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



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

Business Wire

MATTHEWS, N.C. -- May 02, 2013

Harris Teeter Supermarkets, Inc. (NYSE:HTSI) (the “Company”) today reported
that sales for the second quarter of fiscal 2013 ended April 2, 2013 increased
by 4.3% to $1.17 billion from $1.12 billion in the second quarter of fiscal
2012. For the 26 weeks ended April 2, 2013, sales increased by 4.0% to $2.33
billion from $2.24 billion for the comparable period of fiscal 2012. The
increase in sales for the quarter and 26-week period was driven by an increase
in comparable store sales and sales from new stores, partially offset by store
closings. Comparable store sales increased by 3.66% for the quarter, and 3.10%
for the 26-week period ended April 2, 2013, from the respective comparable
periods of fiscal 2012. Comparable store sales were positively impacted by the
shift of the Easter Holiday which is reported in the second quarter of fiscal
2013, but was included in the third quarter of fiscal 2012. Management
estimates that the impact was 22 basis points for the quarterly period and 13
basis points for the 26-week period.

During the first half of fiscal 2013, the Company opened three new stores, two
of which were the stores acquired from Lowe’s Food Stores, Inc. (“Lowes
Foods”) in 2012 that were re-opened under a new format and banner -
“201central”. Since the end of the second 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 operated 211 stores as of the end of the second quarter
of fiscal 2013.

Gross profit in the second quarter of fiscal 2013 increased by 4.7% to $359.6
million (30.76% of sales) from $343.6 million (30.66% of sales) in the second
quarter of fiscal 2012. For the 26 weeks ended April 2, 2013, gross profit
increased by 3.6% to $694.3 million (29.80% of sales) from $670.4 million
(29.93% of sales) in the same period of fiscal 2012. The LIFO charge for the
second quarter of fiscal 2013 was zero as compared to $2.3 million (0.20% of
sales) in the second quarter of fiscal 2012. The LIFO charge for the first
half of fiscal 2013 was $0.7 million (0.03% of sales) as compared to $5.9
million (0.26% of sales) for the first half of fiscal 2012. The Company
currently estimates that it will experience minimal product cost inflation
during fiscal 2013.

Selling, general and administrative (“SG&A”) expenses for the second quarter
and first half of fiscal 2013 increased from the respective prior year periods
as a result of incremental store growth and its impact on associated
operational costs. On a percent of sales basis, SG&A expenses decreased by 4
basis points during the quarter and increased 12 basis points for the 26 weeks
ended April 2, 2013, as compared to the comparable periods of the prior year.
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 in the second quarter of fiscal 2013 increased by 7.3% to
$56.3 million (4.82% of sales) from $52.5 million (4.68% of sales) in the
second quarter of fiscal 2012. For the 26 weeks ended April 2, 2013, operating
profit decreased by 2.0% to $96.8 million (4.15% of sales) from $98.7 million
(4.41% of sales) in the comparable period of fiscal 2012. The operating profit
decrease between the 26-week periods of fiscal 2012 and fiscal 2013 included a
net decrease of $5.8 million, or 25 basis points related to the current year
operating results (which include start-up costs) of the ten stores acquired
from Lowes Foods and the prior year operating results of the six stores sold
to Lowes Foods.

The Company reported net earnings of $32.9 million, or $0.67 per diluted
share, for the second quarter of fiscal 2013. Net earnings for the second
quarter of fiscal 2012 totaled $30.3 million and was comprised of earnings
from continuing operations of $30.5 million, or $0.62 per diluted share, and a
loss from discontinued operations of $0.2 million. Net earnings for the 26
weeks ended April 2, 2013 totaled $55.7 million, or $1.13 per diluted share.
Net earnings for the 26 weeks ended April 1, 2012 totaled $43.9 million and
was comprised of earnings from continuing operations of $56.3 million, or
$1.15 per diluted share, and a loss from discontinued operations of $12.4
million. As reported last year, earnings from continuing operations for the
second quarter of fiscal 2012 was favorably impacted by a reversal of accrued
interest amounting to $1.3 million ($0.8 million after tax, or $0.02 per
diluted share) that was associated with a reduction of the Company’s
unrecognized tax liabilities.

