough
to offset the percentage reduction in sales.

A&Es operating profit in the
U.S. market continued to experience a decline in fiscal
2003 as a result of the sales declines and challenging economic
conditions discussed above. The foreign operations of A&E
experienced improvements in operating profitability in fiscal
2003 as a result of added efficiencies from increased sales and
production. Foreign operations contributed approximately 45% of
A&Es operating profit in fiscal 2003 as compared to
approximately 22% in fiscal 2002 and approximately 24% in fiscal
2001. Given the current economic climate in the
U.S. textile and apparel industry, A&Es
management expects business conditions for the foreseeable
future to remain weak.



| |        
| | -------
| | Outlook

While the performance of Harris Teeter has been
strong, the economic conditions in A&Es industry have
remained very difficult. At Harris Teeter, the consistent
execution of productivity initiatives implemented at
under-performing stores, controls over waste and costs including
the ability to offset rising costs such as health care, pensions
and credit card fees, and effective merchandising strategies
will dictate the pace at which its margins could improve.
Additionally, promotional costs to drive sales in the presently
intense competitive environment could negatively impact
operating margins and net income in future periods. Further, the
competitive environment for supermarkets is not expected to ease
significantly within the foreseeable future. The depth and
duration of softness in apparel and other markets in which
A&E participates will obviously have an impact on
A&Es profitability. Given the weak domestic market
outlook, there is currently no sign of recovery from the
deterioration of domestic production schedules that occurred
during fiscal 2003. A&E will find it difficult to generate
significant improvements in profitability in the absence of a
more favorable economic climate. A&E management remains
focused on generating sales growth in global markets and on
managing costs and manufacturing capacities. Given the complex
factors currently impacting sales and costs at both
subsidiaries, Ruddick Corporation management remains
conservative in its outlook for fiscal 2004. Further operating
improvement will be dependent on the Companys ability to
offset rising health care and benefit costs, including pension
costs, with additional operating efficiencies.

Capital Resources and Liquidity

Ruddick Corporation is a holding company which,
through its wholly-owned subsidiaries, Harris Teeter and
A&E, is engaged in the primary businesses of regional
supermarket operations and industrial sewing thread
manufacturing and distribution, respectively. Ruddick has no
material independent operations, nor

12



---



##### 



material assets, other than the investments in
its operating subsidiaries, as well as investments in certain
fixed assets, short term cash equivalents and life insurance
contracts to support corporate-wide operations and benefit
programs. Ruddick provides a variety of services to its
subsidiaries and is dependent upon income and upstream dividends
from its subsidiaries. There are no restrictions on the
subsidiary dividends, which are determined as a percentage of
net income of each subsidiary.


The Company seeks to limit long-term debt so that
it constitutes no more than 40% of capital employed, which
includes long-term debt, minority interest and
shareholders equity. As of September 28, 2003, this
percentage was 27.3% compared to 28.5% at September 29,
2002. Long-term debt less cash and temporary investments
amounted to $67.5 million as of September 28, 2003 as
compared to $95.9 million at September 29, 2002.

The Companys principal source of liquidity
has been cash generated from operating activities. As of
September 28, 2003, the Company had current liquidity
(cash, cash equivalents and temporary investments) of
$121.6 million compared to $89.9 million at
September 29, 2002. During fiscal 2003, the net cash
provided by operating activities was $150.4 million,
compared to $143.3 million during fiscal 2002 and $168.0
during fiscal 2001. Cash flow from income (net income plus
non-cash items included in net income) has improved to
$145.8 million in fiscal 2003 from $137.9 million in
fiscal 2002 and $110.8 million in fiscal 2001. During
fiscal 2001 changes in working capital components provided an
additional $57.1 million of cash primarily as a result of
the liquidation of inventories associated with the 26 store
divestiture. Investing activities during fiscal 2003 required
net cash of $149.0 million, up from $77.5 million
during fiscal 2002 and $56.1 million during fiscal 2001.
The increase in investing activity was primarily due to
increased investments in temporary and other investments. The
significant components of financing activities for fiscal 2003
included the payment of dividends of $16.7 million and the
purchase and retirement of $5.2 million worth of the
Companys common stock.

During fiscal 2003, capital expenditures totaled
$73.6 million. Harris Teeter capital expenditures were
$64.4 million in fiscal 2003 compared to $66.6 million
in fiscal 2002 and $68.5 million in fiscal 2001. In
addition to the capital expenditures, Harris Teeter has
recognized opportunities to invest in the development of certain
of its new stores. During fiscal 2003 such development capital
spending was $12.3 million compared to $2.2 million
during fiscal 2002. A&Es capital expenditures were
$9.2 million during fiscal 2003 compared to
$7.8 million in fiscal 2002 and $19.2 million in
fiscal 2001. Total capital expenditures for fiscal 2004 are
expected to be approximately $100 million, comprised of
Harris Teeters expected capital expenditures of
approximately $90 million and A&Es expected
capital expenditures of approximately $10 million. Harris
Teeter anticipates that its capital for new store growth and
store remodels will be applied in its core markets in fiscal
2004 as well as the foreseeable future. A&E expects to
target further expansion of global operations. In both operating
companies, these expenditures are for modernization and
expansion. Management expects that internally generated funds,
supplemented by available cash balances if necessary, will be
adequate to finance such expenditures.

On May 14, 2002, the Company and three banks
entered into a revolving credit facility for an aggregate amount
of up to $100 million. The credit agreement provided for a
maturity of three years, plus two annual extensions of one year
each if then granted by the banks. As of September 28,
2003, the three banks granted the first annual extension of the
credit facility and thereby established a maturity date of
May 14, 2006. This maturity date may be further extended by
one year if approved by the banks in 2004 in accordance with the
provisions of the credit agreement. Borrowings and repayments
under this revolving credit facility are of the same nature as
short-term credit lines; however, due to the nature and terms of
the agreement providing for maturity of the repayment
obligations beyond one year, all borrowings under the facility
are classified as long term debt. 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 those
terms are defined 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, minimum fixed charge coverage ratio and tangible net
worth requirements. As of September 28, 2003, the Company
was within the various financial covenants. At
September 28, 2003, no debt was outstanding under

13



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##### 



the revolving credit facility, and no borrowings
are needed or anticipated for the foreseeable future. In
addition, the Company has the capacity to borrow up to an
aggregate amount of $37.2 million from two major
U.S. life insurance companies utilizing certain insurance
assets as collateral.


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
liquidity and that such liquidity is adequate to meet
foreseeable requirements.

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. The following
table represents the scheduled maturities of the Companys
contractual obligations as of September 28, 2003:

|                                        |  |                |           |           |  |           |         |           |  |           |         |  |  |   |         |  |  |   |         | 
|--------------------------------------- |  | -------------- | --------- | --------- |  | --------- | ------- | --------- |  | --------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                        |  |                |           | Less than |  |           |         |           |  | More than
|                                        |  | Total          |           | 1 Year    |  | 1-3 Years |         | 3-5 Years |  | 5 Years  
|                                        |  |                |           |           |  |           |         |           |  |          
|                                        |  |               
|                                        |  | (in thousands)
|Long-Term Debt(1)                       |  | $              | 189,095   |           |  | $         | 31,596  |           |  | $         | 16,414  |  |  | $ | 15,575  |  |  | $ | 125,510 | 
|Operating Leases(1)(2)                  |  |                | 767,685   |           |  |           | 63,832  |           |  |           | 122,382 |  |  |   | 107,643 |  |  |   | 473,828 | 
|Capital Lease Obligations(1)(2)         |  |                | 5,936     |           |  |           | 500     |           |  |           | 749     |  |  |   | 570     |  |  |   | 4,117   | 
|Purchase Oligations  Fixed Assets      |  |                | 16,548    |           |  |           | 16,548  |           |  |           |        |  |  |   |        |  |  |   |        | 
|Purchase Oligations  Inventory         |  |                | 3,549     |           |  |           | 3,549   |           |  |           |        |  |  |   |        |  |  |   |        | 
|Purchase Oligations  Service Contracts |  |                | 7,645     |           |  |           | 3,778   |           |  |           | 2,734   |  |  |   | 1,133   |  |  |   |        | 
|Other(3)                                |  |                | 24,080    |           |  |           | 1,854   |           |  |           | 3,460   |  |  |   | 3,118   |  |  |   | 15,648  | 
|                                        |  |                |           |           |  |           |         |           |  |           |         |  |  |   |         |  |  |   |         | 
|Total Contractual Cash Obligations      |  | $              | 1,014,538 |           |  | $         | 121,657 |           |  | $         | 145,739 |  |  | $ | 128,039 |  |  | $ | 619,103 | 
|                                        |  |                |           |           |  |           |         |           |  |           |         |  |  |   |         |  |  |   |         | 



---



|    |                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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. 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.

The Company is guarantor under a leveraged lease
arrangement for certain lease payments of approximately $436,000
semi-annually until January 2017, related to a previous Harris
Teeter store that has been sublet and assigned to another
supermarket company. Management believes that it is highly
unlikely that the Company will be required to fund the
contingent rents based on the current operations and credit
worthiness of the other supermarket company. If such payments
were to become more likely, management estimates that the
present value of the contingent obligation as of
September 28, 2003 is approximately $8.1 million,
based on a discount rate of 6.0%.

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
18 years and the future minimum lease payments of
approximately $102.1 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: $10.1 million in fiscal 2004 (39 stores),
$9.4 million in fiscal 2005 (33 stores),
$8.9 million in fiscal 2006 (27 stores),
$8.7 million in fiscal 2007 (25 stores),
$8.3 million in fiscal 2008 (24 stores), and
$56.7 million in aggregate during all remaining years
thereafter.

14



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##### 



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 certain casualty insurance. The total
contingent liability under those instruments was approximately
$17.7 million as of September 28, 2003.

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, revenues, expenses, results of operations,
liquidity, capital expenditures or capital resources.

Critical Accounting Policies

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

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



| |                                                       
| | ------------------------------------------------------
| | Vendor Rebates, Credits and Promotional
    Allowances

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. 101
(SAB No. 101)  Revenue Recognition in
Financial Statements, 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. 101, revenue recognition
requires the prerequisite 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 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

15



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##### 



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. 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.



| |                    
| | -------------------
| | Inventory Valuation

The 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. 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.

16



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##### 



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 claims in
each of these categories are reported to the Company by third
party administrators. The third party administrators also report
initial estimates of related loss reserves in the workers
compensation, general liability and automotive liability
programs. 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 calculates the current
period costs based on actual claims, reviewed for the status and
probabilities associated with potential settlement and then
adjusted by development factors from published insurance
industry sources and discounted to present values using an
appropriate discount factor. A similar methodology is used to
evaluate general liability and automotive liability accrual
requirements. 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.

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. 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 as of September 28, 2003 is reasonable and
adequate as of that date.



| |                                                                 
| | ----------------------------------------------------------------
| | 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.

17



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##### 



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, which generally have remaining terms
ranging from one to 14 years. 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 a
supplemental retirement benefit plan for certain selected
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 plans are non-contributory, funded defined
benefit plans, while the non-qualified supplemental pension plan
for executives is an unfunded, defined benefit plan. The
Companys current funding policy for its qualified pension
plans is to contribute annually the amount required by
regulatory authorities to meet minimum funding requirements and
an amount to increase the funding ratios over a period of
approximately five years to a level determined by its actuaries
to be effective in reducing the volatility of contributions.

The Company also has provided from time to time
certain deferred compensation arrangements that allow or allowed
its directors, officers and selected key management personnel to
forego the receipt of earned compensation for specified periods
of time. As of September 28, 2003, these plans were
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.

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.

18



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##### 



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

The Company has adopted various new accounting
standards that became effective since the beginning of fiscal
2003. The adoption of the new standards did not have a material
impact on the Companys results of operations, financial
position or cash flows in fiscal 2003. Information about the new
accounting requirements has been incorporated into the Note
entitled Summary of Significant Accounting Policies
of the Notes to Consolidated Financial Statements in Item 8
hereof.

In the second quarter of fiscal 2003, the Company
adopted the disclosure requirements of Statement of Financial
Accounting Standards (SFAS) No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure, which amends SFAS No. 123
and provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for
stock-based compensation. As permitted by SFAS No. 148 and
SFAS No. 123, Accounting for Stock-Based
Compensation, the Company continues to record compensation
cost for stock option plans in accordance with Accounting
Principles Board Opinion No. 25. The Company will continue
to evaluate and determine when it will adopt the fair value
based method of accounting for stock-based employee compensation.

In May 2003 the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. This
Statement provides guidance on how an entity classifies and
measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify
a financial instrument that is within its scope as a liability
(or an asset in some circumstances). Many of these instruments
were previously classified as equity such as a financial
instrument issued in the form of shares that is mandatorily
redeemable. The adoption of this new standard is not expected to
have a material impact on the Companys results of
operations, financial position or cash flows.

Regarding Forward-Looking Statements

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

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



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

19



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| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in federal, state or local legislation or
    regulations affecting food manufacturing, food distribution or
    food retailing,                                                                    
|
| |  | changes in the competitive environment, including
    increased competition in the Companys primary geographic
    markets, the entry of new competitors and consolidation in the
    supermarket industry,
|
| |  | economic or political changes in the countries in
    which the Company operates or adverse trade regulations,                                                                                              
|
| |  | the passage of future tax legislation, or any
    regulatory or judicial position which prevails, if any, that
    could have an adverse impact on past, current or future tax
    benefits,                
|
| |  | managements ability to accurately predict
    the adequacy of the Companys present liquidity to meet
    future requirements,                                                                             
|
| |  | changes in the Companys capital
    expenditures, new store openings and store closings,                                                                                                                   
|
| |  | managements ability to predict the required
    contributions to the pension plans of the Company, and                                                                                                     
|
| |  | the extent and speed of the successful execution
    of strategic initiatives designed to increase sales and
    profitability in each of the operating companies.                                          

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 28, 2003, the Company
had no significant foreign exchange exposure and no 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 ($150 million of Senior Notes due at
various dates through 2017):

|                               |  |      |   |      |  |      |       |      |  |      |       |            |  |       |       |            |  |   |       |   |  |   |         |   |  |   |         |   |  |   |         | 
|------------------------------ |  | ---- | - | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ----- | ---------- |  | - | ----- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | 
|                               |  | 2004 |   | 2005 |  | 2006 |       | 2007 |  | 2008 |       | Thereafter |  | Total |       | Fair Value
|                               |  |      |   |      |  |      |       |      |  |      |       |            |  |       |       |           
|Fixed rate debt obligations    |  |      |  |      |  | $    | 7,143 |      |  | $    | 7,143 |            |  | $     | 7,143 |            |  | $ | 7,143 |   |  | $ | 121,428 |   |  | $ | 150,000 |   |  | $ | 176,446 | 
|Weighted average interest rate |  |      |  |      |  |      | 6.48  | %    |  |      | 6.48  | %          |  |       | 6.48  | %          |  |   | 6.48  | % |  |   | 7.43    | % |  |   | 7.25    | % |  |   |         | 

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.

