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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 29,
    2002                                               
|[ ]        |  | 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 nonaffiliates of the Registrant as of December 2,
2002 was $474,136,030.

As of December 2, 2002, the Registrant had
outstanding 46,547,875 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 2003 Annual
Meeting of Shareholders to be held on February 20, 2003.
(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 29, 2002

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                                   |  |  | 4  | 
| | Item  4A. |  |  | Executive Officers of the Registrant                                                      |  |  | 4  | 
| | 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 |  |  | 6  | 
| | Item  7A. |  |  | Quantitative and Qualitative Disclosures about
    Market Risk                            |  |  | 19 | 
| | Item  8.  |  |  | Financial Statements and Supplementary Data                                               |  |  | 20 | 
| | Item  9.  |  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |  | 46 | 
| | PART III  |  |  |                                                                                           |  |  |    | 
| | Item  10. |  |  | Directors and Executive Officers of the Registrant                                        |  |  | 46 | 
| | Item  11. |  |  | Executive Compensation                                                                    |  |  | 46 | 
| | Item  12. |  |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |  | 46 | 
| | Item  13. |  |  | Certain Relationships and Related Transactions                                            |  |  | 47 | 
| | PART IV   |  |  |                                                                                           |  |  |    | 
| | Item  14. |  |  | Controls and Procedures                                                                   |  |  | 47 | 
| | Item  15. |  |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                       |  |  | 47 | 



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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.

At September 29, 2002, the Company and its
subsidiaries had total consolidated assets of $1,038,947,000 and
had approximately 17,650 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
Investments of the Notes to Consolidated Financial
Statements of Ruddick Corporation and Subsidiaries in
Item 8 hereof.

The two businesses in which the Company engages
through its principal operating subsidiaries, 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 of Ruddick Corporation and
Subsidiaries in Item 8 hereof.

The only foreign operations conducted by the
Company are through A&E. Neither of the two businesses
engaged in by the Company would be characterized as seasonal.

Net revenue received from domestic United States
customers was $2,504,430,000 in fiscal 2002, $2,611,468,000 in
fiscal 2001 and $2,570,924,000 in fiscal 2000. Net revenue
received from customers in foreign countries was $139,768,000 in
fiscal 2002, $131,822,000 in fiscal 2001 and $121,167,000 in
fiscal 2000. Net long-lived assets located in the domestic
United States were $511,443,000 at fiscal year end 2002,
$502,680,000 at fiscal year end 2001 and $560,693,000 at fiscal
year end 2000. Net long-lived assets located in foreign
countries were $30,836,000, $30,592,000 and $24,692,000 at
fiscal year end 2002, 2001 and 2000, respectively.

The Company employs fifteen people, 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,
audit, insurance, 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

Harris Teeter operates supermarkets in North
Carolina (111), Virginia (13), South Carolina (10), Georgia (1),
Tennessee (5) and Florida (3) for sales of groceries,
produce, meat and seafood, delicatessen items, bakery items,
wines and non-food items such as health and beauty care, floral
and other products normally offered for sale in supermarkets.
Harris Teeter has a program in place whereby each retail store
will undergo remodels on a regular basis. Harris Teeter
remodeled 18 stores during fiscal 2002 and expects to remodel 24
stores in fiscal 2003. In addition, during fiscal 2002 twelve
new stores were opened and six stores were closed. As of fiscal
year end 2002, Harris Teeter had 143 stores in operation. Its
principal offices and distribution facility containing cold
storage perishable products and dry groceries are located near
Charlotte,

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North Carolina. Another dry grocery, cold storage
perishable and frozen products storage facility is located in
Greensboro, North Carolina. Harris Teeter produces dairy
products, but buys most of the products it sells, including its
private label brands. Harris Teeters sales constituted 89%
of the Companys consolidated sales in fiscal 2002 (88% in
2001 and 87% in 2000).


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, may continue to expand
into more traditional 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 fiscal year end, Harris Teeter employed
approximately 8,154 full-time and 6,481 part-time employees,
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s sales are
primarily of industrial sewing thread products, which are sold
to manufacturers 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 2002 (12% in 2001 and 13% in 2000).

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 operates nine modern manufacturing facilities in
North Carolina. These 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 U. S.

A&E also has wholly-owned operations in
Belgium, Canada, China, Costa Rica, El Salvador, England,
Guatemala, Honduras, Hong Kong, Northern Ireland, Italy, Mexico,
Malaysia and Poland, majority-owned joint ventures in China,
Dominican Republic and Haiti and minority interest in ventures
with ongoing operations in Bangladesh, Estonia, Mauritius, the
Netherlands, Portugal, Slovakia, South Africa and Sri Lanka.
A&Es amount of assets in these foreign operations
totals approximately $105 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 the end of the 2002 fiscal year was approximately
$8,785,000 versus $8,988,000 at the end of the preceding fiscal
year. The majority of the order backlog is expected to be filled
within three weeks of fiscal year end. The international order
backlog is not material. A&E has approximately 7,200
domestic and 5,000 international customer accounts which are
active. In fiscal 2002, no single customer accounted for more
than 8% of total net sales, and the ten largest customers
accounted for 23% of 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 and are currently available in an adequate supply.

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A&E has two patents issued. There are no
material licenses, franchises, or concessions held by A&E.
Research and Development expenditures were $490,000, $432,000,
and $459,000 in fiscal 2002, 2001 and 2000, respectively, none
of which were sponsored by customers. Three employees are
engaged in this activity full-time.

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 employed approximately 3,000 persons
worldwide as of the end of fiscal 2002. A&E considers its
employee relations to be good.

Item 2.     Properties

The executive offices of the Company are located
in approximately 9,000 square feet of leased space in a downtown
office tower at 301 S. Tryon Street, Suite 1800, Charlotte,
North Carolina, 28202.

Harris Teeter owns its principal offices, which
consist of 116,000 square feet of space located on a 10-acre
tract of land near Charlotte, North Carolina. Harris Teeter also
owns a 104-acre tract east of Charlotte where a cold storage and
dry grocery distribution facility is located. This facility
includes approximately 330,000 square feet of dry grocery
warehousing space and approximately 187,000 square feet of
storage for refrigerated or perishable goods. Harris Teeter also
owns a 49-acre tract in Greensboro, North Carolina, which
contains approximately 550,000 square feet of dry grocery
warehousing, including the single pick facility for health and
beauty care and other general merchandise, approximately 164,000
square feet of perishable warehouse and approximately 199,000
square feet of frozen goods storage. Harris Teeter owns a 90,500
square foot milk processing and ice cream manufacturing facility
located on 4.7 acres of land in High Point, North Carolina.
During fiscal 2002 Harris Teeter closed its 18,050 square foot
milk processing plant located on 8.3 acres in Charlotte, North
Carolina after consolidating its operations into the High Point
facility. Harris Teeter operates its retail stores primarily
from leased properties. The base annual rentals on leased store
and warehouse properties as of September 29, 2002
aggregated approximately $52,325,000 net of sublease rentals of
approximately $3,664,000. In addition to the base rentals,
certain lease agreements provide for additional annual rentals
based on 1% of the amount by which annual store sales exceed a
predetermined amount. During the fiscal year ended
September 29, 2002, the additional rental amounted to
approximately $1,329,000. Harris Teeters supermarkets
range in size from approximately 12,000 square feet to 66,000
square feet, with an average size of approximately 40,800 square
feet. The following table sets forth selected statistics with
respect to Harris Teeter stores for each of the last three
fiscal years.

Harris Teeter Store Data

|                                                              |  |      |           |      |  |      |           |  |  |   |           | 
|------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                                              |  | 2000 |           | 2001 |  | 2002
|                                                              |  |      |           |      |  |     
|Stores Open at End of Period                                  |  |      | 156       |      |  |      | 137       |  |  |   | 143       | 
|Average Weekly Net Sales Per Store*                           |  | $    | 294,957   |      |  | $    | 312,519   |  |  | $ | 320,262   | 
|Average Square Footage Per Store                              |  |      | 40,248    |      |  |      | 40,447    |  |  |   | 40,774    | 
|Average Square Footage Per New Store Opened
    During Period |  |      | 36,434    |      |  |      | 36,743    |  |  |   | 38,408    | 
|Total Square Footage at End of Period                         |  |      | 6,278,753 |      |  |      | 5,541,229 |  |  |   | 5,830,698 | 



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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. Manufacturing
and related warehouse facilities have an aggregate

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of 1,933,749 square feet of floor space and an
approximate insured value of the facilities and equipment at
$414,000,000. 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.


A&E leases nine distribution centers
scattered throughout its domestic markets with an aggregate of
254,472 square feet of floor space and an approximate annual
rent of $1,058,000.

Through subsidiaries, A&E also owns six
international manufacturing and/or distribution facilities with
an aggregate of 748,924 square feet of floor space and an
approximate insured value of $26,300,000. A&E leases another
23 international facilities with an aggregate of 453,159 square
feet of floor space and an approximate annual rent of
$1,400,000. The subsidiaries which are engaged in manufacturing
have a sewing thread dyeing capacity of approximately 20,750,000
pounds per year. Capacities are based on 168 hours of operations
per week. In addition to its subsidiaries, A&E also has
minority interests in various joint ventures.

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. The
Company participated in the remedial investigation/feasibility
study on the condition that its share of the costs was not to
exceed 1.8% of the total plus an additional payment of $4,680
for costs previously incurred by other parties. Under the
interim allocation of costs agreed to by the parties to the
Administrative Order on Consent, the Companys share was
1.155% of the total cost. The work required under the AOC has
now been completed. 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 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 demands payment of past response costs
incurred by the EPA in the amount of $151,838 and invites 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. As
of the date hereof, the Company has not received a response from
the EPA. The Company continues to aggressively deny any
allegations of liability as to the Site. The Company does not
believe that this proceeding will have a material effect on its
business or financial condition.

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 47, 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

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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 52, 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  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.

Fred J. Morganthall,
II,age 51, 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
52, has been President of A&E since August 1996. Prior to
that time, for more than five years, he served as its Senior
Vice President  Industrial Thread Sales.

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 the 2002 and 2001 fiscal
years is set forth below. The Common Stock is listed on the New
York Stock Exchange. As of December 2, 2002, there were
5,867 holders of record of Common Stock.

Quarterly Information

|                       |      |         |     |         |  |         |     |         |  |   |     |        |  |   |     |        | 
|---------------------- | ---- | ------- | --- | ------- |  | ------- | --- | ------- |  | - | --- | ------ |  | - | --- | ------ | 
|                       |      | First   |     | Second  |  | Third   |     | Fourth 
|                       |      | Quarter |     | Quarter |  | Quarter |     | Quarter
|                       |      |         |     |         |  |         |     |        
|Fiscal 2002            |      |         |     |         |  |         |     |         |  |   |     |        |  |   |     |       
|Dividend per share     |      | $       | .09 |         |  | $       | .09 |         |  | $ | .09 |        |  | $ | .09 |       
|Market price per share |      |         |     |         |  |         |     |         |  |   |     |        |  |   |     |       
|                       | High |         | $   | 16.98   |  |         | $   | 17.41   |  |   | $   | 17.59  |  |   | $   | 17.97  | 
|                       | Low  |         |     | 14.45   |  |         |     | 15.12   |  |   |     | 15.30  |  |   |     | 15.00  | 
|Fiscal 2001            |      |         |     |         |  |         |     |         |  |   |     |        |  |   |     |       
|Dividend per share     |      | $       | .09 |         |  | $       | .09 |         |  | $ | .09 |        |  | $ | .09 |       
|Market price per share |      |         |     |         |  |         |     |         |  |   |     |        |  |   |     |       
|                       | High |         | $   | 14.125  |  |         | $   | 14.200  |  |   | $   | 17.200 |  |   | $   | 17.030 | 
|                       | Low  |         |     | 10.813  |  |         |     | 9.813   |  |   |     | 12.000 |  |   |     | 13.820 | 

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.

5



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Item 6.     Selected
Financial Data

|                                                                          |         |                                               |           |         |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |      | 
|------------------------------------------------------------------------- | ------- | --------------------------------------------- | --------- | ------- |  | ---- | --------- | ----- | - | ---- | --------- | ---- |  | - | --------- | ---- |  | - | --------- | ---- | 
|                                                                          |         | 2002(1)                                       |           | 2001(1) |  | 2000 |           | 1999  |   | 1998
|                                                                          |         |                                               |           |         |  |      |           |       |   |     
|                                                                          |         |                                              
|                                                                          |         | (Dollars in thousands, except per share data)
|Net sales                                                                 |         | $                                             | 2,644,198 |         |  | $    | 2,743,290 |       |   | $    | 2,692,091 |      |  | $ | 2,634,289 |      |  | $ | 2,497,407 |     
|Total operating profit                                                    |         |                                               | 101,268   |         |  |      | 53,437    |       |   |      | 106,624   |      |  |   | 104,055   |      |  |   | 94,196    |     
|Earnings before interest, taxes, depreciation
    & amortization (EBITDA) |         |                                               | 168,588   |         |  |      | 125,230   |       |   |      | 176,896   |      |  |   | 166,699   |      |  |   | 152,851   |     
|Net income (loss)                                                         |         |                                               | 51,983    |         |  |      | (727      | )     |   |      | 51,002    |      |  |   | 50,714    |      |  |   | 46,772    |     
|Net income (loss) per share                                               |         |                                               |           |         |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|                                                                          | Basic   |                                               |           | 1.12    |  |      |           | (0.02 | ) |      |           | 1.10 |  |   |           | 1.09 |  |   |           | 1.00 | 
|                                                                          | Diluted |                                               |           | 1.12    |  |      |           | (0.02 | ) |      |           | 1.10 |  |   |           | 1.08 |  |   |           | 1.00 | 
|Dividend per share                                                        |         |                                               | 0.36      |         |  |      | 0.36      |       |   |      | 0.36      |      |  |   | 0.33      |      |  |   | 0.32      |     
|Total assets                                                              |         |                                               | 1,038,947 |         |  |      | 939,988   |       |   |      | 1,021,018 |      |  |   | 970,114   |      |  |   | 931,618   |     
|Long-term debt  including current
    portion                            |         |                                               | 185,892   |         |  |      | 157,113   |       |   |      | 227,940   |      |  |   | 198,961   |      |  |   | 191,931   |     
|Shareholders equity                                                      |         |                                               | 457,688   |         |  |      | 445,353   |       |   |      | 473,005   |      |  |   | 443,683   |      |  |   | 410,725   |     
|Book value per share                                                      |         |                                               | 9.85      |         |  |      | 9.61      |       |   |      | 10.23     |      |  |   | 9.55      |      |  |   | 8.82      |     



---



|    |                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reference is made to Item 7,
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations  Results of
    Operations  Fiscal 2002 Compared to Fiscal
    2001  Non-recurring Exit and Other Costs, below which
    describes certain non-recurring items in fiscal 2002 and 2001 as
    follows:



| |                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Fiscal 2002  Net charges of $7,113,000
    ($4,394,000 after income tax benefit) related to asset
    impairment costs and other exit costs.                                                                                                              
|
| | Fiscal 2001  Charges of $47,140,000
    ($28,655,000 after income tax benefit) related to asset
    impairment costs and other exit costs and of $20,000,000 of
    additional income taxes related to a settlement with the
    Internal Revenue Service.

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

Results of Operations  Fiscal 2002
Compared to Fiscal 2001

Revenues

Consolidated sales in the fiscal year ended
September 29, 2002 of $2.64 billion decreased by 3.6% from
the $2.74 billion reported for fiscal 2001. Contributing to
the sales decline in fiscal 2002 were weak business conditions
at American & Efird (A&E), the Companys textile
subsidiary, especially during the first two quarters of fiscal
2002, and the displacement of supermarket sales by 26 stores in
non-core markets of subsidiary Harris Teeter, which stores were
divested in July 2001. New stores opened by Harris Teeter in its
core markets during fiscal 2002 partially offset the sales
reductions associated with the divested and closed stores.

