Food Lion 2008 Annual Report Download

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Group strength Local expertise
annual report 2008

Table of contents

  • Page 1
    Group strength Local expertise annual report 2008

  • Page 2
    ...19 billion in revenues and net profit of EUR 467 million. Delhaize Group employs approximately 141 000 associates. Delhaize Group has leading positions in food retailing in key markets. Our operating companies have acquired these leading positions through a distinct go-to-market strategy. The Group...

  • Page 3
    ...United States - 68.8% Belgium - 23.2% Results Revenues Operating profit Net profit from continuing operations Net profit (Group share) Free cash ï¬,ow (1) 27 980 1 330 713 687 221 Greece - 7.0% Rest of the World - 1.0% Financial position Total assets Total equity Net debt(1) Enterprise value...

  • Page 4
    ... exchange rates. This increase is the result of revenue growth, a continued strong gross margin and successful cost savings initiatives. 2005 2006 2007 2008 Group Share in Net Profit (in millions of EUR) 365 352 410 467 Group Share in Net Profit 2005 2006 2007 2008 Group Share in Net...

  • Page 5
    ... in 2008 28 - FINANCIAL REVIEW (1) 32 - BUSINESS REVIEW (1) 32 > UNITED STATES 36 > BELGIUM 38 > GREECE 40 > REST OF THE WORLD p08 Generate Profitable Revenue Growth 44 Corporate Governance(1) 58 Risk Factors(1) 62 Financial Statements 64 - CONSOLIDATED BALANCE SHEETS(1) 66 - CONSOLIDATED INCOME...

  • Page 6
    ... Food Lion launched a new prototype for its innovative Bottom Dollar Food brand and just a few months ago, Delhaize Group opened in Belgium a totally new store concept called Red Market, combining high quality products, ease of shopping, helpful associates and very low prices. In 2008, our store...

  • Page 7
    ... "Best-in-Class" in this domain. Delhaize Belgium will open a new distribution center for fresh products in 2009 and our U.S. operating companies will start to work on the first phase of the project to integrate the existing supply chain organizations into one single master network resulting in an...

  • Page 8
    ...of the U.S. Performance Number of Stores 1 570 1 594 1 549 Revenues (in millions of USD) 18 172 19 239 2008 2008 4 407 Brand positions 2006 2007 2008 2006 17 293 2007 › 1 319 stores in 11 states in the South east and Mid-Atlantic Low price/low cost supermarket chain Conveniently sized...

  • Page 9
    ... Letter from the Chairman and the CEO > Overview of Operating Companies Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information with Local Identity ›› Greece Strategy In Greece, Delhaize Group owns 65.2% of Alfa-Beta, the country...

  • Page 10
    Our Strategy 6 - Delhaize Group - Annual Report 2008

  • Page 11
    ... in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen A SUSTAINABLE GROWTH STRATEGY IN A CHALLENGING ENVIRONMENT Delhaize Group creates value...

  • Page 12
    8 - Delhaize Group - Annual Report 2008

  • Page 13
    ... Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen Generate Profitable Revenue Growth Delhaize Group generates...

  • Page 14
    ... continues its success: all Food Lion markets renewed in 2007 reported comparable store sales growth above the Company's average. During 2009, Food Lion has plans to customize its web-site content towards segment preferences. Attractive Fresh Products Fresh products represent an important part of...

  • Page 15
    ...one of our stores. In early 2008, Hannaford was celebrated as the largest certified-organic supermarket in New England, offering more than 3 000 organic and natural products, including the Nature's Place private brand. Hannaford's Close to Home program supports local farmers and producers and helps...

  • Page 16
    ... promotions. At Food Lion, price investments started in the summer of 2008. To help customers save money in tough economic times, Food Lion launched its Meals for Less program, a money saving meal offer, where shoppers can get dinner for under USD 10. In-store displays with all ingredients were used...

