Food Lion 2007 Annual Report Download

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Group strength
Local expertise
ANNUAL REPORT 2007

Table of contents

  • Page 1
    Group strength Local expertise ANNUAL REPORT 2007

  • Page 2
    ... international food retailer w ith activities in seven countries on three continents. Delhaize Group is listed on Euronext Brussels (ticker symbol: DELB) and the New York Stock Exchange (ticker symbol: DEG). At the end of 2007, Delhaize Group's sales netw ork consisted of 2,545 stores. In 2007...

  • Page 3
    ...410 2005 2006 2007 2005 2006 2007 2005 2006 2007 2005 2006 2007 Financial Highlights (EUR in millions except per share amounts) 2007 2006 2005 Change vs Prior Year 2007 2006 Results Revenues Operating profit Net profit from continuing operations Net profit (Group share) Free cash flow...

  • Page 4
    ..., convenience and customer service. We continued our network expansion to 2,545 stores at year-end. The renewal and conversion work carried on, and more than 160 stores were remodeled throughout the Group. Food Lion remodeled two entire markets: Myrtle Beach, South Carolina and Norfolk, Virginia. In...

  • Page 5
    ...2008. Food Lion will renew four additional markets (Wilmington, North Carolina; Savannah, Georgia; and Richmond and Charlottesville, Virginia) during 2008. Delhaize Belgium will finalize the integration and conversion of the remaining Cash Fresh stores. In aggregate, our operating companies plan to...

  • Page 6
    ... categories: supermarkets, proximity stores and specialty stores. Delhaize Belgium also operates a home delivery service. In 2007, Delhaize Belgium's revenues of EUR 4.4 billion accounted for 23% of the Group total. Number of Stores Revenues (IN BILLIONS OF USD) Number of Stores* Revenues (IN...

  • Page 7
    ... fresh food and meal solutions Neighborhood locations 56 supermarkets in Indonesia Fresh products at every day low prices Neighborhood locations #2 supermarket operator in Jakarta 10 cash & carry stores Food sales to commercial customers 2007 165.5 908 DELHAIZE GROUP / ANNUAL REPORT 2007 5

  • Page 8
    ...strategy is built around three key objectives: to generate strong and profitable revenue growth, to pursue best-in-class execution, and to operate as a corporate citizen, taking responsibility towards all our stakeholders. Generate Profitable Revenue Growth 6 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 9
    Pursue Best-in-Class Execution Operate as a Responsible Company DELHAIZE GROUP / ANNUAL REPORT 2007 7

  • Page 10
    Generate Profitable Revenue Growth Concept Differentiation Competitive Prices Network Renewal and Expansion

  • Page 11
    DELHAIZE GROUP'S OPERATING COMPANIES GO TO MARKET WITH DIFFERENTIATED CONCEPTS AND A CLEAR AND COMPETITIVE PRICE POSITIONING DELHAIZE GROUP / ANNUAL REPORT 2007 9

  • Page 12
    ... In 2007, Food Lion reduced by half the delivery time for fresh products to the stores from three of its distribution centers, thus increasing the quality of its products in-store. In Florida, Sweetbay completed its conversion from Kash 'n Karry with a strong focus on fresh products and with special...

  • Page 13
    ... the concept of The Healthy Stroll, where certified dieticians advise the customer on the nutritional value of products in the stores. Delhaize Belgium also installed Health Check devices to offer customers an opportunity to do a quick check of their health. DELHAIZE GROUP / ANNUAL REPORT 2007 11

  • Page 14
    ... basic products. In 2007, Alfa-Beta lowered prices on 1,500 national brand products, bringing the number of price reductions to more than 7,500 products in the period 2004-2007. Mega Image ran several multi-buy promotion programs to support its price position. 12 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 15
    ...The U.S. operating companies also introduced two new category specific private brands, Healthy Accents and Home 360, for health and beauty and general merchandise products respectively. In 2007, Delhaize Group rolled out a second panEuropean private brand after 365, called CARE. The CARE assortment...

