SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 19, 1999
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 July 23, 1999.
Class A Common Stock 242,890,915
Class B Common Stock 227,189,964
Page 1 of 18
FOOD LION, INC.
Form 10Q/A
Part I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Statements of Income for the 12 and
24 weeks ended June 19, 1999 and June 20, 1998 3-4
Consolidated Balance Sheets as of June 19,
1999, January 2, 1999 and June 20, 1998 5
Consolidated Statements of Cash Flows for
24 weeks ended June 19, 1999 and June
20, 1998 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-17
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOOD LION, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the 12 Weeks ended June 19, 1999 and June 20, 1998
(Dollars in thousands except per share data)
<TABLE>
June 19, 1999 June 20, 1998 June 19, 1999 June 20, 1998
% %
<S> <C> <C> <C> <C>
Net sales $2,509,240 $2,353,260 100.00 100.00
Cost of goods sold 1,933,085 1,826,657 77.04 77.62
Selling and administrative expenses 440,528 406,621 17.56 17.28
Operating income 135,627 119,982 5.40 5.10
Interest expense 25,384 23,154 1.01 0.99
Income before income taxes 110,243 96,828 4.39 4.11
Provision for income taxes 41,892 36,795 1.67 1.56
Net income $ 68,351 $ 60,033 2.72 2.55
Basic earnings per share $ 0.14 $ 0.13
Diluted earnings per share $ 0.14 $ 0.13
Dividends per share $ 0.04 $ 0.04
Weighted average number
of shares outstanding:
Class A 245,114,162 244,777,891
Class B 229,261,156 232,727,364
Total 474,375,318 477,505,255
</TABLE>
-3-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOOD LION, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the 24 Weeks ended June 19, 1999 and June 20, 1998
(Dollars in thousands except per share data)
<TABLE>
June 19, 1999 June 20, 1998 June 19, 1999 June 20, 1998
% %
<S> <C> <C> <C> <C>
Net sales $4,916,286 $4,658,733 100.00 100.00
Cost of goods sold 3,789,947 3,626,772 77.09 77.85
Selling and administrative expenses 871,829 795,334 17.74 17.07
Operating income 254,510 236,627 5.17 5.08
Interest expense 49,737 50,768 1.01 1.09
Income before income taxes 204,773 185,859 4.16 3.99
Provision for income taxes 77,814 70,592 1.58 1.52
Net income $ 126,959 $ 115,267 2.58 2.47
Basic earnings per share $ 0.27 $ 0.24
Diluted earnings per share $ 0.27 $ 0.24
Dividends per share $ 0.08 $ 0.07
Weighted average number
of shares outstanding:
Class A 246,510,337 240,556,329
Class B 230,045,760 232,727,364
Total 476,556,097 473,283,693
</TABLE>
-4-
FOOD LION, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
June 19, 1999 January 2, 1999 June 19, 1998
Assets
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 89,822 $ 123,592 $ 94,697
Receivables 167,358 199,101 157,905
Inventories 1,104,720 1,103,635 1,000,916
Prepaid expenses 27,215 20,552 48,562
Deferred tax asset 65,397 65,397 63,123
Total current assets 1,454,512 1,512,277 1,365,203
Property, at cost, less accumulated
depreciation 1,968,728 1,897,080 1,832,946
Deferred tax asset 4,707 4,707 51,980
Intangible assets 267,193 258,402 267,046
Other assets 3,346 3,495 4,069
Total assets $3,698,486 $3,675,961 $3,521,244
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $ 62,000 $ 61,000 $ -
Accounts payable, trade 559,399 545,015 557,580
Accrued expenses 353,137 360,105 321,621
Capital lease obligations - current 22,531 21,940 21,229
Long term debt - current 42,292 42,518 2,646
Other liabilities - current 11,272 9,839 9,911
Total current liabilities 1,050,631 1,040,417 912,987
Long-term debt 428,641 429,763 470,797
Capital lease obligations 492,327 492,660 491,178
Other liabilities 109,576 114,199 120,686
Total liabilities 2,081,175 2,077,039 1,995,648
Shareholders' Equity:
Class A non-voting common stock, $.50 par value 121,813 123,946 125,299
Class B voting common stock, $.50 par value 114,039 115,415 116,364
Additional capital - 60,332 105,999
Retained earnings 1,381,459 1,299,229 1,177,934
Total shareholders' equity 1,617,311 1,598,922 1,525,596
Total liabilities and shareholders' equity $3,698,486 $3,675,961 $3,521,244
</TABLE>
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FOOD LION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 24 Weeks ended June 19, 1999 and June 20, 1998
(Dollars in thousands)
24 Weeks
