Food Lion 2010 Annual Report Download

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ANNUAL REPORT 2010
TOGETHER THE BEST FOR LIFE

Table of contents

  • Page 1
    TOGETHER THE BEST FOR LIFE ANNUAL REPORT 2010

  • Page 2
    ... 138 600 associates worldwide. 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 is committed to offer its customers a locally differentiated shopping experience, to...

  • Page 3
    ... - 6.0% Share price (year-end) Rest of the World - 0.5% Ratios (%) Operating margin Net margin Net debt to equity(1) 4.9% 2.8% 35.3% 4.7% 2.6% 46.8% 4.8% 2.5% 57.3% +19bps +18bps -115ppt -3bps 12bps -105ppt EUR 1 024 million Number of Associates Currency information Average EUR per USD rate EUR...

  • Page 4
    ... to continued cost savings initiatives. The operating margin increased to 4.9%. +8.7% Group Share in Net Profit (in millions of EUR) Group Share in Net Profit 2010 574 2009 2008 514 467 2007 410 Group share in net profit was EUR 574 million, an increase of 11.7% at actual exchange rates and...

  • Page 5
    ... of Operating Companies Our Vision and Values Our New Game Plan 10 12 20 26 Our Strategy Generate Profitable Revenue Growth Pursue Best-In-Class Execution Operate as a Responsible Corporate Citizen 32 34 38 38 42 44 46 Our Activities in 2010 Financial Review(1) Business Review(1) > United States...

  • Page 6
    ... to Execution For Delhaize Group, 2010 was the first year of the New Game Plan, a comprehensive Group strategy announced at the end of 2009. The Year 2010 continued to be a bumpy ride for the global economy and, as a result, for the retail sector as well. Delhaize Group came out with a set of good...

  • Page 7
    ... STATEMENTS SHAREHOLDER INFORMATION > Financial Highlights > Profile > Interview with the Chairman and the CEO > Overview of Operating Companies > Our Vision and Values > Our New Game Plan million investment plan for 2011 while maintaining the local and customer specific go-to-market strategies...

  • Page 8
    ... creation of Delhaize America but across the entire group we also worked on other cost saving initiatives. Through regional and local synergies we will succeed in achieving our target of EUR 500 million gross annual cost savings by the end of 2012. Simplification of the organization's structures and...

  • Page 9
    ... the CEO > Overview of Operating Companies > Our Vision and Values > Our New Game Plan Apart from growth and efficiency, corporate responsibility (CR) is one of the pillars in the New Game Plan. From a CR point of view, where does Delhaize Group stand today? Pierre-Olivier Beckers - Being a good...

  • Page 10
    ... categories: supermarkets, proximity stores and specialty stores. Delhaize Belgium also operates a home delivery service and started to offer on-line shopping. In 2010, Delhaize Belgium's revenues of EUR 4.8 billion accounted for 23% of the Group total. Delhaize Group has a market share in Belgium...

  • Page 11
    ... STATEMENTS SHAREHOLDER INFORMATION > Financial Highlights > Profile > Interview with the Chairman and the CEO > Overview of Operating Companies > Our Vision and Values > Our New Game Plan GREECE REST OF THE WORLD of Group revenues 1.4% of Group revenues Market Alfa Beta's network of 223 food...

  • Page 12
    ...deliver the best of Delhaize for life. Together, we aspire to enrich the lives of our customers, associates and the communities we serve in a sustainable way. Together, we offer assortments, products and services that are nutritious, healthy and safe, everyday, at prices all customers can afford. We...

  • Page 13
    ...out of Delhaize Direct, an online shopping service. End of 2010 there were 60 collection points and 40 more to come in 2011. We ended 2010 with 2 800 stores, an increase of 68 compared to last year. The focus was on new formats like Red Market and Bottom Dollar Food and on new markets like Indonesia...

  • Page 14
    y g e t a r t S Our 10 me i T g gin n e l l ha C r o yf g e t a Str l u f s cces u S A s

  • Page 15
    ... 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Delhaize Group's New Game Plan strategy leverages the strengths of the strong and proven platform of leading brands and market shares, high profitability and a solid balance sheet. The goal of the New...

  • Page 16
    12

  • Page 17
    ... GROUP AT A GLANCE OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen GROWTH Generate profitable...

  • Page 18
    ... our Food Lion markets, there has been a shift in consumer shopping behavior since the price decreases have been implemented. In 2011, Food Lion will continue to improve its price competitiveness, as well as strengthen its position with regard to customer service and assortment management. Hannaford...

  • Page 19
    ... OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen The combination of an improved price positioning...

  • Page 20
    ...at Food Lion. Also at Hannaford, private brand sales accounted for 27.4% of total revenues compared to 26.7% in 2009. In 2011, we will further streamline and develop our assortment. An entirely new assortment of value line products called MyEssentials will be rolled out across our U.S. operations in...