  • Page 16
    ... 2007, two markets (comprised of over 100 stores in total) were totally renewed: Myrtle Beach, South Carolina and Norfolk, Virginia. The Norfolk renewals included Food Lion, Bloom and Bottom Dollar brands. All of the stores now offer greatly enhanced fresh departments, improved checkout and customer...

  • Page 17
    ...all U.S. operating companies. The program includes a premium brand called Taste of Inspirations, a house brand that carries the banner name and a value line called Smart Option. In January 2008, Alfa-Beta entered into an agreement to acquire 33 Plus Hellas stores. This transaction represents a great...

  • Page 18
    Pursue Best-in-Class Execution Tools, Systems and Processes Group Synergies and Exchanging Best Practices Rigorous Cost Management

  • Page 19
    DELHAIZE GROUP'S OPERATING COMPANIES STRIVE TO ACHIEVE EXCELLENT EXECUTION, COST EFFECTIVENESS AND GROUP SYNERGIES DELHAIZE GROUP / ANNUAL REPORT 2007 17

  • Page 20
    ... trip "a breeze." Delhaize Group uses loyalty programs to offer customers specific discounts and promotions. The use of loyalty cards enables our Group to better understand consumer needs and adapt assortments, store concepts and formats accordingly. Food Lion's customer segmentation work is in...

  • Page 21
    ... improving store productivity. Super Indo opened a new distribution center to serve the Jakarta area. Night shipments will be organized to cope with the difficult Jakarta traffic. improvement. Harveys, our operating company in South Georgia in the U.S., implemented ACIS in 2007. Mega Image will...

  • Page 22
    ...-quality prepared meals to be introduced in 2008. The U.S. operating companies also benefited from Delhaize Belgium's leadership position in the area of private brand development. Hannaford and Food Lion supported Sweetbay during the conversion from Kash 'n Karry. 20 DELHAIZE GROUP / ANNUAL REPORT...

  • Page 23
    ... Food Lion and Delhaize Belgium and will be implemented at Mega Image in 2008. The Computer Assisted Ordering technology applied by Hannaford is being piloted at Delhaize Belgium. Delhaize Belgium is reviewing the introduction of the U.S.-developed applications for price management, store assortment...

  • Page 24
    ... projects in its stores throughout 2007: a new labor scheduling tool was introduced that resulted in productivity increases, changes were made to the operating procedures in the bake-off and dairy departments, and overall store inventory levels decreased. Mega Image and Lion Super Indo took several...

  • Page 25
    ... required significant creativity. The result was a concept store that opened at the end of 2007. The store features, for example, unique developments in the check-out area to enhance customer convenience and combines work stations in fresh food departments for efficiency. The concept store manages...

  • Page 26
    Operate as a Responsible Company Products People Planet

  • Page 27
    DELHAIZE GROUP'S OPERATING COMPANIES WANT TO OPERATE RESPONSIBLY TOWARDS PRODUCTS, PEOPLE AND PLANET 23 DELHAIZE GROUP / ANNUAL REPORT 2007 25

  • Page 28
    ... of its business, Delhaize 26 DELHAIZE GROUP / ANNUAL REPORT 2007 Guiding Stars ranks more than 25,000 food items according to their nutritional value using a good, better and best ranking. The program rates a product one, two or three stars based on the points it earns: food is credited for the...

  • Page 29
    ... 2007, Delhaize Group's operating companies donated approximately EUR 6 million in cash to various organizations. In addition, EUR 4.3 million in cash and approximately 16,000 tons of products were donated with the help of customers, associates and suppliers. DELHAIZE GROUP / ANNUAL REPORT 2007 27

  • Page 30
    ...some new stores are equipped with photovoltaic solar panels, and heat from refrigeration units is reclaimed. In 2007, Delhaize became Belgium's largest user of renewable energy by shifting to green energy for all company-operated stores, distribution centers and its support office. Delhaize Belgium...