June 19, 1999 June 20,1998
Cash flows from operating activities
Net income $126,959 $115,267
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 117,176 106,430
Gain on disposals of property and
capital lease terminations (1,571) (1,841)
Changes in operating assets and liabilities:
Receivables 31,743 8,885
Inventories (1,085) (18,172)
Prepaid expenses (6,663) (26,048)
Other assets 149 1,651
Accounts payable and accrued expenses 7,416 30,121
Other liabilities (3,190) (4,039)
Total adjustments 143,975 96,987
Net cash provided by operating activities 270,934 212,254
Cash flows from investing activities
Capital expenditures (185,851) (141,878)
Proceeds from disposal of property 1,279 66,895
Net cash used in investing activities (184,572) ( 74,983)
Cash flows from financing activities
Net proceeds (payments) under short-term borrowings 1,000 (80,000)
Principal payments on long-term debt (1,348) (4,992)
Principal payments under capital lease obligations (11,214) (17,621)
Dividends paid (39,884) (35,248)
Repurchase of common stock (69,546) -
Proceeds from issuance of common stock 860 1,947
Net cash used in financing activities (120,132) (135,914)
Net (decrease) increase in cash and cash
equivalents (33,770) 1,357
Cash and cash equivalents at beginning
of period 123,592 93,340
Cash and cash equivalents at end of period $ 89,822 $ 94,697
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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 2, 1999 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
consisting of normal recurring adjustments necessary for a fair
presentation of interim results.
2) Supplemental Disclosure of Cash Flow Information:
Selected cash payments and non-cash activities during the period
were as follows:
June 19, 1999 June 20, 1998
Cash payments for income taxes $ 86,923 $93,273
Cash payments for interest,
net of amounts capitalized 51,332 52,952
Non-cash investing and financing activities:
Capitalized lease obligations
incurred for store properties 28,878 31,975
Capitalized lease obligations
terminated for store properties 17,406 12,302
Conversion of long-term debt
to stock 0 110,445
The Company considers all highly liquid investment instruments
purchased with an original maturity of three months or less to
be cash equivalents.
-7-
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 as of June 19, 1999 and June 20,
1998, 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 $141.5 million and $119.9 million greater
as of June 19, 1999 and June 20, 1998, respectively. Application of
the LIFO method resulted in increases in the cost of goods sold of
$2.4 million and $5.5 million for the 24 weeks ended June 19,
1999 and June 20, 1998, respectively.
4) Reclassification
Certain financial statement items have been reclassified to
conform to the current year's format.
5) Earnings Per Share
Basic earnings per share is computed by dividing income available
to common shareholders by the weighted average number of common shares
outstanding (474,375,318 and 477,505,255 for the second quarter of 1999 and
1998, respectively; 476,556,097 and 473,283,693 year to date for 1999 and
1998, respectively). Diluted earnings per share is computed by dividing
income available to common shareholders by the weighted average number of
common shares outstanding and the weighted average number of potential
common shares outstanding. The common stock equivalents that were added to
the weighted average shares outstanding for purposes of diluted EPS were
956,000 and 1,267,000 for outstanding stock options year to date for 1999
and 1998, respectively.
-8-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS (12 and 24 weeks ended June 19, 1999 compared to 12 and
24 weeks ended June 20, 1998)
The Company recorded earnings for the second quarter and year to date
for 1999 of $68.4 million and $127.0 million, respectively, resulting in
increases of 13.9% and 10.1% over the corresponding periods of 1998. The
second quarter of 1999 includes an after-tax charge of $2 million related
to executive post-employment benefits (see discussion below). Excluding
this charge, earnings would have been $70.4 million for the second quarter
and $129.0 million year to date, representing increases of 17.2% and 11.9%
over the respective periods of 1998.
