Food Lion 2006 Annual Report Download

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Table of contents

  • Page 1
    Group StrenGth LocaL expertiSe AnnuAl RepoRt 2006

  • Page 2
    .... Delhaize Group is listed on euronext Brussels (ticker symbol: DeLB) and the new york Stock exchange (ticker symbol: DeG). at the end of 2006, Delhaize Group's sales network consisted of 2,705 stores. in 2006, Delhaize Group posted eur 19.2 billion in net sales and other revenues and net profit of...

  • Page 3
    ... HIGHLIGHTS RESULTS Net sales and other revenues Operating profit Net profit from continuing operations Net profit (Group share) Free cash flow (1) (EUR in millions except per share amounts) 2006 2005 2004 Change vs Prior Year 2006 2005 19,225.2 946.3 425.6 351.9 215.1 18,345.3 899.9 379...

  • Page 4
    ...more than 170 stores remodeled throughout the Group. Hannaford opened 14 stores, its highest number ever in a year. Food Lion converted some of its stores in the Washington, DC market to Bloom and Bottom Dollar through its first multi-brand market renewal. In Florida, 43 Kash n' Karry stores in the...

  • Page 5
    ...Food Lion plans to renew stores in two key markets: Norfolk, Virginia, and Myrtle Beach, South Carolina. All remaining Kash n' Karry stores are expected to be converted to Sweetbay before the end of 2007, finalizing the major conversion project started in 2004. Delhaize Belgium will convert 26 Cash...

  • Page 6
    ...countries, Delhaize Group generated in 2006 net sales and other revenues of EUR 136.9 million (0.7% of the Group total). 53 58 62 68 100.0 117.9 96.5 2003 2004 2005 2006 2003 2004 NUMBER OF STORES NET SALES AND OTHER REVENUES (IN MILLIONS OF EUR) 4 DELHAIZE GROUP / ANNUAL REPORT 2006 2005...

  • Page 7
    ... REVENUES OPERATING PROFIT NUMBER OF ASSOCIATES * The grey blocks in the graph refer to Delvita, Delhaize Group's business in the Czech Republic, which was at Dec. 31, 2006 in the process of being divested. 1,284 stores in 11 states in the Southeast and MidAtlantic Low price/low cost supermarket...

  • Page 8
    ...SALES GROWTH, TO PURSUE BEST-IN-CLASS EXECUTION, AND TO OPERATE AS A CORPORATE CITIZEN, TAKING RESPONSIBILITY TOWARDS ALL OUR STAKEHOLDERS. GENERATE PROFITABLE SALES GROWTH THROUGH > CONCEPT DIFFERENTIATION > COMPETITIVE PRICES > NETWORK RENEWAL AND EXPANSION 6 DELHAIZE GROUP / ANNUAL REPORT 2006

  • Page 9
    PURSUE BEST-IN-CLASS EXECUTION FOCUSING ON > TOOLS, SYSTEMS AND PROCESSES > RIGOROUS COST MANAGEMENT > LEVERAGING GROUP SYNERGIES AND EXCHANGING BEST PRACTICES > ASSOCIATE DEVELOPMENT OPERATE AS A CORPORATE CITIZEN TOWARDS > OUR ASSOCIATES > THE ENVIRONMENT > THE COMMUNITY 7

  • Page 10
    GENERATE PROFITABLE SALES GROWTH

  • Page 11
    CONCEPT DIFFERENTIATION COMPETITIVE PRICES NETWORK RENEWAL AND EXPANSION DELHAIZE GROUP / ANNUAL REPORT 2006 9

  • Page 12
    ..., information kiosks. In 2006, Delhaize Belgium opened a new prototype store, introducing new checkout and payment systems. Food Lion continued to finetune its Bloom and Bottom Dollar concepts, to further improve customers' shopping experience. Although a deep discount store, Bottom Dollar welcomes...

  • Page 13
    ... only one way to strengthen our price image. Another way is to reinforce the private label offering with lower prices than comparable national brand products. In 2006, the operating companies of Delhaize Group continued to expand their private label lines. At the end of the year, Food Lion and Alfa...

  • Page 14
    ... social factors. For 2007, Food Lion has identified two new markets to be renewed, Norfolk, Virginia and Myrtle Beach, South Carolina. In Florida, Sweetbay continued its conversions from the Kash n' Karry brand, with 43 stores converted in 2006. Customers reacted positively to the conversions, and...

