Ruddick Corporation to Take Second Quarter Charge Reflecting Settlement on Tax Exposure for Corporate Owned Life Insurance ("COLI")

Apr 04, 2001, 01:00 ET from Ruddick Corporation

    CHARLOTTE, N.C., April 4 /PRNewswire/ -- Ruddick Corporation (NYSE:   RDK)
 today reported that it will record an income tax charge of approximately
 $20 million in its second fiscal quarter ended April 1, 2001, reflecting a
 settlement reached today with the Internal Revenue Service ("IRS") for tax
 exposure related to the disallowance of deductions for its COLI policy loan
 interest and certain administrative service fees for all years of the
 insurance program.  The agreement with the IRS also provided for the surrender
 of the related insurance policies, thereby eliminating future negative
 exposure associated with the COLI program.  The charge will reduce net income
 for the second quarter, to be reported later in the month, by $.43 per share
 which will result in a net loss for the quarter.  The COLI tax exposure was
 previously disclosed in Ruddick's financial statements and in periodic filings
 with the United States Securities and Exchange Commission.
     As previously reported, on June 17, 1999, the IRS issued a notice of
 assessment of tax to the Company for the amount of COLI loan interest deducted
 in fiscal years 1994 and 1995.  Similar disallowance and assessments were
 being pursued by the IRS for years subsequent to 1995.  The settlement will
 require less than $10 million in cash payment since Ruddick had earlier in the
 fiscal year made payments to the IRS to avoid above market interest
 assessments on the disputed amounts.
     The Company and many other taxpayers have strongly disagreed with the
 national position taken by the IRS with respect to COLI.  However, in February
 2001, a trial court decision against American Electric Power, Inc., together
 with the previous adverse court decisions against other companies,
 subsequently caused Ruddick to consider settlement.  The action reflects risk
 management considerations weighing the recent trial court decision against the
 costs of continuing to seek relief through litigation or other means.  The
 settlement is expected to have a slightly favorable impact on Ruddick's
 effective tax rate in future periods because the related COLI policies have
 been surrendered and the negative carrying costs have been eliminated.
     Ruddick's second quarter ended on April 1, 2001, and results are scheduled
 for release on April 24, 2001.  While the results of the second quarter,
 excluding the tax charge, are not fully known at this time, the Company
 reports that Harris Teeter's results continued to show improvement in
 comparable store sales compared to the prior year and operating profitability
 remained strong.  American & Efird (A&E) continued to experience weak business
 conditions given the slowdown in consumer spending in the U. S.
 
     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 included in reports filed by the Company with the Securities and
 Exchange Commission.
 
     Ruddick Corporation is a holding company which operates two subsidiaries:
 Harris Teeter, Inc., a regional chain of supermarkets in six southeastern
 states and American & Efird, Inc., a leading manufacturer and distributor of
 industrial sewing thread.  For more information on Ruddick Corporation, visit
 our web site at:  http://www.ruddickcorp.com .
 
 

SOURCE Ruddick Corporation
    CHARLOTTE, N.C., April 4 /PRNewswire/ -- Ruddick Corporation (NYSE:   RDK)
 today reported that it will record an income tax charge of approximately
 $20 million in its second fiscal quarter ended April 1, 2001, reflecting a
 settlement reached today with the Internal Revenue Service ("IRS") for tax
 exposure related to the disallowance of deductions for its COLI policy loan
 interest and certain administrative service fees for all years of the
 insurance program.  The agreement with the IRS also provided for the surrender
 of the related insurance policies, thereby eliminating future negative
 exposure associated with the COLI program.  The charge will reduce net income
 for the second quarter, to be reported later in the month, by $.43 per share
 which will result in a net loss for the quarter.  The COLI tax exposure was
 previously disclosed in Ruddick's financial statements and in periodic filings
 with the United States Securities and Exchange Commission.
     As previously reported, on June 17, 1999, the IRS issued a notice of
 assessment of tax to the Company for the amount of COLI loan interest deducted
 in fiscal years 1994 and 1995.  Similar disallowance and assessments were
 being pursued by the IRS for years subsequent to 1995.  The settlement will
 require less than $10 million in cash payment since Ruddick had earlier in the
 fiscal year made payments to the IRS to avoid above market interest
 assessments on the disputed amounts.
     The Company and many other taxpayers have strongly disagreed with the
 national position taken by the IRS with respect to COLI.  However, in February
 2001, a trial court decision against American Electric Power, Inc., together
 with the previous adverse court decisions against other companies,
 subsequently caused Ruddick to consider settlement.  The action reflects risk
 management considerations weighing the recent trial court decision against the
 costs of continuing to seek relief through litigation or other means.  The
 settlement is expected to have a slightly favorable impact on Ruddick's
 effective tax rate in future periods because the related COLI policies have
 been surrendered and the negative carrying costs have been eliminated.
     Ruddick's second quarter ended on April 1, 2001, and results are scheduled
 for release on April 24, 2001.  While the results of the second quarter,
 excluding the tax charge, are not fully known at this time, the Company
 reports that Harris Teeter's results continued to show improvement in
 comparable store sales compared to the prior year and operating profitability
 remained strong.  American & Efird (A&E) continued to experience weak business
 conditions given the slowdown in consumer spending in the U. S.
 
     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 included in reports filed by the Company with the Securities and
 Exchange Commission.
 
     Ruddick Corporation is a holding company which operates two subsidiaries:
 Harris Teeter, Inc., a regional chain of supermarkets in six southeastern
 states and American & Efird, Inc., a leading manufacturer and distributor of
 industrial sewing thread.  For more information on Ruddick Corporation, visit
 our web site at:  http://www.ruddickcorp.com .
 
 SOURCE  Ruddick Corporation