  • Page 21
    ... ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen New Formats Attractive price levels, national and private brands come...

  • Page 22
    ... consumer trends or even creating ones. A growing number of customers attach great value to supporting their local communities. In that regard, Hannaford introduced its "Close to home" shelf tags in 2010 to call out local products. An average Hannaford store carries about 550 of these local products...

  • Page 23
    ...GROUP AT A GLANCE OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen Customers not only want to find...

  • Page 24
    20

  • Page 25
    ... GROUP AT A GLANCE OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen EFFICIENCY Pursue best-in...

  • Page 26
    ... payroll systems. In 2010, Delhaize America announced the creation of one common procurement organization for all its operations. The new structure will support all U.S. banners with assortment and promotions planning and execution, sourcing, promotions and private brand management. It will enable...

  • Page 27
    ... RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen Cash Generation through Local Initiatives In 2010, Delhaize Belgium successfully concluded its 3-year Excel Plan...

  • Page 28
    ... to a pleasant shopping experience. Especially for the growing contingent of time-pressed shoppers that visit our stores. That is why all of our operating companies continue to develop new in-store customer technology. And our Group has long been a pioneer in this area: Delhaize Belgium was the...

  • Page 29
    ... mobile device to use the retailer's website or app in the future. Delhaize Group is ready for that future. In the U.S., Food Lion developed an app for smart phones that gives customers easy access to weekly specials, lets them build and manage virtual shopping lists, download recipes and locate...

  • Page 30
    26

  • Page 31
    ... OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen RESPONSIBILITY Operate as a responsible corporate...

  • Page 32
    ... Assistant store manager, fruit & vegetables he w Healthier Products Health & Wellness Strategic goal: Improve health and wellness communications, particularly in the areas of affordability and disease control During 2010, each Delhaize Group banner continued to adjust its communication strategy...

  • Page 33
    ... GROUP AT A GLANCE OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > Generate Profitable Revenue Growth > Pursue Best-in-Class Execution > Operate as a Responsible Corporate Citizen 2010 has shown us that our...

  • Page 34
    ... Health and Wellness Strategic goal: Use nutritional programs to improve associate health and wellness With more products getting labeled every year, our nutritional information system, Guiding Stars, continues to show its benefits as it helps busy shoppers in the U.S. to quickly identify food...

  • Page 35
    ... products reformulations and Guiding Stars Overall food safety systems Social compliance in our private brand supply chain Associate health and safety programs Training and development Carbon footprint 2010 and related initiatives Waste and packaging Community involvement Delhaize Group - Annual...

  • Page 36
    s e i t i v i t c A Our 32 vie e R s es n i s u B & l a i c Finan w

  • Page 37
    ... margin of 4.9% • Proposed gross dividend of EUR 1.72 per share, 7.5% higher than last year BUSINESS REVIEW United States Added net 20 new stores for a total of 1 627 72 stores remodeled or expanded Bottom Dollar Food made its entry in the Philadelphia area Continued cost-reduction programs...

  • Page 38
    ... 2009 New Game Plan. Underlying volume trends improved in the second half of the year as a result of these price investments and of target promotional offers at Food Lion that were funded in part by ongoing cost savings initiatives. Revenues at Delhaize Belgium amounted to EUR 4.8 billion in 2010...

  • Page 39
    ... RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > FINANCIAL REVIEW > BUSINESS REVIEW > United States > Belgium > Greece > Rest of the World Selling, general and administrative expenses ("SG&A") amounted to 21.1% of revenues (increase of five basis points at actual exchange rates...

  • Page 40
    ... 660 520 714 Cash Flow Statement In 2010, net cash provided by operating activities amounted to EUR 1 317 million, an increase of 12.1% at actual exchange rates (8.6% at identical exchange rates) compared to 2009 as a result of lower taxes paid in 2010 mainly due to the positive impact of the debt...

  • Page 41
    ... GROUP AT A GLANCE OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > FINANCIAL REVIEW > BUSINESS REVIEW > United States > Belgium > Greece > Rest of the World At the end of 2010, total equity had increased by 15...

  • Page 42
    United States 38

  • Page 43
    ... to 0.5% in 2009. new Bottom Dollar stores in 2010 16 low cost supermarket targeting price conscious and time starved customers with its full basket discount formula. Harveys is a strong local supermarket banner in rural Georgia, South Carolina and the Northern part of Florida. Sweetbay serves...

  • Page 44
    ... new shopping experience. Financial Results Delhaize Group's U.S. operations generated USD 18.8 billion in revenues, a decrease of 1.0% in local currency. Comparable store sales decreased with 2.0%. In 2010, particularly Food Lion, made important price investments as part of the New Game Plan...

  • Page 45
    ... OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > FINANCIAL REVIEW > BUSINESS REVIEW > United States > Belgium > Greece > Rest of the World In the second half of the year, the U.S. operations managed to improve...