20



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##### 



Item 8.     Financial
Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS AND
SCHEDULE

|                                                                                                                                                                  |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                                                  |  | Page
|                                                                                                                                                                  |  |     
|Independent Auditors Report                                                                                                                                      |  |      | 22  | 
|Report of Predecessor Auditor (Arthur Andersen
    LLP)                                                                                                           |  |      | 23  | 
|Consolidated Balance Sheets, September 28,
    2003 and September 29, 2002                                                                                        |  |      | 24  | 
|Statements of Consolidated Income and Retained
    Earnings for the fiscal years ended September 28, 2003,
    September 29, 2002 and September 30, 2001          |  |      | 25  | 
|Statements of Consolidated Total Non-Owner
    Changes in Equity for the fiscal years ended September 28,
    2003, September 29, 2002 and September 30, 2001     |  |      | 26  | 
|Statements of Consolidated Cash Flows for the
    fiscal years ended September 28, 2003, September 29, 2002
    and September 30, 2001                            |  |      | 27  | 
|Notes to Consolidated Financial Statements                                                                                                                        |  |      | 28  | 
|Schedule I  Report of Predecessor
    Public Accountant (Arthur Andersen LLP) on Financial Statement
    Schedule                                                |  |      | S-1 | 
|Schedule II  Valuation and
    Qualifying Accounts and Reserves for the fiscal years ended
    September 28, 2003, September 29, 2002 and
    September 30, 2001 |  |      | S-2 | 

21



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##### 



INDEPENDENT AUDITORS REPORT

The Board of Directors

Ruddick Corporation:


We have audited the 2003 and 2002 financial
statements of Ruddick Corporation and subsidiaries as listed in
the accompanying index. In connection with our audits of the
2003 and 2002 financial statements, we also have audited the
2003 and 2002 financial statement schedule as listed in the
accompanying index. These financial statements and financial
statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. The 2001 financial statements and financial
statement schedule of Ruddick Corporation and subsidiaries as
listed in the accompanying index were audited by other auditors
who have ceased operations. Those auditors expressed an
unqualified opinion on those financial statements and financial
statement schedule in their report dated October 29, 2001.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. 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 2003 and 2002 financial
statements referred to above present fairly, in all material
respects, the financial position of Ruddick Corporation and
subsidiaries as of September 28, 2003 and
September 29, 2002, and the results of its operations and
its cash flows for the years ended September 28, 2003 and
September 29, 2002, in conformity with accounting
principles generally accepted in the United States of America.
Also in our opinion, the related 2003 and 2002 financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

/s/ KPMG LLP

Charlotte, North Carolina

October 28, 2003


22



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##### 



REPORT OF PREDECESSOR AUDITOR (ARTHUR ANDERSEN
LLP)

The following is a copy of a report previously
issued by Arthur Andersen LLP and it has not been reissued by
Arthur Andersen LLP. The fiscal 2000 and fiscal 1999
consolidated financial statements are not required to be
presented in the 2003 Annual Report of the Company.

TO RUDDICK CORPORATION:

We have audited the accompanying consolidated
balance sheets of Ruddick Corporation (a North Carolina
corporation) and subsidiaries as of September 30, 2001 and
October 1, 2000, and the related statements of consolidated
income and retained earnings, consolidated total non-owner
changes in equity and consolidated cash flows for each of the
three years in the period ended September 30, 2001. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the 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 financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Ruddick Corporation and
subsidiaries as of September 30, 2001 and October 1,
2000, and the results of their operations and their cash flows
for each of three years in the period ended September 30,
2001, in conformity with accounting principles generally
accepted in the United States.



| |                        
| | -----------------------
| | /s/ ARTHUR ANDERSEN LLP

Charlotte, North Carolina

October 29, 2001


23



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##### 



CONSOLIDATED BALANCE SHEETS

RUDDICK CORPORATION AND SUBSIDIARIES


(dollars in thousands)


|                                              |                                                                                      |                                            |         |               |           |  |         |         |           | 
|--------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------------ | ------- | ------------- | --------- |  | ------- | ------- | --------- | 
|                                              |                                                                                      | September 28,                              |         | September 29,
|                                              |                                                                                      | 2003                                       |         | 2002         
|                                              |                                                                                      |                                            |         |              
|ASSETS                                       
|Current Assets                                |                                                                                      |                                            |         |               |           |  |         |        
|                                              | Cash and Cash Equivalents                                                            |                                            | $       | 63,222        |           |  | $       | 80,422  |          
|                                              | Temporary Investments                                                                |                                            |         | 58,343        |           |  |         | 9,520   |          
|                                              | Accounts Receivable, Net of Allowance For
    Doubtful Accounts of $3,962 and $3,486 |                                            |         | 65,811        |           |  |         | 67,181  |          
|                                              | Inventories                                                                          |                                            |         | 214,122       |           |  |         | 224,548 |          
|                                              | Refundable Income Taxes                                                              |                                            |         |              |           |  |         | 3,502   |          
|                                              | Net Current Deferred Income Tax Benefits                                             |                                            |         | 14,558        |           |  |         | 15,496  |          
|                                              | Prepaid and Other Current Assets                                                     |                                            |         | 24,813        |           |  |         | 24,838  |          
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|                                              |                                                                                      | Total Current Assets                       |         |               | 440,869   |  |         |         | 425,507   | 
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|Property                                      |                                                                                      |                                            |         |               |           |  |         |        
|                                              | Land                                                                                 |                                            |         | 32,217        |           |  |         | 29,199  |          
|                                              | Buildings and Improvements                                                           |                                            |         | 179,324       |           |  |         | 173,125 |          
|                                              | Machinery and Equipment                                                              |                                            |         | 640,362       |           |  |         | 630,558 |          
|                                              | Leasehold Improvements                                                               |                                            |         | 253,578       |           |  |         | 241,496 |          
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|                                              |                                                                                      | Total, at Cost                             |         |               | 1,105,481 |  |         |         | 1,074,378 | 
|                                              | Accumulated Depreciation and Amortization                                            |                                            |         | 582,084       |           |  |         | 537,392 |          
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|                                              |                                                                                      | Property, Net                              |         |               | 523,397   |  |         |         | 536,986   | 
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|Investments                                   |                                                                                      |                                            | 33,706  |               |           |  | 15,185  |        
|Goodwill and Other Intangibles                |                                                                                      |                                            | 12,684  |               |           |  | 12,301  |        
|Other Long-Term Assets                        |                                                                                      |                                            | 56,547  |               |           |  | 48,968  |        
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|                                              |                                                                                      | Total Assets                               |         | $             | 1,067,203 |  |         | $       | 1,038,947 | 
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY     
|Current Liabilities                           |                                                                                      |                                            |         |               |           |  |         |        
|                                              | Notes Payable                                                                        |                                            | $       | 2,667         |           |  | $       | 1,813   |          
|                                              | Current Portion of Long-Term Debt                                                    |                                            |         | 31,596        |           |  |         | 727     |          
|                                              | Dividends Payable                                                                    |                                            |         | 3,408         |           |  |         | 3,406   |          
|                                              | Accounts Payable                                                                     |                                            |         | 144,027       |           |  |         | 156,560 |          
|                                              | Federal and State Income Taxes                                                       |                                            |         | 147           |           |  |         |        |          
|                                              | Accrued Compensation                                                                 |                                            |         | 37,994        |           |  |         | 37,472  |          
|                                              | Other Current Liabilities                                                            |                                            |         | 59,409        |           |  |         | 59,618  |          
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|                                              |                                                                                      | Total Current Liabilities                  |         |               | 279,248   |  |         |         | 259,596   | 
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|Long-Term Debt                                |                                                                                      |                                            | 157,499 |               |           |  | 185,165 |        
|Net Long-Term Deferred Income Tax Liabilities |                                                                                      |                                            | 31,589  |               |           |  | 34,952  |        
|Pension Liabilities                           |                                                                                      |                                            | 60,808  |               |           |  | 61,499  |        
|Other Long-Term Liabilities                   |                                                                                      |                                            | 34,036  |               |           |  | 32,052  |        
|Minority Interest                             |                                                                                      |                                            | 8,758   |               |           |  | 7,995   |        
|Commitments and Contingencies                 |                                                                                      |                                            |        |               |           |  |        |        
|Shareholders Equity                          |                                                                                      |                                            |         |               |           |  |         |        
|                                              | Common Stock  Shares Outstanding:
    2003  46,223,233; 2002  46,454,188          |                                            |         | 47,749        |           |  |         | 51,127  |          
|                                              | Retained Earnings                                                                    |                                            |         | 489,135       |           |  |         | 445,940 |          
|                                              | Accumulated Non-Owner Changes in Equity                                              |                                            |         | (41,619       | )         |  |         | (39,379 | )        
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|                                              |                                                                                      | Total Shareholders Equity                 |         |               | 495,265   |  |         |         | 457,688   | 
|                                              |                                                                                      |                                            |         |               |           |  |         |        
|                                              |                                                                                      | Total Liabilities and Shareholders Equity |         | $             | 1,067,203 |  |         | $       | 1,038,947 | 
|                                              |                                                                                      |                                            |         |               |           |  |         |        

See Notes to Consolidated Financial Statements.

24



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##### 



STATEMENTS OF CONSOLIDATED INCOME AND RETAINED
EARNINGS

RUDDICK CORPORATION AND SUBSIDIARIES


(dollars in thousands, except per share
data)


|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  
|----------------------------------------------------------------------------------- |  | ---------------------- | --------- | ------------- |  | ------------- | --------- | - |  | - | --------- | -
|                                                                                    |  |                       
|                                                                                    |  | For the 52 Weeks Ended
|                                                                                    |  |                       
|                                                                                    |  | September 28,          |           | September 29, |  | September 30,
|                                                                                    |  | 2003                   |           | 2002          |  | 2001         
|                                                                                    |  |                        |           |               |  |              
|Net Sales                                                                           |  | $                      | 2,724,739 |               |  | $             | 2,644,198 |   |  | $ | 2,743,290 |  
|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  
|Cost of Sales                                                                       |  |                        | 1,947,673 |               |  |               | 1,889,379 |   |  |   | 1,984,755 |  
|Selling, General and Administrative Expenses                                        |  |                        | 674,374   |               |  |               | 653,904   |   |  |   | 666,143   |  
|Exit and Impairment Charges                                                         |  |                        | 580       |               |  |               | 7,113     |   |  |   | 43,690    |  
|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  
|Operating Profit                                                                    |  |                        | 102,112   |               |  |               | 93,802    |   |  |   | 48,702    |  
|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  
|Interest Expense                                                                    |  |                        | 12,385    |               |  |               | 12,568    |   |  |   | 14,322    |  
|Interest Income                                                                     |  |                        | (1,417    | )             |  |               | (1,360    | ) |  |   | (376      | )
|Investment (Gains) Losses                                                           |  |                        | (2,419    | )             |  |               | (11       | ) |  |   | 2,385     |  
|Minority Interest                                                                   |  |                        | 1,471     |               |  |               | 1,013     |   |  |   | 1,358     |  
|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  
|Income Before Taxes                                                                 |  |                        | 92,092    |               |  |               | 81,592    |   |  |   | 31,013    |  
|Income Tax Expense                                                                  |  |                        | 32,210    |               |  |               | 29,609    |   |  |   | 31,740    |  
|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  
|Net Income (Loss)                                                                   |  |                        | 59,882    |               |  |               | 51,983    |   |  |   | (727      | )
|Retained Earnings at Beginning of Fiscal Year                                       |  |                        | 445,940   |               |  |               | 410,665   |   |  |   | 428,053   |  
|Common Dividend  2003: $0.36 a share;
    2002: $0.36 a share; 2001: $0.36 a share |  |                        | (16,687   | )             |  |               | (16,708   | ) |  |   | (16,661   | )
|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  
|Retained Earnings at End of Fiscal Year                                             |  | $                      | 489,135   |               |  | $             | 445,940   |   |  | $ | 410,665   |  
|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  
|Net Income (Loss) Per Share  Basic                                                 |  | $                      | 1.29      |               |  | $             | 1.12      |   |  | $ | (0.02     | )
|Net Income (Loss) Per Share  Diluted                                               |  | $                      | 1.29      |               |  | $             | 1.12      |   |  | $ | (0.02     | )
|                                                                                    |  |                        |           |               |  |               |           |   |  |   |           |  

See Notes to Consolidated Financial Statements.

