SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 12,1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........to...........
Commission File number 0-6080
FOOD LION, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0660192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 1330, 2110 Executive Drive Salisbury, NC 28145-1330
(Address of principal executive office) (Zip Code)
(704) 633-8250
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Outstanding shares of common stock of the Registrant as of October 21, 1998.
Class A Common Stock 250,574,943
Class B Common Stock 232,427,364
Page 1 of 20
The Exhibit index is located on page 18.
FOOD LION, INC.
INDEX TO FORM 10-Q
September 12, 1998
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Statements of Operations for the
12 and 36 weeks ended September 12, 1998 and
September 6, 1997 3-4
Consolidated Balance Sheets as of September 12,
1998, January 3, 1998 and September 6, 1997 5
Consolidated Statements of Cash Flows for
36 weeks ended September 12, 1998 and
September 6, 1997 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-15
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security 16
Holders
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Exhibit Index 18
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOOD LION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the 12 Weeks ended September 12, 1998 and September 6, 1997
(Dollars in thousands except per share data)
Restated Restated
Sept 12,1998 Sept 6,1997 Sept 12,1998 Sept 6,1997
% %
<S> <C> <C> <C> <C>
Net sales $2,378,922 $2,366,905 100.00 100.00
Cost of goods sold 1,843,988 1,853,473 77.51 78.31
Gross profit 534,934 513,432 22.49 21.69
Selling and administrative expenses 356,043 346,059 14.97 14.62
Depreciation and amortization 55,777 52,153 2.35 2.20
Store closing charge 96,414 4.07
Operating income 123,114 18,806 5.17 0.80
Interest expense 17,420 29,268 0.73 1.24
Income (loss) before income taxes 105,694 (10,462) 4.44 (0.44)
Income taxes (provision) benefit (32,925) 4,080 (1.38) 0.17
Net income (loss) $ 72,769 $ (6,382) 3.06 (0.27)
Basic and diluted earnings(loss)per share $ 0.15 $ (0.01)
Dividends per share $ 0.04 $ 0.03
Weighted average number
of shares outstanding:
Class A 250,738,274 236,086,942
Class B 232,727,364 232,727,364
Total 483,465,638 468,814,306
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOOD LION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the 36 Weeks ended September 12, 1998 and September 6, 1997
(Dollars in thousands except per share data)
Restated Restated
Sept 12, 1998 Sept 6, 1997 Sept 12, 1998 Sept 6, 1997
% %
<S> <C> <C> <C> <C>
Net sales $7,037,655 $6,968,371 100.00 100.00
Cost of goods sold 5,470,760 5,457,585 77.74 78.32
Gross profit 1,566,895 1,510,786 22.26 21.68
Selling and administrative expenses 1,044,947 1,038,313 14.85 14.90
Depreciation and amortization 162,207 153,000 2.30 2.20
Store closing charge 96,414 1.38
Operating income 359,741 223,059 5.11 3.20
Interest expense 68,188 83,714 0.97 1.20
Income before income taxes 291,553 139,345 4.14 2.00
Income taxes provision 103,517 54,345 1.47 0.78
Net income $ 188,036 $ 85,000 2.67 1.22
Basic and diluted earnings per share $ 0.39 $ 0.18
Dividends per share $ 0.11 $ 0.10
Weighted average number
of shares outstanding:
Class A 243,950,316 236,123,299
Class B 232,727,364 232,796,808
Total 476,677,680 468,920,107
</TABLE>
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<TABLE>
FOOD LION, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
Restated
Sept 12, 1998 January 3, 1998 Sept 6, 1997
Assets
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 159,920 $ 56,147 $ 106,088
Receivables 146,041 166,790 149,951
Inventories 1,005,866 982,744 984,482
Prepaid expenses and other 29,698 28,234 70,876
Deferred tax asset 73,604 63,123 75,807
Total current assets 1,415,129 1,297,038 1,387,204
Property, at cost, less accumulated
depreciation 1,855,498 1,842,269 1,807,934
Deferred tax asset 37,645 51,980 8,619
Intangible assets 264,833 267,656 273,204
Total assets $3,573,105 $3,458,943 $3,476,961
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $ - $ 80,000 $ -
Accounts payable, trade 509,337 460,714 490,500
Accrued expenses 352,714 351,173 427,300
Capital lease obligations - current 20,549 20,427 20,456
Long term debt - current 37,638 2,525 50,805
Other liabilities - current 10,042 8,756 7,408
Income taxes payable 13,812 - -
Total current liabilities 944,092 923,595 996,469
Long-term debt 435,168 586,355 583,802
Capital lease obligations 493,042 489,928 494,973
Other liabilities 118,613 125,880 140,749
Total liabilities 1,990,915 2,125,758 2,215,993