  • Page 17
    ... 2008, revenues from both Healthy Accents, our U.S. line for health and beauty products, and Home 360, the general merchandise line, increased 10% and 18% respectively. Based on the experience of our U.S. operating companies, Delhaize Belgium started the re-launch of its proven private brand program...

  • Page 18
    ... renewed reported comparable store sales above the Company's average. In 2009, Food Lion will renew two additional markets: Daytona in Florida and Colombia in South Carolina. In 2008 in Belgium, Delhaize converted 10 Cash Fresh stores into Delhaize banners, and Alfa-Beta and Mega Image, respectively...

  • Page 19
    ... that the stores want to help the customer enjoy life thanks to the time saved while shopping at Red Market. "Bottom Dollar Food redefines the discount grocer model by offering quality products at great prices, including national brands, private brand products, fresh produce and quality meats in...

  • Page 20
    16 - Delhaize Group - Annual Report 2008

  • Page 21
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen Pursue Best-In-Class-Execution In ...

  • Page 22
    ... and the websites of Food Lion (www.foodlion.com) and Sweetbay Supermarket (www.sweetbaysupermarket. com) were redesigned and enhanced. Personal Assistant Technology allows the customer to view recipes and receive product information and promotions. 18 - Delhaize Group - Annual Report 2008

  • Page 23
    ... real-time stock positions. Data Analysis During 2008, price optimization systems continued to deliver great results. This software is now used at Food Lion, Hannaford and Sweetbay. Food Lion, Hannaford and Sweetbay are all using software systems to plan assortments and store planograms. Delhaize...

  • Page 24
    ...companies leverage their combined skills in both direct and indirect procurement. Our pan-European private brand lines 365 and CARE are good examples of direct procurement work. Vendor Collaboration Philippe De Bock, Vice President Learning, Organizational Development & Talent Management - Delhaize...

  • Page 25
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen Cost Management Improving cost ef...

  • Page 26
    22 - Delhaize Group - Annual Report 2008

  • Page 27
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen Operate as a Responsible Corporate...

  • Page 28
    ... new issues and how best to address them in our strategy. For more info, see also www.delhaizegroup.com Safe and healthy, quality foods at affordable prices Health and wellness of our customers and associates Associate development Energy conservation 24 - Delhaize Group - Annual Report 2008

  • Page 29
    ... Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen First Corporate Responsibility Report in 2008 In 2008, Delhaize...

  • Page 30
    Our Activities in 2008 26 - Delhaize Group - Annual Report 2008

  • Page 31
    ... › Increased revenues by 5.6% at identical exchange rates › Posted strong operating margin of 4.8% › Proposes gross dividend of EUR 1.48 per share, 2.8% higher than last year BUSINESS REVIEW United States › Added 24 stores for a total of 1 594 › Completed four market renewals at Food Lion...

  • Page 32
    ...2007. Excluding the divestiture of the beauty and body care business Di in 2007 and the conversion of Cash Fresh stores into Delhaize banners, revenues would have grown by 2.9% in 2008. Comparable store sales growth was 2.2%. Market share declined by 54 basis points to 25.1% (source: AC Nielsen) but...

  • Page 33
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 > Financial Review > Business Review > United States > Belgium > Greece > Rest of the World Corporate Governance Risk Factors Financial Statements Shareholder Information and Hannaford, primarily through higher private brand sales...

  • Page 34
    ... 2.4 2008 2006 2007 2.2 Net Debt to Equity (in %) 74 Balance Sheet At the end of 2008, Delhaize Group's total assets amounted to EUR 10 billion, 9.9% higher than at the end of 2007 mainly as a result of our investments in property, plant and equipment. At the end of 2008, Delhaize Group's sales...

  • Page 35
    ... Our Strategy Our Activities in 2008 > Financial Review > Business Review > United States > Belgium > Greece > Rest of the World Corporate Governance Risk Factors Financial Statements Shareholder Information result of the realized net profit of the period. The number of Delhaize Group shares...