  • Page 46
    Belgium Store Network 42

  • Page 47
    ... Be Leaders. Strategy Delhaize Belgium operates a wide variety of company-operated and affiliated store formats including supermarkets, convenience and proximity stores, specialty stores and the recently added low cost supermarkets Red Market. Delhaize Belgium strives to be the market value leader...

  • Page 48
    Greece Store Network 44

  • Page 49
    ... 2010, the two Lion Food stores were converted to Red Market. To support the store network, Alfa Beta invested in a new distribution center of 30 000 m², centralizing cold chilled products like dairy, poultry, fish, eggs, fresh juice and deli. Voice picking technology was introduced in distribution...

  • Page 50
    Rest of the World Store Network 46

  • Page 51
    ... by adding 182 new items to their private brand program ending 2010 with 670 different items. 4.5 % of these are As of December 31, 2010 Stores Number of associates Area Format Average surface (sq.m.) Number of products 73 (+7) 4 614 Java, Sumatra Supermarket 1 000 8 700 Delhaize Group - Annual...

  • Page 52
    Store Network PLOIESTI BUCHAREST CONSTANZA ROMANIA As of December 31, 2010 Stores Number of associates Area Format Average surface (sq.m.) Number of products 72 (+21) 2 998 Bucharest, Constana, Ploiesti Supermarket 610 5 900 48

  • Page 53
    ... GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION > FINANCIAL REVIEW > BUSINESS REVIEW > United States > Belgium > Greece > Rest of the World 1 500 private brand items During 2010, Mega Image accelerated its expansion with the opening of 10 Red Market stores in...

  • Page 54
    ..., 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 Corp., Tupperware Brands Corp. Bachelor of Science in Business Administration, MBA Elected 2001 Vice...

  • Page 55
    ... GROUP AT A GLANCE OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION EXECUTIVE COMITTEE President and CEO Delhaize Group Belgium's Bel 20 CEO of the Year 2009 Manager of the Year 2000 (Trends/ Tendances) Master...

  • Page 56
    ... The Board of Directors of Delhaize Group is responsible for the strategy and the management of the Company in its best corporate interests. This responsibility includes the maximization of shareholder value, including the optimization of long-term financial returns, while also taking into account...

  • Page 57
    ... A GLANCE OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Delhaize Group Board of Directors and Comittee Membership in 2010 Name (year of birth) Position Director Since Term Expires Membership Membership Remuneration...

  • Page 58
    ... Directors In March 2011, the Board of Directors considered all criteria applicable to the assessment of independence of directors under the Belgian Company Code, the Belgian Code on Corporate Governance and the New York Stock Exchange (NYSE) rules. Based on the information provided by all directors...

  • Page 59
    ...by the Chief Executive Officer, prepares the strategy proposals for the Board of Directors, oversees the operational activities and analyzes the business performance of the Company. The Terms of Reference of Executive Management are attached as Exhibit D to the Company's Corporate Governance Charter...

  • Page 60
    ... and review of market practices. This consultant worked with Company management to obtain background information and related support in formulating recommendations. Director Remuneration The Company's directors are remunerated for their services with a fixed annual amount, decided by the Board of...

  • Page 61
    ...STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Fixed vs Variable Compensation for the CEO Base Salary Base salary is a key component of the compensation package, both on its own and because annual target awards and long...

  • Page 62
    ... related to the Company's American Depositary Shares traded on the New York Stock Exchange. The options granted in June 2010 under the Delhaize Group 2002 Stock Incentive Plan for executives of the Group's U.S. operating companies vest in equal annual installments of one third over a three-year...

  • Page 63
    ...(as a % of Target) Other Benefits, Retirement and Post-employment Benefits Other benefits include the use of companyprovided transportation, employee and dependent life insurance, welfare benefits and an allowance for financial planning for U.S. members of the Executive Management. Delhaize Group...

  • Page 64
    ... responsibilities in line with current market practice for its position and with the Company's Terms of Reference of Executive Management. 2010 2.7 1.6 1.1 0.3 2.2 1.1 2009 3.1 2.9 1.4 1.8 0.2 0.2 1.8 2.8 2008 1.0 Retirement and Post-Employment Benefits Other Short-Term Benefits Annual...

  • Page 65
    ... Board to repurchase Delhaize Group ordinary shares. Ordinary General Meeting of May 27, 2010 The Ordinary General Meeting is held annually at the call of the Board of Directors. The Ordinary General Meeting of 2010 was held on May 27, 2010. The Company's management presented the Management Report...

  • Page 66
    ...shares of the Company as of that date. On December 31, 2010, the Company's Executive Management owned as a group 686 665 stock options, warrants and restricted stock units representing an equal number of existing or new ordinary shares or ADRs of the Company. Certification of Accounts 2010 In 2011...