Shareholders' Equity:
Class A non-voting common stock, $.50 par value 125,454 118,112 118,054
Class B voting common stock, $.50 par value 116,364 116,364 116,364
Additional capital 107,680 794 222
Retained earnings 1,232,692 1,097,915 1,026,328
Total shareholders' equity 1,582,190 1,333,185 1,260,968
Total liabilities and shareholders' equity $3,573,105 $3,458,943 $3,476,961
</TABLE>
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FOOD LION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 36 Weeks ended September 12, 1998 and September 6, 1997
(Dollars in thousands)
36 Weeks
Restated
Sept 12, 1998 Sept 6, 1997
Cash flows from operating activities
Net income $188,036 $ 85,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 162,207 153,000
(Gain) Loss on disposals of property (1,746) 1,022
Store closing charge 96,414
Deferred income taxes 3,854 (5,850)
Changes in operating assets and liabilities:
Receivables 20,749 1,212
Inventories (23,122) 81,261
Prepaid expenses and other (1,464) (37,216)
Accounts payable and accrued expenses 50,164 44,876
Income taxes payable 13,812 (5,578)
Other liabilities (5,981) (14,149)
Total adjustments 218,473 314,992
Net cash provided by operating activities 406,509 399,992
Cash flows from investing activities
Capital expenditures (219,449) (236,712)
Proceeds from disposal of property 74,702 17,644
Net cash used in investing activities (144,747) (219,068)
Cash flows from financing activities
Net payments under short-term borrowings (80,000) (250,010)
Principal payments on long-term debt (5,629) (161,477)
Proceeds from issuance of long-term debt - 300,000
Principal payments under capital lease obligations (22,884) (16,600)
Dividends paid (53,259) (47,086)
Repurchase of common stock - (2,960)
Proceeds from issuance of common stock 3,783 926
Net cash used in financing activities (157,989) (177,207)
Net increase in cash and cash
equivalents 103,773 3,717
Cash and cash equivalents at beginning
of period 56,147 102,371
Cash and cash equivalents at end of period $159,920 $106,088
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Notes to Consolidated Financial Statements (Dollars in thousands)
1) Basis of Presentation:
The accompanying financial statements are presented in accordance with
the requirements of Form 10-Q and, consequently, do not include all the
disclosures normally required by generally accepted accounting principles or
those normally made in the Annual Report on Form 10-K of Food Lion, Inc.
(the "Company").Accordingly, the reader of this Form 10-Q should refer
to the Company's Form 10-K for the year ended January 3,1998 for further
information.
The financial information has been prepared in accordance with the
Company's customary accounting practices and has not been audited. In the
opinion of management,the financial information includes all adjustments
necessary for a fair presentation of interim results.
2) Supplemental Disclosure of Cash Flow Information:
Selected cash payments and non-cash activities incurred during the 36
week period of 1998 and 1997 were as follows:
Sept 12, 1998 Sept 6,1997
Cash payments for income taxes $96,941 $102,425
Cash payments for interest,
net of amounts capitalized 69,883 70,234
Non-cash investing and financing activities:
Capitalized lease obligations
incurred for store properties 47,006 56,718
Capitalized lease obligations
terminated for store properties 20,886 15,694
Conversion of long-term debt
to stock 110,445 0
The Company considers all highly liquid investment instruments
purchased with an original maturity of three months or less to
be cash equivalents.
During the second quarter of 1998 the Company called for the redemption
of its outstanding convertible subordinated debentures totaling $113.8
million through either (1) payment to the bond
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holders at 101% of the principal together with accrued interest or
(2)conversion of the debentures into shares of the Company's Class A Common
Stock. Most bond holders elected conversion resulting in the issuance of
13,942,371 shares of Class A Common Stock.The Company paid $3.8 million in
principal, premium and accrued interest to remaining bond holders.
3) Inventories
Inventories are stated at the lower of cost or market. Inventories
valued using the last-in, first-out(LIFO) method comprised
approximately 85% and 84% of inventories, in 1998 and 1997,
respectively. Meat, produce and deli inventories are valued on the first-
in, first-out (FIFO) method. If the FIFO method were used
entirely, inventories would have been $121.1 million and $112.7 million
greater at September 12, 1998 and September 6, 1997, respectively.