  • Page 15
    ...exclusive customer segments and 13 combination clusters. The store-specific profiles that resulted from this effort aides Food Lion not only when deciding on which brand to implement in which area, but also in decisions on assortment, service and marketing. DELHAIZE GROUP / ANNUAL REPORT 2006 13

  • Page 16
    PURSUE BEST-IN-CLASS EXECUTION

  • Page 17
    TOOLS, SYSTEMS AND PROCESSES RIGOROUS COST MANAGEMENT GROUP SYNERGIES AND EXCHANGE OF BEST PRACTICES ASSOCIATE DEVELOPMENT DELHAIZE GROUP / ANNUAL REPORT 2006 15

  • Page 18
    ... of the Group posted more than one million man-hours of training. In 2006, Delhaize Group organized several sessions of its "Skill of the Year" finance training program, strengthening the financial knowledge of its corporate and operating company leadership. 16 DELHAIZE GROUP / ANNUAL REPORT 2006

  • Page 19
    ... centers. In addition, Harveys' back office and store systems were integrated into the Food Lion organization. An important area of cost opportunities is in energy use, particularly in light of high energy prices. In 2006, the U.S. companies of the Group saved more than 60 million kilowatt-hours...

  • Page 20
    ...a common knowledge base is required and uses inhouse specialists as teachers. In 2006, more than 400 leaders from the Group and its operating companies received four-day finance training under the "Skill of the Year" program. Sales Expertise Operating companies exchange best practices and knowledge...

  • Page 21
    ...-of-stocks during peak hours and on the highest volume shopping days decreased significantly. Food Lion will roll out CDR to two other distribution centers in 2007. CUSTOMERDRIVEN REPLENISHMENT In 2006, Hannaford carefully examined its internal business processes in all areas of the organization...

  • Page 22
    OPERATE AS A RESPONSIBLE COMPANY

  • Page 23
    OUR ASSOCIATES THE ENVIRONMENT THE COMMUNITY DELHAIZE GROUP / ANNUAL REPORT 2006 21

  • Page 24
    ...recognition programs for individual and collective outstanding performance. Attractive Workplace In addition to offering training, career opportunities and a compensation package, Delhaize Group regularly informs its associates about the Company and its strategy. To achieve this, Delhaize Group uses...

  • Page 25
    ...its energy use. In addition, in early 2007, Delhaize Belgium shifted to green energy for all company-operated stores, distribution centers and its support office. By encouraging customers to use reusable shopping bags, Delhaize Group strives to avoid waste. DELHAIZE GROUP / ANNUAL REPORT 2006 23

  • Page 26
    ... hosts a publicly accessible conference call. In 2006, Delhaize Group organized a second investor field trip to the U.S. All presentations were available through real-time webcast. In recognition of our communications efforts, Delhaize Group was ranked best Belgian company for investor relations by...

  • Page 27
    ... Delhaize Group recognizes the value of a diverse workforce. Food Lion organized a Diversity and Inclusion Summit for its management. Its efforts in this area were recognized by Mainstreet Business Magazine, which listed Food Lion among the top 50 U.S. companies for workforce diversity. Delhaize...

  • Page 28
    > UNITED STATES > BELGIUM > GREECE > EMERGING MARKETS Increased net sales and other revenues by Posted strong operating margin of 5.5% at identical exchange rates 4.9%

  • Page 29
    ... IN 2006: BUSINESS AND FINANCIAL REVIEW Grew operating profit by Realized 5.9% at identical exchange rates 12.9% 1.32 profit from continuing operations growth at identical exchange rates Proposes gross dividend of EUR per share, 10.0% higher than last year DELHAIZE GROUP / ANNUAL REPORT 2006...

  • Page 30
    ...A TOTAL OF 1,549 LAUNCHED WASHINGTON RENEWAL WITH FIRST MULTI-BRAND STRATEGY AT FOOD LION INTRODUCED GUIDING STARS, A NUTRITION NAVIGATION SYSTEM, AT HANNAFORD CONVERTED 43 KASH N' KARRY STORES TO SWEETBAY REINFORCED PRICE POSITION AT ALL OPERATING COMPANIES MARKET In 2006, the United States posted...