  • Page 67
    ...in fulfillment of their risk management responsibilities. The Audit Committee and Executive Committee have approved the Delhaize Group Risk Management Program, which is a Company-wide process to provide high quality, actionable risk information to its leaders. Delhaize Group - Annual Report 2010 63

  • Page 68
    ... into risk information for Company leaders as well as the Executive Committee, Audit Committee and Board of Directors. The Program and its supporting framework have been designed to manage risk broadly throughout the Company. It can be used to manage risk at an enterprise, region, operating company...

  • Page 69
    ... to the beneficiaries the right to acquire ordinary shares of the Company. Management associates of U.S. operating companies received options, which qualify as warrants under Belgian law, issued by the Board of Directors under the Delhaize Group 2002 Stock Incentive Plan, as amended, granting to the...

  • Page 70
    .... The grants under the Performance Cash Plan provide for cash payments to the beneficiaries at the end of a three-year period that are dependent on Company performance against Board-approved financial targets that are closely correlated to building long-term shareholder value. The General Meeting of...

  • Page 71
    ... GROUP AT A GLANCE OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Risk Factors The following discussion reflects business risks that are evaluated by our management and our Board of Directors. This section should be...

  • Page 72
    ... years of service, compensation and/or guaranteed returns on contributions made. Delhaize Group operates defined benefit plans at several of its entities and a total of approximately 20% of Delhaize Group's associates was covered by defined benefit plans at the end of 2010. If, at balance sheet date...

  • Page 73
    ... could have a significant effect on the Group's relationships with its customers and on its financial condition, results of operations and cash flows. The Expansion Risk Delhaize Group's ability to open new stores is dependent on purchasing or entering into Delhaize Group - Annual Report 2010 69

  • Page 74
    ... Financial Statements. Regulatory Risk Delhaize Group is subject to federal, regional, state and local laws and regulations in each country in which it operates relating to, among others, zoning, land use, antitrust restrictions, work place safety, public health, environmental protection, community...

  • Page 75
    ...OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION stock conditions, as well as higher product costs, which could adversely affect our operations and financial performance. Insurance Risk The Group manages its insurable...

  • Page 76
    l a i c n a n i F s t n e m e t a t S 72

  • Page 77
    ... CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 74 76 77 78 80 81 81 81 92 94 98 98 99 101 103 104 106 107 107 107 108 108 111 112 117 120 122 131 133 133 133 133 134 134 135 136 136 137 138 138 139 140 Consolidated Balance Sheet Consolidated Income...

  • Page 78
    ... STATEMENTS Consolidated Balance Sheet Consolidated Assets (in millions of EUR) Note 2010 2009 2008 Goodwill Intangible assets Property, plant and equipment Investment property Investment in securities Other financial assets Deferred tax assets Derivative instruments Other non-current assets Total...

  • Page 79
    ... 2 918 Short-term borrowings Long-term debt - current portion Obligations under finance leases Derivative instruments Provisions Income taxes payable Accounts payable Accrued expenses Other current liabilities Liabilities associated with assets held for sale Total current liabilities 18.2 18.1 18...

  • Page 80
    ... Income Statement (in millions of EUR) Note 2010 2009 2008 Revenues Cost of sales Gross profit Gross margin Other operating income Selling, general and administrative expenses Other operating expenses Operating profit Operating margin Finance costs Income from investments Profit before taxes...

  • Page 81
    ... to net profit Tax (expense) benefit Unrealized gain (loss) on financial assets available for sale, net of tax Actuarial gain (loss) on defined benefit plans Tax (expense) benefit Actuarial gain (loss) on defined benefit plans, net of tax Exchange gain (loss) on translation of foreign operations...

  • Page 82
    ... Balances at December 31, 2009 Other comprehensive income Net profit Total comprehensive income for the period Capital increases Treasury shares purchased Treasury shares sold upon exercise of employee stock options Excess tax benefit on employee stock options and restricted shares Tax payment...

  • Page 83
    ...SUMMARY STATUTORY ACCOUNTS OF DELHAIZE GROUP SA Holders of the Group Other Reserves Discontinued Cash Flow Hedge Reserve Cash Flow Hedge Reserve Availablefor-sale Reserve Actuarial Gains and Losses Reserve Cumulative Translation Adjustment Shareholders' Equity Non-controlling Interests Total Equity...

  • Page 84
    ...and other assets Accounts payable Accrued expenses and other liabilities Provisions Interest paid Interest received Income taxes paid Net cash provided by operating activities Investing activities Business acquisitions, net of cash and cash equivalents acquired(1) Business disposals, net of cash and...

  • Page 85
    ...affiliated stores in its sales network and independent wholesale customers and in retailing of non-food products such as pet products. The Company is a limited liability company incorporated and domiciled in Belgium, with its shares listed on NYSE Euronext Brussels and on the New York Stock Exchange...