25



---



##### 



STATEMENTS OF CONSOLIDATED TOTAL NON-OWNER
CHANGES IN EQUITY

RUDDICK CORPORATION AND SUBSIDIARIES


(dollars in thousands)


|                                   |                                              |                                      |        |               |       |               |        |         |        |   |         |         |       | 
|---------------------------------- | -------------------------------------------- | ------------------------------------ | ------ | ------------- | ----- | ------------- | ------ | ------- | ------ | - | ------- | ------- | ----- | 
|                                   |                                              |                                     
|                                   |                                              | For the 52 Weeks Ended              
|                                   |                                              |                                     
|                                   |                                              | September 28,                        |        | September 29, |       | September 30,
|                                   |                                              | 2003                                 |        | 2002          |       | 2001         
|                                   |                                              |                                      |        |               |       |              
|Net Income (Loss)                  |                                              | $                                    | 59,882 |               |       | $             | 51,983 |         |        | $ | (727    | )      
|Other Non-Owner Changes in Equity: |                                              |                                      |        |               |       |               |        |         |        |   |         |        
|                                   | Foreign Currency Translation Adjustment      |                                      |        | 1,957         |       |               |        | 507     |        |   |         | (332    | )    
|                                   |                                              | Related Income Tax (Expense) Benefit |        |               |      |               |        |         |       |   |         |         |      | 
|                                   | Minimum Pension Liability Adjustment         |                                      |        | (6,936        | )     |               |        | (41,354 | )      |   |         | (18,314 | )    
|                                   |                                              | Related Income Tax (Expense) Benefit |        |               | 2,739 |               |        |         | 16,329 |   |         |         | 7,231 | 
|                                   |                                              |                                      |        |               |       |               |        |         |        |   |         |        
|                                   | Total Other Non-Owner Changes in Equity, Net |                                      |        | (2,240        | )     |               |        | (24,518 | )      |   |         | (11,415 | )    
|                                   |                                              |                                      |        |               |       |               |        |         |        |   |         |        
|Total Non-Owner Changes in Equity  |                                              | $                                    | 57,642 |               |       | $             | 27,465 |         |        | $ | (12,142 | )      
|                                   |                                              |                                      |        |               |       |               |        |         |        |   |         |        

See Notes to Consolidated Financial Statements.

26



---



##### 



STATEMENTS OF CONSOLIDATED CASH
FLOWS

RUDDICK CORPORATION AND SUBSIDIARIES


(dollars in thousands)


|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |         |         |  
|-------------------------------------------------- | ------------------------------------------------ | ------------------------------- | ------- | ------------- | ------ | ------------- | ------ | ------- | ------ | - | ------ | ------- | ------- | -
|                                                   |                                                  |                                
|                                                   |                                                  | For 52 Weeks Ended             
|                                                   |                                                  |                                
|                                                   |                                                  | September 28,                   |         | September 29, |        | September 30,
|                                                   |                                                  | 2003                            |         | 2002          |        | 2001         
|                                                   |                                                  |                                 |         |               |        |              
|Cash Flow from Operating Activities:               |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|                                                   | Net Income (Loss)                                |                                 | $       | 59,882        |        |               | $      | 51,983  |        |   | $      | (727    | )      
|                                                   | Non-Cash Items Included in Net Income            |                                 |         |               |        |               |        |         |        |   |        |         |        
|                                                   |                                                  | Depreciation and Amortization   |         |               | 77,237 |               |        |         | 75,788 |   |        |         | 80,271  |  
|                                                   |                                                  | Deferred Taxes                  |         |               | 96     |               |        |         | 3,246  |   |        |         | (10,035 | )
|                                                   |                                                  | Loss (Gain) on Sale of Property |         |               | 6,061  |               |        |         | 3,495  |   |        |         | 34,733  |  
|                                                   |                                                  | Other, Net                      |         |               | 2,551  |               |        |         | 3,369  |   |        |         | 6,569   |  
|                                                   | Decrease (Increase) in Accounts Receivable       |                                 |         | 1,973         |        |               |        | (6,469  | )      |   |        | 13,165  |        
|                                                   | Decrease (Increase) in Inventories               |                                 |         | 12,242        |        |               |        | (12,081 | )      |   |        | 36,915  |        
|                                                   | Decrease (Increase) in Other Current Assets      |                                 |         | 30            |        |               |        | (3,245  | )      |   |        | 2,850   |        
|                                                   | Increase (Decrease) in Accounts Payable          |                                 |         | (13,189       | )      |               |        | 20,531  |        |   |        | 9,831   |        
|                                                   | Increase (Decrease) in Other Current Liabilities |                                 |         | 3,477         |        |               |        | 6,685   |        |   |        | (5,618  | )      
|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|                                                   | Net Cash Provided by Operating Activities        |                                 |         | 150,360       |        |               |        | 143,302 |        |   |        | 167,954 |        
|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|Investing Activities:                              |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|                                                   | Capital Expenditures                             |                                 |         | (73,581       | )      |               |        | (79,116 | )      |   |        | (87,721 | )      
|                                                   | Net Increase in Temporary Investments            |                                 |         | (48,823       | )      |               |        | (9,520  | )      |   |        |        |        
|                                                   | Purchase of Other Investments                    |                                 |         | (21,536       | )      |               |        | (4,149  | )      |   |        | (3,110  | )      
|                                                   | Cash Proceeds from Sale of Property              |                                 |         | 2,669         |        |               |        | 17,055  |        |   |        | 23,927  |        
|                                                   | COLI, Net                                        |                                 |         | (2,851        | )      |               |        | (1,952  | )      |   |        | 4,745   |        
|                                                   | Other, Net                                       |                                 |         | (4,835        | )      |               |        | 141     |        |   |        | 6,059   |        
|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|                                                   | Net Cash Used in Investing Activities            |                                 |         | (148,957      | )      |               |        | (77,541 | )      |   |        | (56,100 | )      
|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|Financing Activities:                              |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|                                                   | Net Proceeds from Short-Term Debt Borrowings     |                                 |         | 967           |        |               |        |        |        |   |        |        |        
|                                                   | Net Repayments of Long-Term Revolver Borrowings  |                                 |         |              |        |               |        | (900    | )      |   |        | (69,300 | )      
|                                                   | Proceeds from Long-Term Borrowings               |                                 |         | 1,164         |        |               |        | 1,577   |        |   |        | 2,138   |        
|                                                   | Payments on Long-Term Debt                       |                                 |         | (708          | )      |               |        | (5,590  | )      |   |        | (4,667  | )      
|                                                   | Dividends Paid                                   |                                 |         | (16,687       | )      |               |        | (16,708 | )      |   |        | (16,661 | )      
|                                                   | Purchase and Retirement of Common Stock          |                                 |         | (5,202        | )      |               |        |        |        |   |        |        |        
|                                                   | Other, Net                                       |                                 |         | 1,863         |        |               |        | 1,381   |        |   |        | 2,010   |        
|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|                                                   | Net Cash Used in Financing Activities            |                                 |         | (18,603       | )      |               |        | (20,240 | )      |   |        | (86,480 | )      
|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|Increase (Decrease) in Cash and Cash Equivalents   |                                                  |                                 | (17,200 | )             |        |               | 45,521 |         |        |   | 25,374 |        
|Cash and Cash Equivalents at Beginning of Year     |                                                  |                                 | 80,422  |               |        |               | 34,901 |         |        |   | 9,527  |        
|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|Cash and Cash Equivalents at End of Year           |                                                  | $                               | 63,222  |               |        | $             | 80,422 |         |        | $ | 34,901 |        
|                                                   |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|Supplemental Disclosures of Cash Flow Information: |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|Cash Paid During the Year for:                     |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|                                                   | Interest                                         |                                 | $       | 12,797        |        |               | $      | 12,616  |        |   | $      | 14,256  |        
|                                                   | Income Taxes                                     |                                 |         | 29,275        |        |               |        | 33,401  |        |   |        | 51,599  |        
|Non-Cash Activity:                                 |                                                  |                                 |         |               |        |               |        |         |        |   |        |        
|                                                   | Assets Acquired under Capital Leases             |                                 |         | 2,689         |        |               |        |        |        |   |        |        |        

See Notes to Consolidated Financial Statements.

27



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES



| |                            
| | ---------------------------
| | Principles of Consolidation

The accompanying consolidated financial
statements include the accounts of Ruddick Corporation and
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.



| |            
| | -----------
| | Fiscal Year

The Companys fiscal year ends on the Sunday
nearest to September 30. Fiscal years 2003, 2002 and 2001
each include 52 weeks and ended on September 28, 2003,
September 29, 2002 and September 30, 2001.



| |                 
| | ----------------
| | Use of Estimates

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



| |                          
| | -------------------------
| | Cash and Cash Equivalents

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



| |                      
| | ---------------------
| | Temporary Investments

The Company has invested in various municipal and
tax-exempt bonds and other similar investments in order to
enhance its return on cash balances. The Company selects
specific investments based on certain criteria, which include,
but are not limited to, suitable liquidity and credit quality
requirements. The carrying amount of temporary investments are
recorded at their amortized costs which approximates their fair
market values.



| |            
| | -----------
| | Inventories

The 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.



| |                                                       
| | ------------------------------------------------------
| | 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. 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

28



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 assured.

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.

The accounting for vendor funds, as described
above, has been consistently followed in prior years and is in
accordance with guidance established by Emerging Issues Task
Force EITF Issue 02-16, Accounting by a
Customer (Including a Reseller) for Certain Consideration
Received from a Vendor. Accordingly, the adoption of
EITF 02-16 did not have a material impact on the
Companys results of operations, financial position or cash
flows in the reported periods.



| |                          
| | -------------------------
| | Property and Depreciation

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

|                        |  |  |             | 
|----------------------- |  |  | ----------- | 
|Land improvements       |  |  | 10-40 years | 
|Buildings               |  |  | 15-40 years | 
|Machinery and equipment |  |  | 3-15 years  | 

Leasehold improvements are depreciated over the
lesser of the estimated useful life or the remaining term of the
lease. Assets under capital leases are amortized on a
straight-line basis over the lesser of 20 years or the
lease term. Maintenance and repairs are charged against income
when incurred. Expenditures for major renewals, replacements and
betterments are added to property. The cost and the related
accumulated depreciation of assets retired are eliminated from
the accounts with gains or losses on disposal being added to or
deducted from income. Property categories include $14,249,000
and $8,255,000 of accumulated costs for construction in progress
at September 28, 2003 and September 29, 2002,
respectively.

29



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                 
| | ----------------------------------------------------------------
| | Impairment of Long-lived Assets and Closed
    Store Obligations

In 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. 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 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, which generally have remaining terms
ranging from one to 14 years. 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.



| |            
| | -----------
| | Investments

The Company or its Harris Teeter subsidiary holds
financial investments in certain developments, with a managing
partner or partners, in which Harris Teeter, Inc. 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. In prior years the Company made loans to and equity
investments in a number of emerging growth companies, primarily
through investments in certain venture capital funds. 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 Impairment of Long-Lived
Assets.



| |                               
| | ------------------------------
| | Goodwill and Other Intangibles

In 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-Insurance

The 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

30



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

sources. The estimated total expected costs of
claims incurred is discounted to present values using an
appropriate discount factor.

The Company records an accrual for the estimated
amount of self-insured healthcare claims incurred by all
participants but not yet reported. 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.



| |            
| | -----------
| | Derivatives

The 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 Recognition

The 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 Sales

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.

The 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.



| |                                                 
| | ------------------------------------------------
| | Selling, General and Administrative
    Expenses

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 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

31



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 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.



| |            
| | -----------
| | Advertising

Costs incurred to produce media advertising are
expensed in the period in which the advertising first takes
place. All other advertising costs are also expensed when
incurred. Cooperative advertising income from vendors is
recorded in the period in which the related expense is incurred
and amounted to $1,634,000, $1,262,000 and $1,239,000 in fiscal
2003, 2002 and 2001, respectively. Net advertising expenses of
$22,894,000, $22,715,000, and $23,954,000 were included in the
Companys results of operations for fiscal 2003, 2002 and
2001, respectively.



| |                 
| | ----------------
| | Foreign Currency

Assets and liabilities of foreign operations 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 accumulated as a component of non-owner changes
in equity.



| |             
| | ------------
| | Income Taxes

Ruddick 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.



| |                           
| | --------------------------
| | 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 stock options. In 2001, the weighted average diluted
shares outstanding were equal to the weighted average basic
shares as the outstanding stock options had anti-dilution
effects and were therefore disregarded in the determination of
diluted shares outstanding.



| |              
| | -------------
| | Stock Options

As permitted by SFAS No. 123,
Accounting for Stock-Based Compensation and
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, the
Company continues to record compensation cost for stock option
plans in accordance with Accounting Principles Board Opinion
No. 25. Accordingly, compensation cost of stock options is
measured as the excess, if any, of the market price of the
Companys stock at the date of the grant over the option
exercise price and is charged to operations over the vesting
period. Income tax benefits attributable to stock options
exercised are credited to capital stock.

32



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                  
| | ---------------------------------
| | Other Non-Owner Changes in Equity

The Company reports other non-owner changes in
equity in accordance with SFAS No. 130,
Reporting Comprehensive Income. Other non-owner
changes in equity refers to revenues, expenses, gains and losses
that are not included in net earnings but rather are recorded
directly in stockholders equity. The components of
accumulated non-owner changes in equity, net of taxes at
September 28, 2003 (September 29, 2002) were
additional minimum pension liability of $40,305,000
($36,108,000) and foreign currency translation adjustments of
$1,314,000 ($3,271,000).



| |                  
| | -----------------
| | Reclassifications

To conform with classifications adopted in the
current year, the financial statements for the prior year
reflect certain reclassifications, which have no effect on net
income. During the second quarter of fiscal 2003, the Company
began classifying certain corporate administrative expenses of
the holding company as Selling, General and Administrative
Expenses that had previously been classified as
Other Expense (Income). Accordingly, consolidated
operating profit was reduced by $5,134,000 in fiscal 2003,
$7,466,000 in fiscal 2002, and $4,735,000 in fiscal 2001. The
reclassification of prior period amounts had no effect on
previously reported consolidated revenue, cost of sales, net
income, net income per share, business segment operating profit
or the financial position and cash flows of the Company. In
addition, to conform with classifications adopted in the current
year, the financial statements for prior years reflect certain
other reclassifications, which have no effect on net income.

New Accounting
Standards

The Company has adopted various new accounting
standards that became effective since the beginning of fiscal
2003. The adoption of the new standards did not have a material
impact on the Companys results of operations, financial
position or cash flows in the reported periods.

In fiscal 2003, the Company adopted the
disclosure requirements of SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure, which amends
SFAS No. 123 and provides alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based compensation. As permitted by
SFAS No. 148 and SFAS No. 123,
Accounting for Stock-Based Compensation, the Company
continues to record compensation cost for stock option plans in
accordance with Accounting Principles Board Opinion No. 25
(refer to Note captioned Stock Options herein). The
Company will continue to evaluate the alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based compensation. The standard is not
expected to have a material impact on the results of operations,
financial position or cash flows of the Company.