  • Page 31
    ... 17.3 2003 2004 2005 2006 NET SALES AND OTHER REVENUES (IN BILLIONS OF USD) OUTLOOK FOR 2007 OPEN APPROXIMATELY 47 NEW STORES REMODEL 176 STORES COMPLETE CONVERSION OF KASH N' KARRY TO SWEETBAY BRAND RENEW FOOD LION MARKETS OF NORFOLK AND MYRTLE BEACH DELHAIZE GROUP / ANNUAL REPORT 2006 29

  • Page 32
    ... Georgia (GA) Florida (FL) 50 29 14 25 40 6 17 77 327 18 11 65 492 132 99 147 WV KY TN SC GA VA NC MD DE FL TOTAL 1,549 In 2006, Food Lion implemented a customer driven replenishment (CDR) project at one distribution center in North Carolina (see "In Focus" on p. 19 of this report). All stores...

  • Page 33
    ... Kash n' Karry stores. Gross margin increased by 7 basis points, due to better inventory results, continued margin management and price optimization and an improvement in the sales mix partially offset by targeted price investments. Selling, general and administrative expenses as a percentage of net...

  • Page 34
    ... discount stores. LUXEMBOURG STRATEGY 2006 HIGHLIGHTS STRENGTHENED PRICE FOCUS ADDED 35 STORES FOR A TOTAL OF 843 CONTINUED INTEGRATION OF CASH FRESH, WITH FIRST CONVERSIONS TO DELHAIZE BANNERS ROLLED OUT NEW MARGIN AND INVENTORY MANAGEMENT SYSTEM Delhaize Belgium goes to market through...

  • Page 35
    ... CONVERSION OF CASH FRESH STORES TO DELHAIZE BANNERS START SECOND PHASE OF DISTRIBUTION CENTER EXPANSION OPEN APPROXIMATELY 42 STORES SELL DI BEAUTY AND BODY CARE STORES PERFORMANCE In 2006, net sales and other revenues of Delhaize Belgium grew by a strong 7.0%. Comparable stores sales increased by...

  • Page 36
    ... (premium-quality products), Alfa Beta Close to Greek Nature (regional products), Care (general merchandize) and the general AB private label line. The company also doubled the number of "Self Traiteur" departments, an in-store preparation department for deli and meal solutions. In 2006, Alfa-Beta...

  • Page 37
    ... SERVICE ADD 19 STORES FOR A TOTAL OF 167 PERFORMANCE In 2006, Alfa-Beta booked, for the first time, net sales and other revenues of more than EUR 1 billion. Sales increased by an outstanding 13.5%, driven by strong comparable store sales growth and the high number of store openings. Market share...

  • Page 38
    .... 2006 HIGHLIGHTS ADDED TWO STORES IN ROMANIA AND FIVE IN INDONESIA REFINED MEGA IMAGE STORE CONCEPT LAUNCHED PRIVATE LABEL LINE IN INDONESIA REACHED AGREEMENT TO SELL CZECH OPERATIONS STRATEGY Mega Image and Lion Super Indo (51% owned by Delhaize Group) focus on urban areas through a supermarket...

  • Page 39
    ...in 2006. OUTLOOK FOR 2007 OPEN NEW DISTRIBUTION CENTER AT SUPER INDO OPEN NEW GROCERY AND NON-FOOD DISTRIBUTION CENTER AT MEGA IMAGE ADD APPROXIMATELY 15 STORES FOR A TOTAL OF 83 SALE OF DELVITA As a part of its regular portfolio evaluation, Delhaize Group concluded that the resources required for...

  • Page 40
    ... OF EUR) OPERATING MARGIN INCOME STATEMENT (P. 60) In 2006, Delhaize Group posted net sales and other revenues of EUR 19.2 billion, a 4.8% increase compared to 2005. At identical exchange rates, net sales and other revenues would have increased by 5.5%. Organic sales growth was 5.0%, a major...

  • Page 41
    ... losses (EUR 2.8 million in 2006 compared to 6.8 million in 2005) primarily at Food Lion. Delhaize U.S. closed eight stores that were relocated and 20 other stores, compared with 32 stores in 2005. The operating margin remained stable at 4.9% of net sales and other revenues. On the basis of the...