The pre-tax loss from discontinued operations for the first half of fiscal
2012 amounted to $18.3 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 are very pleased with our results for the second quarter. Our comparable
store sales increase, which was favorably impacted by the shift of the Easter
holiday, remained strong despite the fact that we did not see any meaningful
inflation during this period. In addition, we continue to realize increased
number of active households and customer visits year-over-year. Our pricing
and promotional strategies were effective in driving unit sales and increasing
market share while increasing the quarterly gross margin by 10 basis points
over the prior year. We 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 $200
million. During the remainder of fiscal 2013, the Company plans to open seven
new stores (which includes one replacement) and complete major remodels on
seven 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 five in the
fourth quarter. The fiscal 2013 store development program is expected to
result in a 4.7% increase in retail square footage, as compared to a 4.1%
increase in fiscal 2012. The Company currently anticipates re-opening the
temporarily closed store in the Washington D.C. market during the first
quarter of fiscal 2014. 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 stores.

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
results.

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)
(unaudited)
                                                                                                                                            
                      13 Weeks Ended                                                    26 Weeks Ended
                      April 2, 2013                    April 1, 2012                    April 2, 2013                    April 1, 2012
Sales                 $ 1,169,069       100.00 %       $ 1,120,379       100.00 %       $ 2,330,168       100.00 %       $ 2,239,945       100.00 %
Cost of Sales           809,481         69.24  %         776,822         69.34  %         1,635,854       70.20  %         1,569,568       70.07  %
Gross Profit            359,588         30.76  %         343,557         30.66  %         694,314         29.80  %         670,377         29.93  %
                                                                                                                                            
Selling,
General and             303,273         25.94  %         291,071         25.98  %         597,543         25.64  %         571,629         25.52  %
Administrative
Operating               56,315          4.82   %         52,486          4.68   %         96,771          4.15   %         98,748          4.41   %
Profit
                                                                                                                                            
Other Expense
(Income):
Interest                4,217           0.36   %         3,334           0.30   %         8,529           0.37   %         8,072           0.36   %
expense
Interest                (78       )     -0.01  %         (34       )     0.00   %         (137      )     -0.01  %         (82       )     0.00   %
income
                        4,139           0.35   %         3,300           0.29   %         8,392           0.36   %         7,990           0.36   %
                                                                                                                                            
Earnings From
Continuing
Operations
Before Income           52,176          4.46   %         49,186          4.39   %         88,379          3.79   %         90,758          4.05   %
Taxes
Income Tax              19,305          1.65   %         18,730          1.67   %         32,700          1.40   %         34,486          1.54   %
Expense
Earnings from
Continuing              32,871          2.81   %         30,456          2.72   %         55,679          2.39   %         56,272          2.51   %
Operations,
Net
                                                                                                                                            
Loss from
Operations of           -                                -                                -                                (15,755   )
Discontinued
Operations
Loss on
Disposition of          -                                (344      )                      -                                (2,589    )
Discontinued
Operations
Income Tax              -                                (142      )                      -                                (5,985    )
Benefit
Loss from
Discontinued            -                                (202      )                      -                                (12,359   )
Operations,
Net
                                                                                                                                            
Net Earnings          $ 32,871                         $ 30,254                         $ 55,679                         $ 43,913     
                                                                                                                                            
Earnings
(Loss) Per
Share - Basic:
Continuing            $ 0.67                           $ 0.62                           $ 1.14                           $ 1.16
Operations
Discontinued          $ -                              $ -                              $ -                              $ (0.25     )
Operations
Net Earnings          $ 0.67                           $ 0.62                           $ 1.14                           $ 0.90
                                                                                                                                            