Application of the LIFO method resulted in increases in the cost of
goods sold of $6.7 million and $8.2 million for the 36 weeks ended
September 12, 1998 and September 6, 1997, respectively.
4) Restatement of 1997 Financial Statements
The Company previously determined that its financial statements for the
quarter and the 36 weeks ended September 6, 1997 should be restated to reflect
adjustments related to the store closing costs and the acquisition of Kash n'
Karry. The impact of the restatement on the consolidated statement of
operations for the third quarter and year to date ended September 6, 1997 is as
follows:
Amounts Restated Amounts Restated
Previously Amounts - Previously Amounts
Reported - Third Reported - - YTD
Third Quarter YTD
Quarter
Operating income $ 31,283 $ 18,806 $241,891 $223,059
Net income (loss) 1,229 (6,382) 96,488 85,000
Basic earnings (loss) $0.00 $(0.01) $0.21 $0.18
per share
5) Reclassification
Certain financial statement items have been reclassified to conform
with the current year presentation.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS (12 and 36 weeks ended September 12, 1998 compared to 12
and 36 weeks ended September 6, 1997)
Net sales increased 0.5% for the third quarter and 1.0% year to date,
respectively. Third quarter 1998 total sales are not comparable to third quarter
1997 total sales due to (1) prior year sales from stores in the Southwest market
which closed during the fourth quarter of 1997 ($75.6 million for third quarter
and $236.2 million year to date) and (2) a change in the method of collecting
sales tax on products discounted through the MVP customer ("MVP") and Preferred
customer ("PCC") loyalty card programs. On a comparable basis total sales
increased 5.5% for the third quarter and year to date. Same store sales
increased 1.8% for third quarter and 2.1% year to date.
Beginning in May 1998, after receiving permission from all state departments of
revenue, the Company began collecting sales tax on the net sales price, after
considering the MVP/PCC discount granted, rather than on the full retail price
of the MVP/PCC items. The related impact on the quarter and the year to date was
to reduce reported sales by approximately $38.8 million and $63.7 million,
respectively. This change does not impact the same store sales calculation or
the Company's net income, as gross profit and expense dollars are the same under
either method. The only difference is that under the new method the discount
granted is reflected in sales as opposed to cost of goods sold under the
original method. The following table illustrates the impact of the change.
Third Quarter 1998 Dollars Dollars % %
(Dollars in thousands) As Reported Adjusted As Adjusted
(New Method) (Original Reported (Original
Method) (New Method)
Method)
Net sales $2,378,922 $2,417,757 100.00 100.00
Cost of goods sold 1,843,988 1,882,823 77.51 77.87
Gross profit 534,934 534,934 22.49 22.13
Selling and administrative 356,043 356,043 14.97 14.73
expenses
Depreciation and 55,777 55,777 2.34 2.31
amortization
Operating income 123,114 123,114 5.18 5.09
Interest expense 17,420 17,420 0.73 0.72
Income before income taxes 105,694 105,694 4.44 4.37
Provision for income taxes 32,925 32,925 1.38 1.36
Net income 72,769 72,769 3.06 3.01
Basic and diluted earnings $0.15 $0.15
per share
Weighted average number of 483,466 483,466
shares outstanding
-9-
The Company's updated 1998 growth plan includes opening 81 new stores, closing
35 stores (approximately 20 of these closings will be
relocations) and renovating approximately 142 existing stores. With this growth
plan, the Company anticipates a net increase in square footage of 8% in 1998. As
of September 12, 1998, the Company had opened 49 new stores, closed 22 stores
(of which eleven were relocations), and completed renovations to 88 existing
stores.
Gross profits at 22.49% of sales for the third quarter and 22.26% of sales year
to date (or 22.13% and 22.06%,respectively, adjusted to reflect the original
method of collecting sales tax), compared favorably against prior year gross
profits of 21.69% of sales in the third quarter and 21.68% of sales year to
date. The increase in gross profit is due to continued category management
initiatives and solid results in higher margin areas such as perishables and
frozen foods. The third quarter LIFO charge was $1.2 million. The Company's
internal testing for the third quarter indicated a minimal inflation rate of
0.5% primarily due to a 10% increase in tobacco prices (continuing the trend
noted throughout 1998) offset by deflation in the grocery category. All other
significant merchandise categories had no inflation. The current LIFO provision
($6.7 million year to date) is adequate to cover this level of inflation.