  • Page 42
    ... in April 2006. For these redemptions, Delhaize Group used cash on hand and existing credit facilities. Of the total financial debt at year-end, 13.3% was at variable interest rates and 86.7% at fixed interest rates; 73.9% was denominated in U.S. dollar and 26.1% in euro. The average maturity of...

  • Page 43
    ... Delhaize Group prepares its financial statements under IFRS and also prepares a reconciliation of its net income and shareholders' equity to US GAAP in accordance with its obligations as a foreign company listed on the New York Stock Exchange (see p. 103). Under US GAAP, Delhaize Group's 2006 net...

  • Page 44
    ... exchange forward contracts or currency swaps (more information in Note 19 to the Financial Statements, "Derivative Instruments", p. 81). However, in most cases the Group's subsidiaries borrow directly in local currencies. INTEREST RATE RISK Delhaize Group's interest rate risk management objective...

  • Page 45
    ... Delhaize Group's long-term investment policy requires a minimum rating of A-/A3 for its financial investments. More information can be found in Note 11 to the Financial Statements, "Investment in Securities", p. 74. PENSION PLAN RISK Most operating companies of Delhaize Group have pension plans...

  • Page 46
    ... on Form 20-F for the year ending December 31, 2006, requires management and the Statutory Auditor to assess the effectiveness of the Company's internal control over financial reporting. RISK RELATED TO STOCK MARKET LISTING Being listed on Euronext Brussels and the New York Stock Exchange, Delhaize...

  • Page 47
    ... in excess of its existing reserves. Self-insurance reserves of EUR 117.5 million are included as liabilities on the balance sheet. More information on selfinsurance can be found in Note 22 to the Financial Statements, "Self-Insurance Provision" (p. 83). DELHAIZE GROUP / ANNUAL REPORT 2006 45

  • Page 48
    ..., Caledonia Investments Former Managing Director of Paine Webber Group Commercial Engineer, MBA Elected 2001 ROBERT J. MURRAY (1941) Former Chairman, President and CEO of New England Business Service Former EVP North Atlantic Group Gillette Former Board member of Hannaford Board member of LoJack...

  • Page 49
    ... (1960) President and CEO Manager of the Year 2000 (Trends/Tendances) Master in Applied Economics, MBA Joined Delhaize Group in 1983 RICK ANICETTI (1957) EVP Delhaize Group and CEO of Food Lion since 2002 BA in Political Science Joined Hannaford in 1980 RENAUD COGELS (1949) EVP Delhaize Group, Head...

  • Page 50
    ...is reviewed and updated from time to time. The latest update of the Charter is available on the Company's website (www.delhaizegroup.com). The Corporate Governance Charter of Delhaize Group includes the rules and policies of the Company that, together with applicable law, the security exchange rules...

  • Page 51
    ... accounts and the consolidated financial statements and the annual report • Approval of sales and earnings press releases • Review and decision on possible acquisitions and divestitures Executive Officer of Delhaize Group and related follow-up discussions plan • Regular review and update...

  • Page 52
    ... and off-balance sheet structures on the financial statements and valuation rules • Review of changes, as applicable, in accounting principles • Review of U.S. Securities and Exchange Commission comments to the 2005 annual report on Form 20-F and the Company's responses • Review of the...

  • Page 53
    ...day-to-day management of the Company with the assistance of the Executive Committee (together referred to as the "Executive Management"). The Executive Committee, chaired by the Chief Executive Officer, prepares the strategy proposals for the Board of Directors, DELHAIZE GROUP / ANNUAL REPORT 2006...

  • Page 54
    ... program. The aggregate numbers of Delhaize Group shares, stock options or other rights to acquire Delhaize Group shares, granted by the Company and its subsidiaries during 2006 to the CEO and other Executive Managers are described individually in Note 37 to the Financial Statements, "Related...

  • Page 55
    ... the reporting requirements mentioned above may forfeit all or part of the rights attributable to such Delhaize Group securities, including, but not limited to, voting rights or rights to distributions of cash or share dividends or may even be ordered by the President of the Belgian Commercial Court...

  • Page 56
    ...'s Executive Management owned as a group 325,980 ordinary shares or ADRs of Delhaize Group SA, which represented approximately 0.34% of the total number of outstanding shares of the Company as of that date. On December 31, 2006, the Company's Executive Management owned as a group 856,412 stock...