  • Page 36
    ... and characteristics, Delhaize Group operates its U.S. stores through different operating companies (Food Lion LLC, Hannaford and Sweetbay) and under different banners. 2008 Number of stores Revenues(1) Operating profit(1) Operating margin Capital expenditures(1) Number of associates (1) 2007...

  • Page 37
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 > Financial Review > Business Review > United States > Belgium > Greece > Rest of the World Corporate Governance Risk Factors Financial Statements Shareholder Information Market In 2008, the United States posted real GDP growth of...

  • Page 38
    ... companies was a result of the positive impact of initiatives around price and promotions, market segmentation and renewals, assortment changes and customer guidance on healthy and nutritious food products. Gross margin increased by 31 basis points to 27.7%, due to a combination of sales mix...

  • Page 39
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 > Financial Review > Business Review > United States > Belgium > Greece > Rest of the World Corporate Governance Risk Factors Financial Statements Shareholder Information Store Network VT NH MA MA ME • • NY PA TN...

  • Page 40
    ... pet food stores 440 3 600 Average surface (sq.m.) Number of products 1 912 19 500 1 233 13 000 1 136 12 000- 18 000 500 8 000 145 2 000 Store Network 2008 Number of stores Revenues(1) Operating profit(1) Operating margin Capital expenditures(1) Number of associates (1) Strategy 2007 Change...

  • Page 41
    ...Financial Review > Business Review > United States > Belgium > Greece > Rest of the World Corporate Governance Risk Factors Financial Statements Shareholder Information Store Network In 2008, Delhaize Belgium added a net of 37 stores to its network. This included 2 company-operated supermarkets...

  • Page 42
    ... store 10 Cash & carry stores 2 Low price supermarket Surface range (sq.m.) Number of products 700-3 500 13 500 200-350 4 200 500-700 6 100 1 450-3 550 8 500 900-1 000 3 000 2008 Number of stores Revenues(1) Operating profit(1) Operating margin Capital expenditures(1) Number of associates...

  • Page 43
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 > Financial Review > Business Review > United States > Belgium > Greece > Rest of the World Corporate Governance Risk Factors Financial Statements Shareholder Information Market In 2008, the real gross domestic product of Greece ...

  • Page 44
    ... 800 6 500 PLOIESTI BUCHAREST CONSTANZA 2008 2007 22 1 247 Change +18 +50.5% Mega Image's network is concentrated in the Romanian capital of Bucharest, one of the most densely populated areas in Europe. Number of stores Number of associates 40 1 877 40 - Delhaize Group - Annual Report 2008

  • Page 45
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 > Financial Review > Business Review > United States > Belgium > Greece > Rest of the World Corporate Governance Risk Factors Financial Statements Shareholder Information of the World: ›› Rest Romania and Indonesia Mega Image ...

  • Page 46
    ... its supply chain. The use of radio frequency (RF) technology was stepped up during 2008 through the introduction of a new ordering system for the stores. In 2009, the Company will continue to centralize deliveries through its existing warehouses and decrease the number of direct supplier deliveries...

  • Page 47
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 > Financial Review > Business Review > United States > Belgium > Greece > Rest of the World Corporate Governance Risk Factors Financial Statements Shareholder Information › Rest of the World Segment Performance Revenues (in ...

  • Page 48
    ...Engineer Elected 2008 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 Corp., The Hannover Insurance Group, IDEXX Laboratories, Tupperware Brands Corp. Bachelor...

  • Page 49
    ... at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information Executive Committee Pierre-Olivier Beckers (1960) President and CEO Delhaize Group Manager of the Year 2000 (Trends/Tendances) Master in Applied Economics, MBA Joined...

  • 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, which together with applicable law, the securities exchange...

  • Page 51
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information Activity Report of the Board in 2008 In 2008, the Board of Directors met seven times. All directors were present at all of those meetings with the ...