In May 2003 the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and
Equity. This Statement provides guidance on how an entity
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that
an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). Many
of these instruments were previously classified as equity such
as a financial instrument issued in the form of shares that is
mandatorily redeemable. The adoption of this new standard is not
expected to have a material impact on the Companys results
of operations, financial position or cash flows.

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
$18,012,000 and $17,668,000 less than the first-in, first-out
(FIFO) cost method at September 28, 2003 and
September 29, 2002, respectively. Foreign inventories and
limited categories of domestic inventories,

33



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

totaling $54,203,000 for fiscal 2003 and
$49,763,000 for fiscal 2002, are valued on the weighted average
and on the FIFO cost methods. At September 28, 2003
(September 29, 2002) the value of finished goods inventory
was $193,779,000 ($201,736,000), work in progress was $4,002,000
($4,703,000) and raw materials and supplies were $16,341,000
($18,109,000).

GOODWILL AND OTHER INTANGIBLES

The carrying amount of goodwill and other
intangibles at September 28, 2003 and September 29,
2002 was as follows:

|                                                                            |  |                |        |      |  |   |        | 
|--------------------------------------------------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | 
|                                                                            |  | 2003           |        | 2002
|                                                                            |  |                |        |     
|                                                                            |  |               
|                                                                            |  | (in thousands)
|Goodwill                                                                    |  | $              | 8,169  |      |  | $ | 8,169  | 
|Non-Amortizing Intangibles  Pension
    related intangible assets          |  |                | 3,407  |      |  |   | 3,706  | 
|Amortizing Intangibles  Customer
    lists, trademarks and other contracts |  |                | 1,108  |      |  |   | 426    | 
|                                                                            |  |                |        |      |  |   |        | 
|                                                                            |  | $              | 12,684 |      |  | $ | 12,301 | 
|                                                                            |  |                |        |      |  |   |        | 

The goodwill and amortizing intangibles are held
by the Companys American & Efird textile
subsidiary, and the non-amortizing intangibles are recorded with
the corporate assets. In accordance with SFAS No. 142,
Goodwill and Other Intangible Assets, the Company
has reviewed goodwill and other intangibles for possible
impairment, and as a result, there was no impairment charge
required in fiscal 2003. Amortization of goodwill during fiscal
2002 and 2001 impacted operating profit (net income, EPS) by
$924,500 ($570,000, $0.01 per diluted share) and $924,500
($566,000, $0.01 per diluted share), respectively.

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 $44,793,000 at September 28, 2003
and $41,517,000 at September 29, 2002, and no policy loans
were outstanding at either date. Certain leveraged COLI policies
were surrendered in fiscal year 2001 as a part of the
Companys settlement with the Internal Revenue Service
(IRS). The net life insurance expense or income is
included in selling, general and administrative expense in the
statements of consolidated income and retained earnings. Fiscal
2001 net life insurance expense included interest expense of
$1,828,000 associated with the outstanding policy loans that
were repaid in 2001 in connection with the IRS settlement.

IMPAIRMENT AND EXIT COSTS

During fiscal 2003 the Company recorded a pre-tax
charge of $580,000 ($360,000 after tax benefits) related to the
announced closing of one of A&Es thread yarn spinning
plants, which is expected to occur in December 2003. The charge
related to the impairment of the manufacturing plant being
closed.

During fiscal 2002, the Companys textile
subsidiary, American & Efird (A&E), recorded a
pre-tax charge of $7,823,000 ($4,825,000 after income taxes) for
exit and impairment costs related to the consolidation of
industrial thread dyeing and finishing operations into its plant
in Mt. Holly, North Carolina and the closing of its dyeing
and finishing operations in Gastonia, North Carolina. The
pre-tax charge was composed of $7,443,000 for the impairment of
the building, machinery, and equipment and $380,000 for the
costs of severance benefits. As of September 28, 2003 the
established exit cost reserve had been fully settled.

34



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In fiscal 2001, the Companys supermarket
subsidiary, Harris Teeter, sold 26 stores in certain of its
non-core markets. A pre-tax charge of $45,035,000 ($27,370,000
after income taxes) was recorded for exit costs, of which
$3,450,000 related to inventory adjustments charged to cost of
sales. At September 30, 2001 the remaining balance in the
exit reserve was $6,532,000, primarily related to lease
liabilities. During fiscal 2002, charges against the reserve for
costs incurred and paid totaled $5,010,000 and $710,000 was
reversed from the reserve as the result of more favorable
settlement of certain lease obligations than had been
anticipated and accrued in the prior fiscal year. During fiscal
2003, charges against the reserve for costs incurred and paid
totaled $444,000 leaving a remaining exit cost reserve of
$368,000 at September 28, 2003.

Additionally, in fiscal 2001, A&E recorded a
pre-tax charge of $2,105,000 (or $1,285,000 after income taxes)
primarily for the impairment of a spinning facility which was
closed in fiscal 2001.

LEASES

The Company leases certain equipment under
agreements expiring during the next 5 years. Harris Teeter
leases most of its stores under leases that expire during the
next 21 years. It is expected that such leases will be
renewed by exercising options or replaced by leases of other
properties. Most store leases provide for additional rentals
based on sales, and certain store facilities are sublet under
leases expiring during the next 14 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 leases with step rents is recognized on a
straight-line basis over the minimum lease term. Rent expense
for the fiscal years was as follows:

|                                |       |                |        |        |  |      |        |        |  |   |        |        | 
|------------------------------- | ----- | -------------- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                |       | 2003           |        | 2002   |  | 2001
|                                |       |                |        |        |  |     
|                                |       |               
|                                |       | (in thousands)
|Minimum, net of sublease income |       | $              | 65,333 |        |  | $    | 67,932 |        |  | $ | 73,816 |       
|Contingent                      |       |                | 1,215  |        |  |      | 1,329  |        |  |   | 1,456  |       
|                                |       |                |        |        |  |      |        |        |  |   |        |       
|                                | Total |                | $      | 66,548 |  |      | $      | 69,261 |  |   | $      | 75,272 | 
|                                |       |                |        |        |  |      |        |        |  |   |        |       

Future minimum lease commitments (excluding
leases assigned or expected to be assigned  see
below) and total minimum sublease rental income to be received
under non-cancelable subleases at September 28, 2003 were
as follows:

|                                              |                                                                            |                |         |           |  |         |         |   |  |   |       |        |  
|--------------------------------------------- | -------------------------------------------------------------------------- | -------------- | ------- | --------- |  | ------- | ------- | - |  | - | ----- | ------ | -
|                                              |                                                                            | Operating      |         |           |  | Capital
|                                              |                                                                            | Leases         |         | Subleases |  | Leases 
|                                              |                                                                            |                |         |           |  |        
|                                              |                                                                            |               
|                                              |                                                                            | (in thousands)
|2004                                          |                                                                            | $              | 63,832  |           |  | $       | (2,528  | ) |  | $ | 500   |       
|2005                                          |                                                                            |                | 63,073  |           |  |         | (2,347  | ) |  |   | 464   |       
|2006                                          |                                                                            |                | 59,309  |           |  |         | (2,270  | ) |  |   | 285   |       
|2007                                          |                                                                            |                | 54,934  |           |  |         | (2,200  | ) |  |   | 285   |       
|2008                                          |                                                                            |                | 52,709  |           |  |         | (1,906  | ) |  |   | 285   |       
|Later years                                   |                                                                            |                | 473,828 |           |  |         | (14,260 | ) |  |   | 4,117 |       
|                                              |                                                                            |                |         |           |  |         |         |   |  |   |       |       
|Total minimum lease obligations (receivables) |                                                                            | $              | 767,685 |           |  | $       | (25,511 | ) |  |   | 5,936 |       
|                                              |                                                                            |                |         |           |  |         |         |   |  |   |       |       
|                                              | Amount representing interest                                               |                |         |           |  |         |         |   |  |   |       | (2,892 | )
|                                              |                                                                            |                |         |           |  |         |         |   |  |   |       |       
|                                              | Present value of net minimum obligation (included
    with long-term debt) |                |         |           |  |         |         |   |  |   | $     | 3,044  |  
|                                              |                                                                            |                |         |           |  |         |         |   |  |   |       |       

35



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 18 years
and the future minimum lease payments of $102,093,000 over this
period have been assumed by these merchants.

LONG-TERM DEBT

Long-term debt at September 28, 2003 and
September 29, 2002 was as follows:

|                                                                           |                      |                |        |         |  |   |        |         | 
|-------------------------------------------------------------------------- | -------------------- | -------------- | ------ | ------- |  | - | ------ | ------- | 
|                                                                           |                      | 2003           |        | 2002   
|                                                                           |                      |                |        |        
|                                                                           |                      |               
|                                                                           |                      | (in thousands)
|6.48% Senior Note due $7,143 annually March, 2005
    through 2011         |                      | $              | 50,000 |         |  | $ | 50,000 |        
|7.72% Senior Note due April, 2017                                          |                      |                | 50,000 |         |  |   | 50,000 |        
|7.55% Senior Note due July, 2017                                           |                      |                | 50,000 |         |  |   | 50,000 |        
|Lease financing obligation, variable interest
    rate due September, 2004 |                      |                | 30,364 |         |  |   | 30,364 |        
|Capital lease obligations                                                  |                      |                | 3,044  |         |  |   | 668    |        
|Other obligations                                                          |                      |                | 5,687  |         |  |   | 4,860  |        
|                                                                           |                      |                |        |         |  |   |        |        
|                                                                           | Total                |                |        | 189,095 |  |   |        | 185,892 | 
|                                                                           | Less current portion |                |        | 31,596  |  |   |        | 727     | 
|                                                                           |                      |                |        |         |  |   |        |        
|                                                                           | Total long-term debt |                | $      | 157,499 |  |   | $      | 185,165 | 
|                                                                           |                      |                |        |         |  |   |        |        

Long-term debt maturities in each of the next
five fiscal years are as follows: 2004  $31,596,000;
2005  $8,338,000; 2006  $8,076,000;
2007  $7,809,000; 2008  $7,766,000.

In 2002, the Company and three banks entered into
a new revolving credit facility for an aggregate amount of up to
$100 million to refinance an existing credit facility.
Borrowings and repayments under this revolving credit facility
are of the same nature as short-term credit lines; however, due
to the nature and terms of the agreement providing for maturity
of the repayment obligations beyond one year, all borrowings
under the facility are classified as long term debt. During the
period from inception to September 28, 2003, there have
been no borrowings under the credit facility. The facility has a
maturity of three years, plus two annual extensions of one year
each if then granted by the banks. As of September 28,
2003, the three banks granted the first annual extension of the
credit facility and thereby established a maturity date of
May 14, 2006. This maturity date may be further extended by
one year if approved by the banks in 2004 in accordance with the
provisions of the credit agreement. 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 those
terms are defined 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, minimum fixed charge coverage ratio and tangible net
worth requirements. As of September 28, 2003, the Company
was within the various financial covenants. The Company is
charged a variable commitment fee based on the unused balance
net of trade and standby letters of credit which were
approximately $13,250,000 at September 28, 2003. The
commitment fee in fiscal 2003 and 2002 was 0.25% of the unused
balance.

In fiscal 2002, the amount outstanding on the
previous credit facility was $900,000 from the beginning of the
year through the repayment date in May, 2002. The daily weighted
average interest rate (a variable rate related to the current
published CD rate) was 2.4% through the repayment date in fiscal
2002. A commitment fee of 0.15% of the unused line was charged
during 2002.

36



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company currently maintains a lease
arrangement with an expiration date of September 13, 2004
with a non-related national bank as owner-trustee and two
additional banks as lenders. The lease arrangement covers the
real property of primarily three Harris Teeter stores, having an
aggregate cost value of $30.4 million at September 28,
2003. The total financing costs for these properties was
$547,000 in fiscal 2003 and $1,187,000 in fiscal 2002. The lease
includes an option for the Company to purchase the properties on
or before the expiration date, or otherwise a requirement for
the sale of the properties to liquidate the lease termination
obligations estimated currently to be approximately
$30.4 million. The Company guarantees repayment of
approximately $27.1 million if it elects the sale option.
During the second quarter of 2002, the Company consolidated the
above property and related debt obligation in the Companys
balance sheet, increasing property, net and long term debt. On
September 28, 2003, those balances were $24.8 million
in property, net and $30.4 million in long term debt.

As indicated above, various loan agreements
provide, among other things, for the maintenance of minimum
levels of consolidated tangible net worth, as defined in the
respective agreements. The required minimum consolidated net
worth, as defined under the most restrictive provision, was
approximately $434.8 million as of September 28, 2003.
Consolidated tangible net worth, as defined, exceeded this
required minimum by approximately $51.2 million as of
September 28, 2003. Future required minimum consolidated
tangible net worth is subject to annual increases of 40% of
consolidated net income for such year.

Total interest expense on long-term debt was
$12,373,000, $12,135,000 and $14,221,000 in 2003, 2002 and 2001,
respectively.

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
($150 million of Senior Notes due at various dates through
2017) outstanding as of September 28, 2003 was $176,446,000
as compared to its carrying amount of $150,000,000. 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 28, 2003 was 1,000,000 shares of Additional
Preferred stock, 4,000,000 shares of Preference stock
(noncumulative $0.56 convertible, voting, $10 liquidation
value), and 75,000,000 shares of no par value Common stock.
No shares of Additional Preferred stock or Preference stock were
issued or outstanding at September 28, 2003.

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 stock option plans. The stock purchases are
effected from time to time and it is not expected that the
Company will purchase a material number of shares in any
quarterly or annual fiscal period. During fiscal 2003, the
Company purchased and retired 377,800 shares at a total cost of
$5,202,000, or an average price of $13.77 per share. There were
no stock purchases during fiscal 2002 or 2001.