  • Page 31
    ... to enhance the shopping experience. Supermarket News highlighted furthermore that Delhaize Group nurtures its diverse workforce through a policy of inclusion and maximizing the associates' potential through training and creating an exciting workplace. DELHAIZE GROUP / ANNUAL REPORT 2007 29

  • Page 32
    Realized Grew operating profit by Increased revenues by 23.5% group share in net profit growth at identical exchange rates 6.3% at identical exchange rates 4.9% at identical exchange rates Our Business in 2007: Financial and Business Review United States

  • Page 33
    Posted strong operating margin of Proposes gross dividend of EUR 4.9% 1.44 per share, 9.1% higher than last year Belgium Greece Emerging Markets DELHAIZE GROUP / ANNUAL REPORT 2007 31

  • Page 34
    ... store sales growth in the U.S. was driven by dynamic revenue growth at all three operating companies. Food Lion continued to benefit from its market renewal program and customer segmentation work. Hannaford posted strong revenue growth, supported by its competitive pricing and innovative strategy...

  • Page 35
    ... due to the market renewal program at Food Lion, the conversion of Cash Fresh stores to Delhaize banners, the renewal of distribution centers in Belgium and an active store opening program. In 2007, 75.0% of total capital expenditures were invested in the U.S. activities of the Group, 15.6% in the...

  • Page 36
    ... obligations was 11.7% in 2007. At the end of 2007, Delhaize Group's net debt amounted to EUR 2.2 billion, a decrease of EUR 390.5 million or -14.8% mainly due to the weakening of the U.S. dollar between the two balance sheet dates (currency translation effect 34 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 37
    ... into account). of EUR 37.7 million), the conversion of part of the convertible bond and the generation of free cash ï¬,ow. The net debt to equity ratio continued to improve, decreasing from 74.0% at the end of 2006 to 61.0% at the end of 2007. At the end of 2007, Delhaize Group had total annual...

  • Page 38
    ... position through competitive pricing, convenient neighborhood locations and excellent product quality and variety. Strategy Delhaize Group focuses on operating supermarkets on the East Coast of the United States, from Maine to Florida. All the stores have a strong focus on a large variety in food...

  • Page 39
    ... to serve its diverse Floridian customer base. 2008 Outlook for Open 50-55 new stores and remodel 150 Roll-out prepared meal program, On the Go Bistro Introduce Guiding Stars at Food Lion Expand three-tier private label program Renew four Food Lion markets DELHAIZE GROUP / ANNUAL REPORT 2007 37

  • Page 40
    ... KY VA NC SC GA FL NUMBER OF STORES (DECEMBER 31, 2007) Maine (ME) New Hampshire (NH) Vermont (VT) Massachusetts (MA) New York (NY) Pennsylvania (PA) Delaware (DE) Maryland (MD) Virginia (VA) West Virgia (WV) Kentucky (KY) Tennessee (TN) North Carolina (NC) South Carolina (SC) Georgia (GA...

  • Page 41
    ... SERVICE, COMPETITIVE PRICING AND A CONVENIENT LOCATION AND STORE LAYOUT Performance In 2007, revenues of Delhaize Group's U.S. companies grew by 5.1% to USD 18.2 billion (EUR 13.3 billion). Comparable store sales increased by 3.8%. Sales were strong at Food Lion and Hannaford throughout the year...

  • Page 42
    ... 140 2,000 440 3,600 12,000 - 18,000 7,000 Highlights Strengthened price focus Added 27 stores for a total of 738 Continued integration of Cash Fresh Completed sale of Di beauty and body Care stores 2007 Market In 2007, the Belgian real GDP grew by 2.6%, compared to 2.9% growth in 20061. The...

  • Page 43
    ... It extended the range of its private label assortment, especially in the Finish conversion of Cash Fresh stores to Delhaize banners Continue second phase of distribution center expansion Start execution of "Excel 2008-2010" plan Open between 50 and 55 stores DELHAIZE GROUP / ANNUAL REPORT 2007 41

  • Page 44
    ... increase is the result of high comparable store sales growth and store network expansion leading to an increase in market share from 12.8% in 2006 to 13.7% in 2007 (source: AC Nielsen). 1 Source: General Secretariat of National Statistical Service of Greece 42 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 45
    ...1,173 Alfa-Beta continued to extend its product range, including new private label items. It increased its service offering, supported a competitive price policy and executed a dynamic remodeling and store opening program. The company continued to invest in store and supply chain efficiency. Alfa...