Non-recurring
Exit and Other Costs

Included in the results for fiscal years 2002 and
2001 were certain items that are not considered recurring by
management. The non-recurring pre-tax charge recorded in the
third quarter of fiscal 2001 for exit costs associated primarily
with the sale of the 26 stores was $45.0 million, or
$27.4 million after net tax benefits of $17.6 million.
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 2002, the Company realized $710,000
($431,000 after income taxes) in non-recurring income (i.e.,
cost reduction) related to favorable experience of actual
charges incurred compared to costs estimated, including the more
favorable settlement of certain lease obligations. As of

6



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September 29, 2002, the remaining balance of the
exit cost reserve was $812,000, required primarily for rent
obligations. In the third quarter of fiscal 2001, the Company
also recorded a non-recurring pre-tax charge of
$2.1 million, or $1.3 million after net tax benefits of
$0.8 million, primarily for the impairment of an A&E
spinning facility which was closed in fiscal 2001. Additionally,
the Company recorded in the second quarter of fiscal 2002 a
non-recurring $7.9 million pre-tax charge, or
$4.8 million after tax, related to A&Es
consolidation of certain U.S. industrial thread dyeing and
finishing operations. Favorable experience of $35,000 was
recognized in the fourth quarter of fiscal 2002. No remaining
exit cost reserve existed at September 29, 2002.
Additionally, fiscal 2001 was affected by a $20.0 million
non-recurring tax charge recorded by the Company in the second
quarter. This tax charge reflected the terms of settlement with
the Internal Revenue Service (IRS) for income tax exposure
related to the disallowance of deductions for a corporate owned
life insurance program.


Profits
and Earnings

Consolidated gross profit of $754.8 million
in fiscal 2002 declined slightly from $758.5 million in
fiscal 2001, which had been affected by a $3.4 million inventory
charge (see Non-recurring Exit and Other Costs).
Excluding the divestiture related inventory charge in the prior
year, consolidated gross profit in fiscal 2002 declined by 1.0%
from the prior year. Reported operating profit in fiscal 2002 of
$101.3 million increased by 89.5% from $53.4 million
for fiscal 2001. Excluding the effects of the non-recurring
items in both years, operating profit of $108.4 million in
fiscal 2002 would have been up 7.8% from $100.6 million in
fiscal 2001.

Net income in fiscal 2002 and 2001 were affected
by the non-recurring items discussed above. Including the
non-recurring items associated with each of the comparative
periods, the Company reported net income per basic and diluted
share of $1.12 in fiscal 2002 compared to a net loss of $0.02
per share in fiscal 2001. Including the non-recurring items,
consolidated net income of $52.0 million in fiscal 2002
increased from a net loss of $0.7 million in the prior
year. Net income per basic and diluted share, excluding the
non-recurring items in both years, would have been $1.21 in
fiscal 2002 compared to $1.03 in fiscal 2001. Excluding the
non-recurring items in both periods, consolidated net income of
$56.4 million in fiscal 2002 increased 17.6% from
$47.9 million last year. The increase in earnings before
the non-recurring items reflected the strong current performance
of Harris Teeter. In addition, net income in fiscal 2002 was
favorably impacted by a reduction in the effective income tax
rate of the Company, to 36.3% compared to 37.9% in fiscal 2001,
excluding the effect of the fiscal 2001 tax settlement
previously discussed. The lower effective tax rate for the
current fiscal year resulted primarily from the net effects of
various non-taxable income and non-deductible costs during the
current and prior year periods.

Harris
Teeter

Harris Teeter sales of $2.35 billion in
fiscal 2002 decreased by 2.8% from the $2.42 billion
recorded in fiscal 2001. The overall decline in sales was
attributable primarily to the displacement of sales in the 26
stores that were divested in July 2001 partially offset by sales
from the opening of new stores. Additionally, comparable store
sales were down 0.15% for the fiscal year. As an inevitable
consequence of Harris Teeters strategy of focusing on its
core markets, the comparable store sales measurement reflects in
part the impact during fiscal 2002 of opening six new stores, or
half of its new stores, within close proximity to existing
stores and thereby reducing comparable store sales. Harris
Teeter estimates that without the cannibalization effects of
those six new stores the comparable store sales for fiscal 2002
would have increased by approximately 1.75%. Management believes
that the longer term benefit of its strategy of focusing capital
and resources on its core markets will be derived from the
underlying population growth rates in Harris Teeters major
core markets. Other factors which impacted the comparable store
sales result during fiscal 2002 included a difficult retail
environment and general weakness in supermarket sales.
Widespread economic weakness and increased supermarket
competition throughout the industry have put pressure on most
supermarket operators sales. The market environment for
supermarkets in the southeastern U.S. continued to be highly
competitive and characterized by the opening of
competitors new stores in the region and aggressive
feature pricing by competitors. In response, Harris Teeter
continued its aggressive promotional activities in an effort to
drive sales and management expects sales gains as the economy
improves. The company plans to continue to utilize

7



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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. Given the reduced number of
stores in operation, chain-wide non-perishable product sales for
fiscal 2002 were down by 4.9% when compared to fiscal 2001.
Dairy, meat, frozen products and produce had sales decreases and
increases ranging from down 3.4% to up 2.4%, and were down 1.0%
in the aggregate. Further, in-store pharmacy operations
displayed growth primarily as a result of expansion.


Harris Teeter gross profit of $677.7 million
in fiscal 2002 was up only slightly from $675.9 in fiscal 2001,
which was affected by a $3.4 million inventory charge
related to the store divestiture previously described. Excluding
this inventory charge in the prior year, gross profit in fiscal
2002 declined slightly from $679.4 million in the
comparable period last year. Gross profit was lower primarily
due to the displaced sales of divested stores (partially offset
by new store sales) and lower comparable store sales. Gross
margin on sales improved to 28.8% in fiscal 2002 as compared to
gross margin in the prior year of 28.0% including the
divestiture inventory charge, and 28.1% excluding such charge.
Gross profit as a percent of sales increased primarily as a
result of improvements in purchasing and merchandising,
increased sales of higher margin premium private label products
and better control of waste, partially offset by the increased
costs associated with the sales promotional programs. For fiscal
2002, Harris Teeter operating profit was $88.8 million,
including the $710,000 favorable adjustment to non-recurring
charges, compared to $31.8 million in fiscal 2001, which
included non-recurring charges totaling $45.0 million, of
which $3.4 million was recorded in cost of sales (see
Non-recurring Exit and Other Costs). Excluding the
non-recurring items from both fiscal 2002 and 2001, operating
profit of $88.1 million in fiscal 2002 increased by 14.6%
over $76.8 million in the prior year. Excluding the
non-recurring items, operating margin on sales of 3.75% in
fiscal 2002 improved significantly from 3.18% in the prior year.
This improvement resulted primarily from the above stated
factors driving improved gross margin, from the positive
operating margin impact of the strategic sale in fiscal 2001 of
the 26 stores in non-core markets and from improved
productivity, offset in part by increases in certain selling and
administrative expenses, most notably employee fringe benefit
costs and credit card fees. The company maintains ongoing
programs designed to generate sales, improve productivity, and
manage inventory levels and shrinkage. Further, the company
continues to concentrate on its core markets, which management
believes have greater potential for improved returns on
investment in the foreseeable future. Harris Teeter opened
twelve new stores and closed six older stores during fiscal
2002. The new stores by market were as follows: five in the
Charlotte, NC market, two in Raleigh, NC, one in Chapel Hill,
NC, one in Nashville, TN, and three in the northern Virginia
market. Harris Teeter had 143 stores in operation at
September 29, 2002, compared to 137 stores at the end of
fiscal 2001. Total store square footage was 5.8 million at
the end of fiscal 2002 compared to 5.5 million at the end
of fiscal 2001. Harris Teeter plans to open five new stores by
the end of fiscal 2003 and eleven new stores during fiscal 2004.
On a routine basis the company 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. The company currently anticipates store closings in
fiscal 2003 similar in number to fiscal 2002 based on lease
expirations and other factors.

American &
Efird

A&E sales of $294.5 million in fiscal
2002 decreased by 9.8% from $326.5 million in fiscal 2001.
Business conditions for the industrial thread manufacturer and
distributor were weak during the first half of fiscal 2002.
Sales performance in the third and fourth quarters of fiscal
2002 represented an improvement from the more significant
comparative sales declines of the first two fiscal quarters of
2002 as business conditions for A&E strengthened somewhat
beyond the mid-year. The better business conditions during the
more recent quarters were derived from the modest improvement in
the U.S. textile and apparel retail environment as manufacturers
in the channel rebuilt inventories somewhat during the period.
However, A&E incurred weaker business conditions at the end
of the fourth quarter of fiscal 2002 reflecting slower demand
for apparel and home furnishings at retailers. Further, A&E
continues to face highly competitive pricing in its markets.
Having been negatively impacted by weak U.S. retail consumer
demand, deflationary pricing and imports from Asia, business
conditions in the textile and apparel industry remain
challenging. A&E has also been unfavorably affected by the
shift of apparel manufacturing and sourcing out of the U.S. As a
result, A&Es sales in its U.S. markets declined by
19.3% in fiscal 2002 compared to fiscal 2001. A&E continues
to proactively and prudently

8



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address these challenges by selectively
consolidating operations, managing production schedules and
expanding the companys presence in foreign markets to
reflect the changing nature of its customer base. Weak demand
for primarily apparel in the U.S. during much of 2002 also
adversely affected sales by A&E to foreign customers that
export to the U.S. Primarily as a result of retail inventory
replenishment in the second half of the fiscal year, foreign
sales by A&E in fiscal 2002 increased by 4.2% from fiscal
2001. In fiscal 2002, foreign sales accounted for approximately
47% of total A&E sales compared to approximately 40% in the
prior fiscal year. During the fourth quarter of fiscal 2002 the
foreign sales of A&E represented more than half (51%) of its
total sales for the first time in the companys history.
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. Foreign sales
in fiscal 2002 represented 5.2% (4.8% in 2001) of the
consolidated sales of the Company, with Harris Teeter having no
foreign sales. Sales weakness was displayed in a majority of the
foreign operations of A&E during the first six months of
fiscal 2002. However, A&E observed sales improvements in
nearly all of its foreign entities in the third and fourth
quarters of fiscal 2002 as business conditions improved at most
of its foreign operations. Management recognizes that a major
challenge facing A&E is the geographic shift of its customer
base and as a result the company has been pursuing global
expansion over the past several years. A&E continues to
focus on increasing its market share in key foreign markets.
During fiscal 2002, A&E entered into a joint venture with a
manufacturing, sales and distribution company in South Africa,
established sales and distribution in Bangladesh and Colombia,
and acquired an equity interest in a sewing thread company in
the Netherlands with plans to acquire majority ownership during
fiscal 2003 and full ownership during fiscal 2004. While these
ventures and acquisitions are relatively small, they provide
A&E with enhancements to its foundation for global
operations.


In fiscal 2002, A&E gross profit of
$77.1 million declined by 6.6% from $82.6 million in
fiscal 2001, however, gross margin on sales in 2002 improved to
26.2% from 25.3% last year. Lower volume, resulting in reduced
manufacturing schedules, and competitive pricing pressures had
negative impacts on A&E profitability during much of the
first six months of fiscal 2002. However, in the third and
fourth quarters of fiscal 2002, an improvement in gross margins
was facilitated by the cost reduction initiatives and
manufacturing consolidations that management has implemented
during past periods. During the past two years A&E has
closed one spinning plant, consolidated the U.S. dyeing and
finishing operations, reduced the number of U.S. service
centers, and reduced staffing and expenses. Some strengthening
in demand for A&Es products in the second half of
fiscal 2002 resulted in more efficient manufacturing schedules
and more favorable manufacturing costs. However, given the
weakened demand that A&E experienced near the end of fiscal
2002, the more favorable manufacturing volume might not be
sustainable in fiscal 2003. A&E consolidated operating
profit of $12.5 million in fiscal 2002 was 42.2% below the
$21.6 million of fiscal 2001, including the non-recurring
charges associated with each of the years (see Non-recurring
Exit and Other Costs). A&E operating profit in the U.S.
market in fiscal 2002 declined by 40.7% in comparison to the
prior fiscal year, although the third and fourth quarters of
fiscal 2002 displayed improvements in U.S. profits compared to
the comparable prior year periods. Excluding the previously
described non-recurring charges in both 2002 and 2001, A&E
consolidated operating profit of $20.3 million in fiscal
2002 decreased 14.4% from $23.7 million in the prior year.
Foreign operations contributed approximately 22% of
A&Es operating profit in fiscal 2002, compared to 24%
in fiscal 2001. Foreign sales growth generates increases in
greige production volume and efficiencies at A&Es
domestic U.S. manufacturing facilities, and accordingly, some
portion of domestic profits is attributable to foreign sales.
About half of A&Es foreign operations displayed
improvements in operating profitability in fiscal 2002 when
compared to the prior year. Despite staff reductions and other
cost containment measures, the operating results of A&E for
fiscal 2002 were adversely impacted by the sales demand weakness.



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

While the performance of Harris Teeter has been
strong, the economic conditions in A&Es industry have
remained very difficult during much of fiscal 2002. Management
observed with cautious optimism the improved business conditions
that A&E experienced in the third and fourth quarters of
fiscal 2002. The sustainability of any favorable trend that may
have been observed is questionable as business conditions for
A&E weakened in the last month of fiscal 2002 reflecting the
weakness in U.S. apparel and home furnishings markets. Further,
the turmoil in the stock markets raises concern and uncertainty
about the future strength of

9



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consumer spending. A&E management remains
focused on generating sales growth in global markets and on
managing costs and manufacturing capacities. The depth and
duration of softness in apparel and other markets in which
A&E participates will obviously have an impact on A&E
profitability. While the operating performance of Harris Teeter
showed improvement throughout fiscal 2002, further improvement
will be dependent on the ability to offset rising costs,
including health care, pensions and credit card fees.
Additionally, promotional costs to drive sales in the presently
intense competitive environment could negatively impact
operating margins and net income in future periods. Further, at
Harris Teeter the consistent execution of productivity
initiatives implemented at under-performing stores will impact
on the pace at which its margins could improve. The competitive
environment for supermarkets is not expected to ease
significantly within the foreseeable future. Based on the
present economic environment, as the Company looks forward to
fiscal 2003 management remains cautious in its expectations and
believes that it will be difficult to maintain the historically
high level of profitability that was generated within the final
quarter of fiscal 2002.


Results of Operations  Fiscal
2001 Compared to Fiscal 2000

For the fiscal year ended September 30,
2001, consolidated sales of $2.74 billion increased 1.9% over
the $2.69 billion reported in the fiscal year ended
October 1, 2000. After incurring certain non-recurring
charges during fiscal year 2001 (see Non-recurring Exit and
Other Costs), the Company reported a consolidated net loss
for fiscal 2001 of $0.7 million compared to net income of
$51.0 million in fiscal 2000. Basic and diluted earnings
(loss) per share were $(.02) in fiscal 2001 compared to
$1.10 in fiscal 2000. In addition to the aforementioned
non-recurring charges during fiscal 2001, the decrease in net
income resulted primarily from reduced operating profit at
A&E, which faced weakening business conditions throughout
fiscal 2001. Harris Teeter displayed improved operating
performance over the course of fiscal 2001, excluding the
non-recurring charges.

Consolidated net income, excluding the
aforementioned non-recurring charges, would have been
$47.9 million in fiscal 2001, down 6.0% from the $51.0
million reported in fiscal 2000. Basic and diluted earnings per
share, before non-recurring charges, would have been $1.03 in
fiscal 2001 compared to $1.10 in fiscal 2000.



| |                    
| | -------------------
| | Harris Teeter, Inc.