37



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                              |                                             |                      |            |          |   |   |        |        |  
|----------------------------- | ------------------------------------------- | -------------------- | ---------- | -------- | - | - | ------ | ------ | -
|                              |                                             | Shares               |            | Amount  
|                              |                                             |                      |            |         
|                              |                                             |                     
|                              |                                             | (in thousands except
|                              |                                             | share amounts)      
|Balance at October 1, 2000    |                                             |                      | 46,220,876 |          |   | $ | 48,398 |       
|                              |                                             |                      |            |          |   |   |        |       
|                              | Shares issued under exercised stock options |                      |            | 98,820   |   |   |        | 1,075  |  
|                              | Tax effect of disqualifying stock options   |                      |            |         |   |   |        | 76     |  
|                              |                                             |                      |            |          |   |   |        |       
|Balance at September 30, 2001 |                                             |                      | 46,319,696 |          |   | $ | 49,549 |       
|                              |                                             |                      |            |          |   |   |        |       
|                              | Shares issued under exercised stock options |                      |            | 134,492  |   |   |        | 1,374  |  
|                              | Tax effect of disqualifying stock options   |                      |            |         |   |   |        | 204    |  
|                              |                                             |                      |            |          |   |   |        |       
|Balance at September 29, 2002 |                                             |                      | 46,454,188 |          |   | $ | 51,127 |       
|                              |                                             |                      |            |          |   |   |        |       
|                              | Shares issued under exercised stock options |                      |            | 146,845  |   |   |        | 1,705  |  
|                              | Shares purchased and retired                |                      |            | (377,800 | ) |   |        | (5,202 | )
|                              | Tax effect of disqualifying stock options   |                      |            |         |   |   |        | 119    |  
|                              |                                             |                      |            |          |   |   |        |       
|Balance at September 28, 2003 |                                             |                      | 46,223,233 |          |   | $ | 47,749 |       
|                              |                                             |                      |            |          |   |   |        |       

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.

STOCK OPTIONS

At September 28, 2003, the Company has 1988,
1993, 1995, 1997, 2000 and 2002 stock option plans, which plans
were approved by the Companys shareholders and authorized
options for 6,300,000 shares of common stock. Under the
plans, the Company may grant to officers and management
personnel incentive stock options which generally become
exercisable in installments of 20% per year at each of the first
through fifth anniversaries from grant date and which expire
seven years from grant date. Additionally, pursuant to the terms
of certain of the 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. Further, under certain of
the plans the Company may grant performance shares, stock
awards, restricted stock and nonqualified stock options to
employees and outside directors as well as incentive stock
options to employees. Additionally, the Company granted a
single, one-time nonqualified stock option of 1,000 shares
to each of its seven non-employee directors during 1996 which
vested immediately, and which generally expire seven years from
grant date. Under each of the plans the exercise price of each
option shall be no less than the market price of the
Companys stock on the date of grant and an options
maximum term is ten years. At the discretion of the Company,
under certain plans a stock appreciation right may be granted
and exercised in lieu of the exercise of the related option
(which is then forfeited). Under the plans, as of
September 28, 2003 the Company may grant additional options
for the purchase of 2,604,000 shares.

38



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the status of the Companys
stock option plans as of September 28, 2003,
September 29, 2002 and September 30, 2001, changes
during the years ending on those dates and related weighted
average exercise price is presented below (shares in thousands):

|                                 |  |        |       |       |  |        |       |       |  |        |       |       |  |   |       |  |  |  |       |   |  |   |       | 
|-------------------------------- |  | ------ | ----- | ----- |  | ------ | ----- | ----- |  | ------ | ----- | ----- |  | - | ----- |  |  |  | ----- | - |  | - | ----- | 
|                                 |  |        |       |       |  |       
|                                 |  | 2003   |       | 2002  |  | 2001  
|                                 |  |        |       |       |  |       
|                                 |  | Shares |       | Price |  | Shares |       | Price |  | Shares |       | Price
|                                 |  |        |       |       |  |        |       |       |  |        |       |      
|Outstanding at beginning of year |  |        | 2,089 |       |  | $      | 16.15 |       |  |        | 1,797 |       |  | $ | 15.88 |  |  |  | 1,697 |   |  | $ | 16.64 | 
|Granted                          |  |        | 464   |       |  |        | 14.44 |       |  |        | 575   |       |  |   | 15.84 |  |  |  | 368   |   |  |   | 11.52 | 
|Exercised                        |  |        | (163  | )     |  |        | 11.98 |       |  |        | (161  | )     |  |   | 11.17 |  |  |  | (104  | ) |  |   | 11.11 | 
|Forfeited                        |  |        | (111  | )     |  |        | 16.75 |       |  |        | (122  | )     |  |   | 17.43 |  |  |  | (164  | ) |  |   | 16.96 | 
|                                 |  |        |       |       |  |        |       |       |  |        |       |       |  |   |       |  |  |  |       |   |  |   |       | 
|Outstanding at end of year       |  |        | 2,279 |       |  | $      | 16.07 |       |  |        | 2,089 |       |  | $ | 16.15 |  |  |  | 1,797 |   |  | $ | 15.88 | 
|                                 |  |        |       |       |  |        |       |       |  |        |       |       |  |   |       |  |  |  |       |   |  |   |       | 
|Options exercisable at year end  |  |        | 1,138 |       |  | $      | 17.21 |       |  |        | 933   |       |  | $ | 16.77 |  |  |  | 853   |   |  | $ | 15.84 | 
|                                 |  |        |       |       |  |        |       |       |  |        |       |       |  |   |       |  |  |  |       |   |  |   |       | 

The following table summarizes options
outstanding and options exercisable as of September 28,
2003, and the related weighted average remaining contractual
life (years) and weighted average exercise price (shares in
thousands):

|                       |                 |                     |       |                     |  |       |     |             |  |       |       |       |  |  |       |     |  |   |       |       | 
|---------------------- | --------------- | ------------------- | ----- | ------------------- |  | ----- | --- | ----------- |  | ----- | ----- | ----- |  |  | ----- | --- |  | - | ----- | ----- | 
|                       |                 |                     |       |                    
|                       |                 | Options Outstanding |       | Options Exercisable
|                       |                 |                     |       |                    
|                       |                 | Shares              |       | Remaining           |  |       |     | Shares      |  |      
|Option Price per Share |                 | Outstanding         |       | Life                |  | Price |     | Exercisable |  | Price
|                       |                 |                     |       |                     |  |       |     |             |  |      
|$11.50 to $14.38       |                 |                     | 786   |                     |  |       | 5.0 |             |  | $     | 13.16 |       |  |  | 206   |     |  | $ | 12.21 |      
|                       | 14.49 to  17.41 |                     |       | 885                 |  |       |     | 4.9         |  |       |       | 16.29 |  |  |       | 368 |  |   |       | 16.51 | 
|                       | 18.47 to  20.28 |                     |       | 608                 |  |       |     | 2.8         |  |       |       | 19.56 |  |  |       | 564 |  |   |       | 19.49 | 
|                       |                 |                     |       |                     |  |       |     |             |  |       |       |       |  |  |       |     |  |   |       |      
|$11.50 to $20.28       |                 |                     | 2,279 |                     |  |       | 4.1 |             |  |       | 16.07 |       |  |  | 1,138 |     |  |   | 17.21 |      
|                       |                 |                     |       |                     |  |       |     |             |  |       |       |       |  |  |       |     |  |   |       |      

The weighted average fair value at date of grant
for options granted during fiscal 2003, 2002 and 2001 was $3.50,
$4.09 and $3.25 per option, respectively. The fair value of
options at date of grant was estimated using the Black-Scholes
model with the following weighted average assumptions:

|                        |  |      |       |      |  |      |       |   |  |  |       |  
|----------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                        |  | 2003 |       | 2002 |  | 2001
|                        |  |      |       |      |  |     
|Expected life (years)   |  |      | 5.1   |      |  |      | 5.1   |   |  |  | 4.9   |  
|Risk-free interest rate |  |      | 3.14  | %    |  |      | 3.71  | % |  |  | 5.76  | %
|Volatility              |  |      | 29.61 | %    |  |      | 30.33 | % |  |  | 29.66 | %
|Dividend yield          |  |      | 2.30  | %    |  |      | 2.30  | % |  |  | 2.20  | %

The Company has adopted the disclosure-only
provisions of SFAS No. 123, Accounting for
Stock-Based Compensation and SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure. Accordingly, no compensation
cost has been recognized for the stock options granted in fiscal
2003, 2002 or 2001. Had compensation cost been determined based
on the fair value at the grant date

39



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

consistent with the provisions of these
statements, the Companys pro forma net income and basic
and diluted net income per share would have been as follows:

|                                                                                                                           |         |               |               |                        |        |      |        |      |        |      |      |   |        |       |  
|-------------------------------------------------------------------------------------------------------------------------- | ------- | ------------- | ------------- | ---------------------- | ------ | ---- | ------ | ---- | ------ | ---- | ---- | - | ------ | ----- | -
|                                                                                                                           |         |               |               | 2003                   |        | 2002 |        | 2001
|                                                                                                                           |         |               |               |                        |        |      |        |     
|                                                                                                                           |         |               |               |                       
|                                                                                                                           |         |               |               | (in thousands,        
|                                                                                                                           |         |               |               | except per share date)
|Net Income (Loss)                                                                                                          |         |  as reported |               | $                      | 59,882 |      |        | $    | 51,983 |      |      | $ | (727   | )    
|Deduct: Total stock-based employee compensation
    expense determined under the fair value based method, net of
    taxes |         |               | (991          | )                      |        |      | (1,031 | )    |        |      | (771 | )
|                                                                                                                           |         |               |               |                        |        |      |        |      |        |      |      |  
|Net Income (Loss)                                                                                                          |         |  proforma    |               | $                      | 58,891 |      |        | $    | 50,952 |      |      | $ | (1,498 | )    
|                                                                                                                           |         |               |               |                        |        |      |        |      |        |      |      |   |        |      
|Net Income (Loss) Per Share                                                                                               |         |               |               |                        |        |      |        |      |        |      |      |  
|                                                                                                                           | Basic   |               |  as reported |                        | $      | 1.29 |        |      | $      | 1.12 |      |   | $      | (0.02 | )
|                                                                                                                           |         |  pro forma   |               |                        | 1.27   |      |        |      | 1.10   |      |      |   | (0.03  | )    
|                                                                                                                           | Diluted |               |  as reported |                        |        | 1.29 |        |      |        | 1.12 |      |   |        | (0.02 | )
|                                                                                                                           |         |  pro forma   |               |                        | 1.27   |      |        |      | 1.09   |      |      |   | (0.03  | )    

The pro forma effect on net income for fiscal
2003, 2002 and 2001 is not necessarily representative of the pro
forma effect on net income in future years.

INCOME TAXES

The provision for income taxes consisted of the
following:

|                           |                 |                |        |        |   |      |        |        |  |   |         |        |  
|-------------------------- | --------------- | -------------- | ------ | ------ | - | ---- | ------ | ------ |  | - | ------- | ------ | -
|                           |                 | 2003           |        | 2002   |   | 2001
|                           |                 |                |        |        |   |     
|                           |                 |               
|                           |                 | (in thousands)
|CURRENT                    |                 |                |        |        |   |      |        |        |  |   |         |       
|                           | Federal         |                | $      | 22,845 |   |      | $      | 21,832 |  |   | $       | 36,078 |  
|                           | State and other |                |        | 9,269  |   |      |        | 4,531  |  |   |         | 5,697  |  
|                           |                 |                |        |        |   |      |        |        |  |   |         |       
|                           |                 |                | 32,114 |        |   |      | 26,363 |        |  |   | 41,775  |       
|                           |                 |                |        |        |   |      |        |        |  |   |         |       
|DEFERRED                   |                 |                |        |        |   |      |        |        |  |   |         |       
|                           | Federal         |                |        | 1,357  |   |      |        | 2,514  |  |   |         | (6,410 | )
|                           | State and other |                |        | (1,261 | ) |      |        | 732    |  |   |         | (3,625 | )
|                           |                 |                |        |        |   |      |        |        |  |   |         |       
|                           |                 |                | 96     |        |   |      | 3,246  |        |  |   | (10,035 | )     
|                           |                 |                |        |        |   |      |        |        |  |   |         |       
|Provision for income taxes |                 | $              | 32,210 |        |   | $    | 29,609 |        |  | $ | 31,740  |       
|                           |                 |                |        |        |   |      |        |        |  |   |         |       

Income from foreign operations before income
taxes in fiscal 2003, 2002 and 2001 was $4,207,000, $1,010,000
and $3,496,000, respectively. Income taxes provided for income
from foreign operations in fiscal 2003, 2002 and 2001 was
$1,546,000, $699,000 and $736,000, respectively, including the
minority interest in such taxes.

In fiscal 2001, the Company recorded additional
income tax expense of $20.0 million reflecting the terms of
settlement with the Internal Revenue Service (IRS)
related to the disallowance of deductions for its corporate
owned life insurance (COLI) policy loan interest and
administrative fees for all the years of the insurance program
since its inception October 4, 1993. The settlement
provided for the surrender of the related insurance policies,
thereby eliminating any material future tax exposure.