  • Page 86
    ...'s share of the identifiable net assets acquired and contingent liabilities assumed is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the business acquired, the difference is recognized directly in the income statement. When Delhaize Group acquired...

  • Page 87
    ...rate; and (c) the income statements are translated at the average daily exchange rate (i.e., the yearly average of exchange rates on each working day). The differences arising from the use of the average daily exchange rate for the income statement and the closing exchange rate for the balance sheet...

  • Page 88
    ... losses. Amortization begins when the asset is available for use, as intended by management. Residual values of intangible assets are assumed to be zero and are reviewed at each financial year-end. Costs associated with maintaining computer software programs are recognized as an expense as incurred...

  • Page 89
    ... income statement. Residual values, useful lives and methods of depreciation are reviewed at each financial year-end, and adjusted prospectively, if appropriate. Investment Property Investment property is defined as property (land or building - or part of a building - or both) held by Delhaize Group...

  • Page 90
    ...impaired, at which time the cumulative gain or loss recorded in the available-for-sale reserve is recognized in the income statement as a reclassification adjustment. Delhaize Group mainly holds quoted investments and the fair value of these are predominately based on current bid prices (see Note 10...

  • Page 91
    ... value through profit or loss, any directly attributable transaction costs. The fair value is determined by reference to quoted market bid prices at the close of business on the balance sheet date for financial liabilities actively traded in organized financial markets. • Financial liabilities...

  • Page 92
    ... combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the temporary differences...

  • Page 93
    ... are measured at the balance sheet date using management's best estimate of the expenditures expected to be required to settle the obligation, discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risk specific on the liability...

  • Page 94
    ...As stated above, sales are recorded net of sales taxes, value-added taxes and discounts and incentives. These include discounts from regular retail prices for specific items and "buy-one, get-one-free"-type incentives that are offered to retail customers through the Group's customer loyalty programs...

  • Page 95
    ... 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 96
    ... holds several available-for-sale investments. Delhaize Group uses derivative financial instruments to hedge certain risk exposures. The risks the Group is exposed to are evaluated by Delhaize Group's management and Board of Directors and discussed in the section "Risk Factors" in this annual report...

  • Page 97
    ... be disclosed. The operating segments information for 2010, 2009 and 2008 is as follows: Year ended December 31, 2010 (in millions of EUR) United States Belgium(2) Greece Rest of the World(3) Corporate Total Revenues(1) Cost of sales Gross profit Gross margin Other operating income Selling, general...

  • Page 98
    ... OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS Year ended December 31, 2008 (in millions of EUR) United States Belgium(2) Greece Rest of the World(3) Corporate Total Revenues(1) Cost of sales Gross profit Gross margin Other operating income Selling, general and administrative expenses...

  • Page 99
    ... the total net cash outflow. The final goodwill of EUR 9 million is attributed to location-related advantages, as it reinforces Alfa Beta's position in the North-eastern part of Greece, as well as to the acquisition of the customer base of the Koryfi stores. Delhaize Group - Annual Report 2010 95

  • Page 100
    ...FLOWS NOTES TO THE FINANCIAL STATEMENTS From the date of acquisition, the acquired stores have contributed EUR 3 million to the 2009 revenues of the Group and - mainly due to the conversion process - EUR (1) million to the net profit of the year. If the combination had taken place at the beginning...

  • Page 101
    ..., as well as to the acquisition of the customer base of the La Fourmi stores. 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 combination had taken place at...

  • Page 102
    ...The pre-tax (loss) gain recognized on the re-measurement of assets held for sale was zero in 2010 and 2009 and amounted to EUR (8) million in 2008. In addition, no expenses associated with store closings were recorded as other operating expenses in discontinued operations during the last three years...

  • Page 103
    ...use is estimated using revenue projections of each operating entity (see Note 6) and applying an estimated royalty rate of 0.45% and 0.70% for Food Lion and Hannaford, respectively. No impairment loss of trade names was recorded or reversed in 2010, 2009 or 2008. Delhaize Group - Annual Report 2010...

  • Page 104
    ... 2009, Delhaize Group impaired various software solutions that related to projects that the Group abandoned during the year. (in millions of EUR) Trade Names Developed Software Purchased Software Favorable Lease Rights Other Total Cost at January 1, 2010 Additions Sales and disposals Transfers...

  • Page 105
    ... impairment at December 31, 2010 Net carrying amount at December 31, 2010 Cost at January 1, 2009 Additions Sales and disposals Acquisitions through business combinations Transfers to/from other accounts(1) Currency translation effect Balance at December 31, 2009 Accumulated depreciation at January...

  • Page 106
    ... consists mainly of buildings. The number of owned versus leased stores by segment at December 31, 2010 is as follows: Owned Finance Leases Operating Leases Affiliated and Franchised Stores Owned by their Operators or Directly Leased by their Operators from a Third Party Total United States Belgium...