Sales for the second quarter and year to date of 1999 were $2.5
billion and $4.9 billion, respectively, resulting in increases of 6.6%
and 5.5% over the corresponding periods of 1998. The Company's second
quarter 1999 sales are not comparable to 1998 due to a change in the
method of collecting sales tax on products discounted through the MVP
customer ("MVP") and Preferred Customer Club ("PCC") loyalty card
programs (see discussion below). On a comparable basis, 1999 second
quarter and year to date sales increased 7.5% and 7.0% over the
corresponding periods of last year. Same store sales increased 2.4% for
the second quarter.
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 the full retail price of the MVP/PCC items. The related impact to
the second quarter and year to date of 1999 was to reduce reported sales
by approximately $20.4 million and $70.4 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 rather than cost of goods sold
under the original method. The following table illustrates the impact of
the change.
-9-
Second Quarter of
1999 1999
Dollars %
1999 Comparable % Comparable
Dollars to As to
As Qtr. 2- Reported Qtr. 2-
Reported 1998 1998
(Dollars and (New (Original (New (Original
shares in Method) Method) Method) Method)
thousands)
Net sales $ 2,509,240 $ 2,529,658 100.00% 100.00%
Cost of goods sold 1,933,085 1,953,503 77.04 77.22
Selling and
administrative 440,528 440,528 17.56 17.42
expenses
Operating income 135,627 135,627 5.40 5.36
Interest expense 25,384 25,384 1.01 1.00
Income before 110,243 110,243 4.39 4.36
income taxes
Provision for 41,892 41,892 1.67 1.66
income taxes
Net income $68,351 $68,351 2.72% 2.70%
Basic and diluted
earnings per share $0.14 $0.14
Weighted average
number of shares 474,375 474,375
outstanding
The Company's 1999 business plan includes opening 94 new stores,
closing 35 existing stores (approximately 20 of these closings will be
relocations) and renovating approximately 140 existing stores. With this
growth plan, the Company anticipates a net increase in store square
footage of approximately 8.5% in 1999. As of June 19, 1999, the Company
had opened 53 new stores, closed 13 stores (of which 12 were relocations),
and completed renovations of 52 existing stores.
Gross profits of 22.96% for the second quarter and 22.91% year to
date (or 22.78% and 22.59%, respectively, adjusted to the original method
of reporting sales tax) compared favorably against prior year gross
profits of 22.38% of sales in the second quarter and 22.15% of sales year
to date. The increase in gross profit is due to continued category
management initiatives particularly in the perishable and non-grocery
categories. In addition, the Company benefited from continued efficient
warehouse operations which led to lower operating costs. The second
quarter LIFO charge was $1 million. The Company's internal testing for
the second quarter indicated minimal inflation; however, given the
difficulty in predicting inflationary trends, the Company has provided a
$2.4 million LIFO provision through the second quarter of 1999.
-10-
For the second quarter of 1999, selling and administrative expenses
were $440.5 million or 17.56% of sales (17.42% adjusted for the original
method of reporting sales tax) as compared to $406.6 million or 17.28% of
sales in the corresponding period of the prior year. Excluding the one-time
charge of $3.3 million (pre tax) related to the executive post-employment
benefits (see discussion below), selling and administrative expenses would
have been 17.43% of sales for the second quarter (17.30% adjusted for the
original method of reporting sales tax). The Company posted an improvement
in selling and administrative expenses on a comparable basis despite
continued increases in labor related costs due to the low unemployment rate
in the Southeast market, and an increase in occupancy costs resulting from
the Company's new store opening and renovation program. This improvement was
accomplished through strong sales posted during the quarter and good cost
control across all remaining expense categories.
During the second quarter, the Company recorded a $3.3 million pre-
tax charge ($2 million after-tax) related to executive post-employment
benefits. These benefits relate to the resignation of the Company's
former Senior Vice President of Merchandising and finalization of amounts
due upon retirement of the Company's former President and Chief Executive
Officer ("CEO"). These costs are included in selling and administrative
expenses.
Interest expense of $25.4 million for the second quarter of 1999 and
$49.7 million year to date compares to $23.2 million and $50.8 million for
the respective periods of 1998 due to higher interest expense on store
capital leases.
Net income for the quarter was $68.4 million or 2.72% of sales as compared
to $60.0 million or 2.55% of sales in the second quarter of the prior year.
Basic and diluted earnings per share were $0.14 for the second quarter of 1999
compared to $0.13 last year. Excluding the one-time after-tax charge related to
post-employment benefits of $2.0 million (see discussion above), net income for
the second quarter of 1999 would have been $70.4 million or 2.80% of sales, and
basic and diluted earnings per share would have been $0.15.