Harris Teeter sales increased by 3.6% in fiscal
2001 to $2.42 billion from $2.33 billion in fiscal
2000. The growth in sales was moderated by the effect of sales
displaced in the fourth quarter of fiscal 2001 due to the
divestiture of 26 stores on July 9, 2001. The divested
stores generated sales of $207.1 million during a 40-week period
of fiscal 2001 until divestiture compared to sales of
$273.4 million in full fiscal 2000. Excluding the divested
stores from each fiscal year, Harris Teeter sales for stores in
operation in both annual periods increased by 2.84% in fiscal
2001 as compared to 1.28% growth in fiscal 2000. The market
environment for supermarkets in the Southeast continued to be
highly competitive and characterized by modest inflation in the
grocery sector, the opening of competitors new stores in
the region and aggressive feature pricing by competitors. In
response, Harris Teeter continued to drive favorable sales
volume through aggressive promotional activities. Overall,
chain-wide non-perishable product sales for fiscal 2001 grew by
1% when compared to fiscal 2000 and accounted for 20% of the
sales increase. Dairy, meat, produce and frozen products had
sales increases ranging from 3% to 8% and accounted for 57% of
the sales increase in the aggregate.

Even given the difficult pricing environment
during fiscal 2001, Harris Teeter increased gross profit by 4.2%
to $675.9 million from $648.7 million in fiscal 2000.
Gross margin on sales improved to 28.0% in fiscal 2001 from
27.8% in fiscal 2000. The increased costs associated with the
sales promotional programs during fiscal 2001 were primarily
offset by favorable results of initiatives in inventory control
and waste prevention. After non-recurring charges (see
Non-recurring Exit and Other Costs), operating profit
declined to $31.8 million, or 1.32% of sales, in fiscal
2001 from $59.1 million, or 2.54% of sales, in fiscal 2000.
Operating profit before non-recurring charges in fiscal 2001
would have been $76.8 million, and operating margin on
sales excluding non-recurring charges would have been 3.18% in
fiscal 2001 compared to the 2.54% in fiscal 2000. These results
were primarily achieved due to the improvement in comparable
store sales growth and the

10



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positive impacts of productivity gains, improved
inventory control, enhanced waste prevention and other cost
control initiatives, which collectively offset the higher
promotional program costs.


During fiscal 2001 Harris Teeter opened eight new
stores and one replacement store, and closed 28 stores including
the 26 stores divested in July 2001. At the end of fiscal 2001,
137 stores were in operation compared to 156 at the end of
fiscal 2000. Total store square footage was 5.5 million at
the end of fiscal 2001 compared to 6.3 million at the end
of fiscal 2000.



| |                       
| | ----------------------
| | American & Efird, Inc.

American & Efird sales of $326.5 million
in fiscal 2001 declined 9.1% from $359.2 million in fiscal
2000, as A&E experienced sluggish sales and very competitive
conditions throughout fiscal 2001 and saw the unfavorable trend
worsen further in the fourth fiscal quarter. These unfavorable
business conditions for A&E were primarily due to the
slowdown in consumer spending in the United States in the
apparel and home furnishings sectors, growth of apparel imports,
competitive price pressures and shift of apparel manufacturing
out of the U.S. Further, late in fiscal year 2001 the global
economic slump and weak retail demand in the U.S. became more
exacerbated, producing weakness across all A&E product
segments in industrial sewing thread, consumer thread and sewing
notions. Weak demand for apparel and home furnishings in the
U.S. also adversely affected sales by A&E to foreign
manufacturers. In fiscal 2001, U.S. sales by A&E were 18.2%
below those of fiscal 2000. Fiscal 2001 annual sales by
A&Es foreign operations were up 8.8% compared to
fiscal 2000, although in the fourth quarter of fiscal 2001
foreign sales declined by 12.3% when compared to the same period
in fiscal 2000. Sales weakness was observed in most of the
foreign operations of A&E in fiscal 2001, however, those in
the Caribbean Basin displayed some strength. Foreign operations
contributed approximately 40% of A&Es total sales and
24% of its operating profit in fiscal 2001, compared to 34% and
18%, respectively, in fiscal 2000. Foreign growth generates
increases in greige production volume and efficiencies at
A&Es domestic U.S. manufacturing facilities, and
accordingly, some portion of domestic profits is attributable to
foreign sales. Further, A&E continued to pursue its
strategic global expansion during fiscal 2001, in which the
company completed construction of a new dye-house facility in
southern China.

A&Es gross profit declined by 20.5% to
$82.6 million in fiscal 2001 from $103.9 million in
fiscal 2000, and gross margin on sales contracted to 25.3% in
fiscal 2001 from 28.9% in fiscal 2000. A&E experienced
pressure on margins due to reduced operating schedules at its
manufacturing facilities, competitive pricing, a less favorable
mix of products sold and rising costs, including energy, freight
and healthcare. After non-recurring charges (see
Non-recurring Exit and Other Costs), operating profit
declined by 54.4% to $21.6 million, or 6.6% of sales, in
fiscal 2001 from $47.5 million, or 13.2% of sales, in
fiscal 2000. Operating profit before non-recurring charges in
fiscal 2001 would have been $23.7 million, down 50.0% from
fiscal 2000, and operating margin on sales would have been 7.3%
in fiscal 2001 compared to the 13.2% in fiscal 2000. A&E
experienced a significant decline in profits both in the U.S.
and in aggregate foreign operations. The company implemented
several cost containment measures throughout fiscal 2001 that
resulted in lower inventory, reduction of capital expenditures
and reduction of certain expenses and materials costs. A&E
idled finishing capacity in manufacturing, converted seven day
spinning operations to five days and adjusted its workforce
accordingly, consolidated manufacturing of consumer thread
products into an existing facility, and consolidated three
distribution centers in the U.S. bringing the total number from
13 to 10 distribution centers at fiscal 2001 year end.

Capital Resources and Liquidity

Ruddick Corporation is a holding company which,
through its wholly-owned subsidiaries, Harris Teeter, Inc. and
American & Efird, Inc., 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 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 exist no
restrictions on such dividends, which are determined as a
percentage of net income of each subsidiary.

11



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The Company strives to achieve a goal of earning
at least a 15% return on beginning shareholders equity.
The return on beginning equity was 11.7% (12.7% before
non-recurring items) in fiscal 2002 compared to negative 0.2%
(positive 10.1% before non-recurring items) in fiscal 2001. At
the same time, 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 the end of fiscal 2002, this
percentage was 28.5% compared to 25.7% at the end of fiscal 2001.

The Companys principal source of liquidity
has been cash generated from operating activities. As of fiscal
year end September 29, 2002, the Company had cash and cash
equivalent balances of $80.4 million compared to $34.9
million at September 30, 2001. In addition, the Company had
temporary cash investments of $9.5 million at the end of
fiscal 2002 (none in fiscal 2001). During fiscal 2002, the net
cash provided by operating activities of $143.3 million was more
than sufficient to fund both the net investing activities which
required $77.5 million and net financing activities which
required $20.2 million. Consistent with the planned reduction in
capital spending in fiscal 2002, capital expenditures totaled
$79.1 million compared to depreciation and amortization of
$75.8 million. Financing activity requirements were
dominated by $16.7 million for cash dividends to
shareholders and $5.6 million in payments of principal on
long-term debt.

Historically, the Company had a syndicated credit
agreement with three banks providing for borrowings of up to an
aggregate of $100 million under established revolving lines
of credit. After the merger of two of the Companys three
bank lenders during the fiscal quarter ended December 30,
2001, and with the pending final maturity of that existing
revolving credit arrangement of January 2, 2003, the
Company sought to establish a new revolving credit arrangement.
The maximum amount outstanding under the previous credit
facilities was $0.9 million during the quarter ended
March 31, 2002, and at September 30, 2001. On
May 14, 2002, the Company and three banks entered into a
new revolving credit facility for an aggregate amount of up to
$100 million to refinance the existing facility. Borrowings
and prepayments 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 of the credit facility to the end of fiscal 2002,
there was no borrowing under the revolving credit facility. The
facility has a maturity of three years, plus two annual
extensions of one year each if then granted by the banks. The
amount which may be borrowed from time to time and the interest
rate chargeable on such borrowing 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 the end of fiscal 2002,
the Company was within the various financial covenants. Under
the leverage ratio, as of September 29, 2002, the Company
would have the capacity to borrow up to approximately
$98.6 million, although no borrowings are needed or
anticipated for the foreseeable future. The Company also has
$150 million of senior unsecured debt outstanding, with
annual repayments of $7.1 million due in each of fiscal
years 2005  2011 and $100 million due in fiscal 2017.
In addition, as described in more detail below, the Company has
an outstanding debt obligation for $30.4 million related to
certain real property leases, which obligation requires
repayment on September 13, 2004. Further, as of
September 29, 2002, the Company had $5.5 million of
various other debt obligations and capital leases of which
$727,000 is either due upon demand or within 12 months.
Further, the Company has the capacity to borrow up to an
aggregate amount in excess of $27 million from two major
U.S. life insurance companies utilizing certain insurance assets
as collateral.

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 29,
2002. The total financing costs for these properties was
$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

12



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##### 



elects the sale option. During the second quarter
of fiscal 2002, the Company consolidated the above property and
related debt obligation in the Companys balance sheet,
increasing property, net and long term debt. As of September 29,
2002, those balances were $30.1 million in property, net
and $30.4 million in long-term debt.


In addition, the Company is guarantor under a
leveraged lease arrangement for certain lease payments of
approximately $436,000 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 29, 2002 is approximately $8.0 million,
based on a discount rate of 6.5%.

Covenants in certain of the Companys
long-term debt agreements limit the total indebtedness that the
Company may incur as described above. 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.

Additionally, 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 $17.6 million as of
September 29, 2002.

The Company leases certain equipment under
agreements expiring during the next six years and leases most of
its retail stores under leases that expire during the next
21 years. Certain stores are sublet under leases expiring
during the next 15 years. The total minimum lease expense
in fiscal 2002, net of $3.7 million of sublease income, was
$67.9 million. Future minimum lease commitments over each
of the next five years at September 29, 2002 (excluding the
leases assigned or expected to be assigned) were
$64.0 million in fiscal 2003, $62.3 million in 2004,
$60.5 million in 2005, $56.0 million in 2006, and
$53.1 million in 2007. Beyond fiscal 2007 the aggregate
minimum lease commitments as of September 29, 2002 total
$478.4 million. Management expects that revenues generated
by operations will continue to be adequate to fund its rental
obligations.

The Company provides non-contributory defined
benefit pension plans for substantially all domestic full-time
employees. 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 require higher levels of
contribution in future years. In fiscal 2002 and 2001, the
Companys contributions were $22.2 million and
$10.7 million, respectively. For the foreseeable future,
the Company expects to contribute annually an amount similar to
that contributed in fiscal 2002. Management expects that
internally generated funds, supplemented by available cash
balances if necessary, will be adequate to finance such pension
contributions.

Working capital of $166.1 million at
September 29, 2002 increased $53.8 million from
$112.3 million at September 30, 2001. Of the total
change in working capital, the balances of cash and cash
equivalents increased by $45.5 million and temporary cash
investments increased by $9.5 million. In the other
elements of working capital, the business-driven requirements
for the accounts receivable increase of $6.5 million,
inventories increase of $12.1 million and other current
assets increase of $6.3 million were funded entirely by
accounts payable and other current liabilities. The current
ratio was 1.6 at September 29, 2002 compared to 1.5 at
September 30, 2001.

During fiscal 2002 capital expenditures totaling
$79.1 million, including $4.7 million spent at the
Ruddick parent company, were 9.8% lower than the
$87.7 million spent in fiscal 2001. A&E spent
$7.8 million in fiscal 2002. The decrease in A&E annual
capital spending from $19.2 million spent last year
reflects primarily the substantial completion in fiscal 2001 of
the China dyehouse facility. Harris Teeter spent
$66.6 million in fiscal 2002, a decrease of 2.8% from the
$68.5 million spent in fiscal 2001. Planned capital
expenditures during fiscal 2003 will total $79.1 million at
Harris Teeter and $17.6 million at A&E. Harris Teeter
anticipates that its capital for new store growth will continue
to be applied in its core markets in fiscal 2003 as well as in
the

13



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##### 



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.


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.



| |                         
| | ------------------------
| | Closed Store Obligations

The Company provides for closed store liabilities
relating to the present value of the estimated remaining
non-cancelable lease payments after the anticipated closing
date, net of estimated subtenant income. Harris Teeter
management estimates the net lease liabilities using a discount
rate to calculate the present value of the remaining rent
payments on closed stores. 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
20 years. As of September 29, 2002, closed store lease
liabilities totaled $18.9 million. The value of any
equipment and leasehold improvements related to a closed store
is reduced to reflect net recoverable values. Harris Teeter
management estimates the subtenant income, future cash flows and
asset recovery values based on its historical experience and
knowledge of (1) the market in which the store to be closed
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 and
related assets 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
exit 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. Costs, excluding inventory
write-downs, related to closed store locations are reflected in
the income statement as Selling, general and
administrative expenses. Inventory write-downs, if any, in
connection with store closings, are classified in cost of sales.
Costs to transfer inventory and equipment from closed stores are
expensed as incurred. The Company constantly reviews the
relevant, significant factors and makes adjustments where the
facts and circumstances dictate.



| |                                                       
| | ------------------------------------------------------
| | 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

14



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##### 



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

There are numerous types of rebates and
allowances in the retail industry. The Companys accounting
practices with regard to some of the more typical arrangements
are discussed as follows. Vendor allowances for price markdowns
are credited to the cost of sales during the period in which the
related markdown was taken and charged to the cost of sales.
Slotting and stocking allowances received from a vendor to
ensure that its products are carried or to introduce a new
product at the Companys stores are recorded as a reduction
of cost of sales over the period covered by the agreement with
the vendor based on the estimated inventory turns of the
merchandise to which the allowance applies. Display allowances
are recognized as a reduction of cost of sales in the period
earned in accordance with the vendor agreement. 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 Methods and
    Reserves

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

15



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##### 



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. As of
September 29, 2002, the Company has reduced its inventories
by approximately $23.0 million for the difference between
current costs and LIFO value. Management does not believe that
the likelihood is significant that materially higher LIFO
reserves are required given its current expectations of on-hand
inventory quantities and costs.


The proper valuation of inventory also requires
management to estimate the net realizable value of the
Companys obsolete and slow moving inventory at the end of
each period. Management bases its net realizable values upon
many factors including historical recovery rates, the aging of
inventories on hand, the inventory movement of specific products
and the current economic conditions. When management has
determined inventory to be obsolete or slow moving, the
inventory is reduced to its net realizable value by recording an
obsolescence reserve. Given the Companys experiences in
selling obsolete and slow moving inventory, management believes
that the amounts of the obsolescence reserves to the carrying
values of its inventories are materially adequate. As of
September 29, 2002, the Company has reduced the value of
its inventories by approximately $6.6 million for obsolete
and slow moving items.

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 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. As of September 29, 2002, the Company has accrued
approximately $8.9 million for outstanding workers
compensation claims and $3.7 million for general and automotive
liability claims.

16



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##### 



With regard to healthcare cost reserves, the
Company has no material post-retirement healthcare benefit
plans. 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 $3.6 million
accrued as of September 29, 2002 is reasonable and adequate
as of that date.



| |                                
| | -------------------------------
| | Impairment of Long-lived Assets

The Company periodically evaluates the period of
depreciation or amortization for long-lived assets to determine
whether current circumstances warrant revised estimates of
useful lives. The Company reviews its property, plant and
equipment for 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 would be recorded
for the 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.

With respect to owned property and equipment
associated with closed stores and facilities, the value of the
property and equipment 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.

