Food Lion 2005 Annual Report Download

Download and view the complete annual report

Please find the complete 2005 Food Lion annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

LOCAL STRENGTH
GROUP EXPERTISE
ANNUAL REPORT 2005

Table of contents

  • Page 1
    LOCAL STRENGTH GROUP EXPERTISE A N N U A L REP O RT 2 0 0 5

  • Page 2
    ... international food retailer with activities in eight countries on three continents. Delhaize Group is listed on Euronext Brussels (ticker sym bol: DELB) and the New York Stock Exchange (ticker sym bol: DEG). At the end of 2005, Delhaize Group's sales network consisted of 2,636 stores. In 2005...

  • Page 3
    ... 2005 279 296 365 * At actual exchange rates FINANCIAL HIGHLIGHTS (EUR in millions except per share amounts) Change vs Prior Year 2005 2004 2003 2005 2004 RESULTS OF OPERATIONS Net sales and other revenues Operating profit Net profit from continuing operations Group share in net profit Free...

  • Page 4
    .... Food Lion renew ed tw o of its m arkets, Greensboro, North Carolina and Baltim ore, Maryland; it also reinforced its Bloom stores and launched the new deep discount brand Bottom Dollar. In Florida, 19 Sw eetbay Superm arkets w ere added, m ostly converted Kash n' Karry stores. All acquired Victory...

  • Page 5
    ... Food Lion w ill also enter a new m arket in Greenville-Spartanburg, South Carolina. In Florida, w e w ill continue the successful conversion of Kash n' Karry stores to Sw eetbay Superm arkets w ith 73 Sw eetbay stores expected to be open by the end of the year. Also, each of our other operating com...

  • Page 6
    ... in south Georgia and north Florida Focused on m eat, produce and service Strong local m erchandizing Focused on convenient fresh food and m eal solutions Neighborhood locations 145 stores in fi ve states in the Northeast Full-service superm arkets High-quality fresh departm ents # 1 in tw o New...

  • Page 7
    ... 46 superm arkets in Indonesia Fresh products at every day low prices Neighborhood locations # 2 in Jakarta 10 cash & carry stores Specialized in food sales to professional custom ers Focused on fresh products Strong brand recognition # 1 superm arket operator in Bucharest N U M BER O F STO...

  • Page 8
    ...including: / 2005 Retail Excellence Award from Supermarket News (Hannaford) / Special Award for New Concept Development from Chain Store Age (Food Lion - Bloom) / Global CPG & Retail Excellence Awards - Retail Innovation of the Year Award (Food Lion - Bloom) / Czech Retailer of the Year 2005 from GE...

  • Page 9
    ... EXPERIENCE TO ITS CUSTOMERS IN EACH OF ITS MARKETS, TO DELIVERING SUPERIOR VALUE AND TO MAINTAINING HIGH SOCIAL, ENVIRONMENTAL AND ETHICAL STANDARDS. DELHAIZE GROUP'S STRATEGY IS CRYSTALLIZED AROUND FIVE STRATEGIC LEVERS: CONCEPT LEADERSHIP, EXECUTIONAL EXCELLENCE, A LEARNING COMPANY, AN ATTRACTIVE...

  • Page 10
    CONCEPT LEADERSHIP Private labels, like the Hannaford Inspirations unique line of high quality products, are a way to differentiate the assortment and offer customers new tastes. INNOVATIVE FOOD OFFER All Delhaize Group's operating com panies share the sam e focus on food. Through their locally ...

  • Page 11
    ...Com pany added m any im provem ents to its innovative Bloom store form at, based on extensive custom er feedback. Food Lion also opened three Bottom Dollar test stores and a new prototype store for future Food Lion store developm ents. Hannaford converted all acquired Victory stores to the Hannaford...

  • Page 12
    ...THE STORES In-store execution is a key factor in the custom er's shopping experience: service levels, product availability, cleanliness, waiting tim es all affect how custom ers feel about a store. In addition, in-store effi ciency also im pacts a com pany's profi tability. In 2 0 0 5 , Food Lion...

