Food Lion 2006 Annual Report Download - page 79

To the extent permitted by law, the Board of Directors is authorized to increase
the share capital after it has received notice of a public takeover bid related to the
Company. In such a case, the Board of Directors is especially authorized to limit
or suppress the preferential right of the shareholders, even in favor of specific
persons. Such authorization is granted to the Board of Directors for a period of
three years from the date of the Extraordinary General Meeting of May 26, 2005.
It may be renewed under the terms and conditions provided by law.
Share Repurchases
As authorized by the Extraordinary General Meeting held on May 26, 2005, the
Board of Directors is authorized to purchase Delhaize Group ordinary shares for a
period of three years expiring in June 2008, where such a purchase is necessary
to avoid serious and imminent damage to Delhaize Group.
In addition, on May 24, 2006, at an Extraordinary General Meeting, the Company’s
shareholders authorized the Board of Directors, in the absence of any threat or
serious and imminent damage, to acquire up to 10% of the outstanding shares of
the Company at a minimum share price of EUR 1.00 and a maximum share price
not higher than 20% above the highest closing price of the Delhaize Group share
on Euronext Brussels during the 20 trading days preceding the acquisition. This
authorization, which has been granted for 18 months, replaces the one granted
in May 2005. Such authorization also relates to the acquisition of shares of the
Company by one or several direct subsidiaries of the Company, as defined by legal
provisions on acquisition of shares of the Company by subsidiaries.
In May 2004, the Board of Directors approved the repurchase of up to EUR 200
million 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 its associ-
ates. No time limit has been set for these repurchases.
Delhaize Group SA acquired 330,000 Delhaize Group shares (having a par value
of EUR 0.50 per share) in 2006 for an aggregate amount of EUR 21.1 million, rep-
resenting approximately 0.34% of Delhaize Group’s share capital and transferred
25,600 shares to satisfy the exercise of stock options granted to associates of
non-U.S. operating companies. As a consequence, at the end of 2006, the man-
agement of Delhaize Group SA had a remaining authorization for the purchase
of its own shares or ADRs for an amount up to EUR 169.1 million subject to and
within the limits of an outstanding authorization granted to the Board by the
shareholders.
Additionally, in 2006, Delhaize America repurchased 151,400 Delhaize Group
ADRs for an aggregate amount of USD 11.5 million, representing approximately
0.16% of the Delhaize Group share capital as at December 31, 2006 and trans-
ferred 132,787 ADRs to satisfy the exercise of stock options granted to U.S.
management pursuant to the Delhaize America 2000 Stock Incentive Plan and the
Delhaize America 2002 Restricted Stock Unit Plan.
At the end of 2006, Delhaize Group owned 918,599 treasury shares (including
ADRs), of which 437,199 were acquired prior to 2006, representing approximately
0.95% of the Delhaize Group share capital.
Delhaize Group provided a Belgian credit institution with a discretionary mandate
(the “Mandate”) to purchase up to 400,000 Delhaize Group’s shares on Euronext
Brussels between December 15, 2006 and November 24, 2007 in order to satisfy
exercises of stock options held by management of its non-US operating com-
panies. This credit institution makes its decisions to purchase Delhaize Group
shares pursuant to the guidelines set forth in the Mandate, independent of further
instructions from Delhaize Group, and without influence by Delhaize Group with
regard to the timing of the purchases. The credit institution can purchase shares
only when the number of Delhaize Group shares held by a custodian bank falls
below a certain minimum threshold contained in the Mandate. Delhaize Group
anticipates purchasing its own shares from time to time in addition to shares
purchased on its behalf under the Mandate.
Additionally, in 2006 Delhaize America engaged a U.S.-based financial institution
to purchase on its behalf up to 225,000 Delhaize Group ADRs on the New York
Stock Exchange during a period of up to one year beginning August 31, 2006. This
engagement was established to assist in the satisfaction of certain stock options
held by employees of U.S. subsidiaries of Delhaize Group and certain restricted
stock unit awards provided to U.S.-based executive employees. The financial
institution makes its decisions to purchase ADRs under this agreement pursuant
to the guidelines set forth in a related share repurchase plan, independent of
further instruction from Delhaize America. The share repurchase plan may be
terminated by Delhaize America at any time.
Retained Earnings
According to Belgian law, 5% of the statutory net income of the parent company
must be transferred each year to a legal reserve until the legal reserve reaches
10% of the capital. At December 31, 2006, 2005 and 2004, Delhaize Group’s legal
reserve was EUR 4.8 million, EUR 4.7 million and EUR 4.7 million, respectively,
and was recorded in retained earnings. Generally, this reserve cannot be distrib-
uted to the shareholders other than upon liquidation.
The Board of Directors may propose a dividend distribution to shareholders of
up to the amount of the distributable reserves of the parent company, including
the profit of the last fiscal year. The shareholders at Delhaize Group’s Ordinary
General Meeting must approve such dividends.
Other Reserves
“Other reserves” include a deferred loss on the settlement of a hedge agreement
in 2001 related to securing financing for the Hannaford acquisition by Delhaize
America. The deferred loss is being amortized over the life of the underlying debt
instruments. “Other reserves” also include actuarial gains and losses on defined
benefit plans and unrealized gains and losses on securities available for sale.
(in millions of EUR) December 31,
2006 2005 2004
Deferred loss on hedge:
Gross (36.4) (46.1) (46.1)
Tax effect 13.8 17.5 17.5
Actuarial loss on defined
benefit plans:
Gross (16.1) (32.2) (9.3)
Tax effect 5.5 11.3 3.3
Amount attributable to
minority interest 0.8 0.5 0.5
Unrealized loss on
securities held for sale:
Gross (0.3) (0.3) (0.3)
Tax effect 0.1 0.1 0.1
Total other reserves (32.6) (49.2) (34.3)
Cumulative Translation Adjustment
The cumulative translation adjustment relates to changes in the balance of assets
and liabilities due to changes in the functional currency of the Group’s subsidiar-
ies relative to the Group’s reporting currency. The balance in cumulative transla-
tion adjustment is mainly impacted by the inflation or deflation of the U.S. dollar
to the euro. The cumulative translation adjustment balance is as follows:
At December 31 USD Companies Other Companies Total
(in millions of EUR)
2004 (1,115.2) 9.8 (1,105.4)
2005 (675.0) 10.1 (664.9)
2006 (1,045.7) 20.0 (1,025.7)
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