FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1994
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 1-7603
HANNAFORD BROS. CO.
(Exact name of Registrant as specified in its charter)
Maine 01-0085930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
145 Pleasant Hill Road, Scarborough, Maine 04074
(Address of principal executive offices; Zip Code)
Registrant's telephone number, including area code: (207) 883-2911
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 the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
As of October 26, 1994, there were 41,729,599 outstanding shares of Common
Stock, $.75 par value, the only authorized class of common stock of the
Registrant.<PAGE>
INDEX
PART I
FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets, October 1, 1994 and
January 1, 1994 3-4
Consolidated Statements of Earnings, Three Months
Ended October 1, 1994 and October 2, 1993 5
Consolidated Statements of Earnings, Nine Months
Ended October 1, 1994 and October 2, 1993 6
Consolidated Statements of Cash Flows
Nine Months Ended October 1, 1994
and October 2, 1993 7-8
Notes and Schedules to Consolidated Financial
Statements 9-12
Item 2. Management's Discussion and Analysis of
Third Quarter 1994 Results 13-16
PART II - OTHER INFORMATION
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8K 17
Signatures 17
Exhibit 15 - Letter from Coopers & Lybrand
regarding Quarterly Review 18
Exhibit 23 - Letter from Coopers & Lybrand
regarding Form S-8 Consent 19<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in thousands)
(UNAUDITED)
October 1, January 1,
1994 1994
Current assets:
Cash and cash items $ 18,666 $ 77,496
Short-term investments -- 19,855
Accounts receivable, net 21,883 15,765
Inventories 133,307 129,934
Prepaid expenses 4,811 4,695
Deferred income taxes 7,350 7,920
Total current assets 186,017 255,665
Property, plant and equipment, net 493,793 437,606
Leased property under capital leases, net 52,649 50,070
Investment in financing leases 1,762 1,787
Other assets:
Notes receivable 457 2,395
Deferred charges, net 103,901 38,416
Computer software costs, net 8,236 8,790
Miscellaneous assets 578 626
Total other assets 113,172 50,227
$847,393 $795,355
See accompanying notes to consolidated financial statements.<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in thousands)
(UNAUDITED)
October 1, January 1,
1994 1994
Current liabilities:
Current maturities of long-term debt $ 7,634 $ 7,180
Obligations under capital leases 1,293 1,412
Accounts payable 86,462 79,679
Accrued payroll 18,350 17,323
Other accrued expenses 27,429 29,348
Income taxes 3,509 1,893
Total current liabilities 144,677 136,835
Deferred income tax liabilities 22,896 23,753
Other liabilities 20,759 20,618
Long-term debt 155,763 156,716
Obligations under capital leases 62,887 58,835
Redeemable preferred stock of a subsidiary,
par value $100 per share - 1,883
Shareholders' equity:
Class A Serial Preferred stock, no par,
authorized 2,000,000 shares - -
Class B Serial Preferred stock,
par value $.01 per share,
authorized 28,000,000 shares - -
Common stock, par value $.75 per share:
Authorized 110,000,000 shares;
issued and outstanding 41,712,105
shares at October 1, 1994, and
41,210,774 shares at January 1, 1994 31,284 30,908
Additional paid-in capital 109,407 99,748
Preferred stock purchase rights 417 412
Retained earnings 299,303 265,647
Total shareholders' equity 440,411 396,715
$847,393 $795,355
See accompanying notes to consolidated financial statements.<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
(UNAUDITED)
THREE MONTHS ENDED
October 1, October 2,
1994 1993
Sales and other revenues $622,554 $530,064
Cost of sales 470,942 396,939
Gross margin 151,612 133,125
Selling, general and administrative expenses 114,326 100,831
Operating profit 37,286 32,294
Interest expense, net 5,392 4,841
Earnings before income taxes 31,894 27,453
Income taxes 12,792 11,453
Net earnings $ 19,102 $ 16,000
Per share of common stock:
Net earnings $ .46 $ .39
Cash dividends $ .095 $ .085
Weighted average number of common shares
outstanding (000's) 41,655 41,121
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
(UNAUDITED)
NINE MONTHS ENDED
October 1, October 2,
1994 1993
Sales and other revenues $1,679,848 $1,538,603
Cost of sales 1,268,359 1,154,482
Gross margin 411,489 384,121
Selling, general and administrative expenses 319,811 301,464
Operating profit 91,678 82,657
Interest expense, net 15,337 14,674
Earnings before income taxes 76,341 67,983
Income taxes 30,771 27,728
Earnings before cumulative effect of change
in accounting principle 45,570 40,255
Cumulative effect to January 3, 1993 of
change in income tax accounting - 2,100
Net earnings $ 45,570 $ 42,355
Per share of common stock:
Earnings before cumulative effect of
change in accounting principle $ 1.10 $ .98
Cumulative effect to January 3, 1993 of