For the third quarter of 1998, selling and administrative expenses were $356.0
million or 14.97% of sales (14.73% adjusted to reflect the original method of
collecting sales tax) as compared to $346.1 million or 14.62% of sales in the
corresponding period of the prior year. The increase in selling and
administrative expenses over last year is due to (1) soft sales experienced
during the early weeks of the quarter and (2) preparation, clean-up and repair
costs associated with Hurricane Bonnie which impacted the Company's coastal
markets during the quarter.
Year to date selling and administrative expenses of 14.85% of sales (14.71%
adjusted to reflect the original method of collecting sales tax)improved over
the same period last year of 14.90% of sales due to (1) a continued focus on
cost containment, (2) improved sales performance, (3) the fourth quarter 1997
closing of the under-performing stores in the Company's Southwest market, and
(4) improvement in the cost structure at Kash n' Karry due to the integration of
all administrative functions during 1997.
During the quarter, the Company recorded a $4.2 million store closing charge.
This charge included an increase in reserves for store closing costs of $10.2
million. (These items are included in "Additions" in the table below.) This
increase was offset by a change in the estimate of the fair value of the assets
to be disposed of related to the Company's distribution center in the Southwest
market based on offers received for the facility. This revision increased
the carrying value of the related assets by approximately $6 million and is
reflected in "Reductions" in the table below.
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Other significant reductions in the Company's store closing costs relate to
(1) the sale of assets associated with closed store properties, (2) fees
paid for lease terminations and (3) on-going rent payments made on remaining
lease obligations.
Store Closing Costs
Reduction
of Asset Lease Accrued
(Dollars in millions) Values Liabilities Expenses Total
Balance at June 20,1998 $39.7 $120.5 $4.2 $164.4
Additions 0.0 9.5 0.7 10.2
Reductions -11.0 -3.6 -2.9 -17.5
Reclassifications -0.3 -2.0 2.3 0.0
Recognition of unused 0.0 0.0 0.0 0.0
reserves
Balance at Sept. 12,1998 $28.4 $124.4 $4.3 $157.1
At the end of the third quarter of 1998 the Company had $157.1 million in store
closing costs related to 158 stores (154 leased and 4 owned) and two
distribution centers. Disposition efforts on the properties related to these
stores(leases, equipment and store buildings) began immediately following the
store closing and will continue until all related properties are disposed.
Depreciation and amortization of $55.8 million was 2.35% of sales
compared to 2.20% of sales in the third quarter of 1997. Year to date
depreciation and amortization was $162.2 million or 2.30% of sales. The quarter
and year to date increases are primarily due to leasehold improvements and
equipment purchases for new stores and renovations since the third quarter of
last year.
Interest expense of $17.4 million for the third quarter of 1998 and $68.2
million year to date decreased $11.8 million and $15.5 million, respectively,
compared to the same periods in 1997. During the third quarter, the Company
reached an agreement with the U.S. Internal Revenue Service ("IRS")regarding its
examination of tax years 1991-1994. As a result of this agreement, the Company
received a refund, totaling $10.5 million, related to tax paid in previous
years. The refund includes $7.2 million in tax (recorded during the quarter as a
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reduction to the Provision for Income Taxes) and related interest
income (recorded during the quarter as a reduction to Interest Expense). In
addition, interest expense was impacted by (1) the redemption of the Company's
convertible subordinated debentures during the second quarter of 1998,and(2)the
pre-payment of $50 million in note purchase agreements during the fourth quarter
of 1997.
The Provision for Income Taxes was impacted by the IRS refund as discussed
above, creating an effective tax rate for the third quarter
of 31.2%. The Company expects its continuing effective tax rate to be 38%.
Net income for the quarter was $72.8 million as compared to a loss of $6.4
million in the restated third quarter of 1997. The third quarter of 1997
included a $96.4 million pre-tax, non-operating charge ($58.8 after tax)
representing the Company's estimated costs associated with its divestiture of
the Southwest market. Excluding the impact of the tax refund recorded in the
third quarter of 1998, and the impact of the store closing charge recorded in
the third quarter of 1997, comparable net income increased 16% to $60.8 million
in 1998 from $52.4 million in 1997.
Liquidity and Capital Resources
Cash provided by operating activities totaled $406.5 million for the
36 weeks ended September 12, 1998 compared with $400.0 million for the same
period last year. The increase was primarily due to increases in net income and
trade payables (which exceeded the increase in related inventory) and a decrease
in receivables.