  • Page 46
    ...' buying power. Strategy Lion Super Indo (51% owned by Delhaize Group) and Mega Image focus on urban areas with a supermarket concept comprising fresh products, variety, proximity and low prices. In these markets, Delhaize Group fosters local management expertise offering training and support from...

  • Page 47
    ... sales growth and continued network expansion in both countries. Product assortments continued to be extended and innovated. In 2007, both Mega Image and Lion Super Indo moved to new distribution facilities to increase efficiency and service levels to the stores. Delhaize Group's Emerging Markets...

  • Page 48
    ... of health policy and administration at the School of Public Health Doctor of Medicine, MA in Public Health Elected 2003 BARON VA NSTEENKISTE ( 1947) CEO of Recticel Chairman of Spector Photo Group and Telindus Board member of Sioen, Ter Beke Vleeswaren, Companie du Bois Sauvage, Fortis Bank Former...

  • Page 49
    ...in 1977 MICHEL EEC KH OUT (1949) EVP Delhaize Group and Chief Information Officer (until June 30, 2007) EVP Delhaize Group and CEO Delhaize Belgium (as of July 1, 2007) Master in Economics, Executive Master in General Management Joined Delhaize Group in 1978 NICOLAS HO LLAND ERS (1962) EVP of Human...

  • Page 50
    ... of the Belgian Company Code, the Belgian Code on Corporate Governance and the rules of the New York Stock Exchange (NYSE). The Board made its determination based on information furnished by all directors regarding their relationships with Delhaize Group. The shareholders also have determined...

  • Page 51
    ... by Mr. Cornélis, he qualifies as independent under all these criteria. The Board will propose at the Ordinary General Meeting of May 22, 2008 that the shareholders acknowledge that Mr. Cornélis is independent within the meaning of the Belgian Company Code. DELHAIZE GROUP / ANNUAL REPORT 2007 49

  • Page 52
    ... for their service as director of the Company. The amount of the remuneration granted for fiscal year 2007 individually to directors of the Company is described in Note 38 to the Financial Statements, "Related Party Transactions", page 102. Delhaize Group has not extended credit, arranged for...

  • Page 53
    ...of the Executive Management in 2007 is described in Note 38 to the Financial Statements, "Related Party Transactions" (page 102). The Executive Managers also participate in the equity-linked component of the Company's long-term incentive program. The aggregate numbers of Delhaize Group shares, stock...

  • Page 54
    ... 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 to sell the securities concerned to a non-related party. Delhaize Group is not aware of the existence of any shareholders' agreement with respect...

  • Page 55
    ...4.5% 4.5% Including: Alliance Capital Management L.P. (U.S.)(1) Axa Rosenberg (United Kingdom)(1) (1) Held for third parties account. (2) Situation as of June 1, 2006, notified to the Company on September 6, 2007. 3,193,898 1,545,356 3.0% 1.5% 3.0% 1.5% DELHAIZE GROUP / ANNUAL REPORT 2007 53

  • Page 56
    ... applicable to the members of the Board and the Executive Management in addition to the requirements of the conï¬,icts of interest policy in the Company's Code of Business Conduct and Ethics. The Company's Related Party Transactions Policy is attached as Exhibit G to the Company's Corporate...

  • Page 57
    ... right to subscribe to new ordinary shares of the Company. They also received stock options issued by the Board of Directors under the Stock Option Plans 2001-2007, granting to the beneficiaries the right to acquire ordinary shares of the Company. Management associates of U.S. operating companies...

  • Page 58
    ... to exchange rates on its revenues in U.S. dollars. INTEREST RATE RISK Delhaize Group is exposed to interest rate risk due to working capital financing and the overall financing strategy. Daily working capital requirements are typically financed with operational cash ï¬,ow and through the use of...

