Food Lion 2001 Annual Report Download - page 58

56 |Delhaize Group |Annual Report 2001
Deferred taxes are calculated using the liability method on a full provi-
sion basis, thus, taking into account temporary differences between book
and tax values of assets and liabilities in the consolidated balance sheet.
Deferred taxes have two sources: temporary differences in the accounts of
Group companies and consolidation adjustments.
Deferred tax assets are included in the consolidated accounts only to the
extent that their realisation is probable in the foreseeable future.
Within each fiscal entity in the Group, deferred tax assets and liabilities
are offset. Net asset balances are recorded under a separate account of
long term assets.
Translation of Foreign Currencies
The balance sheets of foreign subsidiaries are converted to Euro’s at the
year-end rate (closing rate).
The profit and loss accounts are translated at the average daily rate, i.e.
the yearly average of the rates each working day of the currencies
involved. The differences arising from the use of the average daily rate for
the profit and loss account and the closing rate for the balance sheet is
taken to the “Cumulative translation adjustment” component of equity.
(in EUR) Closing Rate Average Daily Rate
2001 2000 2001 2000
1 USD 1.134687 1.074690 1.116570 1.085001
100 GRD 0.293506 0.293506 0.293506 0.297125
100 CZK 3.128714 2.824499 2.935307 2.809898
100 SKK 2.337537 2.271696 2.309475 2.345469
100 THB 2.557270 2.449932 2.512029 2.704023
100 IDR 0.010808 0.011034 0.010982 0.013014
1 SGD 0.613271 0.612823 0.623480 0.629262
100 ROL 0.003594 0.004098 0.003842 0.004884
3. Scope of Consolidation
Main Changes During 1999. In 1999, Delhaize Group made acquisitions
for an aggregate amount of EUR 226.2 million.
Main Changes During 2000. In 2000, Delhaize Group made acquisitions
for an aggregate amount of EUR 3,830.6 million (including capital con-
sideration).
Main Changes During 2001. In 2001, Delhaize Group made acquisitions
for an aggregate amount of EUR 2,324.1 million (including capital con-
sideration).
Delhaize America
On April 25, 2001, Delhaize Group and Delhaize America consummated
a share exchange transaction in which Delhaize Group acquired all of the
outstanding shares of Delhaize America which it did not already own.
Delhaize America shareholders exchanged their shares of Delhaize
America common stock for 0.4 ordinary share or American Depositary
Receipt (ADR) of Delhaize Group. As a result of the share exchange,
Delhaize America became a wholly-owned subsidiary of Delhaize Group.
The share exchange resulted in the issuance of 40,181,529 new shares of
Delhaize Group having an aggregate value of EUR 2,250.2 million.
Stock option exercise costs and additional direct costs incurred in con-
nection with the share exchange, principally investment banking, legal
and other professional fees, in the amount of EUR 24.5 million have been
included in the purchase price allocation.
The share exchange with Delhaize America was accounted for using the
purchase method of accounting, as a step acquisition. The purchase price
is allocated to acquired assets and liabilities assumed, based on their esti-
mated fair values at the date of acquisition, and any excess is allocated to
goodwill (as Delhaize Group already owned approximately 45% of
Delhaize America, only the 55% of assets and liabilities that it did not
already own was subject to the purchase price allocation. The existing
45% was maintained at book value). The share exchange resulted in
goodwill of approximately EUR 1.9 billion, which will be amortized over
40 years using the straight-line method. As part of the purchase price allo-
cation, EUR 1,634.7 million representing 55% of the existing goodwill
related to the acquisition of Kash n’Karry and Hannaford by Delhaize
America, was cancelled and transfered to the goodwill recorded in the
share exchange, as this amount represented the minority interest portion
in the existing goodwill.
The net purchase price was allocated as follows:
(in millions of EUR)
Goodwill arising on consolidation 1,905
Goodwill arising on consolidation (55% of existing
goodwill on Hannaford and Kash n’Karry) (1,635)
Intangible assets 808
Tangible fixed assets 221
Other assets (55% of rate lock loss, net of tax) (81)
Minority interests 1,538
Provisions for liabilities and deferred taxes (418)
Long-term debt (66)
Short-term obligations 3
Purchase price 2,275
Trofo
In January 2001, Delhaize Group acquired Trofo, a Greek food retailer,
and its fully-owned subsidiary ENA, a Greek food retailer.
Delhaize Belgium
In April 2001, Delhaize Group bought 30% of the transport company
Wambacq Peeters, to bring its ownership interest to 85%.
In April 2001, Delhaize Group acquired Svemark and its fully-owned
subsidiary Regab, both Dutch companies that own a distribution center
located in Zellik used by Delhaize Belgium.
In October 2001, Delhaize Group bought SID, that owns an AD Delhaize
store operated by an independent affiliate.
Super Discount Markets
On November 12, 2001, Super Discount Markets filed for protection
under Chapter 11 of the U.S. Bankruptcy Code and has elected to use
Chapter 11 procedures to effect a liquidation of its business.
4. Methodology
Consolidated Balance Sheet
In analyzing the different asset and liability accounts, it must be remem-
bered that the closing rate for the American dollar used for the conversion
of the balance sheets of the U.S. companies is EUR 1.135 at the end of
2001 compared with EUR 1.075 at the end of 2000, an increase of 5.6%.
In 2001, the accounts of Trofo and ENA are consolidated for the first
time, while the accounts of Super Discount Markets are no longer includ-
ed in the consolidated balance sheet.