Store Closing Costs
(Dollars in millions)
Reduction
of Asset Lease Accrued
Values Liabilities Expenses Total
Balance at March 27, 1999 $15.4 $110.5 $1.2 $127.1
Additions .6 3.8 1.6 6.0
Reductions 0.0 -3.6 -2.7 -6.3
Balance at June 19, 1999 $16.0 $110.7 $.1 $126.8
-11-
The Company recorded $3.5 million in store closing costs (included in
Selling and Administrative Expenses on the Company's Consolidated Statement of
Income) during the second quarter of 1999. These costs are included in the
"Additions" line in the table above. Significant additions also include $2.1
million related to 12 acquired stores that will not re-open as Food Lion
locations. The costs associated with closing these stores were charged against
Goodwill.
Reductions include fees totaling $1.9 million related to the termination of
three store leases. The remaining $4.4 million relates to on-going rent
payments made on lease obligations and payment of expenses arising from
contractual obligations.
During the second quarter of 1999, the Company closed 8 stores in the
normal course of business, all 8 stores were relocated. The revenues and
operating results of these stores were not significant to the Company's total
revenues and operating results.
During the second quarter of 1999, the Company completed disposition
efforts related to 4 closed stores.
At the end of the second quarter of 1999 the Company had $126.8 million in
store closing costs related to 142 stores (137 leased and 5 owned) and one
distribution center. Disposition efforts on the properties related to these
facilities (leases, equipment, and buildings) will continue until all related
properties are disposed.
Liquidity and Capital Resources
Cash provided by operating activities totaled $270.9 million for the
24 weeks ended June 19, 1999, compared with $212.3 million for the same
period last year. The increase was primarily due to an increase in
operating income and improved receivable management.
Capital expenditures totaled $186 million for the 24 weeks ended June
19, 1999, compared with $142 million for the same
period in 1998. The Company opened 53 new stores, closed 13
stores (including 12 relocations), and completed the renovation of 52
existing stores through the end of the second quarter of
1999. Food Lion plans to open a total of 94 new stores in 1999 and
renovate approximately 140 stores. The Company anticipates that the
majority of the new stores will be opened under conventional leasing
arrangements.
Capital expenditures currently estimated for 1999 are $390 million.
Capital expenditures for 1999 will be financed through funds generated
from operations and existing bank and credit lines.
-12-
The Company maintains the following bank and credit lines:
$250.0 million commercial paper program under which no borrowings were
outstanding during the first and second quarters of 1999 and 1998.
A revolving credit facility with a syndicate of commercial banks providing
$625.0 million in committed lines of credit which expires in December 1999.
There were no outstanding borrowings as of the end of the second quarter of
1999 or 1998.
Additional short-term committed lines of credit totaling $20.0 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. As of June 19, 1999, the outstanding borrowings from
this line totaled $20 million. There were no outstanding borrowings as of
June 20, 1998. During the second quarter of 1999, the Company had average
borrowings of $8.04 million at a daily weighted average interest rate of
5.01% with a maximum amount outstanding of $20.0 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 second quarter were as follows:
Informal Credit Arrangements
(Dollars in millions)
1999 1998
Outstanding borrowings
at the end of the second quarter $42.0 $0.0
Average borrowings $26.8 $15.8
Maximum amount outstanding $105.0 $72.0
Daily weighted average interest rate 5.09% 5.62%
During the second quarter of 1999, the Company repurchased $69.5 million of
Company stock, representing approximately 4.4 million Class A shares and
approximately 2.8 million Class B shares. In July 1999, the Board of Directors
approved $100 million as the amount available for share repurchase going
forward. Purchases of Class A and/or Class B Common Stock may be made in the
open market, as deemed in the best interest of shareholders.
Year 2000
In 1996, the Company began evaluating both its information
-13-
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 other areas of the Company. The Year
2000 Team has developed a three-phase plan to identify and remediate all
existing systems to ensure the Company's readiness for the century change.
These phases consist of assessment, system remediation and integration
testing.
Project Phase One primarily focused on assessing the business impact
of the century change on the Company's operating environment. This
assessment included information technology systems, non-information
technology systems and supply chain readiness. The assessment was
conducted based on an analysis of the Company's individual business
processes and the potential material risks associated with the Company's
operations. Project Phase Two primarily focused on code and system
conversion (remediation) of date impacted applications and systems.