  • Page 57
    ... for trading in Company securities. Group Designation of Authority On December 15, 2006, the Company's Chief Executive Officer approved a "Group Designation of Authority" applicable to all operational companies of the Group. This document provides the minimum Group management approval requirements...

  • Page 58
    FINANCIALS 56 DELHAIZE GROUP / ANNUAL REPORT 2006

  • Page 59
    ... operations 28. Share Based compensation 29. cost of Sales 30. employee Benefit expense 31. other operating income 32. other operating expenses 33. Finance costs 34. income from investments 35. net Foreign exchange (Gains) Losses 36. Supplemental cash Flow information 37. related party transactions...

  • Page 60
    ....9 - 1,224.5 446.0 5.5 24.6 1.5 41.4 19.9 660.4 - 11 12 19 32.4 0.3 1.7 39.0 25.8 304.8 5 151.1 Total current assets 2,422.6 2,813.3 2,423.8 Total assets (1) Adjusted for the change in accounting policy described in Note 3 9,295.4 10,253.9 8,702.5 58 DelhAize GRoup / ANNUAL REPORT 2006

  • Page 61
    ....3 Total non-current liabilities Short-term borrowings Long-term debt - current Obligations under finance lease - current Derivative instruments Provisions - current Income tax payable Accounts payable Accrued expenses Other current liabilities Liabilities associated with assets held for sale 17...

  • Page 62
    ... incoMe StateMentS (in millions of EUR) Note 2006 2005(1) 2004(1) Net sales and other revenues Cost of sales Gross profit 29, 30 19,225.2 (14,372.2) 4,853.0 18,345.3 (13,710.1) 4,635.2 17,596.8 (13,250.9) 4,345.9 Gross margin Other operating income Selling, general and administrative...

  • Page 63
    conSoLiDateD StateMentS oF caSh FLowS (in millions of EUR) 2006 2005(1) 2004(1) Operating activities Group share in net profit Net profit attributable to minority interest Adjustments for: Depreciation and amortization - continuing operations Depreciation and amortization - discontinued operations ...

  • Page 64
    ...share) Full Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Net sales and other revenues Gross profit Gross margin Selling, general and administrative expenses as a percentage of sales and other revenues Operating profit Operating margin Net profit from continuing operations Group share in net...

  • Page 65
    ...and 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, 2006 as presented in this annual report were...

  • Page 66
    ...one year from the date of classification. Non-current assets held for sale are measured at the lower of the asset's carrying amount or fair value less costs to sell. Goodwill The purchase method of accounting is used to account for acquisitions of businesses by the Group. The cost of an acquisition...

  • Page 67
    ... at the balance sheet exchange rate. Delhaize Group does not currently apply cash flow hedge accounting and net investment hedge accounting. • Treasury shares: Shares of the Group purchased by the Group or companies within the Group are included in equity at cost (including any costs directly...

  • Page 68
    ... Florida market. Cost of Sales Purchases are recorded net of cash discounts and other supplier discounts and allowances. Cost of sales includes all costs associated with getting products to the retail stores including buying, warehousing and transportation costs. Supplier Allowances Delhaize Group...

  • Page 69
    ... financial statements and therefore decided to apply the new option. Furthermore, as a company listed on the New York Stock Exchange, Delhaize Group prepares a reconciliation of its net income and shareholders' equity to US GAAP. Delhaize Group strives to align its IFRS accounting policy decisions...

  • Page 70
    ...segment information for 2006, 2005, and 2004 is as follows: Year ended December 31, 2006 (in millions of EUR) United States Belgium(2) Greece Emerging Markets(3) Corporate (Unallocated) Total Net sales and other revenues(1) Cost of sales Gross profit Gross margin Other operating income Selling...

  • Page 71
    Year ended December 31, 2005(6) (in millions of EUR) United States Belgium(2) Greece Emerging Markets(3) Corporate (Unallocated) Total Net sales and other revenues(1) Cost of sales Gross profit Gross margin Other operating income Selling, general and administrative expenses Other operating expenses...

  • Page 72
    ...does not exceed the long-term average growth rate for the supermarket retail business. 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 2006, 2005 and 2004...