  • Page 13
    ...Lion launched a new produce quality program . Delhaize Belgium launched a new food safety reporting system , based on quarterly audits in each store. The Group's operating com panies continued their efforts in food safety training and awareness of store associates. EFFICIENT DISTRIBUTION AND SUPPLY...

  • Page 14
    ... its assistant store m anagers. Super Indo created an Operations Training Departm ent and im plem ented a six-m onth store m anager training program . Food Lion continued to develop its com puter-based training offering. LEARNING FROM EACH OTHER 1 2 DELHAI ZE GROUP / AN N UAL REPORT 20 0 5

  • Page 15
    ...local standards. Associates are offered opportunities for personal developm ent, in their current function and throughout their career, through training, talent planning and internal prom otions. Several operating com panies run associate recognition program s, based on career length and outstanding...

  • Page 16
    ...Group's operating com panies take an innovative approach towards energy use. Food Lion now has 4 0 0 stores labeled Energy Star stores, half of the total num ber of Energy Star stores in the U.S. Food Lion alone realized m ore than 8 0 m illion kilowatt hours in energy savings in 20 0 5 . Hannaford...

  • Page 17
    ... the Gulf Coast states of the U.S., Delhaize Group's U.S. banners donated USD 250,000 in cash and truckloads of water, ice, food and supplies, and raised an additional USD 1 million from associates and customers. During its annual Investor Day, the Company shared its strategy with analysts and...

  • Page 18
    OUR BUSIN ESS IN 2005 18 U N I TED STATES BUSINESS AND FINANCIAL REVIEW Grew sales and other revenues by Posted strong operating margin of 4.1% at identical exchange rates 1 6 DELHAI ZE GROUP / AN N UAL REPORT 20 0 5 4.8%

  • Page 19
    22 B ELG I U M 24 G REECE 26 EM ERG I N G M A RK ETS Generated operating profit of EUR Realized net profit growth by 23.4% to EUR Proposes net dividend of EUR 898.0 million 364.9 million 0.90 per share, an increase of 7.1% DELHAI ZE GROUP / AN N UAL REPORT 20 0 5 17

  • Page 20
    ... Lion also plan to enter a com pletely new m arket, Greenville-Spartanburg, South Carolina. After a year of research, Food Lion's five pilot Bloom stores, opened in May 2004, were refined based on extensive custom er feedback. The stores received m ore fresh products, seafood m arkets, new deli...

  • Page 21
    ... grocery store. The store sells national and private label products and carries a full line of m eat and packaged deli/ bakery products. Custom er reacted positively to the new concept. Effi ciency Food Lion continued efforts to im prove its supply chain. Starting in Septem ber of 2005, Food Lion...

  • Page 22
    ... deli, produce, m eat, seafood and grocery departm ents. The Com pany continued its focus on natural and healthy food. Hannaford's Nature's Place store-within-a-store concept was further deployed, with a presence in m ore than half of the Hannaford stores at year-end. Sixty new products were added...

  • Page 23
    ... in inventory losses. Number of Stores December 31, 2005 ME VT NH NY MA Maine (ME) New Hampshire (NH) Vermont (VT) Massachusetts (MA) New York (NY) Pennsylvania (PA) Delaware (DE) Maryland (MD) Virginia (VA) West Virginia (WV) Kentucky (KY) Tennessee (TN) North Carolina (NC) South Carolina (SC...

  • Page 24
    ... store openings and adjustm ents in Delhaize's non-food offering. Market share for the full year decreased slightly to 25 .5 % ( source: AC Nielsen) . Operating m argin declined to 4 .6 % due to weaker than forecasted sales, higher fuel prices and the autom atic increase of statutory labor rate...

  • Page 25
    ...to 36 0 products at the end of the year. The Com pany also started "Buy two, get one free"-prom otions, supporting its increased focus on pricing. Custom ers could obtain additional savings by using their Plus loyalty card. In order to reward custom er loyalty m ore, custom ers received free stam ps...