  • Page 52
    ..., 2009, Mr. Smits will resign as member of the Audit Committee because he will no longer be independent under the Belgian Company Code from that date (see "The Board of Directors - Independence of Directors on page 47). The Board of Directors has determined 48 - Delhaize Group - Annual Report 2008

  • Page 53
    .... Remuneration Policy applied during 2008 During the reported year, the Company applied the remuneration policy for directors and Executive Management as it can be found in Exhibit E of the Corporate Governance Charter posted on the Company's website at www.delhaizegroup.com. Delhaize Group...

  • Page 54
    ... variable compensation for both the CEO and other members of Executive Management. These charts reï¬,ect base salary, annual bonus and performance cash components granted in 2008. The tables used in the following sections of this report are based on the actual payments received during the year and...

  • Page 55
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information 3.3 The following graphs illustrate the split of the variable remuneration paid per component for the CEO and other members of Executive Management. ...

  • Page 56
    ...options related to the Company's American Depositary Shares traded on the New York Stock Exchange. The options granted in May 2008 under the Delhaize Group 2002 Stock Incentive Plan for executives of the Group's U.S. operating companies vest over a three-year period following the grant date. Options...

  • Page 57
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information actual payout is calculated. The cash payment occurs in the year following the end of the threeyear period. For example, the amounts paid in 2008 relate...

  • Page 58
    ... In 2008, the Board of Directors adopted share ownership guidelines based on the recommendation of the RNC. Under these guidelines and during their active employment, the Chief Executive Officer and the other members of Executive Management are expected to acquire and maintain ownership of Delhaize...

  • Page 59
    ...and ADRs of Delhaize Group SA combined, which represented approximately 0.39% of the total number of outstanding shares of the Company as of that date. On December 31, 2008, the Company's Executive Management owned as a group 657 604 stock options, warrants and restricted stock units representing an...

  • Page 60
    ...the Belgian Code on Corporate Governance, the Company adopted a Related Party Transactions Policy containing requirements 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...

  • Page 61
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information to the Board as a whole. Consequently, the Board of Directors reviewed the continued appropriateness of Board membership each time a director qualified...

  • Page 62
    ...based on market quotes from banks. Delhaize Group's interest rate risk management objective is to achieve an optimal balance between borrowing cost and management of the effect of interest rate volatility on earnings and cash ï¬,ows. The Group manages its debt and overall financing strategies using...

  • Page 63
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information December 31, 2008 (in millions of EUR) Currency Reference Interest Rate Shift Impact on Net Profit Impact on Equity EUR USD Total Currency 2.89% 1....

  • Page 64
    ... process information related to customer credit and debit card transactions, see Note 40 "Contingencies" to the Financial Statements. Expansion Risk Delhaize Group's ability to open new stores is dependent on purchasing or entering into leases on commercially reasonable terms for properties that...

  • Page 65
    ... business, see Note 40 "Contingencies" to the Financial Statements. insurance, the Group considers its success in managing risk through safety and other internal programs and the cost of external insurance coverage. External insurance is used when available at a reasonable cost. The associated...

  • Page 66
    Financial Statements 62 - Delhaize Group - Annual Report 2008

  • Page 67
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder Information Consolidated Balance Sheets Consolidated Income Statements Consolidated Statements of Recognized Income and Expense Consolidated Statements of Cash ...

  • Page 68
    ... Statements of Cash Flows Notes to the Financial Statements Consolidated Balance Sheets Consolidated Assets (in millions of EUR) Note 2008 2007 2006 Goodwill Intangible assets Property, plant and equipment Investment property Investment in securities Other financial assets Deferred tax...

  • Page 69
    Supplementary Information Historical Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA Consolidated Liabilities and Equity (in millions of EUR) Note 2008 2007 2006 Share capital Share premium Treasury shares...

  • Page 70
    ... Balance Sheets Consolidated Income Statements Consolidated Statements of Recognized Income and Expense Consolidated Statements of Cash Flows Notes to the Financial Statements Consolidated Income Statements (in millions of EUR) Note 2008 2007(1) 2006(1) Revenues Cost of sales Gross profit...

  • Page 71
    ... Information Historical Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA Consolidated Statements of Cash Flows (in millions of EUR) 2008 2007 2006 Operating activities Group share in net profit Net profit...