Impairment reserves at September 29, 2002
totaled $8,379,000 and the resulting net carrying value of
assets held for sale was $2,233,000.

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.



| |                                                       
| | ------------------------------------------------------
| | 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. 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 29, 2002, these plans were
unfunded, except for a directors compensation deferral
plan which utilizes a rabbi trust. For further disclosures
regarding the Companys pension and deferred compensation
plans, see Commitments and Contingencies in Notes
to Consolidated Financial Statements.

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

17



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date of eligibility for Medicare or any other
employers medical plan. The Company requires that the
retiree pay the estimated full cost of the coverage. The Company
also provides a $5,000 post-retirement mortality benefit to a
small number of retirees under a prior plan. The obligations and
expenses associated with each of these benefit plans are not
material.


The determination of the Companys
obligation and expense for pension, deferred compensation and
other post-retirement benefits is dependent on certain
assumptions selected by management and used by the Company and
its actuaries in calculating such amounts. The more significant
of those assumptions applicable to the qualified pension plan
include the rate by which projected future benefit payments are
discounted (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. As of September 29, 2002 the recorded
obligation for the Companys pension and supplemental
pension plans totaled $61.5 million and for the deferred
compensation arrangements, $16.5 million.

Other Matters

SFAS No. 142, Goodwill and Other
Intangibles will be effective for financial statements
issued in the Companys fiscal year 2003. At September 29,
2002, the Companys goodwill and other intangible asset
balances were approximately $8,600,000. This statement will
require the cessation of the amortization of goodwill and other
intangibles and an assessment of asset impairment by applying a
fair-value-based test at least annually. The amortization
expense in fiscal 2002 associated with the existing intangible
assets was $967,000. Management believes that the adoption of
this statement will have no material impact on the
Companys financial results of operations or financial
position.

SFAS No. 143, Accounting for Asset
Retirement Obligations will be effective for financial
statements issued in the Companys fiscal year 2003. This
statement will require that the fair value of a liability for an
asset retirement obligation for tangible long-lived assets be
recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. Management believes that the
adoption of this statement will have no material impact on the
Companys financial results of operations or financial
position.

SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets will be
effective for financial statements issued in the Companys
fiscal year 2003. This statement addresses financial accounting
and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, and establishes criteria
and methodologies for the recognition and measurement,
classification and valuations of such assets. Management
believes that the adoption of this statement will have no
material impact on the Companys financial results of
operations or financial position.

SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections is applicable for
the Company at the beginning of fiscal year 2003, with the
provisions related to SFAS No. 13 effective for
transactions occurring after May 14, 2002. SFAS No. 4 had
required that all gains and losses from extinguishment of debt
be aggregated and, if material, classified as an extraordinary
item, net of related income tax effect. SFAS No. 145
rescinds SFAS No. 4 and the related requirement of gains
and losses from extinguishment of debt as extraordinary items.
Additionally, SFAS No. 145 amends SFAS No. 13 to
require that certain lease modifications that have economic
effects similar to sale-leaseback transactions be accounted for
in the same manner as sale-leaseback transactions. Management

18



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##### 



believes that the adoption of this statement will
have no material impact on the Companys financial results
of operations or financial position.


SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities is to be
applied prospectively to exit or disposal activities initiated
after December 31, 2002. SFAS No. 146 requires costs
associated with exit or disposal activities to be recognized
when they are incurred rather than at the date of a commitment
to an exit or disposal plan. Management believes that the
adoption of this statement will have no material impact on the
Companys financial results of operations or financial
position.

Non-Audit Services by Independent
Auditors

Consistent with Section 10A(i)(2) of the
Securities Exchange Act of 1934, as added by Section 202 of
the Sarbanes-Oxley Act of 2002, the Company is responsible for
listing the non-audit services, to be performed by KPMG LLP, the
Companys independent auditor, approved by the
Companys Audit Committee through the date of filing of
this Annual Report on Form 10-K. Non-audit services are
defined in the law as services other than those provided in
connection with an audit or a review of the financial statements
of the Company. The Audit Committee approved the engagement of
KPMG for certain tax and financial due diligence matters.

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,           
|
| |  | 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, 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 Registrants market risk sensitive
instruments do not subject the Registrant to material market
risk exposures.

19



---



##### 



Item 8.     Financial
Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS AND
SCHEDULE

|                                                                                                                                                               |  |      |     | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                                               |  | Page
|                                                                                                                                                               |  |     
|Independent Auditors Report                                                                                                                                   |  |      | 21  | 
|Consolidated Balance Sheets, September 29,
    2002 and September 30, 2001                                                                                     |  |      | 23  | 
|Statements of Consolidated Income and Retained
    Earnings for the fiscal years ended September 29, 2002,
    September 30, 2001 and October 1, 2000          |  |      | 24  | 
|Statements of Consolidated Total Non-Owner
    Changes in Equity for the fiscal years ended September 29,
    2002, September 30, 2001 and October 1, 2000     |  |      | 25  | 
|Statements of Consolidated Cash Flows for the
    fiscal years ended September 29, 2002, September 30, 2001
    and October 1, 2000                            |  |      | 26  | 
|Notes to Consolidated Financial Statements                                                                                                                     |  |      | 27  | 
|Schedule II  Valuation and
    Qualifying Accounts and Reserves for the fiscal years ended
    September 29, 2002, September 30, 2001 and
    October 1, 2000 |  |      | S-2 | 

20



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##### 



INDEPENDENT AUDITORS REPORT

The Board of Directors

Ruddick Corporation:


We have audited the 2002 financial statements of
Ruddick Corporation and subsidiaries as listed in the
accompanying index. In connection with our audit of the 2002
financial statements, we also have audited the 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 audit.
The 2001 and 2000 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 audit 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 audit
provides a reasonable basis for our opinion.

In our opinion, the 2002 financial statements
referred to above present fairly, in all material respects, the
financial position of Ruddick Corporation and subsidiaries as of
September 29, 2002, and the results of its operations and
its cash flows for the year ended September 29, 2002, in
conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the related 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 29, 2002


21



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##### 



REPORT OF PREDECESSOR AUDITOR (ARTHUR ANDERSEN
LLP)

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.

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


22



---



##### 



CONSOLIDATED BALANCE SHEETS

RUDDICK CORPORATION AND SUBSIDIARIES


(dollars in thousands)


|                                         |                                                                                           |                                            |       |               |           |  |       |         |           | 
|---------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | ------------- | --------- |  | ----- | ------- | --------- | 
|                                         |                                                                                           | September 29,                              |       | September 30,
|                                         |                                                                                           | 2002                                       |       | 2001         
|                                         |                                                                                           |                                            |       |              
|ASSETS                                  
|Current Assets                           |                                                                                           |                                            |       |               |           |  |       |        
|                                         | Cash and cash equivalents                                                                 |                                            | $     | 80,422        |           |  | $     | 34,901  |          
|                                         | Temporary investments                                                                     |                                            |       | 9,520         |           |  |       |        |          
|                                         | Accounts receivable, less allowance for doubtful
    accounts: 2002, $3,486; 2001, $2,933 |                                            |       | 67,181        |           |  |       | 60,712  |          
|                                         | Inventories                                                                               |                                            |       | 224,548       |           |  |       | 212,467 |          
|                                         | Federal and state income taxes receivable                                                 |                                            |       | 3,502         |           |  |       |        |          
|                                         | Other current assets                                                                      |                                            |       | 40,541        |           |  |       | 33,171  |          
|                                         |                                                                                           |                                            |       |               |           |  |       |        
|                                         |                                                                                           | Total current assets                       |       |               | 425,714   |  |       |         | 341,251   | 
|Property                                 |                                                                                           |                                            |       |               |           |  |       |        
|                                         | Land                                                                                      |                                            |       | 29,199        |           |  |       | 18,669  |          
|                                         | Buildings and improvements                                                                |                                            |       | 173,125       |           |  |       | 167,134 |          
|                                         | Machinery and equipment                                                                   |                                            |       | 630,558       |           |  |       | 636,251 |          
|                                         | Leasehold improvements                                                                    |                                            |       | 241,496       |           |  |       | 206,793 |          
|                                         |                                                                                           |                                            |       |               |           |  |       |        
|                                         |                                                                                           | Total, at cost                             |       |               | 1,074,378 |  |       |         | 1,028,847 | 
|                                         | Accumulated depreciation and amortization                                                 |                                            |       | 537,392       |           |  |       | 500,891 |          
|                                         |                                                                                           |                                            |       |               |           |  |       |        
|                                         |                                                                                           | Property, net                              |       |               | 536,986   |  |       |         | 527,956   | 
|Investments and Other Assets             |                                                                                           |                                            |       |               |           |  |       |        
|                                         | Investments                                                                               |                                            |       | 12,022        |           |  |       | 10,989  |          
|                                         | Other assets                                                                              |                                            |       | 64,225        |           |  |       | 59,792  |          
|                                         |                                                                                           |                                            |       |               |           |  |       |        
|                                         |                                                                                           | Total assets                               |       | $             | 1,038,947 |  |       | $       | 939,988   | 
|                                         |                                                                                           |                                            |       |               |           |  |       |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY
|Current Liabilities                      |                                                                                           |                                            |       |               |           |  |       |        
|                                         | Notes payable                                                                             |                                            | $     | 1,813         |           |  | $     | 1,964   |          
|                                         | Current portion of long-term debt                                                         |                                            |       | 727           |           |  |       | 676     |          
|                                         | Dividends payable                                                                         |                                            |       | 3,406         |           |  |       | 3,336   |          
|                                         | Accounts payable                                                                          |                                            |       | 156,560       |           |  |       | 136,113 |          
|                                         | Federal and state income taxes                                                            |                                            |       |              |           |  |       | 4,242   |          
|                                         | Accrued compensation                                                                      |                                            |       | 37,472        |           |  |       | 29,608  |          
|                                         | Accrued interest                                                                          |                                            |       | 1,973         |           |  |       | 1,882   |          
|                                         | Other accrued liabilities                                                                 |                                            |       | 57,645        |           |  |       | 51,158  |          
|                                         |                                                                                           |                                            |       |               |           |  |       |        
|                                         |                                                                                           | Total current liabilities                  |       |               | 259,596   |  |       |         | 228,979   | 
|Non-Current Liabilities                  |                                                                                           |                                            |       |               |           |  |       |        
|                                         | Long-term debt                                                                            |                                            |       | 185,165       |           |  |       | 156,437 |          
|                                         | Deferred income taxes                                                                     |                                            |       | 34,952        |           |  |       | 43,903  |          
|                                         | Pension liabilities                                                                       |                                            |       | 61,499        |           |  |       | 31,981  |          
|                                         | Other liabilities                                                                         |                                            |       | 32,052        |           |  |       | 24,729  |          
|Minority Interest                        |                                                                                           |                                            | 7,995 |               |           |  | 8,606 |        
|Commitments and Contingencies            |                                                                                           |                                            |      |               |           |  |      |        
|Shareholders Equity                     |                                                                                           |                                            |       |               |           |  |       |        
|                                         | Common stock  shares outstanding:
    2002  46,454,188; 2001  46,319,696               |                                            |       | 51,127        |           |  |       | 49,549  |          
|                                         | Retained earnings                                                                         |                                            |       | 445,940       |           |  |       | 410,665 |          
|                                         | Accumulated non-owner changes in equity                                                   |                                            |       | (39,379       | )         |  |       | (14,861 | )        
|                                         |                                                                                           |                                            |       |               |           |  |       |        
|                                         |                                                                                           | Shareholders equity                       |       |               | 457,688   |  |       |         | 445,353   | 
|                                         |                                                                                           |                                            |       |               |           |  |       |        
|                                         |                                                                                           | Total liabilities and shareholders equity |       | $             | 1,038,947 |  |       | $       | 939,988   | 
|                                         |                                                                                           |                                            |       |               |           |  |       |        

The accompanying notes to consolidated financial
statements

are an integral part of these balance sheets.


23



---



##### 



STATEMENTS OF CONSOLIDATED INCOME AND RETAINED
EARNINGS

RUDDICK CORPORATION AND SUBSIDIARIES


(dollars in thousands, except per share
data)


|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 
|-------------------------------------------------------------------------------- |  | -------------------------- | --------- | ------------- |  | ---------- | --------- | - |  | - | --------- | 
|                                                                                 |  |                           
|                                                                                 |  | For the Fiscal Years Ended
|                                                                                 |  |                           
|                                                                                 |  | September 29,              |           | September 30, |  | October 1,
|                                                                                 |  | 2002                       |           | 2001          |  | 2000      
|                                                                                 |  |                            |           |               |  |           
|Net sales                                                                        |  | $                          | 2,644,198 |               |  | $          | 2,743,290 |   |  | $ | 2,692,091 | 
|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 
|Cost of sales                                                                    |  |                            | 1,889,379 |               |  |            | 1,984,755 |   |  |   | 1,939,511 | 
|Selling, general and administrative expenses                                     |  |                            | 646,438   |               |  |            | 661,408   |   |  |   | 645,956   | 
|Non-recurring exit costs                                                         |  |                            | 7,113     |               |  |            | 43,690    |   |  |   |          | 
|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 
|Operating profit                                                                 |  |                            | 101,268   |               |  |            | 53,437    |   |  |   | 106,624   | 
|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 
|Net interest expense                                                             |  |                            | 11,208    |               |  |            | 13,946    |   |  |   | 15,487    | 
|Other expense, net                                                               |  |                            | 8,468     |               |  |            | 8,478     |   |  |   | 6,744     | 
|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 
|Income before taxes                                                              |  |                            | 81,592    |               |  |            | 31,013    |   |  |   | 84,393    | 
|Taxes                                                                            |  |                            | 29,609    |               |  |            | 31,740    |   |  |   | 33,391    | 
|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 
|Net income (loss)                                                                |  |                            | 51,983    |               |  |            | (727      | ) |  |   | 51,002    | 
|Retained earnings at beginning of fiscal year                                    |  |                            | 410,665   |               |  |            | 428,053   |   |  |   | 393,699   | 
|Common dividend  2002: $.36 a share;
    2001: $.36 a share; 2000: $.36 a share |  |                            | 16,708    |               |  |            | 16,661    |   |  |   | 16,648    | 
|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 
|Retained earnings at end of fiscal year                                          |  | $                          | 445,940   |               |  | $          | 410,665   |   |  | $ | 428,053   | 
|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 
|Net income (loss) per share  basic                                              |  | $                          | 1.12      |               |  | $          | (.02      | ) |  | $ | 1.10      | 
|Net income (loss) per share 
    diluted                                        |  | $                          | 1.12      |               |  | $          | (.02      | ) |  | $ | 1.10      | 
|                                                                                 |  |                            |           |               |  |            |           |   |  |   |           | 

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

24



---



##### 



STATEMENTS OF CONSOLIDATED TOTAL NON-OWNER
CHANGES IN EQUITY

RUDDICK CORPORATION AND SUBSIDIARIES


(dollars in thousands)


|                                               |                                         |                                   |        |               |        |            |      |         |         |   |        |        |        | 
|---------------------------------------------- | --------------------------------------- | --------------------------------- | ------ | ------------- | ------ | ---------- | ---- | ------- | ------- | - | ------ | ------ | ------ | 
|                                               |                                         |                                  
|                                               |                                         | For the Fiscal Years Ended       
|                                               |                                         |                                  
|                                               |                                         | September 29,                     |        | September 30, |        | October 1,
|                                               |                                         | 2002                              |        | 2001          |        | 2000      
|                                               |                                         |                                   |        |               |        |           
|Net income (loss)                              |                                         | $                                 | 51,983 |               |        | $          | (727 | )       |         | $ | 51,002 |       
|Other non-owner changes in equity, net of tax: |                                         |                                   |        |               |        |            |      |         |         |   |        |       
|                                               | Foreign currency translation adjustment |                                   |        | 507           |        |            |      | (332    | )       |   |        | (1,293 | )     
|                                               | Minimum pension liability adjustment    |                                   |        | (25,025       | )      |            |      | (11,083 | )       |   |        |       |       
|                                               |                                         |                                   |        |               |        |            |      |         |         |   |        |       
|                                               | Other non-owner changes in equity       |                                   |        | (24,518       | )      |            |      | (11,415 | )       |   |        | (1,293 | )     
|                                               |                                         |                                   |        |               |        |            |      |         |         |   |        |       
|                                               |                                         | Total non-owner changes in equity |        | $             | 27,465 |            |      | $       | (12,142 | ) |        | $      | 49,709 | 
|                                               |                                         |                                   |        |               |        |            |      |         |         |   |        |       