  • Page 26
    ... store openings in the second half of the year. Alfa-Beta's m arket share increased signifi cantly. The Com pany's operating m argin increased slightly. Contribution to the Group's operating profi t increased by 5 .1% . In the second half of 20 0 5 , Delhaize Group took advantage of an opportunity...

  • Page 27
    ... position Further differentiate food offering Convert all affiliated stores to AB Shop & Go and AB Food Market banners OUTLOOK FOR 200 6 N ET SALES AN D OTHER REVEN UES ( IN M ILLION S OF EUR) 2003 2004 847 873 ASSORTM ENT AND PRICE In 20 0 5 , Alfa-Beta created a new deli departm ent called...

  • Page 28
    ... allowed Delvita to reinforce its price positioning. In order to offer custom ers better value, the Com pany further developed its private label offering. Delvita private-label products already represent m ore than 10 % of total sales. The num ber of "36 5 " products at Delvita increased to 250...

  • Page 29
    ...and a private-label line of Asian products was developed together with Delhaize Belgium . In-store bakery stations were rolled out to the com plete network. For the third consecutive year, Delvita was externally recognized for its differentiated position in the Czech food retail m arket. In a public...

  • Page 30
    ... Fresh stores acquired in Belgium and net of the 11 Slovak Delvita stores sold to Rewe Group in June 2005. Detailed inform ation on the store network evolution per country can be found on p. 82 of this report. Delhaize Group's U.S. operations contributed 71.5% to total net sales and other revenues...

  • Page 31
    ...ent charge for the closing of 34 Kash n' Karry stores m ainly located on the east coast of Florida and in the Orlando m arket of the United States. Discontinued operations included the Thai operations divested on Septem ber 1 , 20 0 4 , the Slovak operations sold to the Germ an Rewe Group in June 20...

  • Page 32
    ... 0 5 , total assets of Delhaize Group am ounted to EUR 10 .3 billion, a 17.8 % increase com pared to the end of 20 0 4 . This increase was prim arily due to the acquisition of Cash Fresh in Belgium , the active store opening program and the 15 .5 % strength- 3 0 DELHAI ZE GROUP / AN N UAL REPORT 20...

  • Page 33
    ...; principal payments (related premiums and discounts not taken into account). ening of the U.S. dollar com pared to the euro between the two closing dates. At the end of 20 0 5 , Delhaize Group's sales network consisted of 2 ,6 36 stores, 71 m ore than one year earlier. Of these 2 ,6 36 stores, 34...

  • Page 34
    ... put Delhaize Group in a disadvantageous com petitive position if m arket interest rates are lower than our average borrowing costs for an extended period of tim e. LIQUIDITY RISK In order to m aintain funding availability through the econom ic and business cycles, Delhaize Group closely m onitors...

  • Page 35
    ... associates' pensionable salary and length of service or on guaranteed returns on contributions m ade. Delhaize Group has defi ned benefi t plans at Delhaize Belgium and Hannaford and a post-em ploym ent benefi t at Alfa-Beta. At its other subsidiaries, including its largest subsidiary, Food Lion...

  • Page 36
    ... RISK Delhaize Group is subject to federal, regional, state and local laws and regulations in each country in which it operates relating to, am ong others, zoning, land use, antitrust, work place safety, public health, environm ental protection, com m unity right-to-know, alcoholic beverage sales...

  • Page 37
    ... food safety guidelines in place, and their application is vigorously followed. In addition to Group policies, Delhaize Group purchases, in the various countries where it is present, policies of insurance of a m andatory nature or designed to cover specifi c risks such as vehicle or worker's com...

  • Page 38
    FINANCIALS 38 CO N SO LI D ATED BAL AN CE SH EET FINANCIALS 3 6 DELHAI ZE GROUP / AN N UAL REPORT 20 0 5

  • Page 39
    ... Store Provision 23. Self Insurance Provision 24. Benefi t Plan Provision 25. Accrued Expenses 26. Income Taxes 27. Earnings per Share 28. Discontinued Operations 29. Share-based Compensation 30. Cost of Sales 31. Employee Benefi t Expense 32. Key M anagement and Board of Directors Compensation...