  • Page 59
    ... of Food Lion, Hannaford and Kash n' Karry, and a post-employment benefit at AlfaBeta. In total, approximately 20% of Delhaize Group's associates was covered by defined benefit plans at the end of 2007. When the assets of a defined benefit plan fall short of the obligations, the Group bears an...

  • Page 60
    ... Group's operations, affecting sales and profitability. Delhaize Group has business continuity plans in place to take the necessary measures to reduce the negative impact from IT failures on its operations. EXPANSION RISK Delhaize Group's ability to open new stores is dependent on purchasing...

  • Page 61
    ... in excess of its existing reserves. Self-insurance reserves of EUR 110.9 million are included as liabilities on the balance sheet. More information on self-insurance can be found in Note 23 to the Financial Statements, "Self Insurance Provision" (p. 89). DELHAIZE GROUP / ANNUAL REPORT 2007 59

  • Page 62
    Financials 60 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 63
    ... Events 42. List of Consolidated and Associated Companies 106 Supplementary Information 108 Historical Financial Overview 108 Reconciliation of IFRS to US GAAP 109 Report of the Statutory Auditor 110 Summary Statutory Accounts of Delhaize Group SA DELHAIZE GROUP / ANNUAL REPORT 2007 61

  • Page 64
    ...125.0 12.3 5.5 1.2 8.3 Total non-current assets 6,624.9 6,872.8 7,440.6 Inventories Receivables Income tax receivables Investment in securities Other financial assets Derivative instruments Prepaid expenses Other current assets Cash and cash equivalents Assets classified as held for sale 13 14...

  • Page 65
    ...41.7 75.1 1,504.4 384.0 99.6 51.2 0.1 658.3 35.8 52.5 79.5 1,498.3 415.9 110.3 - 25 5 375.7 118.2 - Total current liabilities 2,220.7 2,476.0 2,850.7 Total liabilities 5,145.9 5,734.0 6,657.8 Total liabilities and equity 8,821.9 9,295.4 10,253.9 DELHAIZE GROUP / ANNUAL REPORT 2007 63

  • Page 66
    ... gain (loss) on securities held for sale, net of tax Actuarial gain (loss) on defined benefit plans, net of tax Exchange differences gain (loss) on translation of foreign operations Net income (expense) recognized directly in equity Net profit Total recognized income and expense for the period...

  • Page 67
    ... Impairment - continuing operations Impairment - discontinued operations Provisions for losses on accounts receivable and inventory obsolescence Share-based compensation Income taxes Finance costs Income from investments Other non-cash items 410.1 14.4 475.7 0.2 15.1 (1.4) 11.4 22.1 203.0 349.9 (37...

  • Page 68
    ...Full Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Revenues Gross profit Gross margin Selling, general and administrative expenses as a percentage of revenues Operating profit Operating margin Net profit from continuing operations Group share in net profit Group share in net profit per share...

  • Page 69
    ...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, 2007 as presented in this annual report were...

  • Page 70
    ... sale within 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...

  • Page 71
    ...hedged risk. Associated finance charges, including premiums and discounts are amortized or accreted to finance costs using the effective interest method and are added to or subtracted from the carrying amount of the instrument. Issuance, purchases and sales of financial liabilities are accounted for...

  • Page 72
    ...when the gift card or gift certificate is redeemed by the retail customer. 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...

  • Page 73
    ... January 1, 2007 and introduces new requirements to enhance disclosures on financial instruments. IFRS 7 aims at greater transparency, mainly with regard to the risk that entities run from the use of financial instruments. 3. Business Acquisitions In 2005, Delhaize Group acquired 100% of Cash Fresh...

  • Page 74
    ... information for 2007, 2006, and 2005 is as follows: Year ended December 31, 2007 (in millions of EUR) United States Belgium(2) Greece Emerging Markets(3) Corporate (Unallocated) Total Revenues(1) Cost of sales Gross profit Gross margin Other operating income Selling, general and administrative...