40



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                                                      |                                                                     |                |        |        |   |      |        |       |   |   |        |        |  
|--------------------------------------------------------------------- | ------------------------------------------------------------------- | -------------- | ------ | ------ | - | ---- | ------ | ----- | - | - | ------ | ------ | -
|                                                                      |                                                                     | 2003           |        | 2002   |   | 2001
|                                                                      |                                                                     |                |        |        |   |     
|                                                                      |                                                                     |               
|                                                                      |                                                                     | (in thousands)
|Income tax on pre-tax income at the statutory
    federal rate of 35% |                                                                     | $              | 32,232 |        |   | $    | 28,557 |       |   | $ | 10,854 |       
|Increase (decrease) attributable to:                                  |                                                                     |                |        |        |   |      |        |       |   |   |        |       
|                                                                      | IRS settlement                                                      |                |        |       |   |      |        |      |   |   |        | 20,000 |  
|                                                                      | State and other income taxes, net of federal
    income tax benefit |                |        | 3,512  |   |      |        | 3,486 |   |   |        | 388    |  
|                                                                      | Employee Stock Ownership Plan (ESOP)                                |                |        | (1,065 | ) |      |        | (843  | ) |   |        | (1,202 | )
|                                                                      | COLI                                                                |                |        | (974   | ) |      |        | (943  | ) |   |        | (843   | )
|                                                                      | Other items, net                                                    |                |        | (1,495 | ) |      |        | (648  | ) |   |        | 2,543  |  
|                                                                      |                                                                     |                |        |        |   |      |        |       |   |   |        |       
|Income tax expense                                                    |                                                                     | $              | 32,210 |        |   | $    | 29,609 |       |   | $ | 31,740 |       
|                                                                      |                                                                     |                |        |        |   |      |        |       |   |   |        |       

The tax effects of temporary differences giving
rise to the Companys consolidated deferred tax assets and
liabilities at September 28, 2003 and September 29,
2002 are as follows:

|                                                                       |                                              |                                |   |         |         |   |   |         |         |  
|---------------------------------------------------------------------- | -------------------------------------------- | ------------------------------ | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                       |                                              | 2003                           |   | 2002   
|                                                                       |                                              |                                |   |        
|                                                                       |                                              |                               
|                                                                       |                                              | (in thousands)                
|Deferred Tax Assets (no valuation allowance
    considered necessary): |                                              |                                |   |         |         |   |   |        
|                                                                       | Employee benefits                            |                                | $ | 20,501  |         |   | $ | 21,711  |        
|                                                                       | Reserves not currently deductible            |                                |   | 14,376  |         |   |   | 14,221  |        
|                                                                       | Vendor allowances                            |                                |   | 6,322   |         |   |   | 4,321   |        
|                                                                       | Rent obligations                             |                                |   | 9,502   |         |   |   | 10,033  |        
|                                                                       | Other                                        |                                |   | 2,614   |         |   |   | 2,114   |        
|                                                                       |                                              |                                |   |         |         |   |   |        
|                                                                       |                                              | Total deferred tax assets      |   | $       | 53,315  |   |   | $       | 52,400  |  
|                                                                       |                                              |                                |   |         |         |   |   |        
|Deferred Tax Liabilities:                                              |                                              |                                |   |         |         |   |   |        
|                                                                       | Property, plant and equipment                |                                | $ | (57,953 | )       |   | $ | (59,065 | )      
|                                                                       | Undistributed profit on foreign subsidiaries |                                |   | (4,859  | )       |   |   | (5,580  | )      
|                                                                       | Other capitalized costs                      |                                |   |        |         |   |   | (1,749  | )      
|                                                                       | Other                                        |                                |   | (7,534  | )       |   |   | (5,462  | )      
|                                                                       |                                              |                                |   |         |         |   |   |        
|                                                                       |                                              | Total deferred tax liabilities |   | $       | (70,346 | ) |   | $       | (71,856 | )
|                                                                       |                                              |                                |   |         |         |   |   |        

Undistributed earnings of the Companys
foreign subsidiaries amount to approximately $22,960,000 at
September 28, 2003. Of those earnings, approximately
$9,144,000 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
of approximately $3,200,000 (less any applicable U.S. foreign
tax credits and deductions) and withholding taxes payable to the
various foreign countries.

INDUSTRY SEGMENT INFORMATION

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

41



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Teeter operates a regional chain of supermarkets.
The Company evaluates performance of its two businesses
utilizing various measures which are based on operating profit.

Summarized financial information for fiscal 2003,
2002 and 2001 is as follows:

|                              |  |               |       |         |  |              |         |              |  |   |       |   |  |   |         | 
|----------------------------- |  | ------------- | ----- | ------- |  | ------------ | ------- | ------------ |  | - | ----- | - |  | - | ------- | 
|                              |  | Industrial    |       | Retail  |  |              |         |             
|                              |  | Thread        |       | Grocery |  | Corporate(1) |         | Consolidated
|                              |  |               |       |         |  |              |         |             
|                              |  |              
|                              |  | (in millions)
|2003                          |  |               |       |         |  |              |         |              |  |   |       |   |  |   |         | 
|Net Sales                     |  | $             | 293.1 |         |  | $            | 2,431.6 |              |  |   |       |   |  | $ | 2,724.7 | 
|Gross Profit                  |  |               | 73.9  |         |  |              | 703.2   |              |  |   |       |   |  |   | 777.1   | 
|Operating Profit (Loss)       |  |               | 13.6  |         |  |              | 93.6    |              |  | $ | (5.1  | ) |  |   | 102.1   | 
|Assets Employed at Year End   |  |               | 259.1 |         |  |              | 660.1   |              |  |   | 148.0 |   |  |   | 1,067.2 | 
|Depreciation and Amortization |  |               | 17.9  |         |  |              | 57.8    |              |  |   | 1.5   |   |  |   | 77.2    | 
|Capital Expenditures          |  |               | 9.2   |         |  |              | 64.4    |              |  |   |      |   |  |   | 73.6    | 
|2002                          |  |               |       |         |  |              |         |              |  |   |       |   |  |   |         | 
|Net Sales                     |  | $             | 294.5 |         |  | $            | 2,349.7 |              |  |   |       |   |  | $ | 2,644.2 | 
|Gross Profit                  |  |               | 77.1  |         |  |              | 677.7   |              |  |   |       |   |  |   | 754.8   | 
|Operating Profit (Loss)       |  |               | 12.5  |         |  |              | 88.8    |              |  | $ | (7.5  | ) |  |   | 93.8    | 
|Assets Employed at Year End   |  |               | 279.4 |         |  |              | 684.4   |              |  |   | 75.1  |   |  |   | 1,038.9 | 
|Depreciation and Amortization |  |               | 19.4  |         |  |              | 55.0    |              |  |   | 1.4   |   |  |   | 75.8    | 
|Capital Expenditures          |  |               | 7.8   |         |  |              | 66.6    |              |  |   | 4.7   |   |  |   | 79.1    | 
|2001                          |  |               |       |         |  |              |         |              |  |   |       |   |  |   |         | 
|Net Sales                     |  | $             | 326.5 |         |  | $            | 2,416.8 |              |  |   |       |   |  | $ | 2,743.3 | 
|Gross Profit                  |  |               | 82.6  |         |  |              | 675.9   |              |  |   |       |   |  |   | 758.5   | 
|Operating Profit (Loss)       |  |               | 21.6  |         |  |              | 31.8    |              |  | $ | (4.7  | ) |  |   | 48.7    | 
|Assets Employed at Year End   |  |               | 280.5 |         |  |              | 602.1   |              |  |   | 57.4  |   |  |   | 940.0   | 
|Depreciation and Amortization |  |               | 19.7  |         |  |              | 59.3    |              |  |   | 1.3   |   |  |   | 80.3    | 
|Capital Expenditures          |  |               | 19.2  |         |  |              | 68.5    |              |  |   |      |   |  |   | 87.7    | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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:

|                                                   |  |                |           |      |  |      |           |  |  |   |           | 
|-------------------------------------------------- |  | -------------- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                                   |  | 2003           |           | 2002 |  | 2001
|                                                   |  |                |           |      |  |     
|                                                   |  |               
|                                                   |  | (in thousands)
|Net Revenues  Domestic United States              |  | $              | 2,572,987 |      |  | $    | 2,506,805 |  |  | $ | 2,611,468 | 
|Net Revenues  Foreign                             |  |                | 151,752   |      |  |      | 137,393   |  |  |   | 131,822   | 
|                                                   |  |                |           |      |  |      |           |  |  |   |           | 
|                                                   |  | $              | 2,724,739 |      |  | $    | 2,644,198 |  |  | $ | 2,743,290 | 
|                                                   |  |                |           |      |  |      |           |  |  |   |           | 
|Net Long-Lived Assets  Domestic United
    States |  | $              | 505,102   |      |  | $    | 511,562   |  |  | $ | 502,739   | 
|Net Long-Lived Assets  Foreign                    |  |                | 32,924    |      |  |      | 30,836    |  |  |   | 30,592    | 
|                                                   |  |                |           |      |  |      |           |  |  |   |           | 
|                                                   |  | $              | 538,026   |      |  | $    | 542,398   |  |  | $ | 533,331   | 
|                                                   |  |                |           |      |  |      |           |  |  |   |           | 

42



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

EMPLOYEE BENEFIT PLANS

Substantially all domestic full-time employees of
the Company and its subsidiaries participate in non-contributory
defined benefit pension plans. Employees in foreign subsidiaries
participate to varying degrees in local pension plans, which, in
the aggregate, are not significant. 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 plans is to contribute annually the amount required by
regulatory authorities to meet minimum funding requirements and
an amount to increase the funding ratios over a period of
approximately five years to a level determined by its actuaries
to be effective in reducing the volatility of contributions. As
a result of primarily lower discount rates for the measurement
of benefit obligations and negative returns on the plans
assets, over the past two years, the funding ratios of the
pension plans have eroded and will require higher levels of
contributions in future years.

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 28,
2003 and September 29, 2002 for the pension plan and the
supplemental retirement plan:

|                              |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |         |         |  
|----------------------------- | --------------------------------------------- | ----------------------------------------- | - | ----------------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | - | - | ------- | ------- | -
|                              |                                               |                                           |   |                  
|                              |                                               | Pension Plan                              |   | Supplemental Plan
|                              |                                               |                                           |   |                  
|                              |                                               | 2003                                      |   | 2002              |         | 2003 |   | 2002   
|                              |                                               |                                           |   |                   |         |      |   |        
|                              |                                               |                                          
|                              |                                               | (in thousands)                           
|Change in benefit obligation: |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                              | Benefit obligation at the beginning of year   |                                           | $ | 189,649           |         |      | $ | 153,625 |         |  | $ | 19,747  |         |   | $ | 19,044  |        
|                              | Service cost                                  |                                           |   | 8,982             |         |      |   | 6,787   |         |  |   | 552     |         |   |   | 367     |        
|                              | Interest cost                                 |                                           |   | 12,188            |         |      |   | 11,323  |         |  |   | 1,327   |         |   |   | 1,378   |        
|                              | Plan change                                   |                                           |   |                  |         |      |   | 213     |         |  |   |        |         |   |   | (247    | )      
|                              | Actuarial loss                                |                                           |   | 17,754            |         |      |   | 25,399  |         |  |   | 2,921   |         |   |   | 173     |        
|                              | Benefits paid                                 |                                           |   | (8,495            | )       |      |   | (7,698  | )       |  |   | (1,145  | )       |   |   | (968    | )      
|                              |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                              |                                               | Pension benefit obligation at end of year |   |                   | 220,078 |      |   |         | 189,649 |  |   |         | 23,402  |   |   |         | 19,747  |  
|                              |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|Change in plan assets:        |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                              | Fair value of assets at the beginning of year |                                           |   | 120,631           |         |      |   | 111,985 |         |  |   |        |         |   |   |        |        
|                              | Actual return on plan assets                  |                                           |   | 15,857            |         |      |   | (5,012  | )       |  |   |        |         |   |   |        |        
|                              | Employer contribution                         |                                           |   | 22,000            |         |      |   | 22,164  |         |  |   | 1,145   |         |   |   | 968     |        
|                              | Benefits paid                                 |                                           |   | (8,495            | )       |      |   | (7,698  | )       |  |   | (1,145  | )       |   |   | (968    | )      
|                              | Non-investment expenses                       |                                           |   | (1,044            | )       |      |   | (808    | )       |  |   |        |         |   |   |        |        
|                              |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                              |                                               | Fair value of assets at end of year       |   |                   | 148,949 |      |   |         | 120,631 |  |   |         |        |   |   |         |        |  
|                              |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                              | Funded status                                 |                                           |   | (71,129           | )       |      |   | (69,018 | )       |  |   | (23,402 | )       |   |   | (19,747 | )      
|                              | Unrecognized net actuarial loss               |                                           |   | 93,631            |         |      |   | 82,917  |         |  |   | 6,762   |         |   |   | 4,043   |        
|                              | Unrecognized prior service cost               |                                           |   | 1,384             |         |      |   | 1,552   |         |  |   | 2,023   |         |   |   | 2,154   |        
|                              | Unrecognized transition asset                 |                                           |   |                  |         |      |   |        |         |  |   |        |         |   |   |        |        
|                              |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                              |                                               | Prepaid (accrued) benefit cost            |   | $                 | 23,886  |      |   | $       | 15,451  |  |   | $       | (14,617 | ) |   | $       | (13,550 | )
|                              |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        

43



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                          |                                               |                |   |                   |   |      |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------- | --------------------------------------------- | -------------- | - | ----------------- | - | ---- | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                          |                                               |                |   |                  
|                                                                          |                                               | Pension Plan   |   | Supplemental Plan
|                                                                          |                                               |                |   |                  
|                                                                          |                                               | 2003           |   | 2002              |   | 2003 |   | 2002   
|                                                                          |                                               |                |   |                   |   |      |   |        
|                                                                          |                                               |               
|                                                                          |                                               | (in thousands)
|Amounts recognized in the statement of financial
    position consist of: |                                               |                |   |                   |   |      |   |         |   |  |   |         |   |  |   |        
|                                                                          | Accrued benefit liability                     |                | $ | (42,170           | ) |      | $ | (45,434 | ) |  | $ | (18,571 | ) |  | $ | (16,039 | )
|                                                                          | Intangible pension asset                      |                |   | 1,384             |   |      |   | 1,552   |   |  |   | 2,023   |   |  |   | 2,154   |  
|                                                                          | Accumulated other changes in non-owner equity |                |   | 64,672            |   |      |   | 59,333  |   |  |   | 1,931   |   |  |   | 335     |  

Assets of the pension plan are invested in
directed trusts. Assets in the directed trusts are invested in
U.S. government securities, corporate bonds, cash equivalents
and domestic equities. The pension plan contribution payable at
September 28, 2003 and September 29, 2002 required to
be paid by the due date of the federal income tax return was
zero for both years.

For the pension plan, a weighted average discount
rate of 6.0% in 2003 (6.5% in 2002) and rate of increase in
future payroll costs of 3.5%  4.0% in both 2003 and
2002 were used in determining the actuarial present value of the
projected benefit obligations. The assumed expected long-term
rate of return on assets was 8.25% in both 2003 and 2002.

For the supplemental plan, a 6.0% and 6.5%
weighted average discount rate was used for 2003 and 2002,
respectively, and a 6.0% rate of increase in future payroll
costs was used in both 2003 and 2002 in determining the
actuarial present value of the projected benefit obligations.

A minimum pension liability adjustment is
required when the accumulated benefit obligation exceeds 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 non-owner changes in equity. The amounts
recorded in other non-owner changes in equity, net of tax, as a
result of minimum pension liability adjustments for the pension
and supplemental plans were $4,197,000, $25,025,000, and
$11,083,000 in fiscal 2003, 2002, and 2001, respectively.