Capital expenditures totaled $219.4 million for the 36 weeks ended September 12,
1998 compared with $236.7 million for the same period in 1997. The Company
opened 49 new stores, closed 22 stores (including eleven relocations), and
completed the renovation of 88 existing stores through the end of third quarter
of 1998. Food Lion plans to open a total of 81 new stores in 1998 and to
renovate approximately 142 stores. The Company anticipates that the majority of
the new stores will be opened under conventional leasing arrangements.
Capital expenditures are projected to total approximately $360 million in 1998.
These capital expenditures will be financed through funds generated from
operations, existing bank and credit lines, and other debt, if necessary.
The Company maintains the following bank and credit lines:
$250 million commercial paper program under which no borrowings were
outstanding during the 36 weeks ended September 12, 1998 and September 6, 1997.
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A revolving credit facility with a syndicate of commercial banks providing
$700 million in committed lines of credit, of which $350 million expires in
December, 1998 and the remaining $350 million will expire in December, 2001.
There were no outstanding borrowings at the end of the third quarter of 1998
or during 1997.
Additional short-term committed lines of credit totaling $30 million which
are available when needed. The Company is not required to
maintain compensating balances related to these lines of credit, and
borrowings may occur periodically. There were no outstanding
borrowings as of September 12, 1998 or September 6, 1997. During the third
quarter of 1998, the Company had average borrowings of $.6 million at a daily
weighted average interest rate of 5.77% with a maximum amount outstanding of
$20 million.
Periodic short-term borrowings may be placed under informal credit
arrangements, which are available to the Company at the discretion of the
lender. Borrowings for the third quarter were as follows (see table below):
Informal Credit Arrangements
(dollars in millions) 1998 1997
Outstanding borrowings at end of third quarter $0 $0
Average borrowings $ 2.4 $ 4.9
Maximum amount outstanding $30.0 $52.0
Daily weighted average interest rate 5.76% 5.79%
During the third quarter of 1998, the Company did not purchase any shares of
Class A or Class B stock under the Company's $100 million stock repurchase plan
which expires in May of 1999. The Company activated the share repurchase program
October 6, 1998.
Year 2000
In 1996, the Company began evaluating both its information technology
systems, and other systems and equipment in order to identify and adjust date
sensitive systems for Year 2000 compliance. As part of this undertaking, the
Company created a Year 2000 Project Team to address the issues related to Year
2000 compliance. The Year 2000 Team is led by representatives from the
Company's Information Technology department and includes key representatives
from all areas of the Company. The Year 2000 Team has developed a plan to
identify and remediate all existing systems to ensure Year 2000 compliance by
the end of 1998.
Project phases one and two included an assessment by each of the Company's
departments to identify date sensitive systems and the creation
and execution of a remediation plan for systems impacted by Year 2000
issues. At the end of the third quarter of 1998, the Company is on track to
complete all remaining remediation efforts for existing systems during the
current fiscal year.
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The third and final phase of the plan began during the third quarter of the
current fiscal year and is focused on testing the remediation of
existing systems. Testing will focus on those systems identified by the plan as
critical to the operation of the Company's business and will continue throughout
1999 as appropriate.
In addition to the plan for existing systems, the Company anticipates finalizing
the implementation of certain replacement systems in the first six months of
1999 and has included the cost of these systems in its estimates for the Year
2000 project.
Except for the cost of replacement systems, the Company will expense the
cost of the Year 2000 project as incurred. The Company is funding the costs
associated with the Year 2000 project through operating cash flows and
has not deferred any Information Technology projects in order to complete
the Year 2000 project.
The Company estimates the total incremental cost of the Year 2000 project,
is $10.5 million which includes equipment and software replacements,
reprogramming, systems testing, and outside consulting services.
Approximately $2.8 million of the total cost for the Year 2000 project is
related to reprogramming or remediation of existing software, while the
remaining cost of approximately $7.7 million is related to the implementation
of certain replacement systems. At the end of the third quarter, the
Company had incurred approximately $6.0 million of the total cost of the
Year 2000 project of which $1.8 million had been expensed as incurred and
$4.2 million had been capitalized for replacement systems.
As part of the Year 2000 project, the Company has identified relationships with
third parties, including vendors, suppliers, and service providers, which the
Company believes are critical to its business operations. The Company is in the
process of communicating with these third parties through questionnaires,
letters and interviews in an effort to determine the extent to which they are
addressing their Year 2000 compliance issues. The Company will continue to
communicate with, assess and monitor the progress of these third parties in
resolving Year 2000 issues.