  • Page 107
    .... Operating expenses arising from investment property generating rental income, included in selling, general and administrative expenses, were EUR 4 million in 2010, 2009 and 2008. (in millions of EUR) 2010 2009 2008 Cost at January 1 Additions Sales and disposals Transfers to/from other accounts...

  • Page 108
    ...value an instrument are observable, either directly (i.e. as prices) or indirectly (i.e. derived from prices), the instrument is included in level 2. • Level 3: If one or more of the significant inputs used in applying the valuation technique is not based on observable market date, the financial...

  • Page 109
    ...equity Current Available for sale - through equity Derivatives - through profit or loss Derivatives - through equity Total financial assets measured at fair value 11 19 19 11 19 19 124 12 136 2 96 98 - 126 96 12 234 During 2010 EUR 1 million of securities were transferred from Level 2 to Level...

  • Page 110
    ... of currency) 2011 2012 - 2015 2016 Total Cash flows in USD Cash flows in USD translated into EUR 2 2 2 2 9 6 13 10 Delhaize Group further holds smaller investments in money market and investment funds in order to satisfy future pension benefit payments for a limited number of employees. The...

  • Page 111
    ...11) 3 4 Trade receivables credit risk is managed by the individual operating entities and credit rating is continuously monitored either based on internal rating criteria or with the support of third party service providers and the requirement for an impairment is analyzed at each reporting date on...

  • Page 112
    ...THE FINANCIAL STATEMENTS Trade receivables are predominantly to be paid, in full, between 30 days and 60 days. The movement of the bad debt allowance account can be summarized as follows: (in millions of EUR) Note 2010 2009 2008 Bad debt allowance as of January 1 Additions (recognized in profit or...

  • Page 113
    ... 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 associates. No time limit has...

  • Page 114
    ... EUR) 2010 December 31, 2009 2008 Deferred gain (loss) on discontinued cash flow hedges: Gross Tax effect Cash flow hedge: Gross Tax effect Actuarial gain (loss) on defined benefit plans: Gross Tax effect Unrealized gain (loss) on securities available-for-sale: Gross Tax effect Total other reserves...

  • Page 115
    ... been included as a liability in Delhaize Group's consolidated financial statements prepared under IFRS. The total estimated dividend, based on the number of shares outstanding at March 9, 2011 is EUR 175 million. The payment of this dividend will not have income tax consequences for the Group. As...

  • Page 116
    ...-bank offering rate at the borrowing date plus a pre-set margin. Delhaize Group also uses a treasury notes program. The carrying values of long-term debt (excluding finance leases, see Note 18.3), net of discounts and premiums, deferred transaction costs and hedge accounting fair value adjustments...

  • Page 117
    ... of principals of Delhaize Group's non-derivative financial liabilities, excluding any hedging effects and not taking premiums and discounts into account: (in millions of USD) 2011 2012 2013 2014 2015 Thereafter Fair Value Fixed rates Notes due 2011 Average interest rate Interest due Notes...

  • Page 118
    ... of non-public debt are estimated using rates currently available for debt of similar terms and remaining maturities offered to the Group and its subsidiaries. (in millions of EUR) 2010 December 31, 2009 2008 Fair value of long-term debt Carrying value of long-term debt: Current Non-current Total...

  • Page 119
    ... 2009 2008 U.S. dollar Euro Total 2 14 16 35 28 63 152 152 The carrying amounts of short-term borrowings approximate their fair values. U.S. Entities At December 31, 2010 Food Lion, LLC had a short term construction facility of USD 5 million (EUR 4 million) in place, with maturity June 5, 2011...

  • Page 120
    .... Delhaize Group signed lease agreements for additional store facilities under construction at December 31, 2010. The corresponding lease terms as well as the renewal options generally range from 15 to 25 years. Total future minimum lease payments for these agreements relating to stores under...

  • Page 121
    ...a liability settled: (in millions of EUR) 2010 Assets Liabilities Assets December 31, 2009 Liabilities Assets 2008 Liabilities Interest rate swaps Cross currency swaps Foreign exchange forward contracts Total 61 5 66 16 16 61 35 96 40 40 39 18 1 58 - Delhaize Group - Annual Report 2010 117

  • Page 122
    ...tested using statistical methods in the form of a regression analysis. Changes in fair values were recorded in the income statement as finance costs as follows (see Note 29.1): (in millions of EUR) Note 2010 December 31, 2009 2008 Losses (gains) on Interest rate swaps Related debt instruments Total...