Net periodic pension expense for defined benefit
plans for fiscal 2003, 2002 and 2001 included the following
components:

|                                   |  |                |         |      |  |      |         |   |  |   |         |  
|---------------------------------- |  | -------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                   |  |               
|                                   |  | Pension Plan  
|                                   |  |               
|                                   |  | 2003           |         | 2002 |  | 2001
|                                   |  |                |         |      |  |     
|                                   |  |               
|                                   |  | (in thousands)
|Service cost                       |  | $              | 8,982   |      |  | $    | 6,787   |   |  | $ | 5,578   |  
|Interest cost                      |  |                | 12,188  |      |  |      | 11,323  |   |  |   | 10,722  |  
|Expected return on plan assets     |  |                | (11,976 | )    |  |      | (10,831 | ) |  |   | (10,620 | )
|Amortization of transition asset   |  |                |        |      |  |      |        |   |  |   | (358    | )
|Amortization of prior service cost |  |                | 168     |      |  |      | 243     |   |  |   | 319     |  
|Recognized net actuarial loss      |  |                | 4,203   |      |  |      | 1,665   |   |  |   |        |  
|                                   |  |                |         |      |  |      |         |   |  |   |         |  
|Net periodic benefit cost          |  | $              | 13,565  |      |  | $    | 9,187   |   |  | $ | 5,641   |  
|                                   |  |                |         |      |  |      |         |   |  |   |         |  

44



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                   |  |                   |       |      |  |      |       |  |  |   |       | 
|---------------------------------- |  | ----------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                   |  |                  
|                                   |  | Supplemental Plan
|                                   |  |                  
|                                   |  | 2003              |       | 2002 |  | 2001
|                                   |  |                   |       |      |  |     
|                                   |  |                  
|                                   |  | (in thousands)   
|Service cost                       |  | $                 | 552   |      |  | $    | 367   |  |  | $ | 259   | 
|Interest cost                      |  |                   | 1,327 |      |  |      | 1,378 |  |  |   | 1,315 | 
|Amortization of prior service cost |  |                   | 131   |      |  |      | 134   |  |  |   | 134   | 
|Recognized net actuarial loss      |  |                   | 202   |      |  |      | 557   |  |  |   | 917   | 
|                                   |  |                   |       |      |  |      |       |  |  |   |       | 
|Net periodic benefit cost          |  | $                 | 2,212 |      |  | $    | 2,436 |  |  | $ | 2,625 | 
|                                   |  |                   |       |      |  |      |       |  |  |   |       | 

The Company also has an Employee Stock Ownership
Plan (ESOP) for eligible employees. Under the ESOP
the Company provides cash contributions, as determined by the
Board of Directors, to a trust for the purpose of purchasing
shares of the Companys common stock. Such contributions
are based on the Companys net income return on average
shareholders equity in the fiscal year with a base
contribution of 1.5% of participants eligible compensation
and additionally up to 3.5% of eligible compensation. At
September 28, 2003, approximately 18% of the Companys
common shares outstanding were owned by employees as
participants in the ESOP.

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
liability under such plan being determined by the fair market
value of the Companys common stock, (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.

The Companys textile subsidiary maintains a
profit sharing plan for most of its domestic employees. American
& Efird provides 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.

Expenses under the ESOP, as well as the profit
sharing, deferred compensation and other plans, were as follows:

|                         |  |                |       |      |  |      |       |  |  |   |       | 
|------------------------ |  | -------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                         |  | 2003           |       | 2002 |  | 2001
|                         |  |                |       |      |  |     
|                         |  |               
|                         |  | (in thousands)
|ESOP                     |  | $              | 7,371 |      |  | $    | 8,059 |  |  | $ | 4,626 | 
|Profit sharing and other |  |                | 1,791 |      |  |      | 6,725 |  |  |   | 1,464 | 

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 for additional commitments
and contingencies.

45



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

COMPUTATION OF EARNINGS PER SHARE

The following table details the computation of
EPS for fiscal 2003, 2002 and 2001 (in thousands except per
share data):

|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |        |  
|---------------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | ---- | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                                                                         |                                                                           | 2003 |   | 2002   |   | 2001
|                                                                                         |                                                                           |      |   |        |   |     
|Basic EPS:                                                                               |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Net income (loss)                                                         |      | $ | 59,882 |   |      | $ | 51,983 |   |  | $ | (727   | )
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Weighted average common shares outstanding                                |      |   | 46,385 |   |      |   | 46,402 |   |  |   | 46,276 |  
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Basic EPS                                                                 |      | $ | 1.29   |   |      | $ | 1.12   |   |  | $ | (0.02  | )
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|Diluted EPS:                                                                             |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Net income (loss)                                                         |      | $ | 59,882 |   |      | $ | 51,983 |   |  | $ | (727   | )
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Weighted average common shares outstanding                                |      |   | 46,385 |   |      |   | 46,402 |   |  |   | 46,276 |  
|                                                                                         | Potential common share equivalents(1)                                     |      |   | 78     |   |      |   | 176    |   |  |   |       |  
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Weighted average common shares outstanding                                |      |   | 46,463 |   |      |   | 46,578 |   |  |   | 46,276 |  
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Diluted EPS                                                               |      | $ | 1.29   |   |      | $ | 1.12   |   |  | $ | (0.02  | )
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|Calculation of potential common share
    equivalents:(1)                                |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Options to purchase potential common shares                               |      |   | 805    |   |      |   | 1,118  |   |  |   | 733    |  
|                                                                                         | Potential common shares assumed purchased                                 |      |   | (727   | ) |      |   | (942   | ) |  |   | (622   | )
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Potential common share equivalents                                        |      |   | 78     |   |      |   | 176    |   |  |   | 111    |  
|                                                                                         |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|Calculation of potential common shares assumed
    purchased with potential proceeds:(1) |                                                                           |      |   |        |   |      |   |        |   |  |   |       
|                                                                                         | Potential proceeds from exercise of options to
    purchase common shares |      | $ | 10,585 |   |      | $ | 15,329 |   |  | $ | 8,531  |  
|                                                                                         | Common stock price used under the treasury stock
    method               |      | $ | 14.55  |   |      | $ | 16.27  |   |  | $ | 13.72  |  
|                                                                                         | Potential common shares assumed purchased                                 |      |   | 727    |   |      |   | 942    |   |  |   | 622    |  



---



|    |                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The effect of 111,535 weighted potential shares
    under stock options computed for 2001 using the Treasury Stock
    Method is anti-dilutive and thus is disregarded in the
    determination of weighted average diluted common equivalent
    shares outstanding.

Outstanding options to purchase shares excluded
from potential common share equivalents (option price exceeded
the average market price during the period) amounted to
1,511,000 shares, 1,008,000 shares and
1,152,000 shares for the years ended September 28,
2003, September 29, 2002 and September 30, 2001,
respectively.

46



---



##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

QUARTERLY INFORMATION (UNAUDITED)

The following table sets forth certain financial
information, the high and low sales prices and dividends
declared for the common stock for the periods indicated. The
Companys stock is listed and traded on the New York Stock
Exchange.

|                        |      |                                      |       |         |  |         |       |         |  |   |       |       |  |   |       |       | 
|----------------------- | ---- | ------------------------------------ | ----- | ------- |  | ------- | ----- | ------- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                        |      | First                                |       | Second  |  | Third   |       | Fourth 
|                        |      | Quarter                              |       | Quarter |  | Quarter |       | Quarter
|                        |      |                                      |       |         |  |         |       |        
|                        |      |                                     
|                        |      | (in millions, except per share data)
|2003 Operating Results  |      |                                      |       |         |  |         |       |         |  |   |       |       |  |   |       |      
|Net Sales               |      | $                                    | 678.4 |         |  | $       | 685.2 |         |  | $ | 685.0 |       |  | $ | 676.1 |      
|Gross Profit            |      |                                      | 191.8 |         |  |         | 196.1 |         |  |   | 194.0 |       |  |   | 195.2 |      
|Net Income(1)           |      |                                      | 13.0  |         |  |         | 14.4  |         |  |   | 16.1  |       |  |   | 16.4  |      
|Net Income Per Share(1) |      |                                      | 0.28  |         |  |         | 0.31  |         |  |   | 0.35  |       |  |   | 0.35  |      
|Dividend Per Share      |      |                                      | 0.09  |         |  |         | 0.09  |         |  |   | 0.09  |       |  |   | 0.09  |      
|Market Price Per Share  |      |                                      |       |         |  |         |       |         |  |   |       |       |  |   |       |      
|                        | High |                                      |       | 15.70   |  |         |       | 14.11   |  |   |       | 15.90 |  |   |       | 16.97 | 
|                        | Low  |                                      |       | 13.90   |  |         |       | 12.09   |  |   |       | 12.58 |  |   |       | 15.67 | 
|2002 Operating Results  |      |                                      |       |         |  |         |       |         |  |   |       |       |  |   |       |      
|Net Sales               |      | $                                    | 653.2 |         |  | $       | 659.5 |         |  | $ | 666.3 |       |  | $ | 665.2 |      
|Gross Profit            |      |                                      | 181.0 |         |  |         | 184.9 |         |  |   | 195.4 |       |  |   | 193.5 |      
|Net Income(2)           |      |                                      | 10.5  |         |  |         | 8.7   |         |  |   | 16.5  |       |  |   | 16.3  |      
|Net Income Per Share(2) |      |                                      | 0.23  |         |  |         | 0.19  |         |  |   | 0.35  |       |  |   | 0.35  |      
|Dividend Per Share      |      |                                      | 0.09  |         |  |         | 0.09  |         |  |   | 0.09  |       |  |   | 0.09  |      
|Market Price Per Share  |      |                                      |       |         |  |         |       |         |  |   |       |       |  |   |       |      
|                        | High |                                      |       | 16.98   |  |         |       | 17.41   |  |   |       | 17.59 |  |   |       | 17.97 | 
|                        | Low  |                                      |       | 14.45   |  |         |       | 15.12   |  |   |       | 15.30 |  |   |       | 15.00 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes the effects of pre-tax exit and
    impairment costs totaling $580,000 ($360,000 after tax benefits,
    or $0.01 per diluted share) in the fourth quarter of 2003,
    as more fully described in the note Impairment and Exit
    Costs.                                                                                                                                                  
|   
|(2) | Includes the effects of pre-tax exit and
    impairment costs totaling $7.8 million ($4.8 million
    after tax benefits, or $0.10 per diluted share) in the
    second fiscal quarter and pre-tax exit and impairment credits of
    $710,000 ($431,000 after taxes, or $0.01 per diluted share) in
    the third fiscal quarter, as more fully described in the note
    Impairment and Exit Costs.

47



---



##### 



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

Effective April 18, 2002, upon the
recommendation of the Audit Committee, the Board of Directors of
the Company approved the dismissal of its independent public
accountants, Arthur Andersen LLP, and engaged KPMG LLP as its
new independent public accountants. KPMG LLP reviewed the
Companys financial statements for its fiscal quarters
ended March 31 and June 30, 2002 and audited the
Companys financial statements for the fiscal year ended
September 29, 2002 and September 28, 2003.

During the Companys fiscal years ended
October 1, 2000, and September 30, 2001, and the
subsequent interim periods through April 18, 2002, there
were no disagreements between the Company and Arthur Andersen
LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to Arthur Andersen
LLPs satisfaction, would have caused Arthur Andersen LLP
to make reference to the subject matter of the disagreements in
connection with its reports on the Companys financial
statements for such periods. None of the reportable events
described under Item 304(a)(1)(v) of Regulation S-K
occurred during the Companys fiscal years ended
October 1, 2000, and September 30, 2001, or during any
subsequent interim period through April 18, 2002.

The audit reports issued by Arthur Andersen LLP
on the Companys consolidated financial statements as of
and for the fiscal years ended October 1, 2000 and
September 30, 2001 did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. The Company
provided Arthur Andersen LLP with a copy of the foregoing
disclosures, and a letter from Arthur Andersen LLP confirming
its agreement with these disclosures was filed as an exhibit to
the Companys Current Report on Form 8-K, filed with
the Securities and Exchange Commission on April 23, 2002.

During the Companys fiscal years ended
October 1, 2000, and September 30, 2001, and through
April 18, 2002, the Company did not consult with KPMG LLP
with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Companys
consolidated financial statements, or any of the other matters
or events set forth in Item 304(a)(2)(i) and (ii) of
Regulation S-K.

Item 9A.     Controls
and Procedures

(a) Evaluation of disclosure controls and
procedures. As of September 28, 2003, an evaluation of
the effectiveness of the Companys disclosure controls and
procedures (as defined in Rule 13(a)-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) Changes in internal control over
financial reporting. During the Companys fourth fiscal
quarter of 2003, there has been no change in the Companys
internal controls over financial reporting (as defined in
Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange
Act) that has materially affected, or is reasonably likely to
materially affect, the Companys internal controls over
financial reporting.

PART III

Item 10.     Directors
and Executive Officers of the Registrant

The information required by this item with
respect to executive officers is set forth above in
Item 4A. 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

48



---



##### 



Compliance in the Registrants Proxy
Statement to be filed with the Securities and Exchange
Commission with respect to the Registrants 2004 Annual
Meeting of Shareholders (the 2004 Proxy Statement).


Code of Ethics and Code of Business Conduct
and Ethics

The Company has adopted a written Code of Ethics
(the Code of Ethics) that applies to our 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 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
Charters

In 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 approved Corporate Governance
Guidelines. 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
and Special Stock Option Committee and Corporate Governance and
Nominating Committee are also included on the Companys
website.

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 and Executive Compensation in the
Registrants 2004 Proxy Statement.