Remediation or replacement was conducted for all information technology
and embedded systems impacted by Year 2000 issues. Project Phase Three
involves the execution of various testing protocol, analysis of test
results and the development of contingency plans for each of the impacted
systems.
The Company has completed Project Phase One for all systems and
Project Phase Two for all systems not scheduled for replacement.
Installation of replacement systems impacted by Year 2000 issues is
progressing with completion expected in fall, 1999. The Company has
included the cost of these systems in its estimates for the Year 2000
Project. The Company has commenced Project Phase Three, which includes
testing and validation of impacted systems, and anticipates this phase, as
well as development of contingency plans, will continue throughout 1999.
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 approximately $17 million which includes equipment and software
replacements, reprogramming, systems testing, and outside consulting
services. Approximately $4.0 million of the total cost for the Year 2000
Project is related to reprogramming or remediation of existing software
and new systems, while the remaining cost of approximately $13.0 million
-14-
is related to the implementation of certain replacement systems. At the
end of the second quarter of fiscal 1999, the Company had incurred
approximately $11 million of the total cost of the Year 2000 project of
which $3.1 million had been expensed as incurred and $7.9 million had been
capitalized for replacement systems.
The Company has not materially increased the number of its employees
in order to complete the Year 2000 Project. Although the Company has
utilized external contractors in various phases of the Year 2000 Project,
the Company does not consider any of these contracts or relationships
material for the completion of the Year 2000 Project. The Company has
assigned certain employees from its Information Technology department to
the Year 2000 Project (averaging approximately 20 employees during Phase
One, 22 employees during Phase Two, and 19 employees during Phase Three of
the project and less than 15 employees from its user departments). As
discussed above, the Company has created a Year 2000 Project Team composed
of representatives from all areas of the Company. Members of the Year
2000 Project Team have completed the tasks associated with the Year 2000
Project as part of their normal duties. Although the Company has
discussed its Year 2000 Project with certain of its consultants, third
parties were not retained to perform independent verification and
validation processes regarding the risks and cost estimates of the Year
2000 Project.
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. Although the Company considered several factors in
identifying these critical relationships, the Company has concentrated its
communication efforts, as discussed below, with suppliers and vendors from
whom the Company makes annual purchases in excess of $10 million. The
Company continues to communicate 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.
Based on the responses received to date from these efforts, the Company
understands that all critical suppliers have indicated they anticipate
being Year 2000 compliant. A substantial percentage of these critical
suppliers have indicated they are Year 2000 compliant while the remaining
suppliers have indicated they are still addressing Year 2000 issues.
Where appropriate, the Company has developed strategies to work with its
suppliers to verify Year 2000 readiness and create contingency plans as
discussed below.
The Company has identified its operational and supply chain
activities as its most critical functions potentially impacted by Year
2000 issues. The Company will conduct testing within a parallel operating
environment created to simulate business
-15-
processes and integrated systems functionality, including front-end
operations and supply chain activities. Validation of integrated systems
functionality will be performed by comparing test results to actual
processes and data.
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. Such 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. As discussed below, the
Company has developed contingency plans with its critical suppliers in
order to arrange for the timely delivery of inventory. The Company will
continue to communicate with, assess and monitor the progress of these
third parties in resolving Year 2000 issues.
Although the Company does not believe the actual impact of any system
failures related to the century change will be material, the Company has
developed various contingency plans with its critical suppliers and
certain other vendors in order to assure the timely delivery of inventory
and prepare for normal business activities following the century change.
In the event the Company or a key supplier is adversely impacted by the
century change, the Company will implement its contingency plan for such
situation. These plans include alternate means of communication with
suppliers, such as facsimile, telephone and hand delivery, manual
operation of certain systems, as well as the implementation of certain
established ordering procedures. Under the terms of these established
ordering procedures, the Company's critical suppliers will provide
inventory to the Company based on historical ordering patterns. These
suppliers will also substitute products and adjust inventory levels of
substitute items based on the availability of certain products. The
Company will continue to develop and finalize the implementation of its
contingency plans with third parties throughout 1999.
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
-16-
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, and 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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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: August 17, 1999 BY:\s\ Laura Kendall
Laura Kendall
Vice President of Finance
Chief Financial Officer
Principal Accounting Officer
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