  • Page 40
    ... Goodw ill Intangible assets Property, plant and equipment Investment property Investment accounted for using the equity method Investment in securities Other financial assets Deferred tax assets Derivative instruments Other non-current assets 6 7, 10 8, 10 9, 10 11 12 26 20 2,997.4 675.2 3,587...

  • Page 41
    ... 2005 2004 2003 Share capital Share premium Treasury shares ...Total non-current liabilities 3,809.5 3,885.4 3,827.5 Short-term borrow ings Long-term debt - current Obligations under finance lease - current Provisions - current Income taxes payable Accounts payable Accrued expenses Other current...

  • Page 42
    CONSOLIDATED INCOME STATEMENT (in m illions of EUR) Note 2005 2004 2003 Net sales and other revenues Cost of sales 30 18,627.5 (13,930.9) 4,696.6 17,875.1 (13,480.4) 4,394.7 18,497.4 (13,979.2) 4,518.2 Gross profit Gross margin Other operating income Selling, general and administrative expenses...

  • Page 43
    ... acquired Sale of shares in consolidated companies, net of cash and cash equivalents disposed of Purchase of tangible and intangible assets (capital expenditures) Sale of tangible and intangible assets Investment in debt securities Sale and maturity of debt securities Purchase of other financial...

  • Page 44
    ... directly in equity Net profit - - Total recognized income and expense for the period Capital increases Treasury shares purchased Treasury shares sold upon exercise of employee stock options Excess tax benefit on employee stock options and restricted shares Tax payment for restricted shares...

  • Page 45
    ...) (in m illions of EUR, except earnings per share) Full Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Net sales and other revenues Operating profit Net profit from continuing operations Group share in net profit Group share in net profit per share: - Basic - Diluted 2004 18,627.5 898.0 373...

  • Page 46
    ... Delhaize Group's American Depositary Shares (" ADS" ), as evidenced by American Depositary Receipts (" ADR" ), are listed on the New York Stock Exchange (" NYSE" ) under the symbol " DEG." The consolidated financial statements for the year ended December 31, 2005 as presented in this annual report...

  • Page 47
    ... fair value of the Group's share of the identifiable net assets acquired is recorded as goodw ill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement. Goodw ill is not amortized but review...

  • Page 48
    ... present value of any estimated lease liabilities, including contractually required real estate taxes, common area maintenance and insurance costs, net of anticipated subtenant income. When severance costs are incurred in connection w ith a store closing, a liability for the termination benefits is...

  • Page 49
    ...get one free" incentives, are offered to customers through loyalty card programs. Sales are recorded at the net amount received from the customer. Funding from suppliers for these discounts, if available, is recognized as a reduction of cost of sales at the time the related products are sold. Share...

  • Page 50
    ... Business Acquisitions In 2005, Delhaize Group acquired 100% of Cash Fresh, a chain of 43 supermarkets mainly located in northeastern Belgium. Delhaize Group paid an aggregate amount of EUR 160.8 million in cash for the acquisition of Cash Fresh, including EUR 1.6 million costs directly attributable...

  • Page 51
    ... and operating characteristics. The operation of supermarkets represents approximately 92% of Delhaize Group's consolidated net sales and other revenues and w as its only reportable business segment in 2005, 2004 and 2003. The geographical segment information for 2005, 2004 and 2003 is as follow...

  • Page 52
    ... M arkets(3) Corporate (Unallocated) Total Net sales and other Cost of sales Gross profit Gross margin Other operating income Selling, general and administrative expenses Other operating expenses Operating profit Operating margin Operating profit from discontinued operations revenues(1) 13,595...

  • Page 53
    ... of EUR) Trade names Developed Softw are Purchased Softw are Favorable Lease Rights Other Total Cost at January 1, 2005 Additions Sales and disposals Acquisitions through business combinations Transfers to other accounts Translation effect Cost at December 31, 2005 Accumulated depreciation at...