  • Page 75
    ... and income tax related liabilities. Year ended December 31, 2005 (in millions of EUR) United States Belgium(2) Greece Emerging Markets(3) Corporate (Unallocated) Total Revenues(1) Cost of sales Gross profit Gross margin Other operating income Selling, general and administrative expenses Other...

  • Page 76
    ...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 2007, 2006 and 2005...

  • Page 77
    ..., 2006 2005 Food Lion Hannaford United States 175.6 146.7 322.3 196.2 164.0 360.2 219.0 183.1 402.1 Amortization expense was charged to earnings as follows: (in millions of EUR) 2007 2006 2005 Selling, general and administrative expenses Result from discontinued operations Total amortization...

  • Page 78
    ...Finance Leases Total Property, Plant and Equipment Cost at January 1, 2007 Additions Sales and disposals Transfer to/from other accounts Currency translation effect Divestitures Balance at December 31, 2007 Accumulated depreciation at January 1, 2007... 3,587.7 76 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 79
    ... Affiliated and Franchised Stores Owned by their Operators or Directly Leased by their Operators from a Third Party Total United States Belgium Greece Emerging Markets Total 135 142 44 4 325 694 26 720 741 209 115 74 1,139 361 361 1,570 738 159 78 2,545 DELHAIZE GROUP / ANNUAL REPORT 2007...

  • Page 80
    ... related to the sale of Delvita and that will be released in three equal annual installments, starting in 2008. 13. Inventories No inventory has been written down at December 31, 2007, 2006 or 2005, and no previous write-downs were reversed in 2007, 2006 or 2005. 78 DELHAIZE GROUP / ANNUAL REPORT...

  • Page 81
    ... of warrants issued under the Delhaize Group 2002 Stock Incentive Plan, the Company may have to issue new ordinary shares, to which payment in 2008 of the 2007 dividend is entitled, between the date of adoption of the annual accounts by the Board of Directors and the date of their approval by the...

  • Page 82
    ...,062 Balances at December 31, 2005 Net income (expense) recognized directly in equity Net profit Total recognized income and expense for the period Capital increases 1,751,862 Treasury shares purchased Treasury shares sold upon exercise of employee stock options Excess tax benefit on employee stock...

  • Page 83
    ... the date falling seven business days prior to April 30, 2009, unless previously redeemed, converted or purchased and cancelled. The equity component of the convertible bonds credited to share premium was EUR 19.0 million, net of tax of EUR 9.8 million. DELHAIZE GROUP / ANNUAL REPORT 2007 81

  • Page 84
    ... December 15, 2006 and November 24, 2007 in order to satisfy exercises of stock options held by management of its non-U.S. operating companies. This credit institution made its decisions to purchase Delhaize Group shares 82 DELHAIZE GROUP / ANNUAL REPORT 2007 pursuant to the guidelines set forth in...

  • Page 85
    ... arrangements 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...

  • Page 86
    ...Delhaize Group's long-term debt are denominated are as follows: (in millions of EUR) 2007 December 31, 2006 2005 U.S. dollar Euro Total 1,059.7 960.9 2,020.6 1,719.7 631.7 2,351.4 2,411.5 793.2 3,204.7 Principal payments (premiums and discounts not taken into account) and related interest rates...

  • Page 87
    ... of consolidated earnings before interest, taxes, depreciation and amortization for the current and prior year, unless the Group maintains a minimum credit rating. At December 31, 2007, 2006 and 2005, Delhaize Group was in compliance with all such covenants. DELHAIZE GROUP / ANNUAL REPORT 2007 85

  • Page 88
    ... currency swaps. Changes in fair value of these swaps are recorded in finance costs or investment income in the income statement. In November 2006, Delhaize Group entered into foreign exchange forward contracts (the "Forward Contracts") to purchase on January 30, February 21 and March 7, 2007, CZK...

  • Page 89
    ... fair value on the balance sheet with changes in fair value recorded in the income statement as finance costs. The amounts of (gain) or loss included in the income statement are as follows: December 31, 2006 In the second quarter of 2007, Delhaize Group entered into interest rate swap arrangements...