  • Page 73
    ..., 2005 2004 Food Lion Hannaford United States 196.2 164.0 360.2 219.0 183.1 402.1 189.7 158.5 348.2 Amortization expense was charged to earnings as follows: (in millions of EUR) 2006 2005 2004 Selling, general and administrative expenses Result from discontinued operations Total amortization...

  • Page 74
    ...2006 Net carrying amount at December 31, 2006 Cost at January 1, 2005 Additions Sales and disposals Acquisitions through business combinations Transfers to/from other accounts Currency translation effect Balance....7) 92.2 1.9 10.4 112.6 (2,143.6) (45.7) 3,022.8 72 DelhAize GRoup / ANNUAL REPORT 2006

  • Page 75
    ... space attached to supermarket buildings and excess real estate, is held for long-term rental yields or appreciation and is not occupied by the Group. (in millions of EUR) 2006 2005 2004 Cost at January 1 Additions Sales and disposals Acquisitions through business combinations Divestitures...

  • Page 76
    ... financial statements prepared under Belgian GAAP ("the annual accounts"). The total estimated dividend, based on the number of shares outstanding at March 14, 2007 is EUR 127.8 million. As a result of the exercise of warrants issued under the Delhaize Group 2002 Stock Incentive Plan, the Company...

  • Page 77
    ... policy Change in accounting policy Balances at January 1, 2004 Net income (expense) recognized 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...

  • Page 78
    ... into 5,263,158 ordinary shares at the initial conversion price of EUR 57.00 per share. The bonds 76 DelhAize GRoup / ANNUAL REPORT 2006 are convertible into ordinary shares any time on or after June 10, 2004 and up to and including the date falling seven business days prior to April 30, 2009...

  • Page 79
    ... of the Company's shares or ADRs from time to time in the open market, in compliance with applicable law and subject to and within the limits of an outstanding authorization granted to the Board by the shareholders, to satisfy exercises under the stock option plans that Delhaize Group offers to...

  • Page 80
    ... generally bear interest at the inter-bank offering rate at the borrowing date plus a pre-set margin. Delhaize Group also uses a treasury notes program. Long-term debt (excluding finance leases) net of discounts/premiums, deferred transaction cost and hedge accounting fair value adjustment...

  • Page 81
    ... principal payments (premiums and discounts not taken into account) and related interest rates (before effect of interest rate swaps) of the Group's long-term debt by currency: 2007 2008 2009 2010 2011 Thereafter Fair Value Debt held in USD (in millions of USD) Notes due 2007 Average interest rate...

  • Page 82
    ...EUR 37.2 million) 80 DelhAize GRoup / ANNUAL REPORT 2006 2004 U.S. dollar Euro Other currencies Total 101.8 101.8 0.1 0.1 4.8 15.5 7.8 28.1 18. Leases Delhaize Group's stores operate principally in leased premises. Lease terms generally range from three to 27 years with renewal options ranging...

  • Page 83
    ...December 31, 2006, 2005 and 2004, respectively, for the discounted value of remaining lease payments net of expected sublease income on closed stores was included in provisions (both non-current and current). The discount rate is based (in millions of EUR) Year Trade Date Year Expiration Date Amount...

  • Page 84
    ...from one to 17 years. The average remaining lease term for closed stores was 5.9 years at December 31, 2006. The liability associated with each store is discounted using a pre-tax rate that reflects the borrowing rate of debt with terms matching the terms of future rent payments. The adequacy of the...

  • Page 85
    ... a minimum guaranteed return. The pension plan is insured. The expense related to the plan was EUR 2.9 million, EUR 2.7 million and EUR 2.7 million in 2006, 2005 and 2004, respectively. Delhaize Group sponsors profit-sharing retirement plans covering all employees at Food Lion and Kash n' Karry with...

  • Page 86
    ... in the balance sheet: Deficit for funded plans 11.3 Present value of unfunded obligations 12.7 Unrecognized past service (cost) benefit 0.1 Net liability 24.1 Weighted average assumptions used to determine benefit obligations: Discount rate Rate of compensation increase Rate of price inflation (in...

  • Page 87
    ... Delhaize Belgium's defined benefit pension plan is funded through a group insurance program. The plan assets, which benefit from a guaranteed minimum return, are part of the insurance company's overall investment. The market-related value of the plan assets is determined using the fair market value...