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

25



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##### 



STATEMENTS OF CONSOLIDATED CASH
FLOWS

RUDDICK CORPORATION AND SUBSIDIARIES


(dollars in thousands)


|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |          |        |  
|---------------------------------------------------- | ------------------------------------------------------- | ----------------------------- | ------ | ------------- | ------ | ---------- | ------ | ------- | ------- | - | ------ | -------- | ------ | -
|                                                     |                                                         |                              
|                                                     |                                                         | For the Fiscal Years Ended   
|                                                     |                                                         |                              
|                                                     |                                                         | September 29,                 |        | September 30, |        | October 1,
|                                                     |                                                         | 2002                          |        | 2001          |        | 2000      
|                                                     |                                                         |                               |        |               |        |           
|Cash Flow from Operating Activities:                 |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|                                                     | Net income (loss)                                       |                               | $      | 51,983        |        |            | $      | (727    | )       |   | $      | 51,002   |       
|                                                     | Non-cash items included in net income                   |                               |        |               |        |            |        |         |         |   |        |          |       
|                                                     |                                                         | Depreciation and amortization |        |               | 75,788 |            |        |         | 80,271  |   |        |          | 77,016 |  
|                                                     |                                                         | Deferred taxes                |        |               | 3,246  |            |        |         | (10,035 | ) |        |          | (2,520 | )
|                                                     |                                                         | Loss on sale of property      |        |               | 3,495  |            |        |         | 34,733  |   |        |          | 92     |  
|                                                     |                                                         | Other, net                    |        |               | 3,362  |            |        |         | 6,569   |   |        |          | (5,464 | )
|                                                     | Decrease (increase) in accounts receivable              |                               |        | (6,469        | )      |            |        | 13,165  |         |   |        | 5,298    |       
|                                                     | Decrease (increase) in inventories                      |                               |        | (12,081       | )      |            |        | 36,915  |         |   |        | (20,845  | )     
|                                                     | Decrease (increase) in other current assets             |                               |        | (3,238        | )      |            |        | 2,850   |         |   |        | 12,076   |       
|                                                     | Increase (decrease) in current liabilities              |                               |        | 27,216        |        |            |        | 4,213   |         |   |        | (15,865  | )     
|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|                                                     | Net cash provided by operating activities               |                               |        | 143,302       |        |            |        | 167,954 |         |   |        | 100,790  |       
|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|Investing Activities:                                |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|                                                     | Capital expenditures                                    |                               |        | (79,116       | )      |            |        | (87,721 | )       |   |        | (118,755 | )     
|                                                     | Cash proceeds from sale of property                     |                               |        | 17,055        |        |            |        | 23,927  |         |   |        | 1,426    |       
|                                                     | COLI, net                                               |                               |        | (1,952        | )      |            |        | 4,745   |         |   |        | (5,320   | )     
|                                                     | Other, net                                              |                               |        | (13,528       | )      |            |        | 2,949   |         |   |        | 5,866    |       
|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|                                                     | Net cash used in investing activities                   |                               |        | (77,541       | )      |            |        | (56,100 | )       |   |        | (116,783 | )     
|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|Financing Activities:                                |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|                                                     | Proceeds (repayments) of long-term revolver             |                               |        | (900          | )      |            |        | (69,300 | )       |   |        | 29,400   |       
|                                                     | Proceeds from long-term borrowings                      |                               |        | 1,577         |        |            |        | 2,138   |         |   |        |         |       
|                                                     | Payments of principal on long-term debt                 |                               |        | (5,590        | )      |            |        | (4,667  | )       |   |        | (422     | )     
|                                                     | Dividends paid                                          |                               |        | (16,708       | )      |            |        | (16,661 | )       |   |        | (16,648  | )     
|                                                     | Other, net                                              |                               |        | 1,381         |        |            |        | 2,010   |         |   |        | (1,277   | )     
|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|                                                     | Net cash provided by (used in) financing
    activities |                               |        | (20,240       | )      |            |        | (86,480 | )       |   |        | 11,053   |       
|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|Increase (decrease) in cash and cash
    equivalents |                                                         |                               | 45,521 |               |        |            | 25,374 |         |         |   | (4,940 | )       
|Cash and cash equivalents at beginning of year       |                                                         |                               | 34,901 |               |        |            | 9,527  |         |         |   | 14,467 |         
|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|Cash and cash equivalents at end of year             |                                                         | $                             | 80,422 |               |        | $          | 34,901 |         |         | $ | 9,527  |         
|                                                     |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|Supplemental Disclosures of Cash Flow Information:   |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|Cash Paid During the Year for:                       |                                                         |                               |        |               |        |            |        |         |         |   |        |         
|                                                     | Interest                                                |                               | $      | 12,616        |        |            | $      | 14,256  |         |   | $      | 16,092   |       
|                                                     | Income taxes                                            |                               | $      | 33,401        |        |            | $      | 51,599  |         |   | $      | 30,679   |       

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

26



---



##### 



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 2002, 2001 and 2000 include
52 weeks.

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 on the
basis of criteria which include, but are not limited to,
suitable liquidity and credit quality requirements. The carrying
amount of these investments approximates their fair market value.

Inventories Inventories
are valued at the lower of cost or market with the cost of
substantially all domestic U.S. inventories being determined
using the last-in, first-out (LIFO) method. The LIFO cost
of such inventories was $22,985,000 and $23,515,000 less than
the first-in, first-out (FIFO) cost method at September 29,
2002 and September 30, 2001, respectively. Foreign
inventories and limited categories of domestic inventories,
totaling $49,763,000 for fiscal 2002 and $43,681,000 for fiscal
2001, are valued on the weighted average and on the FIFO cost
methods. At September 29, 2002 (September 30, 2001)
the value of finished goods inventory was $201,736,000
($193,688,000), work in progress was $4,703,000 ($4,246,000) and
raw materials and supplies were $18,109,000 ($14,533,000).

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

|                        |  |  |             | 
|----------------------- |  |  | ----------- | 
|Land improvements       |  |  | 10-40 years | 
|Buildings               |  |  | 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; gains or losses on disposal are added to or
deducted from income. Property categories include $8,255,000 and
$41,019,000 undepreciated construction in progress at
September 29, 2002 and September 30, 2001,
respectively.

Investments The
Company holds a financial position in certain shopping centers
in which Harris Teeter, Inc., is an anchor tenant. Additionally
it makes loans to and equity investments in a number of emerging
growth companies, primarily through investments in certain
venture capital funds. Real estate and other investments are
carried at the lower of cost or market. In managements
opinion, the net carrying value of financial instruments of
$2,820,000 and $3,807,000 held for investment approximated their
fair value at September 29, 2002 and September 30,
2001, respectively.

Other
Assets Other assets
included cash surrender value of Company owned life insurance
(COLI), investment in unconsolidated foreign subsidiaries and
various acquisition costs. The cash surrender value of life
insurance is recorded net of policy loans. The cash value of the
Companys life insurance policies were $40,422,000 at
September 29, 2002 and $37,767,000 at September 30,
2001, and no policy loans were

27



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.
The net life insurance expense, including interest expense of
none in 2002, $1,828,000 in 2001, and $3,874,000 in 2000, is
included in other expense in the statements of consolidated
income and retained earnings. Acquisition costs allocated to
other assets, including goodwill, are being amortized over
15 years, however, effective in fiscal 2003 the Company
will cease amortization and subject such assets to assessments
of impairment, as will be required under new accounting
standards.

Fair Value
Disclosures The
carrying amounts for certain of the Companys financial
instruments, including cash and cash equivalents, accounts and
notes receivable, accounts payable and other accrued liabilities
approximate fair value because of their short maturities. The
recorded amount of fixed rate obligations is less than their
fair value by approximately $4,700,000 based on borrowing rates
currently available to the Company for loans with similar terms
and maturities. The Company reviews the carrying value of
property and equipment whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. Measurement of any impairment would include a
comparison of estimated future operating cash flows anticipated
to be generated during the remaining life to the net carrying
value of the asset. At September 29, 2002, the carrying
value of the Companys long-lived assets and intangibles,
including goodwill, was recoverable in all material respects.

Derivative Instruments and
Hedging Derivative
instruments (including certain derivative instruments embedded
in other contracts) are recorded in the balance sheet as either
an asset or liability measured at their fair values. Changes in
the derivatives fair value are recognized currently in
earnings unless specific hedge accounting criteria are met and
the Company formally documents, designates, and assesses the
effectiveness of transactions that receive hedge accounting.

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.

Shipping and Handling
Costs Freight
expenses are accounted for as a component of the cost of sales.
The freight amounts reflected in cost of sales were
approximately $8,700,000, $8,400,000 and $9,300,000,
respectively, in fiscal 2002, 2001 and 2000. Approximately
$9,652,000, $5,900,000 and $5,900,000, respectively, of shipping
and handling costs are included in selling, general and
administrative expenses in fiscal 2002, 2001 and 2000.

Advertising Costs
incurred to produce media advertising are expensed in the period
in which the advertising first takes place. All other
advertising costs are also expensed when incurred. Cooperative
advertising income from vendors is recorded in the period in
which the related expense is incurred. Net advertising expenses
of $22,715,000, $23,954,000, and $22,680,000 were included in
the Companys results of operations for fiscal 2002, 2001
and 2000, 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.

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RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Per Share
Amounts Basic and
diluted net income per share amounts are determined based on the
weighted average number of shares of common stock and common
stock equivalents (non-cumulative, voting $.56 convertible
preference stock and stock options) outstanding. The weighted
average basic shares outstanding were 46,401,667 in 2002,
46,276,278 in 2001, and 46,274,479 in 2000. As the result of
outstanding stock options the weighted average diluted shares
outstanding were 46,577,643 in 2002, 46,276,278 in 2001, and
46,349,694 in 2000. 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. Common stock equivalents had no effect on per share
earnings in fiscal year 2002, 2001 and 2000.

Stock
Options As permitted
by 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. 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.

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

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

New Accounting
Standards SFAS
No. 142, Goodwill and Other Intangibles will be
effective for financial statements issued in the Companys
fiscal year 2003. At September 29, 2002, the Companys
goodwill and other intangible asset balances were approximately
$8,600,000. This statement will require the cessation of the
amortization of goodwill and other intangibles and an assessment
of asset impairment by applying a fair-value-based test at least
annually. The amortization expense in fiscal 2002 associated
with the existing intangible assets was $967,000. Management
believes that the adoption of this statement will have no
material impact on the Companys financial results of
operations or financial position.

SFAS No. 143, Accounting for Asset
Retirement Obligations will be effective for financial
statements issued in the Companys fiscal year 2003. This
statement will require that the fair value of a liability for an
asset retirement obligation for tangible long-lived assets be
recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. Management believes that the
adoption of this statement will have no material impact on the
Companys financial results of operations or financial
position.

SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets will be
effective for financial statements issued in the Companys
fiscal year 2003. This statement addresses financial accounting
and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, and establishes criteria
and methodologies for the recognition and measurement,
classification and valuations of such assets. Management
believes that the adoption of this statement will have no
material impact on the Companys financial results of
operations or financial position.

SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections is applicable for
the Company at the beginning of fiscal year 2003, with the
provisions related to SFAS No. 13 effective for
transactions occurring after May 14, 2002. SFAS No. 4 had
required that all gains and losses from extinguishment of debt
be aggregated and, if material, classified as an extraordinary
item, net of related income tax effect. SFAS No. 145
rescinds SFAS No. 4 and the related requirement of gains
and losses from extinguishment of debt as extraordinary items.
Additionally, SFAS

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RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

No. 145 amends SFAS No. 13 to require
that certain lease modifications that have economic effects
similar to sale-leaseback transactions be accounted for in the
same manner as sale-leaseback transactions. Management believes
that the adoption of this statement will have no material impact
on the Companys financial results of operations or
financial position.

SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities is to be
applied prospectively to exit or disposal activities initiated
after December 31, 2002. SFAS No. 146 requires costs
associated with exit or disposal activities to be recognized
when they are incurred rather than at the date of a commitment
to an exit or disposal plan. Management believes that the
adoption of this statement will have no material impact on the
Companys financial results of operations or financial
position.

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.

Closed Store
Obligations The Company
provides for closed store liabilities relating to the present
value of the estimated remaining non-cancelable lease payments
after the anticipated closing date, net of estimated subtenant
income. Harris Teeter management estimates the net lease
liabilities using a discount rate to calculate the present value
of the remaining rent payments on closed stores. 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 20 years. As of
September 29, 2002, closed store lease liabilities totaled
$18.9 million. The value of any equipment and leasehold
improvements related to a closed store is reduced to reflect net
recoverable values. Harris Teeter management estimates the
subtenant income, future cash flows and asset recovery values
based on its historical experience and knowledge of (1) the
market in which the store to be closed 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 and related assets 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
exit 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. Costs, excluding inventory
write-downs, related to closed store locations are reflected in
the income statement as Selling, general and
administrative expenses. Inventory write-downs, if any, in
connection with store closings, are classified in cost of sales.
Costs to transfer inventory and equipment from closed stores are
expensed as incurred. The Company constantly reviews the
relevant, significant factors and makes adjustments where the
facts and circumstances dictate.

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.

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RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

There are numerous types of rebates and
allowances in the retail industry. The Companys accounting
practices with regard to some of the more typical arrangements
are discussed as follows. Vendor allowances for price markdowns
are credited to the cost of sales during the period in which the
related markdown was taken and charged to the cost of sales.
Slotting and stocking allowances received from a vendor to
ensure that its products are carried or to introduce a new
product at the Companys stores are recorded as a reduction
of cost of sales over the period covered by the agreement with
the vendor based on the estimated inventory turns of the
merchandise to which the allowance applies. Display allowances
are recognized as a reduction of cost of sales in the period
earned in accordance with the vendor agreement. 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.

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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Inventory Valuation Methods and
Reserves 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. As of
September 29, 2002, the Company has reduced its inventories
by approximately $23.0 million for the difference between
current costs and LIFO value. Management does not believe that
the likelihood is significant that materially higher LIFO
reserves are required given its current expectations of on-hand
inventory quantities and costs.

The proper valuation of inventory also requires
management to estimate the net realizable value of the
Companys obsolete and slow moving inventory at the end of
each period. Management bases its net realizable values upon
many factors including historical recovery rates, the aging of
inventories on hand, the inventory movement of specific products
and the current economic conditions. When management has
determined inventory to be obsolete or slow moving, the
inventory is reduced to its net realizable value by recording an
obsolescence reserve. Given the Companys experiences in
selling obsolete and slow moving inventory, management believes
that the amounts of the obsolescence reserves to the carrying
values of its inventories are materially adequate. As of
September 29, 2002, the Company has reduced the value of
its inventories by approximately $6.6 million for obsolete
and slow moving items.

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
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.

32



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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. As of September 29, 2002, the Company has accrued
approximately $8.9 million for outstanding workers
compensation claims and $3.7 million for general and automotive
liability claims.

With regard to healthcare cost reserves, the
Company has no material post-retirement healthcare benefit
plans. 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 $3.6 million
accrued as of September 29, 2002 is reasonable and adequate
as of that date.