  • Page 72
    ... pet products. The Company is a limited liability company incorporated and domiciled in Belgium, with its shares listed on Euronext Brussels and on the New York Stock Exchange ("NYSE"). The consolidated financial statements for the year ended December 31, 2008 as presented in this annual report were...

  • Page 73
    ... Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA Business Combinations and Goodwill Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the fair value...

  • Page 74
    ... accumulated depreciation and accumulated impairment losses, if any, i.e. applying the same accounting policies as for property, plant and equipment. The fair values, which reflect the market conditions at the balance sheet date, are disclosed in Note 10. 70 - Delhaize Group - Annual Report 2008

  • Page 75
    ... income statement on a systematic basis over the expected useful life of the related asset. Inventories Inventories are valued at the lower of cost on a weighted average cost basis and net realizable value. Costs of inventory include all costs incurred to bring each product to its present location...

  • Page 76
    ... close of business on the balance sheet date for financial liabilities actively traded in organized financial markets. • Financial liabilities measured at amortized costs are measured at amortized cost after initial recognition. Amortized cost is computed using the effective interest method less...

  • Page 77
    ...: Delhaize Group's ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects. • Treasury shares: Shares of the Group purchased by the Group or companies...

  • Page 78
    ... service costs. The defined benefit obligation is calculated regularly by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate...

  • Page 79
    ... used. • For certain products or services, such as the sale of lottery tickets, third-party prepaid phone cards, etc., Delhaize Group acts as an agent and consequently records the amount of commission income in its net sales. • Rental income from investment property is recognized in profit...

  • Page 80
    ...fair values of financial instruments; • Note 19 - classification of leases; • Note 22 - Closed Store Provisions; • Note 23 - Self-insurance Provision; • Note 24 - Employee Benefit Plans; • Note 26 - Income Taxes; • Note 29 - Share-Based Compensation. Changes in Accounting Policies...

  • Page 81
    ... (applicable to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after July 1, 2009). While the revised IFRS 3 continues to apply the purchase accounting method, it introduces a number of changes in the accounting...

  • Page 82
    ... risk, credit risk and liquidity risk, which are evaluated by Delhaize Group's management and Board of Directors and discussed in the section "Risk Factors" in this annual report. 3. Acquisitions of subsidiary and minority interest Business combinations Acquisition of P.L.L.C. On February 14, 2008...

  • Page 83
    ... Information Historical Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA Acquisition of Plus Hellas On April 1, 2008, Delhaize Group acquired, through its subsidiary Alfa-Beta, 100% of the shares...

  • Page 84
    ... of Recognized Income and Expense Consolidated Statements of Cash Flows Notes to the Financial Statements From the date of acquisition, stores of the former La Fourmi Group have contributed EUR 6 million to the 2008 revenues of the Group and EUR - 0.2 million to the net profit of the year. If the...

  • Page 85
    ... geographical segment information for 2008, 2007 and 2006 is as follows: Year ended December 31, 2008 (in millions of EUR) United States Belgium(2) Greece Rest of the World(3) Corporate and Unallocated Total Revenues(1) Cost of sales Gross profit Gross margin Other operating income Selling, general...

  • Page 86
    ... United States Consolidated Statements of Cash Flows Rest of the World(3) Notes to the Financial Statements Corporate and Unallocated Year ended December 31, 2006 (in millions of EUR) Belgium(2) Greece Total Revenues(1) Cost of sales Gross profit Gross margin Other operating income Selling...

  • Page 87
    ... Historical Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA In 2008, 2007 and 2006, goodwill relating to the U.S. entities was tested applying discounted cash flows models to estimate the VIU and a market...

  • Page 88
    ... Recognized Income and Expense Trade Names Developed Software Consolidated Statements of Cash Flows Purchased Software Favorable Lease Rights Notes to the Financial Statements Other Total Cost at January 1, 2008 Additions Sales and disposals Acquisitions through business combinations Transfers to...