  • Page 54
    ... Food Lion Hannaford Harveys United States 214.9 183.1 4.1 402.1 186.2 158.5 3.5 348.2 200.8 171.0 3.8 375.6 Amortization expense w as charged to earnings as follow s: (in m illions of EUR) 2005 2004 2003 Selling, general and administrative expenses Result from discontinued operations Total...

  • Page 55
    ... expenses. Bank borrow ings and other commitments are secured by land and building w ith a value of EUR 12.9 million, EUR 16.6 million and EUR 51.7 million at December 31, 2005, 2004 and 2003 respectively. 45.2 399.0 9.4 453.6 Cost of sales Selling, general and administrative expenses Result...

  • Page 56
    ... average grow th rate for the supermarket retail business in w hich each company operates. The fair value less cost to sell of each operating company is based on earnings multiples paid for similar companies in the market and market capitalization for publicly traded subsidiaries. In 2005, 2004 and...

  • Page 57
    ... issued under the Delhaize Group 2002 Stock Incentive Plan, the Company might have to issue new ordinary shares, to w hich coupon no. 44 entitling to the payment of the 2005 dividend is attached, betw een the date of adoption of the annual accounts by the Board of Directors and the date of their...

  • Page 58
    ... of the convertible bond credited to share premium w as EUR 19.0 million, net of tax of EUR 9.8 million. In 2003, Delhaize Group issued 231,853 shares of common stock for EUR 5.7 million. At the end of 2005, the Board of Directors had, after several applications of the authorization granted...

  • Page 59
    ... under the stock option plans that Delhaize Group offers to its associates. No time limit has been set for these repurchases. Delhaize Group SA acquired 155,000 Delhaize Group shares (having a par value of EUR 0.50) in 2005 for an aggregate amount of EUR 7.6 million, representing approximately 0.16...

  • Page 60
    ... interest rate swap agreement qualifies for hedge accounting and therefore, the carrying amount of these bonds is adjusted to reflect changes in the fair value of the hedged risk. Delhaize Group has a multi-currency treasury note program in Belgium. Under this treasury note program, Delhaize Group...

  • Page 61
    ....5 The table below details the expected principal payments (premiums and discounts not taken into account) and related interest rates (before effect of interest rate sw aps) of the Group's long-term debt by currency. 2006 2007 2008 2009 2010 Thereafter Fair Value Debt held in USD (in millions of...

  • Page 62
    ... Debt The fair value of the Group's long-term debt is based on the current market quotes for publicly traded debt and estimated rates for non-public debt, reflecting current market rates offered to the Group and its subsidiaries for debt w ith similar maturities: (in m illions of EUR) 2005 Decem ber...

  • Page 63
    ... foreign currency sw aps. Changes in fair value of these sw aps are recorded in finance costs in the income statement. Interest Rate Sw aps During 2003, a subsidiary of Delhaize Group entered into interest rate sw ap agreements to exchange the fixed interest rate of its new ly issued EUR 100 million...

  • Page 64
    ... real estate taxes, common area maintenance and insurance cost, net of estimated amounts to be recovered from subletting closed store space. Remaining lease liabilities on closed stores generally range from one to 17 years. The liability associated w ith each store is discounted using a pre-tax rate...

  • Page 65
    ... associate before his/ her retirement. Delhaize Group funds the plan based upon legal requirements and tax regulations. An insurance company guarantees a minimum return on plan assets. Delhaize Group bears the risk above this minimum guarantee. Hannaford maintains a non-contributory defined benefit...

  • Page 66
    ...,* Change in plans assets: Fair value of plans assets at January 1, Actuarial return on plan assets Group contributions Plan participant contributions Benefits paid Translation difference Fair value of plans assets at December 31, Funded status of the plan Unrecognized past service cost Unrecognized...

  • Page 67
    ...term rate of return for Delhaize Belgium's defined benefit pension plan is based on the guaranteed return by the insurance company and the expected insurance dividend. The investment policy for the Hannaford defined benefit plan is to maintain a targeted balance of equity securities, debt securities...