Impairment of Long-lived
Assets The Company
periodically evaluates the period of depreciation or
amortization for long-lived assets to determine whether current
circumstances warrant revised estimates of useful lives. The
Company reviews its property, plant and equipment for 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 would be recorded for
the 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.

With respect to owned property and equipment
associated with closed stores and facilities, the value of the
property and equipment 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.

Impairment reserves at September 29, 2002
totaled $8,379,000 and the resulting net carrying value of
assets held for sale was $2,233,000.

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.

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. 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.

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RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 29, 2002, these plans were
unfunded, except for a directors compensation deferral
plan which utilizes a rabbi trust. For further disclosures
regarding the Companys pension and deferred compensation
plans, see Commitments and Contingencies in Notes
to Consolidated Financial Statements.

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

The determination of the Companys
obligation and expense for pension, deferred compensation and
other post-retirement benefits is dependent on certain
assumptions selected by management and used by the Company and
its actuaries in calculating such amounts. The more significant
of those assumptions applicable to the qualified pension plan
include the rate by which projected future benefit payments are
discounted (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. As of September 29, 2002 the recorded
obligation for the Companys pension and supplemental
pension plans totaled $61.5 million and for the deferred
compensation arrangements, $16.5 million.

IMPAIRMENT AND EXIT COSTS

During fiscal 2002, the Companys textile
subsidiary, American & Efird (A&E), recorded a
non-recurring 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, NC, resulting in the
shutdown of the dyeing and finishing operations in Gastonia, NC.
The 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 29, 2002 the
established exit cost reserve had been fully settled.

Additionally, in fiscal 2001, the Companys
textile subsidiary recorded a non-recurring 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.

In fiscal 2001, the Companys supermarket
subsidiary, Harris Teeter, sold 26 stores in certain of its
non-core markets. A non-recurring 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

34



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

anticipated and accrued in the prior fiscal year.
At September 29, 2002 the remaining balance of the exit
cost reserve was $812,000.

LEASES

The Company leases certain equipment under
agreements expiring during the next six 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 15 years. Rent expenses
were as follows:

|                  |                                 |                |   |        |        |      |   |        |        |  |   |        |        | 
|----------------- | ------------------------------- | -------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                  |                                 | 2002           |   | 2001   |        | 2000
|                  |                                 |                |   |        |        |     
|                  |                                 |               
|                  |                                 | (in thousands)
|Operating Leases: |                                 |                |   |        |        |      |   |        |        |  |   |       
|                  | Minimum, net of sublease income |                | $ | 67,932 |        |      | $ | 73,816 |        |  | $ | 70,785 |       
|                  | Contingent                      |                |   | 1,329  |        |      |   | 1,456  |        |  |   | 1,278  |       
|                  |                                 |                |   |        |        |      |   |        |        |  |   |       
|                  |                                 | Total          |   | $      | 69,261 |      |   | $      | 75,272 |  |   | $      | 72,063 | 
|                  |                                 |                |   |        |        |      |   |        |        |  |   |       

Future minimum lease commitments at
September 29, 2002 (excluding leases assigned or expected
to be assigned  see below) were as follows:

|            |                                                                                 |                |         |         | 
|----------- | ------------------------------------------------------------------------------- | -------------- | ------- | ------- | 
|            |                                                                                 | Operating     
|            |                                                                                 | Leases        
|            |                                                                                 |               
|            |                                                                                 | (in thousands)
|2003        |                                                                                 | $              | 64,034  |        
|2004        |                                                                                 |                | 62,326  |        
|2005        |                                                                                 |                | 60,485  |        
|2006        |                                                                                 |                | 56,001  |        
|2007        |                                                                                 |                | 53,062  |        
|Later years |                                                                                 |                | 478,371 |        
|            |                                                                                 |                |         |        
|            | Total minimum lease payments                                                    |                | $       | 774,279 | 
|            |                                                                                 |                |         |        
|            | Total minimum sublease rentals to be received
    under noncancelable subleases |                | $       | 22,419  | 
|            |                                                                                 |                |         |        

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 19 years
and the future minimum lease payments of $110,762,000 over this
period have been assumed by these merchants. Leases related to
certain closed store locations have been subleased to other
merchants. The future minimum lease payments related to these
stores totaled $29,503,000 at September 29, 2002. In addition,
Harris Teeter leases certain store locations which are not
currently in use, or have been identified in plans for closing
generally within a period of twelve months, but are expected to
be subleased or assigned to other merchants. These leases expire
over the next 15 years and the future minimum lease
payments related to these locations total $21,403,000
(approximating $2,737,000 per year for each of the next five
years). The Company has provided reserves of $18,911,000 for the
estimated net liability associated with stores subleased, or
expected to be subleased, at rental amounts below the related
minimum lease payments.

35



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

LONG-TERM DEBT

Long-term debt at September 29, 2002 and
September 30, 2001 was as follows:

|                                                                                  |                      |                |        |         |  |   |        |         | 
|--------------------------------------------------------------------------------- | -------------------- | -------------- | ------ | ------- |  | - | ------ | ------- | 
|                                                                                  |                      | 2002           |        | 2001   
|                                                                                  |                      |                |        |        
|                                                                                  |                      |               
|                                                                                  |                      | (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 |         |  |   |       |        
|Revolving line of credit, variable rate, due
    January, 2003, prepaid May, 2002 |                      |                |       |         |  |   | 900    |        
|Revolving line of credit, variable rate, due May,
    2005                        |                      |                |       |         |  |   |       |        
|Other obligations                                                                 |                      |                | 5,528  |         |  |   | 6,213  |        
|                                                                                  |                      |                |        |         |  |   |        |        
|                                                                                  | Total                |                |        | 185,892 |  |   |        | 157,113 | 
|                                                                                  | Less current portion |                |        | 727     |  |   |        | 676     | 
|                                                                                  |                      |                |        |         |  |   |        |        
|                                                                                  | Total long-term debt |                | $      | 185,165 |  |   | $      | 156,437 | 
|                                                                                  |                      |                |        |         |  |   |        |        

Long-term debt maturities in each of the next
five fiscal years are as follows: 2003  $727,000;
2004  $31,090,000; 2005  $7,837,000;
2006  $7,700,000; 2007  $7,722,000.

During 2002 and 2001 the maximum outstanding
borrowing under the revolving line of credit due January, 2003
was $900,000 and $97,800,000, respectively. In fiscal 2002, the
amount outstanding on that revolving line of credit was $900,000
from the beginning of the year through the prepayment date in
May, 2002, while the average outstanding for fiscal 2001 was
$45,646,000. 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 and 5.4% for fiscal
2001. A commitment fee of .15% of the unused line was charged
during 2002 and 2001.

On May 14, 2002, the Company and three banks
entered into a new revolving credit facility for an aggregate
amount of up to $100 million to refinance the existing
credit facility. Borrowings and prepayments 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 29,
2002, there was no borrowing 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. The
amount which may be borrowed from time to time and the interest
rate chargeable on such borrowing 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 29, 2002,
the Company was within the various financial covenants. Under
the leverage ratio, as of September 29, 2002, the Company
would have the capacity to borrow up to approximately
$98.6 million, although no borrowings are needed or
anticipated for the foreseeable future. The Company is charged a
variable commitment fee based on the unused balance net of trade
and standby letters of credit which were approximately
$10,442,000 at September 29, 2002. The commitment fee in
fiscal 2002 was .25% of the unused balance.

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

36



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

at September 29, 2002. The total financing
costs for these properties was $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 29, 2002, those balances were
$30.1 million in property, net and $30.4 million in
long term debt.

As indicated above, various loan agreements
provide, among other things, for maintenance of minimum levels
of consolidated shareholders equity or tangible net worth.
At September 29, 2002, consolidated tangible net worth
exceeded by $38,300,000 the balance which, under the most
restrictive provisions, must be maintained through
September 28, 2003. The requirement shall increase annually
by 40% of consolidated net income for such year.

Total interest expense on long-term debt was
$12,135,000, $14,221,000 and $16,694,000 in 2002, 2001 and 2000,
respectively.

CAPITAL STOCK

The capital stock of the Company authorized at
September 29, 2002 was 1,000,000 shares of Additional
Preferred stock, 4,000,000 shares of Preference stock
(noncumulative $.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 29, 2002.

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

|                              |                                             |                      |            |          |   |   |        |        |  
|----------------------------- | ------------------------------------------- | -------------------- | ---------- | -------- | - | - | ------ | ------ | -
|                              |                                             |                     
|                              |                                             | Common              
|                              |                                             |                     
|                              |                                             | Shares               |            | Amount  
|                              |                                             |                      |            |         
|                              |                                             |                     
|                              |                                             | (in thousands except
|                              |                                             | share amounts)      
|Balance at October 3, 1999    |                                             |                      | 46,451,240 |          |   | $ | 52,137 |       
|                              |                                             |                      |            |          |   |   |        |       
|                              | Shares issued under exercised stock options |                      |            | 57,836   |   |   |        | 625    |  
|                              | Shares purchased and retired                |                      |            | (288,200 | ) |   |        | (4,408 | )
|                              | Tax effect of disqualifying option stocks   |                      |            |         |   |   |        | 44     |  
|                              |                                             |                      |            |          |   |   |        |       
|Balance at October 1, 2000    |                                             |                      | 46,220,876 |          |   | $ | 48,398 |       
|                              |                                             |                      |            |          |   |   |        |       
|                              | Shares issued under exercised stock options |                      |            | 98,820   |   |   |        | 1,075  |  
|                              | Shares purchased and retired                |                      |            |         |   |   |        |       |  
|                              | Tax effect of disqualifying option stocks   |                      |            |         |   |   |        | 76     |  
|                              |                                             |                      |            |          |   |   |        |       
|Balance at September 30, 2001 |                                             |                      | 46,319,696 |          |   | $ | 49,549 |       
|                              |                                             |                      |            |          |   |   |        |       
|                              | Shares issued under exercised stock options |                      |            | 134,492  |   |   |        | 1,374  |  
|                              | Shares purchased and retired                |                      |            |         |   |   |        |       |  
|                              | Tax effect of disqualifying option stocks   |                      |            |         |   |   |        | 204    |  
|                              |                                             |                      |            |          |   |   |        |       
|Balance at September 29, 2002 |                                             |                      | 46,454,188 |          |   | $ | 51,127 |       
|                              |                                             |                      |            |          |   |   |        |       

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

37



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 $.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 29, 2002, the Company has 1988,
1993, 1995, 1997 and 2000 stock option plans, which plans were
approved by the Companys shareholders and authorized
options for 4,300,000 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 under the 1995 plan (or if sufficient
options are not available for grant under the 1995 Plan, then
the 2000 Plan), 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 the 1997 and
2000 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 29, 2002 the Company may grant additional options
for the purchase of 957,350 shares.

A summary of the status of the Companys
stock option plans as of September 29, 2002,
September 30, 2001 and October 1, 2000, changes during
the years ending on those dates and related weighted average
exercise price is presented below (shares in thousands):

|                                 |  |        |       |       |  |        |       |       |  |        |       |       |  |   |       |  |  |  |       |   |  |   |       | 
|-------------------------------- |  | ------ | ----- | ----- |  | ------ | ----- | ----- |  | ------ | ----- | ----- |  | - | ----- |  |  |  | ----- | - |  | - | ----- | 
|                                 |  |        |       |       |  |       
|                                 |  | 2002   |       | 2001  |  | 2000  
|                                 |  |        |       |       |  |       
|                                 |  | Shares |       | Price |  | Shares |       | Price |  | Shares |       | Price
|                                 |  |        |       |       |  |        |       |       |  |        |       |      
|Outstanding at beginning of year |  |        | 1,797 |       |  | $      | 15.88 |       |  |        | 1,697 |       |  | $ | 16.64 |  |  |  | 1,488 |   |  | $ | 16.36 | 
|Granted                          |  |        | 575   |       |  |        | 15.84 |       |  |        | 368   |       |  |   | 11.52 |  |  |  | 408   |   |  |   | 17.27 | 
|Exercised                        |  |        | (161  | )     |  |        | 11.17 |       |  |        | (104  | )     |  |   | 11.11 |  |  |  | (59   | ) |  |   | 10.95 | 
|Forfeited                        |  |        | (122  | )     |  |        | 17.43 |       |  |        | (164  | )     |  |   | 16.96 |  |  |  | (140  | ) |  |   | 18.08 | 
|                                 |  |        |       |       |  |        |       |       |  |        |       |       |  |   |       |  |  |  |       |   |  |   |       | 
|Outstanding at end of year       |  |        | 2,089 |       |  |        | 16.15 |       |  |        | 1,797 |       |  |   | 15.88 |  |  |  | 1,697 |   |  |   | 16.64 | 
|                                 |  |        |       |       |  |        |       |       |  |        |       |       |  |   |       |  |  |  |       |   |  |   |       | 
|Options exercisable at year end  |  |        | 933   |       |  | $      | 16.77 |       |  |        | 853   |       |  | $ | 15.84 |  |  |  | 707   |   |  | $ | 14.74 | 
|                                 |  |        |       |       |  |        |       |       |  |        |       |       |  |   |       |  |  |  |       |   |  |   |       | 

38



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes options
outstanding and options exercisable as of September 29,
2002, 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
|                       |  |                     |       |                     |  |       |     |             |  |      
|$11.44 to $14.38       |  |                     | 542   |                     |  |       | 3.7 |             |  | $     | 11.78 |  |  |  | 285 |  |  | $ | 12.04 | 
|14.56 to   18.47       |  |                     | 920   |                     |  |       | 5.7 |             |  |       | 16.40 |  |  |  | 192 |  |  |   | 17.21 | 
|19.31 to   20.28       |  |                     | 627   |                     |  |       | 2.8 |             |  |       | 19.56 |  |  |  | 456 |  |  |   | 19.53 | 
|                       |  |                     |       |                    
|$11.44 to $20.28       |  |                     | 2,089 |                     |  |       | 4.3 |             |  | $     | 16.15 |  |  |  | 933 |  |  | $ | 16.77 | 
|                       |  |                     |       |                    

The weighted average fair value at date of grant
for options granted during fiscal 2002, 2001 and 2000 was $4.09,
$3.25 and $4.71 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:

|                        |  |      |       |      |  |      |       |   |  |  |       |  
|----------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                        |  | 2002 |       | 2001 |  | 2000
|                        |  |      |       |      |  |     
|Expected life (years)   |  |      | 5.1   |      |  |      | 4.9   |   |  |  | 4.8   |  
|Risk-free interest rate |  |      | 3.71  | %    |  |      | 5.76  | % |  |  | 6.06  | %
|Volatility              |  |      | 30.33 | %    |  |      | 29.66 | % |  |  | 28.18 | %
|Dividend yield          |  |      | 2.30  | %    |  |      | 2.20  | % |  |  | 2.30  | %

The Company has adopted the disclosure-only
provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. Accordingly, no compensation
cost has been recognized for the stock options granted in fiscal
2002, 2001 or 2000. Had compensation cost been determined based
on the fair value at the grant date consistent with the
provisions of this statement, the Companys pro forma net
income and basic and diluted net income per share would have
been as follows (in thousands, except per share data):

|                              |         |               |               |      |        |      |  |      |        |      |   |   |        |      | 
|----------------------------- | ------- | ------------- | ------------- | ---- | ------ | ---- |  | ---- | ------ | ---- | - | - | ------ | ---- | 
|                              |         |               |               | 2002 |        | 2001 |  | 2000
|                              |         |               |               |      |        |      |  |     
|Net income (loss)             |         |  as reported |               | $    | 51,983 |      |  | $    | (727   | )    |   | $ | 51,002 |     
|                              |         |  pro forma   |               |      | 50,952 |      |  |      | (1,498 | )    |   |   | 50,098 |     
|Net income (loss) per share  |         |               |               |      |        |      |  |      |        |      |   |  
|                              | Basic   |               |  as reported |      | $      | 1.12 |  |      | $      | (.02 | ) |   | $      | 1.10 | 
|                              |         |  pro forma   |               |      | 1.10   |      |  |      | (.03   | )    |   |   | 1.08   |     
|                              | Diluted |               |  as reported |      | $      | 1.12 |  |      | $      | (.02 | ) |   | $      | 1.10 | 
|                              |         |  pro forma   |               |      | 1.09   |      |  |      | (.03   | )    |   |   | 1.08   |     
|                              |         |               |               |      |        |      |  |      |        |      |   |   |        |     

The pro forma effect on net income for fiscal
2002, 2001 and 2000 is not representative of the pro forma
effect on net income in future years because it does not take
into consideration pro forma compensation expense related to
grants made prior to fiscal year 1996.