  • Page 89
    ... Payments Property under Finance Leases Total Property, Plant and Equipment Cost at January 1, 2008 Additions Sales and disposals Acquisitions through business combinations Transfers to/from other accounts Currency translation effect Amount classified as held for sale Balance at December 31, 2008...

  • Page 90
    ...EUR) 2008 December 31, 2007 2006 United States Belgium Greece Rest of the World Corporate Total property, plant and equipment 2 696 746 339 38 13 3 832 2 407 738 202 22 14 3 383 2 462 723 186 15 14 3 400 In accordance with the accounting policy stated in Note 2, Delhaize Group tests assets with...

  • Page 91
    ... Historical Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA 10. Investment Property Investment property, principally comprised of owned rental space attached to supermarket buildings and excess real estate...

  • Page 92
    ... of warrants issued under the Delhaize Group 2002 Stock Incentive Plan, the Company may have to issue new ordinary shares, to which payment in 2009 of the 2008 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 93
    ... Excess tax benefit on employee stock options and restricted shares Tax payment for restricted shares vested Share-based compensation expense Dividend declared Purchase of minority interests Balances at December 31, 2006 96 456 924 Net income (expense) recognized directly in equity Net profit Total...

  • Page 94
    ... Company's shareholders authorized the Board of Directors, in the ordinary course of business, 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...

  • Page 95
    ... Information Historical Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA Retained Earnings According to Belgian law, 5% of the statutory net income of the parent company must be transferred each year...

  • Page 96
    Consolidated Balance Sheets Consolidated Income Statements Consolidated Statements of Recognized Income and Expense Consolidated Statements of Cash Flows Notes to the Financial Statements 17. Long-term Debt Delhaize Group manages its debt and overall financing strategies using a combination of ...

  • Page 97
    ... Delhaize Group's long-term (excluding finance leases) debt are denominated are as follows: (in millions of EUR) 2008 December 31, 2007 2006 U.S. dollar Euro Total 1 112 980 2 092 1 060 961 2 021 1 719 632 2 351 The principal payments (premiums and discounts not taken into account) and related...

  • Page 98
    ... Balance Sheets Consolidated Income Statements Consolidated Statements of Recognized Income and Expense Consolidated Statements of Cash Flows Notes to the Financial Statements Collateralization The portion of Delhaize Group's long-term debt that was collateralized by mortgages and security...

  • Page 99
    ... exposure of derivative financial instruments to credit risk at the reporting date equals their carrying values at balance sheet date (i.e. EUR 58 million at December 31, 2008). The following table indicates the contractual maturities associated with derivative financial instruments at December...

  • Page 100
    ... 31, 2008. Changes in fair value of these swaps are recorded in "Finance costs" or "Income from investments" in the income statement: (in millions) Year Trade Date Year Expiration Date Amount Received from Bank at Trade Date, and to be Delivered to Bank at Expiration Date Interest Rate Foreign...

  • Page 101
    ... purchase at different dates in 2009 EUR 8 million in aggregate in exchange of RON 30 million to offset the foreign currency risk on intercompany loans to Mega Image, denominated in RON. Changes in the fair value of forward contracts are recorded in the income statement in "Finance costs" or "Income...

  • Page 102
    ... relating to closed store provisions were recorded in the income statement as follows: (in millions of EUR) 2008 2007 2006 Other operating expenses Interest expense included in "Finance costs" Results from discontinued operations Total 9 3 1 13 8 4 2 14 3 8 2 13 23. Self-insurance Provision...

  • Page 103
    ...return, which is guaranteed by an external insurance company that receives and manages the contributions. The expenses related to the plan were EUR 3 million in 2008, 2007 and 2006. • In the U.S., Delhaize Group sponsors profit-sharing retirement plans covering all employees at Food Lion and Kash...

  • Page 104
    ... balance sheet: Present value of funded obligation 101 Fair Value of plan assets (79) Deficit for funded plans 22 Present value of unfunded obligations 10 Unrecognized past service (cost) benefit Net liability 32 Weighted average assumptions used to determine Discount rate 6.01% Rate of compensation...