  • Page 90
    ... be affected by changes in the economic conditions in the areas where closed stores are located. Other operating expenses Interest expense included in "finance costs" Results from discontinued operations Total 8.0 4.5 1.1 13.6 2.8 7.7 2.3 12.8 9.5 9.4 1.9 20.8 88 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 91
    ... 17.3 million related to forfeited accounts in the retirement and profit-sharing plans of Food Lion and Kash n' Karry. Defined Benefit Plans Approximately 20% of Delhaize Group employees are covered by defined benefit plans. Delhaize Belgium has a contributory defined benefit pension plan covering...

  • Page 92
    ... plans 9.4 Present value of unfunded obligations 12.5 Unrecognized past service (cost) benefit (0.8) Net liability 21.1 Weighted average assumptions used to determine benefit obligations: Discount rate Rate of compensation increase Rate of price inflation (in millions of EUR) United States Plans...

  • Page 93
    ... the United States Total Balance sheet reconciliation: Balance sheet liability at January 1 Pension expense recognized in the income statement in the year Amounts recognized in the statement of recognized income and expense in the year Employer contributions made in the year Benefits paid directly...

  • Page 94
    ...in the balance sheet: Present value of unfunded obligations 3.9 Unrecognized past service benefit 0.4 Net liability 4.3 Weighted-average actuarial assumptions used to determine benefit obligations: Discount rate 6.00% Current health care cost trend 8.55% Ultimate health care cost trend 5.00% Year of...

  • Page 95
    ... current year Recognition in current tax of previously unrecognized tax losses and tax credits Deferred tax Recognition of deferred tax on previously unrecognized tax losses and tax credits Deferred tax expense relating to changes in tax rates or the imposition of new taxes Total income tax expense...

  • Page 96
    ...Accelerated Tax Depreciation Closed Store Provision Leases Pension Other Total Net deferred tax liabilities at January 1, 2005 Charge (credit) to equity for the year Charge (credit) to profit or loss for the year Effect of change in tax rates Acquisition Divestiture Transfers to/from other accounts...

  • Page 97
    ... numbers of shares and earnings per share) 2007 2006 2005 Net profit from continuing operations Net profit from continuing operations attribuable to minority interests Group share in net profit from continuing operations Interest expense on convertible bond, net of tax Group share in net profit...

  • Page 98
    ...a new share. The stock option plans and the restricted stock unit plans are based on existing shares. The remuneration policy of Delhaize Group can be found as exhibit E to the Delhaize Group's Corporate Governance Charter available on the Company's website (www.delhaizegroup.com). Prior to Delhaize...

  • Page 99
    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, 2007 Exercise Price Number of Beneficiaries (at the ...

  • Page 100
    ... of Delhaize Group's nonvested options for non U.S. stock option and warrant plans as of December 31, 2007, and changes during the year ended December 31, 2007, is presented below: Shares Weighted Average Grant-Date Fair Value (in EUR) Expected dividend yield (%) Expected volatility (%) Risk-free...

  • Page 101
    ... 2.3 39.7 3.7 4.1 A summary of the status of Delhaize Group's non-vested options for the U.S. 2002 Stock Incentive Plan as of December 31, 2007, and changes during the year ended December 31, 2007, is presented below. Shares Weighted Average Grant-Date Fair Value (in USD) Expected volatility was...

  • Page 102
    ... the sale of idle real estate by Hannaford. Other primarily includes in-store advertising and litigation settlement income. The increase in 2007 mainly represents the different sales transactions of Cash Fresh stores to independent owners for EUR 7.9 million. 100 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 103
    ...36. Net Foreign Exchange Losses/(Gains) The exchange differences charged (credited) to the income statement are as follows: (in millions of EUR) 2007 2006 2005 Cost of sales Selling, general and administrative expenses Finance costs Income from investments Result from discontinued operations Total...

  • Page 104
    ... post-employment benefit plans for the benefit of employees of the Group. Payments made to these plans and receivables from and payables to these plans are disclosed in Note 24. The Company's Remuneration Policy for Directors and the Executive Management can be found as Exhibit E to the Corporate...