39



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

INCOME TAXES

The provision for income taxes consisted of the
following:

|                           |                 |                |        |        |  |      |         |        |   |   |        |        |  
|-------------------------- | --------------- | -------------- | ------ | ------ |  | ---- | ------- | ------ | - | - | ------ | ------ | -
|                           |                 | 2002           |        | 2001   |  | 2000
|                           |                 |                |        |        |  |     
|                           |                 |               
|                           |                 | (in thousands)
|CURRENT                    |                 |                |        |        |  |      |         |        |   |   |        |       
|                           | Federal         |                | $      | 21,832 |  |      | $       | 36,078 |   |   | $      | 30,469 |  
|                           | State and other |                |        | 4,531  |  |      |         | 5,697  |   |   |        | 5,442  |  
|                           |                 |                |        |        |  |      |         |        |   |   |        |       
|                           |                 |                | 26,363 |        |  |      | 41,775  |        |   |   | 35,911 |       
|                           |                 |                |        |        |  |      |         |        |   |   |        |       
|DEFERRED                   |                 |                |        |        |  |      |         |        |   |   |        |       
|                           | Federal         |                |        | 2,514  |  |      |         | (6,410 | ) |   |        | (2,804 | )
|                           | State and other |                |        | 732    |  |      |         | (3,625 | ) |   |        | 284    |  
|                           |                 |                |        |        |  |      |         |        |   |   |        |       
|                           |                 |                | 3,246  |        |  |      | (10,035 | )      |   |   | (2,520 | )     
|                           |                 |                |        |        |  |      |         |        |   |   |        |       
|Provision for income taxes |                 | $              | 29,609 |        |  | $    | 31,740  |        |   | $ | 33,391 |       
|                           |                 |                |        |        |  |      |         |        |   |   |        |       

Income from foreign operations before income
taxes in fiscal 2002, 2001 and 2000 was $1,010,000, $3,496,000
and $6,835,000, respectively. Income taxes provided for income
from foreign operations in fiscal 2002, 2001 and 2000 was
$699,000, $736,000 and $1,376,000, respectively, including the
minority interest in such taxes.

In fiscal 2001, the Company recorded a
non-recurring charge of $20.0 million reflecting the terms of
settlement with the Internal Revenue Service (IRS)
for income tax exposure 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.

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

|                                                                      |                                                                     |                |        |        |   |      |        |        |   |   |        |        |  
|--------------------------------------------------------------------- | ------------------------------------------------------------------- | -------------- | ------ | ------ | - | ---- | ------ | ------ | - | - | ------ | ------ | -
|                                                                      |                                                                     | 2002           |        | 2001   |   | 2000
|                                                                      |                                                                     |                |        |        |   |     
|                                                                      |                                                                     |               
|                                                                      |                                                                     | (in thousands)
|Income tax on pre-tax income at the statutory
    federal rate of 35% |                                                                     | $              | 28,557 |        |   | $    | 10,854 |        |   | $ | 29,538 |       
|Increase (decrease) attributable to:                                  |                                                                     |                |        |        |   |      |        |        |   |   |        |       
|                                                                      | IRS settlement                                                      |                |        |       |   |      |        | 20,000 |   |   |        |       |  
|                                                                      | State and other income taxes, net of federal
    income tax benefit |                |        | 3,839  |   |      |        | 1,612  |   |   |        | 4,080  |  
|                                                                      | Employee Stock Ownership Plan (ESOP)                                |                |        | (843   | ) |      |        | (1,202 | ) |   |        | (1,313 | )
|                                                                      | COLI                                                                |                |        | (943   | ) |      |        | (843   | ) |   |        | (486   | )
|                                                                      | Other items, net                                                    |                |        | (1,001 | ) |      |        | 1,319  |   |   |        | 1,572  |  
|                                                                      |                                                                     |                |        |        |   |      |        |        |   |   |        |       
|Income tax expense                                                    |                                                                     | $              | 29,609 |        |   | $    | 31,740 |        |   | $ | 33,391 |       
|                                                                      |                                                                     |                |        |        |   |      |        |        |   |   |        |       

40



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The tax effects of temporary differences giving
rise to the Companys consolidated deferred tax liability
at September 29, 2002 and September 30, 2001 are as
follows:

|                          |                                              |                                |   |         |         |   |   |         |         |  
|------------------------- | -------------------------------------------- | ------------------------------ | - | ------- | ------- | - | - | ------- | ------- | -
|                          |                                              | 2002                           |   | 2001   
|                          |                                              |                                |   |        
|                          |                                              |                               
|                          |                                              | (in thousands)                
|Deferred Tax Assets:      |                                              |                                |   |         |         |   |   |        
|                          | Employee benefits                            |                                | $ | 21,711  |         |   | $ | 14,429  |        
|                          | Reserves not currently deductible            |                                |   | 14,221  |         |   |   | 14,396  |        
|                          | Vendor allowances                            |                                |   | 4,321   |         |   |   | 2,002   |        
|                          | Rent obligations                             |                                |   | 7,424   |         |   |   | 5,285   |        
|                          | Other                                        |                                |   | 2,114   |         |   |   | 2,887   |        
|                          |                                              |                                |   |         |         |   |   |        
|                          |                                              | Total deferred tax assets      |   | $       | 49,791  |   |   | $       | 38,999  |  
|                          |                                              |                                |   |         |         |   |   |        
|Deferred Tax Liabilities: |                                              |                                |   |         |         |   |   |        
|                          | Property, plant and equipment                |                                | $ | (59,065 | )       |   | $ | (55,999 | )      
|                          | Other capitalized costs                      |                                |   | (1,749  | )       |   |   | (3,188  | )      
|                          | Undistributed profit on foreign subsidiaries |                                |   | (5,580  | )       |   |   | (3,421  | )      
|                          | Other                                        |                                |   | (2,853  | )       |   |   | (8,931  | )      
|                          |                                              |                                |   |         |         |   |   |        
|                          |                                              | Total deferred tax liabilities |   | $       | (69,247 | ) |   | $       | (71,539 | )
|                          |                                              |                                |   |         |         |   |   |        

Undistributed earnings of the Companys
foreign subsidiaries amount to approximately $21,732,000 at
September 29, 2002. Up to $11,300,000 of those earnings 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 and state taxes, net of
foreign credits, of up to approximately $3,955,000 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 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 information for fiscal 2002, 2001 and
2000 is as follows (in millions):

|                              |  |            |       |         |  |              |         |              |  |   |      |  |  |   |         | 
|----------------------------- |  | ---------- | ----- | ------- |  | ------------ | ------- | ------------ |  | - | ---- |  |  | - | ------- | 
|                              |  | Industrial |       | Retail  |  |              |         |             
|                              |  | Thread     |       | Grocery |  | Corporate(1) |         | Consolidated
|                              |  |            |       |         |  |              |         |             
|2002                          |  |            |       |         |  |              |         |              |  |   |      |  |  |   |         | 
|Net Sales                     |  | $          | 294.5 |         |  | $            | 2,349.7 |              |  |   |      |  |  | $ | 2,644.2 | 
|Gross Profit                  |  |            | 77.1  |         |  |              | 677.7   |              |  |   |      |  |  |   | 754.8   | 
|Operating Profit              |  |            | 12.5  |         |  |              | 88.8    |              |  |   |      |  |  |   | 101.3   | 
|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    | 

41



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                              |  |            |       |         |  |              |         |              |  |   |      |  |  |   |         | 
|----------------------------- |  | ---------- | ----- | ------- |  | ------------ | ------- | ------------ |  | - | ---- |  |  | - | ------- | 
|                              |  | Industrial |       | Retail  |  |              |         |             
|                              |  | Thread     |       | Grocery |  | Corporate(1) |         | Consolidated
|                              |  |            |       |         |  |              |         |             
|2001                          |  |            |       |         |  |              |         |              |  |   |      |  |  |   |         | 
|Net Sales                     |  | $          | 326.5 |         |  | $            | 2,416.8 |              |  |   |      |  |  | $ | 2,743.3 | 
|Gross Profit                  |  |            | 82.6  |         |  |              | 675.9   |              |  |   |      |  |  |   | 758.5   | 
|Operating Profit              |  |            | 21.6  |         |  |              | 31.8    |              |  |   |      |  |  |   | 53.4    | 
|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    | 
|2000                          |  |            |       |         |  |              |         |              |  |   |      |  |  |   |         | 
|Net Sales                     |  | $          | 359.2 |         |  | $            | 2,332.9 |              |  |   |      |  |  | $ | 2,692.1 | 
|Gross Profit                  |  |            | 103.9 |         |  |              | 648.7   |              |  |   |      |  |  |   | 752.6   | 
|Operating Profit              |  |            | 47.5  |         |  |              | 59.1    |              |  |   |      |  |  |   | 106.6   | 
|Assets Employed at Year End   |  | $          | 288.1 |         |  | $            | 665.5   |              |  | $ | 67.4 |  |  | $ | 1,021.0 | 
|Depreciation and Amortization |  |            | 18.6  |         |  |              | 57.0    |              |  |   | 1.4  |  |  |   | 77.0    | 
|Capital Expenditures          |  |            | 19.8  |         |  |              | 99.0    |              |  |   |     |  |  |   | 118.8   | 






|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Corporate Assets Employed include property,
    equipment, cash and investment assets, and net cash surrender
    value of Company-owned life insurance.

Geographic information as required by SFAS
No. 131 is as follows: Net revenues received from domestic
United States customers was $2,504,430,000 in fiscal 2002
($2,611,468,000 in 2001 and $2,570,924,000 in 2000), and net
revenues received from customers in foreign countries was
$139,768,000 for 2002 ($131,822,000 in 2001 and $121,167,000 in
2000). Net long-lived assets located in the domestic United
States were $511,443,000 in 2002 ($502,680,000 in 2001 and
$560,693,000 in 2000), and net long-lived assets located in
foreign countries were $30,836,000 in 2002 ($30,592,000 in 2001
and $24,692,000 in 2000).

COMMITMENTS AND CONTINGENCIES

Substantially all domestic full-time employees of
the Company and its subsidiaries participate in non-contributory
defined benefit pension plans. Employees in foreign subsidiaries
participate to varying degrees in local pension plans, which, in
the aggregate, are not significant. 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 require higher levels of
contributions in future years.

42



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 29,
2002 and September 30, 2001 for the pension plans and the
supplemental retirement plans:

|                                                                          |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |         |         |  
|------------------------------------------------------------------------- | --------------------------------------------- | ----------------------------------------- | - | ----------------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                          |                                               |                                           |   |                  
|                                                                          |                                               | Pension Plan                              |   | Supplemental Plan
|                                                                          |                                               |                                           |   |                  
|                                                                          |                                               | 2002                                      |   | 2001              |         | 2002 |   | 2001   
|                                                                          |                                               |                                           |   |                   |         |      |   |        
|                                                                          |                                               |                                           |   |                   |         |     
|                                                                          |                                               |                                           |   | (in thousands)    |         |     
|Change in benefit obligation:                                             |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                                                                          | Benefit obligation at the beginning of year   |                                           | $ | 153,625           |         |      | $ | 130,973 |         |  | $ | 19,044  |         |   | $ | 15,142  |        
|                                                                          | Service cost                                  |                                           |   | 6,787             |         |      |   | 5,578   |         |  |   | 367     |         |   |   | 259     |        
|                                                                          | Interest cost                                 |                                           |   | 11,323            |         |      |   | 10,722  |         |  |   | 1,378   |         |   |   | 1,315   |        
|                                                                          | Plan change                                   |                                           |   | 213               |         |      |   | 586     |         |  |   | (247    | )       |   |   |        |        
|                                                                          | Actuarial loss                                |                                           |   | 25,399            |         |      |   | 13,879  |         |  |   | 173     |         |   |   | 3,237   |        
|                                                                          | Benefits paid                                 |                                           |   | (7,698            | )       |      |   | (8,113  | )       |  |   | (968    | )       |   |   | (909    | )      
|                                                                          |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                                                                          |                                               | Pension benefit obligation at end of year |   |                   | 189,649 |      |   |         | 153,625 |  |   |         | 19,747  |   |   |         | 19,044  |  
|                                                                          |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|Change in plan assets:                                                    |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                                                                          | Fair value of assets at the beginning of year |                                           |   | 111,985           |         |      |   | 117,138 |         |  |   |        |         |   |   |        |        
|                                                                          | Actual return on plan assets                  |                                           |   | (5,012            | )       |      |   | (7,725  | )       |  |   |        |         |   |   |        |        
|                                                                          | Employer contribution                         |                                           |   | 22,164            |         |      |   | 10,685  |         |  |   | 968     |         |   |   | 909     |        
|                                                                          | Benefits paid                                 |                                           |   | (7,698            | )       |      |   | (8,113  | )       |  |   | (968    | )       |   |   | (909    | )      
|                                                                          | Non-investment expenses                       |                                           |   | (808              | )       |      |   |        |         |  |   |        |         |   |   |        |        
|                                                                          |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                                                                          |                                               | Fair value of assets at end of year       |   |                   | 120,631 |      |   |         | 111,985 |  |   |         |        |   |   |         |        |  
|                                                                          |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                                                                          | Funded status                                 |                                           |   | (69,018           | )       |      |   | (41,640 | )       |  |   | (19,747 | )       |   |   | (19,044 | )      
|                                                                          | Unrecognized net actuarial loss               |                                           |   | 82,917            |         |      |   | 42,249  |         |  |   | 4,043   |         |   |   | 4,433   |        
|                                                                          | Unrecognized prior service cost               |                                           |   | 1,552             |         |      |   | 1,866   |         |  |   | 2,154   |         |   |   | 2,534   |        
|                                                                          | Unrecognized transition asset                 |                                           |   |                  |         |      |   |        |         |  |   |        |         |   |   |        |        
|                                                                          |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                                                                          |                                               | Accrued benefit cost                      |   | $                 | 15,451  |      |   | $       | 2,475   |  |   | $       | (13,550 | ) |   | $       | (12,077 | )
|                                                                          |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|Amounts recognized in the statement of financial
    position consist of: |                                               |                                           |   |                   |         |      |   |         |         |  |   |         |         |   |   |        
|                                                                          | Accrued benefit liability                     |                                           | $ | (45,434           | )       |      | $ | (17,705 | )       |  | $ | (16,039 | )       |   | $ | (14,338 | )      
|                                                                          | Intangible pension asset                      |                                           |   | 1,552             |         |      |   | 1,866   |         |  |   | 2,154   |         |   |   | 2,261   |        
|                                                                          | Accumulated other changes in non-owner equity |                                           |   | 59,333            |         |      |   | 18,314  |         |  |   | 335     |         |   |   |        |        

The pension plans assets consist primarily
of U.S. government securities, corporate bonds, cash equivalents
and domestic equities, managed primarily by two banks. The
pension plan contribution payable at September 29, 2002 and
September 30, 2001 required to be paid by the due date of
the federal income tax return was zero for both years.