  • Page 105
    ... expected long-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...

  • Page 106
    ... applied in determining benefit obligation and cost, are summarized in the table below: December 31, 2008 2007 2006 Weighted-average actuarial assumptions used to determine benefit obligations: Discount rate Current health care cost trend Ultimate health care cost trend Year of ultimate trend rate...

  • Page 107
    ... in the current year 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 from continuing and discontinued operations Net profit 2008 2007 2006 702...

  • Page 108
    ... the Financial Statements The changes in net deferred tax liabilities are as follows: (in millions of EUR) Accelerated Tax Depreciation Closed Store Provision Leases Pension Other Total Net deferred tax liabilities at January 1, 2006 Charge (credit) to equity for the year Charge (credit) to profit...

  • Page 109
    ... nihil in 2008 and EUR 1 million in 2007 and 2006. 29. Share-Based Compensation Delhaize Group offers share-based incentives to certain members of management: stock option and warrant plans for associates of its non-U.S. operating companies; stock option, warrant and restricted stock unit plans for...

  • Page 110
    ... and 2002 grant years. 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, 2008 Exercise Price Number of...

  • Page 111
    ...convert their options to the new warrant plan. As of December 31, 2008, there were options outstanding to acquire 52 470 ADRs under the "Delhaize America 2000 Stock Incentive Plan", relating to certain Food Lion and Hannaford employees that decided not to convert to the 2002 plan. No new options can...

  • Page 112
    ...the Financial Statements Options and warrants granted to associates of U.S. operating companies under the various plans are as follows: Plan Effective Date of Grants Number of Shares Underlying Award Issued Number of Shares Underlying Awards Outstanding at December 31, 2008 Exercise Price Number of...

  • Page 113
    ... Information Historical Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA The following table summarizes options outstanding and options exercisable as of December 31, 2008, and the related weighted average...

  • Page 114
    ... restricted stock unit awards granted during 2008, 2007 and 2006 was USD 74.74, USD 96.30 and USD 63.04 based on the share price at the grant date, respectively. 30. Cost of Sales (in millions of EUR) 2008 2007 2006 Product cost, net of vendor allowances and cash discounts Purchasing, distribution...

  • Page 115
    ...financing costs Loss on rate lock to hedge for tender price Tender fees Total 74 14 7 4 2 101 Borrowing costs attributable to the construction or production of qualifying assets were capitalized using an average interest rate of 6.6%, 7.4% and 7.9% in 2008, 2007 and 2006, respectively. 35. Income...

  • Page 116
    ...Company and its subsidiaries) during the respective years to the Chief Executive Officer and the members of the Executive Committee, we refer to section "Corporate Governance" in this annual report. The aggregate compensation for the members of Executive Management recognized in the income statement...

  • Page 117
    ... in the income statement 6 1 2 3 1 13 7 1 4 3 2 17 7 1 3 4 1 16 (1) Short-term benefits include the Annual Bonus payable during the subsequent year for performance achieved during the respective years. (2) The members of Executive Management benefit from corporate pension plans, which vary...

  • Page 118
    Consolidated Balance Sheets Consolidated Income Statements Consolidated Statements of Recognized Income and Expense Consolidated Statements of Cash Flows Notes to the Financial Statements 42. List of Consolidated and Associated Companies A. Fully Consolidated Ownership Interest in % 2008 2007 ...

  • Page 119
    ....0 100.0 88.0 Summary Statutory Accounts of Delhaize Group SA Maascad NV Marion Real Estate Investments, LLC Martin's Food of South Burlington, Inc. Mega Doi S.R.L Mega Image S.R.L. Merelmart NV Molmart NV Octomarket NV Plain Street Properties, Inc. Points Plus Punten SA P.L.L.C. S.A. Progressive...

  • Page 120
    ... Expense Consolidated Statements of Cash Flows Notes to the Financial Statements Supplementary Information Quarterly Data (Unaudited) (in millions of EUR, except earnings per share) 2008 Full Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Revenues Gross profit Gross margin Selling, general...