  • Page 123
    ... of derivative financial instruments to credit risk at the reporting date equals their carrying values at balance sheet date (i.e., EUR 66 million at December 31, 2010). See Note 12 in connection with collateral posted on derivative financial liabilities. Delhaize Group - Annual Report 2010 119

  • Page 124
    ... FINANCIAL STATEMENTS 20. Provisions (in millions of EUR) Note 2010 December 31, 2009 2008 Closed stores: Non-current Current Self-insurance: Non-current Current Pension benefit and other post-employment benefits: Non-current Current Other: Non-current Current Total provisions Non-current Current...

  • Page 125
    ... 31, 2009 Store closings added Stores sold/lease terminated Balance at December 31, 2010 168 19 (38) 149 32 (35) 146 7 (49) 104 Expenses relating to closed store provisions were recorded in the income statement as follows: (in millions of EUR) Note 2010 2009 2008 Other operating expenses Interest...

  • Page 126
    ...6 million in 2010 and EUR 4 million and EUR 3 million in 2009 and 2008, respectively. • In the U.S., Delhaize Group sponsors profit-sharing retirement plans covering all employees at Food Lion and Kash n' Karry (the legal entity operating the Sweetbay stores) with one or more years of service. As...

  • Page 127
    ... invests mainly in equity securities and is, therefore, exposed to stock market movements. Further, Delhaize Group operates in the US unfunded supplemental executive retirement plans ("SERP") covering a limited number of executives of Food Lion, Hannaford and Kash n' Karry. Benefits generally...

  • Page 128
    ... EUR) United States Plans 2010 Plans Outside of the United States Total 2009 United Plans Outside States of the United Plans States Total United States Plans 2008 Plans Outside of the United States Total Components of pension cost: Amounts recognized in the income statement: Current service cost...

  • Page 129
    ... 2008 Plans Outside of 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 OCI Employer contributions made in the year Benefits paid directly by company in the year Business...

  • Page 130
    ... level they remained in 2010. The assumptions applied in determining benefit obligation and cost, are summarized in the table below: December 31, 2010 2009 2008 Weighted-average actuarial assumptions used to determine benefit obligations: Discount rate Current health care cost trend Ultimate health...

  • Page 131
    ...ACCOUNTS OF DELHAIZE GROUP SA The exercise price associated with stock options is dependent on the rules applicable to the relevant stock option plan. The exercise price is either the Delhaize Group share price on the date of the grant (US plans) or the Delhaize Group share price on the working day...

  • Page 132
    ... the date of grant using the following assumptions: 2010 2009 2008 Share price (in EUR) Expected dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected term (years) 60.55 2.5 26.6 1.5 5.0 49.41 2.5 28.5 2.8 5.0 40.97 2.5 27.1 4.3 5.0 U.S. Operating Entities Stock Option...

  • Page 133
    ... options granted under the 1996 Food Lion Plan and the 1998 Hannaford Plan. Activity related to the "Delhaize Group 2002 Stock Incentive Plan" and the "Delhaize America 2000 Stock Incentive Plan" is as follows: Shares Weighted Average Exercise Price (in USD) 2008 Outstanding at beginning of year...

  • Page 134
    ...12.88 and USD 14.35 per option for the years 2010, 2009 and 2008, respectively and were estimated using the following weighted average assumptions: 2010 2009 2008 Share price (in USD) Expected dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected term (years) 78.33 2.5 25...

  • Page 135
    ... relating to changes in tax rates or the imposition of new taxes Total income tax expense from continuing and discontinued operations Net profit 2010 2009 2008 821 (1) 820 17 (2) 226 3 2 (1) 245 575 740 8 748 231 (4) (8) 12 2 (5) 228 520 702 (6) 696 195 (14) 38 (2) 217 479 (1) In 2010, current...

  • Page 136
    ...) Accelerated Tax Depreciation Closed Store Provision Leases Pension Other Total Net deferred tax liabilities at January 1, 2008 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...

  • Page 137
    ... EUR) Note 2010 2009 2008 Product cost, net of vendor allowances and cash discounts Employee benefit expenses Supplies, services and utilities purchased Depreciation and amortization Operating lease expenses Bad debt allowance expense Other expenses(1) Total expenses by nature Cost of Sales Selling...

  • Page 138
    ... and store closings, being a result of an operational review (EUR 10 million at Food Lion), both set in motion in December 2009 and (ii) the effect of updating the estimates used for existing store closing provisions (EUR 4 million). The 2008 store closing and restructuring expenses relate mainly to...

  • Page 139
    ... the line item "Fair value (gains) losses on currency swaps"). Borrowing costs attributable to the construction or production of qualifying assets were capitalized using an average interest rate of 7.5%, 6.9% and 6.6% in 2010, 2009 and 2008, respectively. 29.2. Income from Investments (in millions...

  • Page 140
    ... (Gains) The exchange differences charged (credited) to the income statement, excluding the impact of hedge accounting and economic hedges, are as follows: (in millions of EUR) Note 2010 2009 2008 Selling, general and administrative expenses Finance costs Income from investments Total 29.1 29...