Earnings
(Loss) Per
Share -
Diluted:
Continuing            $ 0.67                           $ 0.62                           $ 1.13                           $ 1.15
Operations
Discontinued          $ -                              $ -                              $ -                              $ (0.25     )
Operations
Net Earnings          $ 0.67                           $ 0.62                           $ 1.13                           $ 0.90
                                                                                                                                            
Weighted
Average Number
of Shares of
Common Stock
Outstanding:
Basic                   48,930                           48,780                           48,896                           48,714
Diluted                 49,189                           49,034                           49,173                           49,016
                                                                                                                                            
Quarterly
Dividends             $ 0.15                           $ 0.14                           $ 0.30                           $ 0.27
Declared Per
Common Share
Special
Dividends             $ -                              $ -                              $ 0.50                           $ -
Declared Per
Common Share
                                                                                                                                            
Effective Tax
Rate on                 37.0      %                      38.1      %                      37.0      %                      38.0      %
Continuing
Operations

                                                                
Harris Teeter
Supermarkets, Inc.
Consolidated Condensed
Balance Sheets
(in thousands)
(unaudited)
                             April 2,          October 2,        April 1,
                               2013              2012              2012       
Assets
Current Assets:
Cash and Cash                $ 192,541         $ 212,211         $ 232,476
Equivalents
Accounts Receivable,           60,883            59,267            52,784
Net
Refundable Income              3,839             27,583            10,042
Taxes
Inventories                    307,442           305,106           290,659
Deferred Income Taxes          7,299             6,044             5,023
Prepaid Expenses and           24,895            24,182            26,772     
Other Current Assets
Total Current Assets           596,899           634,393           617,756
                                                                  
Property, Net                  1,107,963         1,102,703         1,040,048
Investments                    105,317           107,424           104,735
Goodwill                       19,301            19,301            -
Intangible Assets              14,399            15,039            13,073
Other Long-Term Assets         76,385            73,628            82,440
                                                                  
Total Assets                 $ 1,920,264       $ 1,952,488       $ 1,858,052  
                                                                  
                                                                  
Liabilities and
Shareholders' Equity
Current Liabilities:
Current Portion of
Long-Term Debt and           $ 4,405           $ 4,219           $ 4,137
Capital Lease
Obligations
Accounts Payable               248,234           281,142           246,032
Accrued Compensation           54,169            69,390            57,072
Other Current                  90,017            96,887            79,410     
Liabilities
Total Current                  396,825           451,638           386,651
Liabilities
                                                                  
Long-Term Debt and
Capital Lease                  206,539           208,271           210,702
Obligations
Deferred Income Taxes          6,230             10,941            23,175
Pension Liabilities            129,382           119,883           104,459
Other Long-Term                124,830           124,136           111,397
Liabilities
                                                                  
Equity:
Common Stock                   114,090           111,347           107,940
Retained Earnings              1,056,039         1,039,935         1,015,140
Accumulated Other              (113,671  )       (113,663  )       (101,412  )
Comprehensive Loss
Total Equity                   1,056,458         1,037,619         1,021,668
                                                                  
Total Liabilities and        $ 1,920,264       $ 1,952,488       $ 1,858,052  
Equity

                                                                  
Harris Teeter Supermarkets, Inc.
Consolidated Condensed Statements of Cash
Flows
(in thousands)
(unaudited)
                                                   26 Weeks Ended
                                                   April 2,        April 1,
                                                     2013            2012     
Cash Flow From Operating Activities:
Net Earnings                                       $ 55,679        $ 43,913
Loss from Discontinued Operations                    -               12,359
Non-Cash Items Included in Net Income
Depreciation and Amortization                        73,455          66,885
Deferred Income Taxes                                (5,895  )       2,153
Net Gain on Sale of Property and                     (352    )       (162    )
Investments
Share-Based Compensation                             4,064           3,808
Other, Net                                           (1,125  )       (2,020  )
Changes in Operating Accounts Providing
(Utilizing) Cash
Accounts Receivable                                  (1,616  )       (5,696  )
Inventories                                          (2,336  )       (3,522  )
Prepaid Expenses and Other Current Assets            22,928          (1,304  )
Accounts Payable                                     (32,883 )       (10,055 )
Other Current Liabilities                            (22,092 )       (8,439  )
Other Long-Term Operating Accounts                   8,639           (30,191 )
Net Cash Provided by Operating Activities            98,466          67,729   
                                                                    