  • Page 121
    Supplementary Information Historical Financial Overview Certification of Responsible Persons Report of the Statutory Auditor Summary Statutory Accounts of Delhaize Group SA Number of Stores (at year-end) 2009(1) 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 United States Belgium and G.D. ...

  • Page 122
    ... Use of Free Cash Flow in 2008 (in millions of EUR) Inflow: Free cash flow Additions to short-term loans (net) Release of escrow for funding senior notes Sale and maturity of debt securities, net of investment Settlement of derivative instruments Stock options exercised, net of buyback own shares...

  • Page 123
    ... Statutory Accounts of Delhaize Group SA Historical Financial Overview Results (in 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) 2008 2007...

  • Page 124
    ... notes. The consolidated balance sheet shows total assets of EUR 9.700 Million and a consolidated profit (group share) for the year then ended of EUR 467 Million. The board of directors of the company is responsible for the preparation of the consolidated financial statements. This responsibility...

  • Page 125
    ...valued at the exchange rate prevailing on the closing date. The resulting translation difference is written off if it is a loss and deferred if it is a gain. The exchange differences arising from financial debts pertaining to non financial assets are recognized in the income statement by application...

  • Page 126
    ... the balance sheet date, is not precisely known. They include, principally: • Pension obligations, early retirement benefits and similar benefits due to present or past employees • Taxation due on review of taxable income or tax calculations not already included in the estimated payable included...

  • Page 127
    ... issued under the Delhaize Group 2002 Stock Incentive Plan, the Company might have to issue new ordinary shares, to which coupon no. 47 entitling to the payment of the 2008 dividend is attached, between the date of adoption of the annual accounts by the Board of Directors and the date of their...

  • Page 128
    .... American Depositary Shares (ADS), each representing one ordinary share of Delhaize Group, are traded on the New York Stock Exchange under the symbol DEG. ADSs are evidenced by American Depositary Receipts (ADRs). Information on Delhaize Group's share price can be found on the websites of Delhaize...

  • Page 129
    Delhaize Group at a Glance Our Strategy Our Activities in 2008 Corporate Governance Risk Factors Financial Statements Shareholder information is June 4, 2009. The payment will be made at the registered office of the Company (rue Osseghemstraat 53, 1080 Brussels, Belgium) as well as at the ...

  • Page 130
    ... Company's website. Consultation of Documents The public documents concerning Delhaize Group can be consulted at the registered office (rue Osseghemstraat 53, 1080 Brussels - Belgium). In the United States, Delhaize Group is subject to the informational requirements of the U.S. Securities Exchange...

  • Page 131
    ... in 2008 Corporate Governance Risk Factors Financial Statements Shareholder information Information Delhaize Group Share 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 Share price (in EUR) Price: year-end average (close) highest (intraday) lowest (intraday) Annual return Delhaize Group...

  • Page 132
    ... Group share in net profit (loss) divided by average shareholders' equity. Revenues Revenues include the sale of goods and point of sale services to customers, including wholesale and affiliated customers, relating to the normal activity of the Company (the sale of groceries and pet products), net...

  • Page 133
    ... OF OPERATING COMPANIES ›› flap ›› 02 ›› 04 00 06 Our Strategy GENERATE PROFITABLE REVENUE GROWTH PURSUE BEST-IN-CLASS EXECUTION OPERATE AS A RESPONSIBLE CORPORATE CITIZEN ›› 08 ›› 16 ›› 22 Our Activities in 2008 FINANCIAL REVIEW(1) BUSINESS REVIEW (1) > UNITED STATES...

  • Page 134
    ..., press releases, projects of modifications of Articles of Association, special reports from the Board of Directors, publication of annual report, statutory accounts, dividend payment, number of outstanding shares and warrants, and shareholder notifications. Company Support Office Delhaize Group...

  • Page 135
    For more info, see also www.delhaizegroup.com