  • Page 141
    ... 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 21. The Company's Remuneration Policy for Directors and the Executive Management can be found as Exhibit E to the Corporate...

  • Page 142
    ...was part of what appears to be a local investigation affecting several companies in Belgium in the retail sector and relating to prices of health and beauty products and other household goods. The investigation is still pending as of today. In February 2008, Delhaize Group became aware of an illegal...

  • Page 143
    ... 2013. On March 3, 2011, Delhaize Group announced the signing of an agreement to acquire 100% of the registered share capital and voting rights of Delta Maxi Group, a retail company operating more than 450 stores in five countries in Southeastern Europe. The agreed total purchase price amounts...

  • Page 144
    CONSOLIDATED BALANCE SHEET CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS 36. List of Consolidated and Associated Companies and Joint Ventures A. ...

  • Page 145
    ... Alfa Beta Vassilopoulos SA on December 9, 2008. (13) Merged into Alfa Beta Vassilopoulos SA on November 3, 2010. 3735 Beam Rd, Unit B, Charlotte, NC 28217, U.S.A. 2110 Executive Drive, Salisbury, NC 28147, U.S.A. Route d'Olm 6, 8287 Kehlen, Grand-Duchy of Luxembourg PO Box 1000, Portland, ME 04104...

  • Page 146
    ... INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS STATEMENTS B. Joint Ventures - Proportionally Consolidated Ownership Interest in % 2010 2009 2008 P.T. Lion...

  • Page 147
    ... OF RESPONSIBLE PERSONS REPORT OF THE STATUTORY AUDITOR SUMMARY STATUTORY ACCOUNTS OF DELHAIZE GROUP SA Supplementary Information Quarterly Data (Unaudited) (in millions of EUR, except earnings per share) 2010 Full Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Revenues Gross profit Gross...

  • Page 148
    ... 444 In 2011, Delhaize Group plans to open 120 to 130 new stores and to close 20 stores, which will result in a net addition of 100 to 110 stores or a total of 2 900 to 2 910 stores end 2011. Number of Associates (at year-end) 2010 2009 2008 Full-time Part-time FTE(1) Male Female Total 61 77 103...

  • Page 149
    ...) At Actual Rates 2010 Effect of Exchange Rates At Identical Rates 2009 At Actual Rates 2010/2009 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 flow 20...

  • Page 150
    ... Operating margin Effective tax rate of continuing operations Net margin Net debt to equity(1) CURRENCY INFORMATION Average EUR per USD rate EUR per USD rate at year-end OTHER INFORMATION Number of sales outlets Capital expenditures (in millions of EUR) Number of associates (thousands) Full-time...

  • Page 151
    ... accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of 10.902 Million EUR and the consolidated income statement shows a consolidated profit (group share) for the year then ended of 574 Million EUR. The board of directors of the company is responsible...

  • Page 152
    ... THE FINANCIAL STATEMENTS Summary Statutory Accounts of Delhaize Group SA The summarized annual statutory accounts of Delhaize Group SA are presented below. In accordance with the Belgian Company Code, the full annual accounts, the statutory Directors' report and the Statutory Auditor's report will...

  • Page 153
    ... 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 in the amounts due within one year • Significant reorganization and store closing costs • Charges for which the Company...

  • Page 154
    ... 942 Income Statement (in millions of EUR) 2010 2009 Operating income Sales Other operating income Operating expenses Merchandise and consumables Salaries, social security and pensions Other operating expenses Operating profit Income from financial fixed assets Net financial expense Current profit...

  • Page 155
    ... ACCOUNTS OF DELHAIZE GROUP SA Share Capital (December 31, 2010) (in thousands of EUR) Number of Shares Share capital Shares in issue At the end of the previous year Issue of new shares At the end of the financial year Analysis of share capital Class of shares Ordinary shares of no nominal value...

  • Page 156
    ...the websites of Delhaize Group (www.delhaizegroup.com), Euronext Brussels (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. (in EUR) 70 Share Performance in 2010...

  • Page 157
    ... OUR STRATEGY OUR ACTIVITIES IN 2010 CORPORATE GOVERNANCE STATEMENT RISK FACTORS FINANCIAL STATEMENTS SHAREHOLDER INFORMATION the previous year. After deduction of 25% Belgian withholding tax, this will result in a net dividend of EUR 1.29 per share (EUR 1.20 the prior year). The net dividend...

  • Page 158
    ...at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005, U.S.A. Annual Report This annual report is available in English, French and Dutch. It can be downloaded from Delhaize Group's website: www. delhaizegroup.com. A printed or electronic version may be ordered via...

  • Page 159
    ... 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) Enterprise value = market capitalization + net debt. Delhaize Group - Annual Report 2010 155

  • Page 160
    ... 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 of discounts...

  • Page 161
    ..., 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 162
    For more info, see also www.delhaizegroup.com