  • Page 88
    ... Fair value of plan assets at December 31 Amounts recognized in the balance sheet: Present value of unfunded obligations 4.7 Unrecognized past service benefit 1.5 Net liability 6.2 Weighted-average actuarial assumptions used to determine benefit obligations: Discount rate 5.80% Current year trend...

  • Page 89
    ... 71% of Delhaize Group's consolidated profit before tax was attributable to Delhaize America, which had an effective tax rate of 38.9%. (2) The Greek statutory tax rate was changed from 35% to 32% for fiscal year 2005, 29% for fiscal year 2006 and 25% for fiscal years starting 2007. 1.1 223...

  • Page 90
    ... Tax Depreciation Closed Store Provision Leases Pension Other Total Net deferred tax liabilities at January 1, 2004 Charge (credit) to equity for the year Charge (credit) to profit or loss for the year Effect of change in tax rates Acquisition Transfers to/from other accounts Currency translation...

  • Page 91
    ... per share for the years ended December 31, 2006, 2005 and 2004 is as follows: (in millions of EUR, except numbers of shares and earnings per share) 2006 2005 2004 Net profit from continuing operations Net profit from continuing operations attribuable to minority interests Group share in net profit...

  • Page 92
    ... of 2005, Delhaize Group sold its 11 stores in Slovakia. In the first quarter of 2004, Delhaize Group closed 34 Kash n' Karry stores mainly located on the East coast of Florida and in the Orlando, Florida, market of the U.S. In 2004, Delhaize Group divested its 36 Food Lion Thailand stores. The...

  • Page 93
    Delhaize Group stock options and warrants granted to associates of non-U.S. operating companies are as follows: Plan Effective Date of Grants Number of Shares Underlying Award Issued Number of Shares Underlying Awards Outstanding at December 31, 2006 Exercise Price Number of Beneficiaries (at the ...

  • Page 94
    A summary of the status of Delhaize Group's nonvested options for non U.S. stock option and warrant plans as of December 31, 2006, and changes during the year ended December 31, 2006, is presented below: Shares Weighted Average Grant-Date Fair Value As of December 31, 2006, there was EUR 4.0 ...

  • Page 95
    ... using the Black-Scholes-Merton model with the following weighted average assumptions: 2006 2005 2004 Restricted stock unit awards granted to associates of U.S. operating companies under the Delhaize America 2002 Restricted Stock Unit Plan are as follows: Effective Date of Grants Number of Shares...

  • Page 96
    ... Other operating income includes income generated from activities other than sales and point of sale services to retail and wholesale customers. (in millions of EUR) 2006 2005 2004 Product cost, net of vendor allowances and cash discounts Purchasing, distribution and transportation costs Total 13...

  • Page 97
    ...35. Net Foreign Exchange (Gains) Losses The exchange differences (credited) charged to the income statement are as follows: (in millions of EUR) 2006 2005 2004 Cost of sales Selling, general and administrative expenses Finance costs Income from investments Result from discontinued operations Total...

  • Page 98
    ... use of a company car, as well as employee and dependent life insurance, welfare benefits and financial planning for U.S. members of Executive Management. (2) The members of Executive Management benefit from corporate pension plans which vary regionally, including a defined benefit group insurance...

  • Page 99
    ... Golden Power 95 Com S.R.L. Haagmart NV(1) Hannbro, Co. Hannaford Bros. Co. Hannaford Licensing Corp. Hannaford Procurement Corp. Hannaford Trucking Company, Inc. Harveys Stamping Company, LLC Hermfri NV(1) Heulcad NV(1) Huro NV(1) J.H. Harvey Co., LLC Jobmart NV(1) Kash n' Karry Food Stores, Inc...

  • Page 100
    ... 51.0 51.0 51.0 C. Associated Companies Accounted for under the equity method: Super Discount Markets, Inc. (6) Debarry Center U.S.A. U.S.A. - 60.0 - 60.0 50.0 (1) Companies acquired as part of the acquisition of Cash Fresh in May 2005. (2) In February 2005, Delhaize Group discontinued its...

