Harris Teeter Supermarkets, Inc. Reports Results for the First Quarter of Fiscal 2013

  Harris Teeter Supermarkets, Inc. Reports Results for the First Quarter of
  Fiscal 2013

Business Wire

MATTHEWS, N.C. -- January 31, 2013

Harris Teeter Supermarkets, Inc. (NYSE:HTSI) (the “Company”) today reported
that sales for the first quarter of fiscal 2013 ended January 1, 2013
increased by 3.7% to $1.16 billion from $1.12 billion in the first quarter of
fiscal 2012. The increase in sales was driven by an increase in comparable
store sales of 2.53% and sales from new stores, partially offset by store
closings. During the first quarter of fiscal 2013, the Company opened three
new stores, two of which were the stores acquired from Lowe’s Food Stores,
Inc. (“Lowes Foods”) that were re-opened under a new format and banner -
“201central”. Since the end of the first quarter of fiscal 2012, the Company
has opened twelve new stores, opened one store that replaced a store closed in
the first quarter of fiscal 2012, closed two stores and sold six stores to
Lowes Foods, for a net addition of five stores. The closed stores included one
that will be replaced with a new store scheduled to open in the third quarter
of fiscal 2013 and one that was temporarily closed due to damage caused by
flooding. The Company is in the process of repairing damages to the
temporarily closed store and expects to re-open it once repairs are completed.
The Company operated 211 stores as of January 1, 2013.

Gross profit in the first quarter of fiscal 2013 increased by 2.4% to $334.7
million (28.83% of sales) from $326.8 million (29.19% of sales) in the first
quarter of fiscal 2012. The LIFO charge for the first quarter of fiscal 2013
was $0.7 million (0.06% of sales) as compared to $3.6 million (0.32% of sales)
for the first quarter of fiscal 2012. The fiscal 2013 annual inflation rate as
estimated by the Company has moderated since the first quarter of fiscal 2012.

Selling, general and administrative (“SG&A”) expenses in the first quarter of
fiscal 2013 increased by 4.9% to $294.3 million (25.34% of sales) from $280.6
million (25.06% of sales) in the first quarter of fiscal 2012. The increase
primarily resulted from incremental store growth and its impact on associated
operational costs, along with the Company’s continued investment to remodel
existing stores that enhance the product offering and customer experience. The
Company’s emphasis on cost controls and improved labor management has been
effective in offsetting a portion of the increases in pension expense and
other fringe benefit costs and credit card expense.

Operating profit for the first quarter of fiscal 2013 was $40.5 million (3.48%
of sales), compared to $46.3 million (4.13% of sales) for the first quarter of
fiscal 2012. Operating profit decreased by $3.1 million, or 27 basis points
between the first quarter of fiscal 2012 and the first quarter of fiscal 2013
related to the operations and start-up costs of the ten stores acquired from
Lowes Foods and the six stores sold to Lowes Foods. Net earnings for the first
quarter of fiscal 2013 were $22.8 million, or $0.46 per diluted share,
compared to net earnings of $13.7 million, or $0.28 per diluted share, for the
first quarter of fiscal 2012. Net earnings for the first quarter of fiscal
2012 were comprised of earnings from continuing operations of $25.8 million,
or $0.53 per diluted share, and losses from discontinued operations of $12.1
million, or $0.25 per diluted share.

As previously disclosed, pre-tax losses from discontinued operations for the
first quarter of fiscal 2012 amounted to $18.0 million and were primarily
driven by non-cash charges for the settlement of pension liabilities and other
employee benefits in connection with the sale of the Company’s wholly-owned
industrial thread manufacturing company American & Efird (“A&E”). The final
purchase price allocation for the sale and its impact on income taxes will not
be complete until the Company files its tax return in the third quarter of
fiscal 2013. Additional adjustments to taxes or other costs related to the A&E
sale could occur in the future.

Thomas W. Dickson, Chairman of the Board and Chief Executive Officer stated,
“We continue to focus on driving unit sales and growing our market share.
During the first quarter of fiscal 2013, our pricing and promotional
strategies were effective in this regard, as evidenced by an increase in the
number of active households and number of customer visits we experienced over
the prior year. However, aggressive pricing by competitors, low inflation
during the period and the generally sluggish retail environment experienced
during the holiday season combined to put downward pressure on our gross
profit. We believe it is important to continue to drive sales and grow our
market share and remain committed to our customers to deliver outstanding
values and excellent customer service.”