  • Page 68
    ... (0.3) Fair value of plan assets at December 31, Funded status at the end of the period: Funded status of the plan (3.5) Unrecognized past service cost (1.0) Unrecognized actuarial gain/loss 2.0 Net amount recognized (2.5) Actuarial assumptions used to determine benefit obligations: Discount rate...

  • Page 69
    ... Tax Depreciation Closed Store Provision Leases Pension Other Total Net deferred tax liabilities at January 1, 2003 Charge (credit) to equity for the year Charge (credit) to profit or loss for the year Effect of change in tax rates Divestiture Transfers to other accounts Translation effect...

  • Page 70
    ... earnings per share for the years ended December 31, 2005, 2004 and 2003 is as follow s: (in m illions of EUR, except num bers of shares) 2005 2004 2003 Net profit from continuing operations Net profit from continuing operations attribuable to minority interests Group share in net profit from...

  • Page 71
    ...the probability of sale w ithin the one-year period criterion. 29. Share-Based Compensation Delhaize Group offers share-based incentives to certain members of management. For associates of its non-U.S. operating companies, Delhaize Group offers stock option and w arrant plans. For associates of its...

  • Page 72
    ... respectively. Delhaize Group stock options and w arrants granted to associates of non-U.S. operating companies are as follow s: Plan Effective Date of Grants Number of Shares Underlying Aw ard Issued Number of Shares Underlying Aw ards Outstanding at December 31, 2005 Exercise Price Number of...

  • Page 73
    ...Activity related to the Delhaize Group 2002 Stock Incentive Plan is as follow s: Shares Weighted Average Exercice Price (in USD) The w eighted average share price at the date of exercise w as USD 64.26, USD 55.99 and USD 32.09 at 2005, 2004 and 2003 respectively. The w eighted average fair value of...

  • Page 74
    ... operating companies under the restricted stock plans is as follow s: Plan Effective Date of Grants Number of Shares Underlying Aw ard Issued Number of Shares Underlying Aw ards Outstanding at December 31, 2005 Number of Beneficiaries (at the moment of issuance) Exercise Period Delhaize Group 2002...

  • Page 75
    ...2003, 2004 and 2005 to the Chief Executive Officer and the other members of the Executive Committee. For more details on the share-based incentive plans, see Note 29. 2005 2004 2003 32. Executive M anagement and Board of Directors Compensation The Company's Remuneration Policy for Directors and the...

  • Page 76
    ...'s career length w ith the company. U.S.-based members of the Executive M anagement participate in profit sharing plans as w ell as defined benefit plans. Figures indicated in the schedule represent the employer contributions to the plans for defined contribution plans and the employer service costs...

  • Page 77
    ... 30.0% of NP Lion Leasing and Consulting). Delhaize Group paid an aggregate price of EUR 0.3 million for all those transactions. Several of the Group's subsidiaries provide for post-employment benefit plans for the benefit of employees of the Group. Payments made to these plans and receivables from...

  • Page 78
    ...Ltd.(3) Food Lion Thailand, Inc.(3) Golden Pow er 95 Com S.R.L. Haagmart NV(7) Hannabro, Co. Hannaford Bros., Co. Hannaford Licensing Corp. Hannaford Procurement Corp. Hannaford Trucking Company, Inc. Hermfri NV(7) Heulcad NV(7) Huro NV(7) J.H. Harvey Co., LLC Jobmart NV(7) Kash n' Karry Food Stores...

  • Page 79
    ...49.0 51.0 C. Associated Companies Accounted for under the equity method: Super Discount M arkets, Inc. (6) Debarry Center Thornton Road 420, Lithia Springs, GA 30057, U.S.A. U.S.A. 60.0 - 60.0 50.0 60.0 50.0 (1) In liquidation. (2) In February 2005, Delhaize Group discontinued its operations...

  • Page 80
    ... instruments Change in accounting policy for inventory Impairment of assets Pension plans Closed store provision Share-based compensation Deferred tax adjustment related to business combinations Convertible bond Adjustment related to the Alfa-Beta tax audits Other Group share in net profit according...