  • Page 105
    ...corporate pension plans, which vary regionally, including a defined benefit group insurance plan for European members, that is contributory and based on the individual's career length with the Company. U.S. members of Executive Management participate in profit sharing plans and defined benefit plans...

  • Page 106
    ... 19 Rudna, Czech Republic 950, East Paces Ferry Road, Atlanta, GA 30326, U.S.A. Rue Osseghemstraat 53, 1080 Brussels, Belgium Za Panskou zahradou 1018, 252 19 Rudna, Czech Republic Slovakia Everdongenlaan 21, 2300 Turnhout, Belgium 2110 Executive Drive, Salisbury, NC 28145, U.S.A. Everdongenlaan 21...

  • Page 107
    ...is accounted for as a joint venture because Delhaize Group shares control with another party. Delhaize Group's interest in assets and liabilities of Super Indo is as follows: Cash flows of Super Indo included in Delhaize Group's cash flow statements are as follows: (in millions of EUR) 2007 2006...

  • Page 108
    ...929 103,786 (1) Full-time equivalent. (2) Includes 492 associates working in company-operated Di stores sold in 2007. Organic Revenue Growth Reconciliation (in millions of EUR) 2007 2006 % Revenues 18,957.2 19,225.2 Effect of exchange rates 1,214.7 Revenues at identical exchange rates 20,171.9 19...

  • Page 109
    ... share amounts) At Actual Rates 2007 Effect of Exchange Rates At Identical Rates 2006 At Actual Rates 2007/2006 At Actual Rates At Identical Rates Revenues Operating profit Net profit from continuing operations Group share in net profit Basic earnings per share Diluted earnings per share Free cash...

  • Page 110
    ...millions of EUR) Revenues Operating profit Net financial expenses Income tax expense Net profit from continuing operations 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...

  • Page 111
    ... ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 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 112
    ... is ready for use. Internally developed software is depreciated over a period of 5 years. 3. Tangible Fixed Assets Tangible fixed assets are recorded at purchase price, at cost price or at agreed contribution value. Net earnings per share 1,43 1.54 0.86 110 DELHAIZE GROUP / ANNUAL REPORT 2007

  • Page 113
    ... issued under the Delhaize Group 2002 Stock Incentive Plan, the Company might have to issue new ordinary shares, to which coupon no. 46 entitling to the payment of the 2007 dividend is attached, between the date of adoption of the annual accounts by the Board of Directors and the date of their...

  • Page 114
    ... (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 115
    ... New York Shareholder Relations P.O. Box 11258 Church Street Station New York, N.Y. 10286-1258 U.S.A. Toll free telephone number for U.S. callers: 1-877-853-2191 Non-U.S. callers can call: 1- 212 815 3700 e-mail: [email protected] website: www.stockbny.com DELHAIZE GROUP / ANNUAL REPORT 2007...

  • Page 116
    ... 76 Delhaize Group Investor Relations Department P.O. Box 1330 Salisbury, NC 28145-1330 United States Tel.: +1 704 633 8250, ext. 2529 Fax.: +1 704 645 2050 Questions can be sent to [email protected]. Information regarding Delhaize Group (press releases, annual reports, share price,...) can...

  • Page 117
    ... 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 2007 115

  • Page 118
    ... days Accounts payable divided by cost of sales and selling, general and administrative expenses less employee benefit expense, multiplied by 365. Inventories at year-end divided by cost of product sold, net of vendor allowances and cash discounts, multiplied by 365. Net debt Non-current financial...

  • Page 119
    Operat ions United States FOOD LION P .O. Box 1330, 2110 Execut ive Drive Salisbury - NC 28145-1330 U.S.A. Tel: +1 704 633 82 50 w w w.f oodlion.com Company Inf ormat ion Greece ALFA-BETA VASSILOPOULOS 81, Spat on Ave. Gerakas At t ica Greece 153 44 Tel: +30 210 66 08 000 Fax: +30 ...

  • Page 120
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