Investing Activities:
Capital Expenditures                                 (79,672 )       (70,393 )
Purchase of Other Investments                        (2,617  )       (591    )
Proceeds from Sale of Property and                   8,110           170,418
Investments
Investments in Company-Owned Life                    (1,618  )       (611    )
Insurance
Other, Net                                           -               (28     )
Net Cash Provided (Used) by Investing                (75,797 )       98,795   
Activities
                                                                    
Financing Activities:
Payments on Long-Term Debt and Capital               (1,546  )       (81,357 )
Lease Obligations
Dividends Paid                                       (39,575 )       (13,308 )
Proceeds from Stock Issued                           306             314
Share-Based Compensation Tax Benefits                523             1,838
Shares Effectively Purchased and Retired             (2,155  )       (5,129  )
for Withholding Taxes
Other, Net                                           108             (885    )
Net Cash Used by Financing Activities                (42,339 )       (98,527 )
                                                                    
(Decrease) Increase in Cash and Cash                 (19,670 )       67,997
Equivalents
Cash and Cash Equivalents at Beginning of            212,211         164,479
Period
                                                                    
Cash and Cash Equivalents at End of Period         $ 192,541       $ 232,476  
                                                                    
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash Paid During the Year for:
Interest, Net of Amounts Capitalized               $ 8,750         $ 9,357
Income Taxes                                         14,354          21,716
Non-Cash Activity:
Assets Acquired Under Capital Leases                 -               8,866

                                                                          
Harris Teeter
Supermarkets,
Inc.
Other
Statistics
                    13 Weeks Ended                      26 Weeks Ended
                    April 2,           April 1,         April 2,           April 1,
                      2013               2012             2013               2012       
LIFO Charge
(Included in
Cost of Goods
Sold):
Dollars             $ -                $ 2,283          $ 670              $ 5,909
Percent of            0.00       %       0.20      %      0.03       %       0.26      %
Sales
                                                                            
New Store
Pre-Opening
Costs (1):
Dollars             $ 1,077            $ 1,429          $ 1,741            $ 2,841
Percent of            0.09       %       0.13      %      0.07       %       0.13      %
Sales
                                                                            
Comparable
Store
Statistics:
Increase in
Comparable            3.66       %       3.91      %      3.10       %       4.62      %
Store Sales
Increase in
Active                1.21       %       1.67      %      1.37       %       1.89      %
Household -
VIC Customers
Increase
(Decrease) in         2.65       %       (0.75     )%     1.86       %       0.01      %
Number of
Items Sold
                                                                            
Store Brand
Penetration           24.40      %       24.15     %      24.56      %       24.25     %
Based on
Units
Store Brand
Penetration           25.20      %       24.98     %      25.25      %       25.12     %
Based on
Sales
                                                                            
Store Count
Beginning
number of             211                206              208                204
stores
Opened during         -                  -                3                  3
the period
Closed during         -                  -                -                  (1        )
the period
Stores in
operation at          211                206              211                206        
end of period
                                                                            
Total Square
Footage at            10,336,635         9,970,557        10,218,118         9,818,232
Beginning of
Period
New Stores            335                10,223           118,852            196,959
and Remodels
Closed Stores         -                  -                -                  (34,411   )
Total Square
Footage at            10,336,970         9,980,780        10,336,970         9,980,780  
Beginning of
Period
                                                                            
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.
                                                                            
(1) 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.

Contact:

Harris Teeter Supermarkets, Inc.
John B. Woodlief, 704-844-3100
Executive Vice President and Chief Financial Officer
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