change in income tax accounting - .05
Net earnings $ 1.10 $ 1.03
Cash dividends $ .285 $ .255
Weighted average number of common shares
outstanding (000's) 41,478 41,008
See accompanying notes to consolidated financial statements.<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
NINE MONTHS ENDED
October 1, October 2,
1994 1993
Cash flows from operating activities:
Net income $ 45,570 $ 42,355
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 45,894 41,926
Cumulative effect of accounting change - (2,100)
Decrease in inventories 5,488 2,726
(Increase) decrease in receivables and
prepayments 293 (3,600)
Increase (decrease) in accounts payable
and accrued expenses 230 (12,833)
Increase (decrease) in income taxes payable 1,616 (2,404)
Decrease in deferred taxes (287) (1,144)
Other operating activities (2,208) (1,493)
Net cash provided by operating
activities 96,596 63,433
Cash flows from investing activities:
Acquisition of Wilson's Supermarkets,
net of cash acquired (110,007) -
Acquisition of property, plant and
equipment (53,672) (44,828)
Sale of property, plant and
equipment, net 2,351 1,223
Increase in deferred charges (1,800) (3,492)
Increase in computer software costs (1,825) (2,601)
(Increase) decrease in short-term
investments 19,855 (25,008)
Net cash used in investing activities (145,098) (74,706)
Cash flows from financing activities:
Principal payments under capital
lease obligations (705) (1,017)
Proceeds from issuance of long-term debt 3,800 -
Issuance of common stock 8,035 7,266
Payments of long-term debt (9,549) (8,277)
Dividends paid (11,909) (10,638)
Net cash used for financing activities (10,328) (12,666)
Net decrease in cash and cash items (58,830) (23,939)
Cash and cash items at beginning of period 77,496 94,789
Cash and cash items at end of period $ 18,666 $ 70,850
See accompanying notes to consolidated financial statements.<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information
On July 26, 1994, the Company purchased the capital stock of Boney Wilson
& Sons, Inc.,and the majority of the assets owned by Wilson Brothers
Partnership for approximately $120,454,000. In conjunction with the
acquisition, liabilities were assumed and common stock and a promissory
note were issued as follows:
(in thousands)
Total cost of acquisition $126,256
Less: Liabilities assumed 5,802
Issuance of common stock 2,000
Promissory note 4,500
Cash acquired 3,947
Cash paid for acquisition $110,007
(in thousands)
(UNAUDITED)
NINE MONTHS ENDED
October 1, October 2,
Cash paid during the first three quarters for: 1994 1993
Interest (net of amount capitalized,
$1,307 in 1994 and $1,137 in 1993) $16,294 $16,323
Income taxes $29,442 $31,277
Supplemental disclosure of non-cash investing and financing activity.
Capital lease obligations of $5,383,000 and $3,155,000 were incurred
during the nine month period ended October 1, 1994 and October 2, 1993
respectively, when the Company entered into leases for certain improved
real estate.
Disclosure of accounting policy
For the purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid debt instruments purchased with maturities of
three months or less at time of purchase to be cash items.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, the amounts shown
reflect all adjustments necessary to present fairly the financial position
and results of operations for the periods presented. All such adjustments
are of a normal recurring nature.
Earnings per share of common stock have been determined by dividing net
earnings available to common shareholders by the weighted average number of
shares of common stock outstanding. The assumed exercise of existing
employee stock options has been excluded since it does not result in any
material dilution. Net earnings available to common shareholders is equal
to net earnings reduced by preferred stock dividends of $47,000 for the
three months ended October 2, 1993, $74,000 for the nine months ended
October 1, 1994 and $172,000 for the nine months ended October 2, 1993.
All of the remaining outstanding shares of preferred stock were redeemed in
the second quarter of 1994 (Note 7) so there were no preferred dividends
paid in the third quarter of 1994.
It is suggested that the financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's latest
annual report.
2. ACQUISITION OF WILSON'S SUPERMARKETS
On July 26, 1994, the Company acquired Boney Wilson & Sons, Inc. (Wilson's)
and the majority of assets owned by Wilson Brothers Partnership, a
partnership which owned certain real estate, the majority of which was
leased to Wilson's and used in the ordinary course of business. Wilson's
operates 20 supermarkets in southeastern North Carolina and northeastern
South Carolina. The purchase also included sites for five additional
supermarkets, one of which was opened on September 21, 1994, and two of
which are under construction.
