Food Lion 2004 Annual Report Download - page 46

DELHAIZE GROUP  ANNUAL REPORT 2004
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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 in
long-term receivables.
Translation of Foreign Currencies
The balance sheets of foreign subsidiaries are converted to euro at the
year-end rate (closing rate).
The profit and loss accounts are translated at the average daily rate, i.e.
the yearly ave rage of the rates each w orking 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 are recorded in
the “ Cumulative translation adjustment” component of equity.
(in EUR) Closing Rate Average Daily Rate
2004 2003 2004 2003
1 USD 0.734160 0.791766 0.803922 0.884048
100 CZK 3.282563 3.085467 3.135671 3.140125
100 SKK 2.580978 2.428953 2.498637 2.410284
100 ROL 0.002539 0.002430 0.002469 0.002663
100 THB 1.876595 2.005463 1.995110* 2.125583
100 IDR 0.007864 0.009408 0.008987 0.010289
1 SGD - 0.466200 - 0.507532*
(*) Average for the period until the date of deconsolidation
3. Scope of Consolidation
Main changes during 2004. Delhaize Group acquired Victory Super M arkets, Inc.
(“ Victory” ), a company which operates 19 supermarkets, 17 in central and
southeastern M assachusetts and two in southern New Hampshire. Delhaize
Group paid an aggregate amount of EUR 143.7 million (USD 178.6 million)
for the acquisition of Victory. Victory’s results of operations are included in
Delhaize Group’s consolidated results from November 26, 2004.
In June 2004, Delhaize Group sold its interest of 70.0% in Super Dolphin,
a non-operating company of the M ega Image Group and acquired most of
the remaining interests of the other companies related to its Romanian
activities (30.0% of M ega Image, 18.6% of M ega Dolphin, 13.2% of M ega
Doi, 30.0% of A.T.T.M . Consulting and Commercial and 30.0% of NP Lion
Leasing and Consulting). These transactions were consumated for an
aggregate price of EUR 0.3 million.
In August 2004, Delhaize Group divested its loss-making Thai operations.
Delhaize Group excluded the companies Food Lion Thailand, Lion Garden
Food and Delhaize Siam (collectiveley “ Food Lion Thailand” ) from the scope
of consolidation as of September 1, 2004. Food Lion Thailand’s results
of operations are included in Delhaize Group’s consolidated results until
August 31, 2004. As part of the deconsolidation of Food Lion Thailand,
Delhaize Group recorded a liability (under the caption “ Other liabilities” ),
of EUR 8.5 million, representing the estimated amount needed by Food Lion
Thailand to complete its liquidation.
In August 2004, Delhaize Group acquired two Belgian companies, Distra and
Warenhuizen Trouken – Peeters, for an aggregate price of EUR 5.7 million.
Each company operates one supermarket in Belgium.
Main changes during 2003. Delhaize Group acquired Harveys, a chain that was
operating 43 supermarkets located in central and south Georgia and the
Tallahassee, Florida area. Delhaize Group paid an aggregate amount of
EUR 28.2 million for the acquisition of Harveys. Harveys’ results of opera-
tions are included in Delhaize Group’s consolidated results from October
26, 2003.
In November 2003, Delhaize Group sold its 49% interest in the Singaporean
retailer Shop N Save for a total consideration of EUR 21.8 million. Shop N
Save's results of operations are included in Delhaize Group’s consolidated
results until September 30, 2003.
4. M ethodology
Consolidated Balance Sheet
The closing rate for the U.S. dollar used for the conversion of the balance
sheets of the U.S. companies is EUR 0.734160 at the end of 2004 compared
with EUR 0.791766 at the end of 2003, a decrease of 7.3%.
Consolidated Income Statement
The average daily rate for one USD used in translating the results of U.S.
companies is EUR 0.8039 against EUR 0.8840 in 2003, a 9.1% decrease.
Consolidated Statement of Cash Flow s
Belgian law is silent on the publication of a statement of cash flow s and
the methods to be used for preparing such a statement. The method used
by the Group is accordingly based on international standards published by
the International Accounting Standards Board. In particular, IAS 7 deals
with the statement of cash flows.
This statement describes the cash movements that result from three types
of activity: operating, investing and financing.
Under IAS 7 the flow from operating activities can be determined on the
basis of two methods:
• the direct method, whereby the most important categories of incoming
and outgoing gross funds (receipt of payments from clients, payments
to suppliers, etc.) are used to obtain the net cash flow generated by
operating activities.
• the indirect method, whereby the net profit is adjusted for non-monetary
transactions (such as depreciation) and transactions concerning inves-
ting and financing activities.
The Group has, like most other companies w hich publish a statement of
cash flows, opted to use the indirect method that is easier to employ.
Cash flows arising from transactions in foreign currencies are translated
using the average exchange rate between the euro and the foreign cur-
rencies.
2. Establishment Costs
Establishment costs represent debt issuance costs at Delhaize America,
Delhaize Group SA, Delhaize “ The Lion” Nederland and Delhaize Finance.
EUR 5.0 million cost w as incurred upon the issuance of a EUR 300 million
convertible bond by Delhaize Group SA (see note 14 to the consolidated
financial statements).
Analysis of Establishment Costs (in thousands of EUR)
Net book value at the end of the previous financial year 14,750
M ovements during the current year:
• New ly incurred costs 4,962
• Amortization (2,655)
• Translation difference (782)
Net book value at the end of the financial year 16,275
Being: debt issuance costs 16,275