  • Page 101
    ...572 753(2) 167 24 59 2,575 (1) Estimates based on planned openings and closings. (2) Excluding 132 Di stores that are planned to be sold in 2007. Number of Associates (at year-end) Delhaize Group Full-time Part-time Full-time equivalent (FTE) Male Female Total 2006 64,726 77,790 106,648 69,137 73...

  • Page 102
    ...) At Actual Rates 2006 Effect of Exchange Rates 2005 At Identical Rates 2006/2005 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 cash flow (in...

  • Page 103
    ...Net profit (Group share) Free cash flow (1) FINANCIAL POSITION (in millions of EUR) Total assets Total equity Net debt (1) Enterprise value (1) (3) PER SHARE INFORMATION (in EUR) Net earnings (basic) (2) Net earnings (diluted) (2) Free cash flow (1) (2) Gross dividend Net dividend Pay-out ratio (net...

  • Page 104
    ... ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 PRESENTED TO THE ORDINARY GENERAL MEETING OF DELHAIZE BROTHERS AND Co "THE LION" (DELHAIZE GROUP) SA To the Shareholders As required by law and the company's articles of association, we are pleased to report to you on...

  • Page 105
    ... made in 2001 by Delhaize Group, or Delhaize America, to repurchase Delhaize Group's shares in the open market to satisfy Delhaize America employee stock option exercises, net of cash received from those employees, were recorded in the purchase price allocation. These payments were excluded from the...

  • Page 106
    ... Benefit Pension and Other Retirment Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)." SFAS 158 requires employers to recognized the funded status of a defined benefit plan as an asset or liability in its balance sheet, measured as the difference between the fair value of plan...

  • Page 107
    ... sublease income that is considered in recording the provision may differ from the market value approach when supermarket restrictions are placed on a closed store site to retain the customer base in the market in which a store has operated and has been closed. The discounting rules associated with...

  • Page 108
    ... GRoup / ANNUAL REPORT 2006 Net earnings per share 1.54 0.86 0.99 Summary Company Accounts of Delhaize Group SA Balance Sheet Assets (in thousands of EUR) December, 31 2006 2005 Fixed assets Establishment costs Intangible fixed assets Tangible fixed assets Financial fixed assets Current...

  • Page 109
    ...the exercise of warrants issued under the Delhaize Group 2002 Stock Incentive Plan, the Company might have to issue new ordinary shares, to which coupon no. 45 entitling to the payment of the 2006 dividend is attached, between the date of adoption of the annual accounts by the Board of Directors and...

  • Page 110
    ... (www. euronext.com) and the New York Stock Exchange (www.nyse.com). Detailed information on trading activity and share prices can also be found in the financial section of many newspapers. Alfa-Beta, Delhaize Group's operating company in Greece, is listed on the Athens Stock Exchange (www.ase.gr...

  • Page 111
    ...a direct purchase and sale plan for depositary receipts, including a dividend reinvestment plan (DRIP). For further information on ADRs or Global BuyDIRECT, please see the ADR section on Delhaize Group's website www.delhaizegroup.com or call The Bank of New York. DELHAIZE GROUP / ANNUAL REPORT 2006...

  • Page 112
    ...be downloaded from Delhaize Group's website: www.delhaizegroup.com. A printed or electronic version may be ordered via the same website 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...

  • Page 113
    ... divided by share price at year-end. (3) Cannot be calculated for years before 2003, since no IFRS financials are available before 2003. (4) Excluding shares traded on the New York Stock Exchange. (5) Entreprise value = market capitalization plus net debt. DELHAIZE GROUP / ANNUAL REPORT 2006 111

  • Page 114
    ... at year-end divided by cost of product sold, net of vendor allowances and cash discounts, multiplied by 365. Accounts payable days Accounts payable divided by cost of sales and selling, general and administrative expenses less employee benefit expense, multiplied by 365. Affiliated store A store...

  • Page 115
    ... company formed in 1867 and converted into a limited company on February 22, 1962. Corporate Support Office: Delhaize Group Square Marie curie 40 1070 Brussels - Belgium tel: +32 2 412 22 11 - Fax: +32 2 412 22 22 operationS United States FOOD LION p.o. Box 1330, 2110 executive Drive Salisbury nc...

  • Page 116
    WWW.DELHAIZEGROUP.COM Group StrenGth, LocaL expertiSe AnnuAl RepoRt 2006