The Company’s operating performance and strong financial position provides the
flexibility to continue with our store development program for new and
replacement stores along with the remodeling and expansion of existing stores.
Capital expenditures for fiscal 2013 are planned to total approximately $219
million. During the remainder of fiscal 2013, the Company plans to open nine
new stores (which includes two replacements) and complete major remodels on
eight stores (three of which will be expanded in size). The remaining store
openings for fiscal 2013 are expected to include two in the third quarter (one
of which is a replacement for a store closed in fiscal 2012) and seven in the
fourth quarter. In addition, the Company anticipates re-opening the store in
the Washington D.C. market that was closed to repair damage caused by
flooding. The fiscal 2013 store development program and re-opening of the
temporarily closed store is expected to result in a 5.9% increase in retail
square footage, as compared to a 4.1% increase in fiscal 2012. The Company
routinely evaluates its existing store operations in regards to its overall
business strategy and from time to time will close or divest underperforming

The Company’s capital expenditure plans entail the continued expansion of its
existing markets, including the Washington, D.C. metro market area which
incorporates northern Virginia, the District of Columbia, southern Maryland
and coastal Delaware. Real estate development by its nature is both
unpredictable and subject to external factors including weather, construction
schedules and costs. Any change in the amount and timing of new store
development can impact the expected capital expenditures, sales and operating

The Company’s management remains cautious in its expectations for fiscal 2013
due to the current economic environment and its impact on the Company’s
customers. The Company will continue to refine its merchandising strategies to
respond to the changing shopping demands. The retail grocery market remains
intensely competitive, and any operating improvement will be dependent on the
Company’s ability to increase its market share and to effectively execute the
Company’s strategic expansion plans.

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

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

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

Harris Teeter                                     
Supermarkets, Inc.
Consolidated Condensed
Statements of Earnings
(in thousands, except
per share data)
                             13 Weeks Ended
                             January 1, 2013            January 1, 2012
Sales                        $ 1,161,099   100.00 %     $ 1,119,566   100.00 %
Cost of Sales                 826,373    71.17  %      792,746    70.81  %
Gross Profit                   334,726     28.83  %       326,820     29.19  %
Selling, General and
Administrative                294,270    25.34  %      280,558    25.06  %
Operating Profit              40,456     3.48   %      46,262     4.13   %
Other Expense
Interest expense               4,312       0.37   %       4,738       0.42   %
Interest income               (59       ) -0.01  %      (48       ) 0.00   %
Total                         4,253      0.37   %      4,690      0.42   %
Earnings From
Continuing Operations          36,203      3.12   %       41,572      3.71   %
Before Taxes
Income Tax Expense            13,395     1.15   %      15,756     1.41   %
Earnings from
Continuing Operations,        22,808     1.96   %      25,816     2.31   %
Loss from Operations
of Discontinued                -                          (15,755   )
Loss on Disposition of
Discontinued                   -                          (2,245    )
Income Tax Benefit            -                        (5,843    )
Loss from Discontinued        -                        (12,157   )
Operations, Net
Net Earnings                 $ 22,808                  $ 13,659    
Earnings (Loss) Per
Share - Basic:
Continuing Operations        $ 0.47                     $ 0.53
Discontinued                 $ -                        $ (0.25     )
Net Earnings                 $ 0.47                     $ 0.28
Earnings (Loss) Per
Share - Diluted:
Continuing Operations        $ 0.46                     $ 0.53
Discontinued                 $ -                        $ (0.25     )
Net Earnings                 $ 0.46                     $ 0.28
Weighted Average
Number of Shares of
Common Stock
Basic                          48,862                     48,648
Diluted                        49,156                     48,999
Quarterly Dividends
Declared Per Common          $ 0.15                     $ 0.13
Special Dividends
Declared Per Common          $ 0.50                     $ -
Effective Tax Rate on          37.0      %                37.9      %
Continuing Operations

Harris Teeter Supermarkets,
Consolidated Condensed
Balance Sheets
(in thousands)
                                 January 1,      October 2,      January 1,
                                  2013          2012          2012      
Current Assets:
Cash and Cash Equivalents        $ 120,114       $ 212,211       $ 265,678
Accounts Receivable, Net           80,577          59,267          54,160
Refundable Income Taxes            27,858          27,583          16,788
Inventories                        321,405         305,106         293,557
Deferred Income Taxes              3,267           6,044           1,146
Prepaid Expenses and Other        25,910        24,182        25,928    
Current Assets
Total Current Assets               579,131         634,393         657,257
Property, Net                      1,094,765       1,102,703       1,024,344
Investments                        109,008         107,424         112,722
Goodwill                           19,301          19,301          -
Intangible Assets                  14,719          15,039          13,341
Other Long-Term Assets             75,042          73,628          80,610
Total Assets                     $ 1,891,966    $ 1,952,488    $ 1,888,274 
Liabilities and Equity
Current Liabilities:
Current Portion of Long-Term
Debt and Capital Lease           $ 4,301         $ 4,219         $ 84,081
Accounts Payable                   245,934         281,142         226,398
Accrued Compensation               37,316          69,390          36,243
Other Current Liabilities         99,573        96,887        90,205    
Total Current Liabilities          387,124         451,638         436,927
Long-Term Debt and Capital         207,417         208,271         211,468
Lease Obligations
Deferred Income Taxes              20,309          10,941          19,113
Pension Liabilities                124,415         119,883         110,299
Other Long-Term Liabilities        123,774         124,136         114,819
Common Stock                       112,092         111,347         105,629
Retained Earnings                  1,030,588       1,039,935       991,788
Accumulated Other                 (113,753  )    (113,663  )    (101,769  )
Comprehensive Loss
Total Equity                       1,028,927       1,037,619       995,648
Total Liabilities and Equity     $ 1,891,966    $ 1,952,488    $ 1,888,274 