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



| |                                     
| | ------------------------------------
| | Equity Compensation Plan Information

The following table provides information as of
September 28, 2003 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       |           | Price of Outstanding      |  | Equity Compensation Plans          
|                                                               |  | of Outstanding Options,    |           | Options, Warrants and     |  | (excluding securities              
|                                                               |  | Warrants and Rights        |           | Rights                    |  | reflected in column(a))            
|Plan Category(1)                                               |  | (a)                        |           | (b)                       |  | (c)                                
|                                                               |  |                            |           |                           |  |                                    
|Equity compensation plans approved by security
    holders     |  |                            | 2,276,400 |                           |  | $                                   | 16.08 |  |  |  | 2,604,000 | 
|Equity compensation plans not approved by
    security holders |  |                            | 3,000     | (2)                       |  | $                                   | 13.19 |  |  |  |          | 
|                                                               |  |                            |           |                           |  |                                     |       |  |  |  |           | 
|Total                                                          |  |                            | 2,279,400 |                           |  | $                                   | 16.07 |  |  |  | 2,604,000 | 
|                                                               |  |                            |           |                           |  |                                     |       |  |  |  |           | 



---



|    |                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The table does not include information regarding
    the Ruddick Corporation Director Deferral plan. This plan
    permits the deferral of the payment of the annual fee and the
    regular board meeting fees. The deferred fees are converted into
    a number of shares of common stock with a fair market value
    equal to the

49



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | value of the retainer or fees deferred, and such
    number of shares are then credited to the directors
    account (along with the amount of any dividends or stock
    distributions) in the form of phantom stock units. At the time a
    participant in the plan ceases to be a director, shares of
    common stock or cash, in the discretion of the Compensation
    Committee, will be distributed to the participant or a
    designated beneficiary. On September 28, 2003, there were
    59,050 phantom stock units allocated pursuant to this plan.



|    |                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents options granted to non-employee
    directors on November 21, 1996 with an exercise price of
    $13.19, the average of the high and low sale price on the date
    of grant. The expiration date of the options was
    November 21, 2003.

Additional 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 Registrants 2004 Proxy Statement.

Item 13.     Certain
Relationships and Related Transactions

The information required by this item is
incorporated herein by reference to the section entitled
Certain Relationships and Related Transactions in
the Registrants 2004 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 Public Accountants in the
Registrants 2004 Proxy Statement.

PART IV

Item 15.     Exhibits,
Financial Statement Schedules and Reports on
Form 8-K

(a) The following documents are filed as
part of this report:



| |     |                      
| | --- | ---------------------
| | (1) | Financial Statements:

|                                                                                                                                                              |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                              |  | Page
|                                                                                                                                                              |  |     
|Independent Auditors Report                                                                                                                                  |  |      | 22 | 
|Report of Predecessor Auditor (Arthur Andersen
    LLP)                                                                                                       |  |      | 23 | 
|Consolidated Balance Sheets, September 28,
    2003 and September 29, 2002                                                                                    |  |      | 24 | 
|Statements of Consolidated Income and Retained
    Earnings for the fiscal years ended September 28, 2003,
    September 29, 2002 and September 30, 2001      |  |      | 25 | 
|Statements of Consolidated Total Non-Owner
    Changes in Equity for the fiscal years ended September 28,
    2003, September 29, 2002 and September 30, 2001 |  |      | 26 | 
|Statements of Consolidated Cash Flows for the
    fiscal years ended September 28, 2003, September 29,
    2002 and September 30, 2001                        |  |      | 27 | 
|Notes to Consolidated Financial Statements                                                                                                                    |  |      | 28 | 



| |     |                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------
| | (2) | Financial Statement Schedules: The following
    report and financial statement schedules are filed herewith:

|                                                                     |  |  |     | 
|-------------------------------------------------------------------- |  |  | --- | 
|Report of Predecessor Accountant on Financial
    Statement Schedule |  |  | S-1 | 
|Schedule II  Valuation and
    Qualifying Accounts and Reserves     |  |  | S-2 | 



| |  |                                                                                                                                                                                       
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | All other schedules are omitted as the required
    information is inapplicable or the information is presented in
    the consolidated financial statements or related notes thereto.

50



---



##### 





| |     |                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------
| | (3) | Index to
    Exhibits:The following exhibits
    are filed with this report or, as noted, incorporated by
    reference herein.

|        |      |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ---- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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  | *                      |  | Credit Agreement for up to an aggregate of
    $100,000,000 entered into as of May 14, 2002, by and
    between the Company and each of Branch Banking and Trust Company
    and RBC Centura Bank as lenders and Wachovia Bank, National
    Association as lender and administrative agent, 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, 2002 (Commission File No. 1-6905).         
|       
|        | 4.2  | *                      |  | $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).                                                                                        
|       
|        | 4.3  | *                      |  | $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).
|       
|        |      |                        |  | The Company has certain 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 | *                      |  | Description of Incentive Compensation Plans,
    incorporated herein by reference to Exhibit 10.1 of the
    registrants Annual Report on Form 10-K for the fiscal
    year ended September 29, 1996 (Commission
    No. 1-6905).**                                                                                                                                                                                                                                                           
|       
|        | 10.2 | *                      |  | 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).**                                                                                                                                                                                                           
|       
|        | 10.3 | *                      |  | 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).**                                            
|       
|        | 10.4 | *                      |  | 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).**                                                                                                                                                                                
|       
|        | 10.5 | *                      |  | 1988 Incentive Stock Option Plan, incorporated
    herein by reference to Exhibit 10.6 of the
    registrants Annual Report on Form 10-K for the fiscal
    year ended October 2, 1994 (Commission File
    No. 1-6905).**                                                                                                                                                                                                                                                                    

51



---



##### 



|        |       |                        |  |                                                                                                                                                                                                                                                                                                                          
|------- | ----- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|       
|        | 10.6  | *                      |  | 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).**                                                                
|       
|        | 10.7  | *                      |  | 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).**                                          
|       
|        | 10.8  | *                      |  | 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).**
|       
|        | 10.9  | *                      |  | 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).                           
|       
|        | 10.10 | *                      |  | 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).**                      
|       
|        | 10.11 | *                      |  | Ruddick Corporation Nonstatutory Stock Option
    Agreement Between the Company and Edwin B. Borden, Jr.,
    incorporated herein by reference to Exhibit 10.2 of the
    registrants Quarterly Report on Form 10-Q for the
    quarterly period ended December 29, 1996 (Commission File
    No. 1-6905).**            
|       
|        | 10.12 | *                      |  | [Intentionally left blank]                                                                                                                                                                                                                                                                                               
|       
|        | 10.13 | *                      |  | Ruddick Corporation Nonstatutory Stock Option
    Agreement Between the Company and Roddey Dowd, Sr., incorporated
    herein by reference to Exhibit 10.4 of the
    registrants Quarterly Report on Form 10-Q for the
    quarterly period ended December 29, 1996 (Commission File
    No. 1-6905).**                
|       
|        | 10.14 | *                      |  | Ruddick Corporation Nonstatutory Stock Option
    Agreement Between the Company and James E.S. Hynes, incorporated
    herein by reference to Exhibit 10.5 of the
    registrants Quarterly Report on Form 10-Q for the
    quarterly period ended December 29, 1996 (Commission File
    No. 1-6905).**                
|       
|        | 10.15 | *                      |  | Ruddick Corporation Nonstatutory Stock Option
    Agreement Between the Company and Hugh L. McColl, Jr.,
    incorporated herein by reference to Exhibit 10.6 of the
    registrants Quarterly Report on Form 10-Q for the
    quarterly period ended December 29, 1996 (Commission File
    No. 1-6905).**             
|       
|        | 10.16 | *                      |  | Ruddick Corporation 1995 Comprehensive Stock
    Option 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).**                                                                
|       
|        | 10.17 | *                      |  | Ruddick Corporation 1997 Comprehensive Stock
    Option and Award 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).**                                                  
|       
|        | 10.18 | *                      |  | Ruddick Corporation Director Deferred 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).**                                                                             
|       
|        | 10.19 | *                      |  | 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).**                                                                  

52



---



##### 



|        |       |                        |  |                                                                                                                                                                                                                                                                                                                                       
|------- | ----- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|       
|        | 10.20 | *                      |  | Ruddick Corporation 2000 Comprehensive Stock
    Option and Award 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).**                                                                   
|       
|        | 10.21 | *                      |  | 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).**
|       
|        | 10.22 | *                      |  | 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).**                                                                                             
|       
|        | 10.23 | *                      |  | Ruddick Corporation 2002 Comprehensive Stock
    Option and Award 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).**                                                                  
|       
|        | 21    |                       |  | List of Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                  
|       
|        | 23.1  |                       |  | Consent of Independent Public Accountants.                                                                                                                                                                                                                                                                                            
|       
|        | 23.2  |                       |  | Notice regarding Consent of Arthur Andersen LLP.                                                                                                                                                                                                                                                                                      
|       
|        | 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) Reports on Form 8-K.



| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | The following reports on Form 8-K were filed
    by the Company during the quarter ended September 28, 2003.



| |     
| | ----
| | None

(c) Exhibits



| |                  
| | -----------------
| | See (a)(3) above.

(d) 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: December 8, 2003

| |                                          
| | -----------------------------------------
| | By: /s/ THOMAS W. DICKSON                
| |                                          
| | Thomas W. Dickson,                       
| | 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. DICKSONThomas W. Dickson       |  | President and Chief Executive Officer and
    Director (Principal Executive Officer)   |  | December 8, 2003
|                                            
|/s/ JOHN B. WOODLIEFJohn B. Woodlief         |  | Vice President  Finance and Chief
    Financial Officer (Principal Financial Officer) |  | December 8, 2003
|                                            
|/s/ RONALD H. VOLGERRonald H. Volger         |  | Vice President and Treasurer (Principal
    Accounting Officer)                        |  | December 8, 2003
|                                            
|/s/ JOHN R. BELKJohn R. Belk                 |  | Director                                                                               |  | December 8, 2003
|                                            
|/s/ EDWIN B. BORDEN, JR.Edwin B. Borden, Jr. |  | Director                                                                               |  | December 8, 2003
|                                            
|/s/ JOHN P. DERHAM CATOJohn P. Derham Cato   |  | Director                                                                               |  | December 8, 2003
|                                            
|/s/ ALAN T. DICKSONAlan T. Dickson           |  | Chairman of the Board and Director                                                     |  | December 8, 2003
|                                            
|/s/ R. STUART DICKSONR. Stuart Dickson       |  | Chairman of the Executive Committee and Director                                       |  | December 8, 2003
|                                            
|/s/ JAMES E. S. HYNESJames E. S. Hynes       |  | Director                                                                               |  | December 8, 2003
|                                            
|/s/ ANNA S. NELSONAnna S. Nelson             |  | Director                                                                               |  | December 8, 2003
|                                            
|/s/ BAILEY W. PATRICKBailey W. Patrick       |  | Director                                                                               |  | December 8, 2003
|                                            
|Robert H. Spilman, Jr.                       |  | Director                                                                               |  |                 
|                                            
|/s/ HAROLD C. STOWEHarold C. Stowe           |  | Director                                                                               |  | December 8, 2003
|                                            
|Isaiah Tidwell                               |  | Director                                                                               |  |                 

54



---



##### 



REPORT OF PREDECESSOR PUBLIC
ACCOUNTANT

(ARTHUR ANDERSEN LLP)


ON FINANCIAL STATEMENT SCHEDULE


The following report is a copy of a report
previously issued by Arthur Andersen LLP and it has not been
reissued by Arthur Andersen LLP. This report applies to
Supplemental Schedule II Valuation and Qualifying Accounts
and Reserves for the year ended September 30, 2001.

REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

We have audited in accordance with auditing
standards generally accepted in the United States, the
consolidated financial statements included in this
Form 10-K, and have issued our report thereon dated October
29, 2001. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule
listed in Item 14(a)(2) is the responsibility of the
Companys management and is presented for purposes of
complying with the Securities and Exchange Commissions
rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic
financial statements taken as a whole.



| |                        
| | -----------------------
| | /s/ ARTHUR ANDERSEN LLP

Charlotte, North Carolina

October 29, 2001


S-1



---



##### 



SCHEDULE II

RUDDICK CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES

For the Fiscal Years Ended


September 30, 2001, September 29,
2002 and September 28, 2003


|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |       |       | 
|------------------------------------- | ------------------------------------------------------- | ------------------------------- | - | ---------- | ----- | ---------- | - | --------- | ----- |  | - | ----- | --- | - | - | ----- | ----- | 
|Column A                              |                                                         | Column B                        |   | Column C   |       | Column D   |   | Column E 
|                                      |                                                         |                                 |   |            |       |            |   |          
|                                      |                                                         |                                 |   | Additions  |       |            |   |          
|                                      |                                                         | Balance at                      |   | Charged to |       |            |   | Balance  
|                                      |                                                         | Beginning of                    |   | Costs and  |       |            |   | at End of
|Description                           |                                                         | Fiscal Year                     |   | Expenses   |       | Deductions |   | Period   
|                                      |                                                         |                                 |   |            |       |            |   |          
|                                      |                                                         |                                
|                                      |                                                         | (in thousands)                 
|Fiscal Year Ended September 30, 2001: |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|                                      | Reserves deducted from assets to which they
    apply  |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |       |      
|                                      |                                                         | Allowance For Doubtful Accounts |   | $          | 3,166 |            |   | $         | 692   |  |   | $     | 925 | * |   | $     | 2,933 | 
|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|                                      | Reserves For Exit Costs                                 |                                 | $ |           |       |            | $ | 9,200     |       |  | $ | 2,668 |     |   | $ | 6,532 |      
|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|Fiscal Year Ended September 29, 2002: |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|                                      | Reserves deducted from assets to which they
    apply  |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |       |      
|                                      |                                                         | Allowance For Doubtful Accounts |   | $          | 2,933 |            |   | $         | 1,263 |  |   | $     | 710 | * |   | $     | 3,486 | 
|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|                                      | Reserves For Exit Costs                                 |                                 | $ | 6,532      |       |            | $ | (710      | )     |  | $ | 5,010 |     |   | $ | 812   |      
|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|Fiscal Year Ended September 28, 2003: |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|                                      | Reserves deducted from assets to which they
    apply  |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |       |      
|                                      |                                                         | Allowance For Doubtful Accounts |   | $          | 3,486 |            |   | $         | 1,436 |  |   | $     | 960 | * |   | $     | 3,962 | 
|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|                                      | Reserves For Exit Costs                                 |                                 | $ | 812        |       |            |   |          |       |  | $ | 444   |     |   | $ | 368   |      
|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      



---



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

S-2