The Company anticipates minimal disruptions in its operations as a result of
system failures related to Year 2000 issues. If the Company or a key third
party experiences a systems failure due to the century change, the Company
believes the most significant adverse impact would be its inability to
communicate with suppliers concerning timely delivery of inventory. Other
possible consequences include, but are not limited to, loss of communications
with stores, loss of electric power, and an inability to process customer
transactions or otherwise engage in similar normal business activities. The
Company cannot assure that there will not be an adverse impact on the
Company if third parties do not appropriately address their Year 2000 issues
in a timely manner.
Although the Company does not believe the actual impact of these failures will
be material, the Company is currently developing a
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contingency plan for possible Year 2000 issues including the delivery of
inventory and processing of customer transactions. The Company will continue
to develop these plans based on its internal testing results, tests with third
parties and its assessment of other outside risks. The Company will continually
refine its contingency plan throughout 1999 as additional information becomes
available.
The projections and project completion dates are based on management's best
estimates and may be updated from time to time as additional information becomes
available. This section discussing Year 2000 issues contains forward-looking
statements (refer to "Other" below which addresses forward-looking
statements made by the Company).
Other
Information provided by the Company, including written or oral statements made
by its representatives, may contain forward-looking information as defined in
the Private Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, which address activities, events or developments
that the Company expects or anticipates will or may occur in the future,
including such things as expansion and growth of the Company's business, future
capital expenditures and the Company's business strategy, are forward-looking
statements. In reviewing such information it should be kept in mind that actual
results may differ materially from those projected or suggested in such
forward-looking statements. This forward-looking information is based on
various factors and was derived utilizing numerous assumptions. Many of
these factors have previously been identified in filings or statements made
by or on behalf of the Company, including filings with the Securities and
Exchange Commission of Forms 10-Q, 10-K and 8-K. Important assumptions and
other important factors that could cause actual results to differ materially
from those set forth in the forward-looking statements include: changes in
the general economy or in the Company's primary markets, changes in
consumer spending, competitive factors, the nature and extent of continued
consolidation in the industry, changes in the rate of inflation, changes in
state or federal legislation or regulation, adverse determinations with respect
to litigation or other claims, inability to develop new stores or complete
remodels as rapidly as planned, stability of product costs - supply or quality
control problems with the Company's vendors,issues and uncertainties
related to Year 2000 detailed from time-to-time in the Company's filings with
the Securities and Exchange Commission.
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Part II OTHER INFORMATION
Item 1. Legal Proceedings
Except as set forth below, the Company has had no significant developments
related to legal matters since the Item 1 disclosure included in the Company's
Form 10-Q for the quarter ended June 20, 1998.
In re Food Lion, Inc. Fair Labor Standards Act "Effective Scheduling" Litigation
In the first quarter of 1998, a petition for attorneys' fees was filed with
respect to the Florida claims and was settled during the third quarter of 1998
for an amount not material to the financial condition or results of operations
of the Company.
For further information concerning this litigation, see the Company's Form 10-Q
for the quarter ended June 20, 1998.
Item 2. Change in Securities
This item is not applicable.
Item 3. Defaults Upon Senior Securities
This item is not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
This item is not applicable.
Item 5. Other Information
This item is not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
27 Financial Data Schedule
(b). The Company did not file a report on Form 8-K for the period ended
September 12, 1998.
-16-
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
FOOD LION, INC.
Registrant
DATE October 27, 1998 BY: Laura Kendall
Laura Kendall
Vice President of Finance
Chief Financial Officer
Principal Financial Officer
-17-
EXHIBIT INDEX
SEQ. PAGE
EXHIBIT #
DESCRIPTION NO.
27 Financial Data Schedule 19-20
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets, the Consolidated Statements of Operations and the
Consolidated Statement of Cash Flows and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> SEP-12-1998
<CASH> 159,920
<SECURITIES> 0
<RECEIVABLES> 146,041
<ALLOWANCES> 0
<INVENTORY> 1,005,866
<CURRENT-ASSETS> 1,415,129
<PP&E> 2,963,963
<DEPRECIATION> 1,108,465
<TOTAL-ASSETS> 3,573,105
<CURRENT-LIABILITIES> 944,092
<BONDS> 435,168
0
0
<COMMON> 349,498
<OTHER-SE> 1,232,692
<TOTAL-LIABILITY-AND-EQUITY> 3,573,105
<SALES> 7,037,655
<TOTAL-REVENUES> 7,037,655
<CGS> 5,470,760
<TOTAL-COSTS> 5,470,760
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,188
<INCOME-PRETAX> 291,553
<INCOME-TAX> 103,517
<INCOME-CONTINUING> 188,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,036
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