Harris Teeter Supermarkets, Inc.
Consolidated Condensed Statements of Cash
(in thousands)
                                                   13 Weeks        13 Weeks
                                                   January 1,      January 1,
                                                    2013          2012    
Cash Flow From Operating Activities:
Net Earnings                                       $ 22,808        $ 13,659
Losses from Discontinued Operations                  -               12,157
Non-Cash Items Included in Net Income
Depreciation and Amortization                        36,496          33,269
Deferred Income Taxes                                12,204          5,928
Net (Gain) Loss on Sale of Property and              (59     )       71
Share-Based Compensation                             2,022           2,032
Other, Net                                           48              (879    )
Changes in Operating Accounts Providing
(Utilizing) Cash
Accounts Receivable                                  (21,310 )       (7,072  )
Inventories                                          (16,299 )       (6,421  )
Prepaid Expenses and Other Current Assets            (2,143  )       (784    )
Accounts Payable                                     (35,216 )       (29,579 )
Other Current Liabilities                            (29,389 )       (26,218 )
Other Long-Term Operating Accounts                  4,632         (23,939 )
Net Cash Used in Operating Activities               (26,206 )      (27,776 )
Investing Activities:
Capital Expenditures                                 (28,692 )       (29,204 )
Purchase of Other Investments                        (1,933  )       (417    )
Proceeds from Sale of Property and                   114             169,663
Investments in Company-Owned Life Insurance         (1,149  )      (572    )
Net Cash (Used in) Provided by Investing            (31,660 )      139,470 
Financing Activities:
Payments on Long-Term Debt and Capital Lease         (772    )       (647    )
Dividends Paid                                       (32,155 )       (6,406  )
Proceeds from Stock Issued                           306             37
Share-Based Compensation Tax Benefits                491             1,615
Shares Effectively Purchased and Retired for         (2,155  )       (5,129  )
Withholding Taxes
Other, Net                                          54            35      
Net Cash Used in Financing Activities               (34,231 )      (10,495 )
(Decrease) Increase in Cash and Cash                 (92,097 )       101,199
Cash and Cash Equivalents at Beginning of            212,211         164,479
Cash and Cash Equivalents at End of Period         $ 120,114      $ 265,678 
Cash Paid During the Year for:
Interest, Net of Amounts Capitalized               $ 4,482         $ 4,782
Income Taxes                                       $ 998           $ 6,319
Non-Cash Activity:
Assets Acquired Under Capital Leases               $ -             $ 8,866

Harris Teeter Supermarkets, Inc.
Other Statistics
(dollars in thousands)
                                         13 Weeks Ended
                                         January 1, 2013      January 1, 2012
                                         Dollars  Margin     Dollars  Margin
LIFO Charge (Included in Cost of         $  670   0.06 %     $ 3,626  0.32 %
Goods Sold)
New Store Pre-Opening Costs              $  664   0.06 %     $ 1,412  0.13 %

Pre-opening costs are included with SG&A expenses and consist of rent, labor
and associated fringe benefits, and recruiting and relocation costs incurred
prior to a new store opening.

                                                       13 Weeks Ended
                                                       January 1,  January 1,
Comparable Store Statistics:                           2013        2012
Increase in Comparable Store Sales                     2.53   %     5.33    %
Increase in Active Household - VIC Customers           1.54   %     2.07    %
Increase in Number of Items Sold - Company             1.07   %     0.78    %
(Decrease) Increase in Transaction Size -              (0.54  )%    2.15    %
Company Average
Store Brand Penetration Based on Units                 24.72  %     24.35   %
Store Brand Penetration Based on Sales                 25.30  %     25.25   %
Store Count
Beginning number of stores                             208          204
Opened during the period                               3            3
Closed during the period                               -          (1      )
Stores in operation at end of period                   211        206     
Number of Major Store Remodels Completed               -            1
Number of Expansion Remodels Included Above            -            -

Definition of Comparable Store Sales:

Comparable store sales are computed using corresponding calendar weeks to
account for the occasional extra week included in a fiscal year. A new store
must be in operation for 14 months before it enters into the calculation of
comparable store sales. A closed store is removed from the calculation in the
month in which its closure is announced. A new store opening within an
approximate two-mile radius of an existing store that is to be closed upon the
new store opening is included as a replacement store in the comparable store
sales measure as if it were the same store. Sales increases resulting from
existing comparable stores that are expanded in size are included in the
calculations of comparable store sales, if the store remains open during the
construction period. If the location is closed during the construction period,
the sales during the reporting period are removed from the calculation. If the
location is completely rebuilt, it is reported as a replacement store and
included in the same store sales calculation for the weeks actually open.


Harris Teeter Supermarkets, Inc.
John B. Woodlief, 704-844-7516
Executive Vice President and Chief Financial Officer
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