  • Page 81
    ... value. The fair value of trade names was estimated using revenue projections of each operating entity and applying an estimated royalty rate developed by a third party valuation expert. Key assumptions used for testing assets for impairment at January 1, 2003 were: Food Lion Hannaford Kash n' Karry...

  • Page 82
    ...2003, Food Lion and Kash n' Karry changed their method of accounting for store inventories from the retail method to the average item cost method. As a result, Delhaize Group decided to change its accounting policy for inventory from the " First In First Out" (FIFO) method to the average cost method...

  • Page 83
    ...a fixed rate basis of Trofo and Ena. IFRS 1 requires that goodwill be adjusted by the amount of contingent adjustments to purchase consideration for past business combinations. Therefore, Delhaize Group has recorded part of the settlement related to the Trofo and ENA acquisitions in its opening IFRS...

  • Page 84
    ...112 1,904 1,816 1,700 (1) Estim ates based on planned openings and closings. Number of Associates (at year-end) 2005 Full-time Part-time Full-time equivalent M ale Female Delhaize U.S. Delhaize Belgium Alfa-Beta Delvita M ega Image Super Indo Food Lion Thailand 2004 62,087 75,824 101,415 67,183...

  • Page 85
    ... share am ounts) At Actual Rates 2005 Impact of Exchange Rates 2004 At Identical Rates 2005/2004 At Actual Rates At Identical Rates Net sales and other revenues Operating profit Net profit from continuing operations Group share in net profit Basic earnings per share Diluted earnings per share Free...

  • Page 86
    ... ON THE CONSOLIDATED FINANCIAL STATEM ENTS FOR THE YEAR ENDED 31 DECEM BER 2005 PRESENTED TO THE ORDINARY GENERAL M EETING OF DELHAIZE BROTHERS AND Co "THE LION" (DELHAIZE GROUP) SA To the Shareholders As required by law and the company's articles of association, w e are pleased to report to you on...

  • Page 87
    ..., Delhaize Group elected to apply IAS 21 " The Effect of Changes in Foreign Exchange Rates" retrospectively to fair value adjustments and goodwill arising in business combinations that occurred before the date of transition to IFRS and recorded goodwill in the acquired company's currency at the date...

  • Page 88
    ... Board Opinion No. 25, " Accounting for Stock Issued to Employees" (" APBO 25" ), for grants of restricted shares and stock options. As of January 1, 2005, Delhaize Group adopted SFAS 123(R) " Stock-Based Payment." Under IFRS 2 and SFAS 123(R), compensation expense is based on the fair value...

  • Page 89
    ...Principle In the second quarter of 2003, Food Lion and Kash n' Karry changed their method of accounting for store inventories from the retail method to the average item cost method. As a result, Delhaize Group decided to change its accounting policy for inventory from the " First In First Out" (FIFO...

  • Page 90
    ... Net earnings per share 0.86 0.99 0.88 Summary Company Accounts of Delhaize Group SA Balance Sheet Assets Fixed assets Establishment costs Intangible fixed assets Tangible fixed assets Financial fixed assets Current assets Inventories Short-term receivables Short-term investments Cash and bank...

  • Page 91
    ... issued under the Delhaize Group 2002 Stock Incentive Plan, the Company might have to issue new ordinary shares, to w hich coupon no. 44 entitling to the payment of te 2005 dividend is attached, betw een the date of adoption of the annual accounts by the Board of Directors and the date of their...

  • Page 92
    ... represented by Philip M aeyaert Executive Committee In September 2005, tw o new members joined Delhaize Group's Executive Committee: Joyce W ilson-Sanford, Executive Vice President of Strategic Organizational Development, and M ichel Eeckhout, Executive Vice President and Chief Information Officer...

  • Page 93
    ... L. Homa Senior Vice President and Chief Information Officer Beth M . New lands-Campbell Senior Vice President, Business Strategy and Retail Operations Bradford A. W ise Senior Vice President, Human Resources Steven H. Brinn Vice President, Research Andrew D. Couch Vice President, Real Estate Steve...