In 2002 for the pension plan, a weighted average
discount rate of 6.5% (7.3% in 2001) and rate of increase in
future payroll costs of 3.5%  4.0% in both 2002 and
2001 were used in determining the actuarial present value of the
projected benefit obligations. The expected long-term rate of
return on assets was 8.25% in 2002 and 8.75% for 2001.

43



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

For the supplemental plan, a 6.5% and 7.3%
weighted average discount rate was used for 2002 and 2001,
respectively, and a 6.0% rate of increase in future payroll
costs was used in both 2002 and 2001 in determining the
actuarial present value of the projected benefit obligations.

Net periodic pension expense for defined benefit
plans for fiscal 2002, 2001 and 2000 included the following
components:

|                                   |  |                |         |      |  |      |         |   |  |   |        |  
|---------------------------------- |  | -------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                   |  |               
|                                   |  | Pension Plan  
|                                   |  |               
|                                   |  | 2002           |         | 2001 |  | 2000
|                                   |  |                |         |      |  |     
|                                   |  |               
|                                   |  | (in thousands)
|Service cost                       |  | $              | 6,787   |      |  | $    | 5,578   |   |  | $ | 5,775  |  
|Interest cost                      |  |                | 11,323  |      |  |      | 10,722  |   |  |   | 9,631  |  
|Expected return on plan assets     |  |                | (10,831 | )    |  |      | (10,620 | ) |  |   | (9,572 | )
|Amortization of transition asset   |  |                |        |      |  |      | (358    | ) |  |   | (394   | )
|Amortization of prior service cost |  |                | 243     |      |  |      | 319     |   |  |   | 403    |  
|Recognized net actuarial loss      |  |                | 1,665   |      |  |      |        |   |  |   |       |  
|                                   |  |                |         |      |  |      |         |   |  |   |        |  
|Net periodic benefit cost          |  | $              | 9,187   |      |  | $    | 5,641   |   |  | $ | 5,843  |  
|                                   |  |                |         |      |  |      |         |   |  |   |        |  

|                                   |  |                   |       |      |  |      |       |  |  |   |       | 
|---------------------------------- |  | ----------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                   |  |                  
|                                   |  | Supplemental Plan
|                                   |  |                  
|                                   |  | 2002              |       | 2001 |  | 2000
|                                   |  |                   |       |      |  |     
|                                   |  |                  
|                                   |  | (in thousands)   
|Service cost                       |  | $                 | 367   |      |  | $    | 259   |  |  | $ | 164   | 
|Interest cost                      |  |                   | 1,378 |      |  |      | 1,315 |  |  |   | 1,101 | 
|Amortization of prior service cost |  |                   | 134   |      |  |      | 134   |  |  |   | 133   | 
|Recognized net actuarial loss      |  |                   | 557   |      |  |      | 917   |  |  |   | 117   | 
|                                   |  |                   |       |      |  |      |       |  |  |   |       | 
|Net periodic benefit cost          |  | $                 | 2,436 |      |  | $    | 2,625 |  |  | $ | 1,515 | 
|                                   |  |                   |       |      |  |      |       |  |  |   |       | 

The Company also has an 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 29, 2002,
approximately 19% 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 rabbi trust, the benefit
liability under the 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 employees. American &
Efird provides discretionary cash contributions, as determined
by its management 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.

44



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##### 



RUDDICK CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                         |  |                |       |      |  |      |       |  |  |   |       | 
|------------------------ |  | -------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                         |  | 2002           |       | 2001 |  | 2000
|                         |  |                |       |      |  |     
|                         |  |               
|                         |  | (in thousands)
|ESOP                     |  | $              | 8,059 |      |  | $    | 4,626 |  |  | $ | 6,769 | 
|Profit sharing and other |  |                | 6,725 |      |  |      | 1,464 |  |  |   | 4,558 | 

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.

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)
|2002 Operating Results(1)   |      |                                      |       |         |  |         |       |         |  |   |       |        |  |   |       |       
|Net Sales                   |      | $                                    | 653.2 |         |  | $       | 659.5 |         |  | $ | 666.3 |        |  | $ | 665.2 |       
|Gross Profit                |      |                                      | 181.0 |         |  |         | 184.9 |         |  |   | 195.4 |        |  |   | 193.5 |       
|Net Income                  |      |                                      | 10.5  |         |  |         | 8.7   |         |  |   | 16.5  |        |  |   | 16.3  |       
|Net Income Per Share        |      |                                      | .23   |         |  |         | .19   |         |  |   | .35   |        |  |   | .35   |       
|Dividend Per Share          |      |                                      | .09   |         |  |         | .09   |         |  |   | .09   |        |  |   | .09   |       
|Market Price Per Share      |      |                                      |       |         |  |         |       |         |  |   |       |        |  |   |       |       
|                            | High |                                      |       | 16.98   |  |         |       | 17.41   |  |   |       | 17.59  |  |   |       | 17.97  | 
|                            | Low  |                                      |       | 14.45   |  |         |       | 15.12   |  |   |       | 15.30  |  |   |       | 15.00  | 
|2001 Operating Results(2)   |      |                                      |       |         |  |         |       |         |  |   |       |        |  |   |       |       
|Net Sales                   |      | $                                    | 717.4 |         |  | $       | 694.0 |         |  | $ | 704.3 |        |  | $ | 627.6 |       
|Gross Profit                |      |                                      | 193.9 |         |  |         | 192.6 |         |  |   | 194.2 |        |  |   | 177.8 |       
|Net Income (Loss)           |      |                                      | 11.2  |         |  |         | (7.3  | )       |  |   | (16.8 | )      |  |   | 12.2  |       
|Net Income (Loss) Per Share |      |                                      | .24   |         |  |         | (.16  | )       |  |   | (.36  | )      |  |   | .26   |       
|Dividend Per Share          |      |                                      | .09   |         |  |         | .09   |         |  |   | .09   |        |  |   | .09   |       
|Market Price Per Share      |      |                                      |       |         |  |         |       |         |  |   |       |        |  |   |       |       
|                            | High |                                      |       | 14.125  |  |         |       | 14.200  |  |   |       | 17.200 |  |   |       | 17.030 | 
|                            | Low  |                                      |       | 10.813  |  |         |       | 9.813   |  |   |       | 12.000 |  |   |       | 13.820 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net of the effects of non-recurring charges for
    exit costs and impairment totaling $7.9 million (or
    $4.8 million after tax benefits) in the second fiscal
    quarter and non-recurring credits of $710,000 (or $431,000 after
    taxes) in the third fiscal quarter, as more fully described in
    the note Impairment and Exit Costs.                                  
|(2) | Net of the effects of non-recurring charges for a
    tax settlement of $20.0 million with the Internal Revenue
    Service in the second fiscal quarter and exit costs and
    impairment totaling $47.1 million (or $28.7 million
    after tax benefits) in the third fiscal quarter, as more fully
    described in the notes Income Taxes and
    Impairment and Exit Costs.

45



---



##### 



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, 2002 and June 30, 2002 and audited the
Companys financial statements for the fiscal year ended
September 29, 2002.

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.

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. The other information required by this item is
incorporated herein by reference to the sections entitled
Election of Directors and Section 16(a)
Beneficial Ownership Reporting Compliance in the
Registrants Proxy Statement to be filed with the
Securities and Exchange Commission with respect to the
Registrants 2003 Annual Meeting of Shareholders (the
2003 Proxy Statement).

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, Executive Compensation and
Retirement Arrangements in the Registrants
2003 Proxy Statement.

Item 12.     Security
Ownership of Certain Beneficial Owners and
Management

The information required by this item is
incorporated herein by reference to the sections entitled
Principal Shareholders, Election of
Directors  Beneficial Ownership of Company
Stock and Equity Compensation Plan Information
in the Registrants 2003 Proxy Statement.

46



---



##### 



Item 13.     Certain
Relationships and Related Transactions

The information required by this item is
incorporated herein by reference to the sections entitled
Certain Relationships and Related Transactions and
Retirement Arrangements in the Registrants
2003 Proxy Statement.

PART IV

Item 14.     Controls
and Procedures

The Companys Chief Executive Officer and
Chief Financial Officer have reviewed and evaluated the
Companys disclosure controls and procedures within
90 days of the filing of this report, and have concluded
that the Companys disclosure controls and procedures were
adequate and effective to ensure that information required to be
disclosed is recorded, processed, summarized, and reported in a
timely manner.

There were no significant changes in the
Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of
the Chief Executive Officer and Chief Financial Officers
evaluation, nor were there any significant deficiencies or
material weaknesses in the controls which required corrective
action.

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                                                                                                                               |  |      | 21 | 
|Consolidated Balance Sheets, September 29,
    2002 and September 30, 2001                                                                                 |  |      | 23 | 
|Statements of Consolidated Income and Retained
    Earnings for the fiscal years ended September 29, 2002,
    September 30, 2001 and October 1, 2000      |  |      | 24 | 
|Statements of Consolidated Total Non-Owner
    Changes in Equity for the fiscal years ended September 29,
    2002, September 30, 2001 and October 1, 2000 |  |      | 25 | 
|Statements of Consolidated Cash Flows for the
    fiscal years ended September 29, 2002, September 30,
    2001 and October 1, 2000                        |  |      | 26 | 
|Notes to Consolidated Financial Statements                                                                                                                 |  |      | 27 | 



| |     |                                                                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------
| | (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.
|
| | (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 June 30, 2002 (Commission File
    No. 1-6905).                          

47



---



##### 



|        |      |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ---- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                       
|Number  |      | Description of Exhibit
|        |      |                       
|        | 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).**                                                                                                                                                                                                                                                                        
|        | 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).**                                                                                                                                                                      

48



---



##### 



|        |       |                        |  |                                                                                                                                                                                                                                                                                                                                      
|------- | ----- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 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).**                                                                              
|        | 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**                                                                                                                                                                                                                                                                                         
|        | 11    |                       |  | Statement Regarding the Computation of Per Share
    Earnings.                                                                                                                                                                                                                                                                       
|        | 21    |                       |  | List of Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                 

49



---



##### 



|        |      |                        |  |                                                                                                                                
|------- | ---- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                       
|Number  |      | Description of Exhibit
|        |      |                       
|        | 23.1 |                       |  | Consent of Independent Public Accountants.                                                                                     
|        | 23.2 |                       |  | Notice regarding Consent of Arthur Andersen LLP.                                                                               
|        | 99.1 |                       |  | Certification pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.
|        | 99.2 |                       |  | Certification 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 29, 2002.
|
| |  | Current report on Form 8-K dated
    July 23, 2002 and filed July 24, 2002; Items 5
    and 7.              
| |  | Current report on Form 8-K dated
    August 13, 2002 and filed August 13, 2002;
    Items 7 and 9.          



| |     |         
| | --- | --------
| | (c) | Exhibits

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



| |     |                              
| | --- | -----------------------------
| | (d) | Financial Statement Schedules

| |  |                   
| |  | ------------------
| |  | See (a) (2) above.

50



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
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 6, 2002

| |     |                      
| | --- | ---------------------
| | 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 date indicated:

|                                                 |  |                                                                                        |  |                 
|------------------------------------------------ |  | -------------------------------------------------------------------------------------- |  | ----------------
|Name                                             |  | Title                                                                                  |  | Date            
|                                                 |  |                                                                                        |  |                 
|                                                
|/s/ THOMAS W. DICKSONThomas W. Dickson           |  | President and Chief Executive Officer and
    Director (Principal Executive Officer)   |  | December 6, 2002
|                                                
|/s/ JOHN B. WOODLIEFJohn B. Woodlief             |  | Vice President  Finance and Chief
    Financial Officer (Principal Financial Officer) |  | December 6, 2002
|                                                
|/s/ DOUGLAS A. STEPHENSONDouglas A. Stephenson   |  | Vice President and Treasurer (Principal
    Accounting Officer)                        |  | December 6, 2002
|/s/ JOHN R. BELKJohn R. Belk                     |  | Director                                                                               |  | December 6, 2002
|/s/ EDWIN B. BORDEN, JR.Edwin B. Borden, Jr.     |  | Director                                                                               |  | December 6, 2002
|/s/ ALAN T. DICKSONAlan T. Dickson               |  | Chairman of the Board and Director                                                     |  | December 6, 2002
|                                                
|/s/ R. STUART DICKSONR. Stuart Dickson           |  | Chairman of the Executive Committee and Director                                       |  | December 6, 2002
|/s/ RODDEY DOWD, SR.Roddey Dowd, Sr.             |  | Director                                                                               |  | December 6, 2002
|/s/ JAMES E. S. HYNESJames E. S. Hynes           |  | Director                                                                               |  | December 6, 2002
|/s/ ANNA S. NELSONAnna S. Nelson                 |  | Director                                                                               |  | December 6, 2002
|/s/ ROBERT H. SPILMAN, JR.Robert H. Spilman, Jr. |  | Director                                                                               |  | December 6, 2002
|/s/ HAROLD C. STOWEHarold C. Stowe               |  | Director                                                                               |  | December 6, 2002
|/s/ ISAIAH TIDWELLIsaiah Tidwell                 |  | Director                                                                               |  | December 6, 2002
|/s/ JOHN P. DERHAM CATOJohn P. Derham Cato       |  | Director                                                                               |  | December 6, 2002

51



---



##### 



I, Thomas W. Dickson, certify that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 10-K of Ruddick Corporation;                                                                                                                                                                                                                                                                 
|
| | 2. Based on my knowledge, this annual report
    does not contain any untrue statement of a material fact or omit
    to state a material fact necessary to make the statements made,
    in light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this annual
    report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | (b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of registrants board of directors (or persons
    performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                          
| | -----------------------------------------
| | /s/ THOMAS W. DICKSON                    
| |                                          
| | Thomas W. Dickson                        
| | President and Chief Executive
    Officer

Date: December 6, 2002

52



---



##### 



I, John B. Woodlief, certify that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 10-K of Ruddick Corporation;                                                                                                                                                                                                                                                                 
|
| | 2. Based on my knowledge, this annual report
    does not contain any untrue statement of a material fact or omit
    to state a material fact necessary to make the statements made,
    in light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this annual
    report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | (b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of registrants board of directors (or persons
    performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                                         
| | --------------------------------------------------------
| | /s/ JOHN B. WOODLIEF                                    
| |                                                         
| | John B. Woodlief                                        
| | Vice President  Finance and Chief
    Financial Officer

Date: December 6, 2002

53



---



##### 



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 years ended October 1, 2000 and
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



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##### 



SCHEDULE II

RUDDICK CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES

For the Fiscal Years Ended


October 1, 2000, September 30, 2001
and September 29, 2002


|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |       |       | 
|------------------------------------- | ------------------------------------------------------- | ------------------------------- | - | ---------- | ----- | ---------- | - | --------- | ----- |  | - | ----- | --- | - | - | ----- | ----- | 
|Column A                              |                                                         | Column B                        |   | Column C   |       | Column D   |   | Column E 
|                                      |                                                         |                                 |   |            |       |            |   |          
|                                      |                                                         |                                 |   | Additions  |       |            |   |          
|                                      |                                                         | Balance                         |   | Charged to |       |            |   | Balance  
|                                      |                                                         | at Beginning                    |   | Costs and  |       |            |   | at End   
|Description                           |                                                         | of Fiscal Year                  |   | Expenses   |       | Deductions |   | of Period
|                                      |                                                         |                                 |   |            |       |            |   |          
|                                      |                                                         |                                
|                                      |                                                         | (in thousands)                 
|Fiscal Year Ended October 1, 2000:    |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|                                      | Reserves deducted from assets to which they
    apply  |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |       |      
|                                      |                                                         | Allowance For Doubtful Accounts |   | $          | 3,233 |            |   | $         | 688   |  |   | $     | 755 | * |   | $     | 3,166 | 
|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      
|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   |      
|                                      |                                                         |                                 |   |            |       |            |   |           |       |  |   |       |     |   |   |      






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

S-2