  • Page 94
    ... Å pendla Chief Operating Officer Vice President, Operations and Sales Director, Human Resources Director, Finance Director, Purchasing and M arketing Director, IT and Supply Chain Development Director, Development, Real Estates and Technical Department Kash n' Karry/Sw eetbay Supermarket Ron Hodge...

  • Page 95
    ... 31, 2005. The Board of Directors of Delhaize Group will review the Corporate Governance Charter from time to time and make such changes as it deems necessary and appropriate. The latest update of the Charter is available on the Company's website (www.delhaizegroup.com). The Corporate Governance...

  • Page 96
    Delhaize Group Board of Directors in 2005 Name (year of birth) Baron Jacobs (1940) Pierre-Olivier Beckers (1960) Position Chairman President, Chief Executive Officer, and Director Director Director Director Director Director Director Director Director Director Director Director Director Since M ay...

  • Page 97
    ..., she worked 30 years at M cDonald's Corporation, where her last position was Senior Executive Vice President and Chief Restaurant Operations Officer. M s. Babrowski holds a M aster in Business Administration from the University of North Carolina. In 1998, she received the Emerging Leader Award from...

  • Page 98
    ... as director expired on M ay 26, 2005. Indemnification of Directors - Article 523 of the Belgian Company Code - Interest of Directors In accordance with market practice, the Company subscribes annually to a liability insurance policy for acts or omissions committed by its directors and officers in...

  • Page 99
    ... directors for service on the committees of the Board; (v) recommend to the Board the compensation of the members of executive management, (vi) recommend to the Board any incentive compensation plans and equity-based plans, and awards thereunder, and profit-sharing plans for the Company's associates...

  • Page 100
    ...Financial Statements, " Key M anagement and Board of Directors Compensation" , p. 73. The Executive M anagers also participate in the equity-linked component of the Company's long-term incentive program. The aggregate number of Delhaize Group shares, stock options or other rights to acquire Delhaize...

  • Page 101
    ... fees of the Statutory Auditor and its associated companies relating to the services with respect to fiscal year 2005 to Delhaize Group SA and its subsidiaries. In 2005, the fees of the Statutory Auditor have been influenced significantly by two legally required projects. First, in compliance with...

  • Page 102
    .... The Company's Code of Business Conduct and Ethics is attached as Exhibit F to the Company's Corporate Governance Charter. Further Information on Related Party Transactions, as defined under International Financial Reporting Standards, can be found under Note 40 to the Financial Statements (p. 75...

  • Page 103
    ... Drug Retailers Index increased by 6.9% in 2005. In 2005, Delhaize Group shares traded on Euronext Brussels at an average closing price of EUR 51.68 and an average daily trading volume of 279,830 shares. On December 31, 2005, the closing price of Delhaize Group's ADRs on the New York Stock Exchange...

  • Page 104
    ... may be ordered via the same w ebsite or directly from the Delhaize Group Investor Relations Department (see contacts at the end of this section). Delhaize Group is subject to the reporting requirements of the U.S. Securities and Exchange Commission (SEC) governing foreign companies listed in the...

  • Page 105
    ... Delhaize Group Investor Relations Department P .O. Box 1330 Salisbury, NC 28145-1330 United States Tel.: +1 704 633 8250, ext. 3398 Fax.: +1 704 645 2050 Questions can be sent to [email protected]. Information regarding Delhaize Group (press releases, annual reports, share price,...) can...

  • Page 106
    ... the bank that issued the ADS. Each Delhaize Group's ADSs represents one share of Delhaize Group common stock and is traded on the New York Stock Exchange. Net debt to equity ratio Net financial income Net debt divided by total equity. Finance costs less income from investments. Net sales and...

  • Page 107
    ... B of Item 3 of Delhaize Group's Annual Report on Form 20-F for the fi scal year ended December 31, 2004, fi led with the U.S. Securities And Exchange Commission on June 30, 2005. Delhaize Group undertakes no obligation to update forward-looking statements, whether as a result of new information...

  • Page 108
    Annual Report 2005 WWW.DELHAIZEGROUP.COM LOCAL STRENGTH, GROUP EXPERTISE