The acquisition has been accounted for as a purchase, and accordingly the
assets acquired and liabilities assumed have been recorded at their
estimated fair values on the date of acquisition. The results of <PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
operations of Wilson's are included in the Consolidated Statements of
Earnings from June 19, 1994, the effective date of ownership. The total
cost of the acquisition, including assumed liabilities, is approximately
$126.3 million, which exceeds the fair value of the acquired net assets by
approximately $67.8 million. The excess will be recorded as goodwill and
amortized utilizing the straight line method over 20 years. Included
within the assets acquired was approximately $3.9 million of cash and $4.5
million of cash advances to certain wholesalers.
Proforma unaudited results of operations of the Company, assuming the
acquisition had occurred on January 1, 1994, and January 2, 1993, are as
follows:
Unaudited
Nine Months Ended
October 1 October 2
(In thousands except per share data) 1994 1993
Net sales $1,773,930 $1,678,133
Earnings before cumulative effect
of change in accounting principle $ 46,406 $ 41,870
Net earnings $ 46,406 $ 43,970
Per share of common stock:
Earnings before cumulative effect
of change in accounting principle $ 1.12 $ 1.01
Cumulative effect of change in
accounting principle $ -- $ .05
Net earnings $ 1.12 $ 1.06
The foregoing proforma data is not necessarily indicative of what would
have occurred had the acquisition been consummated at the beginning of each
nine month period, nor of future operations of the combined companies.
3. CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES
Effective January 3, 1993, the Company adopted STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS (SFAS) NO. 109 - ACCOUNTING FOR INCOME TAXES (the
Statement). The Statement requires a liability method to be used in
accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using
the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. Prior to the adoption of the Statement, income
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
tax expense was determined using the deferred method. Deferred tax
expense was based on items of income and expense reported in different
years in the financial statements and tax returns and were measured at the
tax rate in effect in the year the difference originated.
As permitted by the Statement, the Company has elected not to restate the
financial statements of any prior periods, the impact of which would not
be material. The cumulative effect of this change for periods prior to
January 3, 1993 is $2.1 million or $.05 per share and is shown separately
in the Consolidated Statement of Earnings for the nine months ended
October 2, 1993.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
(in thousands)
(Unaudited)
October 1, January 1,
1994 1994
Land and improvements $ 73,096 $ 55,699
Buildings 198,377 175,894
Furniture, fixtures & equipment 284,157 252,474
Leasehold interests & improvements 164,782 145,595
Construction in progress 13,482 16,789
733,894 646,451
Less accumulated depreciation and
amortization 240,101 208,845
$493,793 $437,606
5. LEASED PROPERTY
Leased property under capital leases consists of the following:
(in thousands)
(Unaudited)
October 1, January 1,
1994 1994
Real property $69,689 $65,151
Less accumulated amortization 17,040 15,081
$52,649 $50,070
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
6. LONG-TERM DEBT
During the first three quarters of 1994, the Company extinguished certain
debt, collateralized by real estate and equipment, held by insurance
companies and by an Industrial Development Agency, totalling $3,742,000.
These loans had terms ranging from 7 to 25 years and interest rates
between 8.75% and 10.375%. In October 1994, the Company extinguished
certain debt, secured by real estate and held by a group of insurance
companies, totalling $13,175,000. This loan had a term of 20 years and an
interest rate of 13.7%.
On July 26, 1994, the Company signed a promissory note for $4,500,000 as
part of its purchase of Wilson's Supermarkets. The note carries an
interest rate of 6% and a term of 5 years.
During the first three quarters of 1994 the Company reduced its unused,
uncommitted short term lines of credit from $38 million with five banks to
$28 million with four banks. Of this amount, approximately $8 million is
reserved to support outstanding letters of credit which guarantee payment
of certain insurance claims and premiums. On October 1, 1994 the Company
had outstanding $3,800,000 on its revolving lines of credit.
7. REDEEMABLE PREFERRED STOCK OF A SUBSIDIARY
On April 21, 1994, the Company redeemed 18,834 shares of a Series B Voting
Preferred Stock of its subsidiary. The shares had a par value of $100 and
were redeemed at $108 per share, or a total of $2,034,000.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1994 RESULTS
RESULTS OF OPERATIONS
Sales and other revenues rose 9.2% for the first three quarters of 1994, to
$1,679.8 million, an increase of $141.2 million over the first three
quarters of 1993. Retail sales increased $144.9 million or 11.3% to
$1,614.6 million, reflecting an increase of $16.1 million or 1.2% in sales
from supermarkets that were open in both periods presented ("comparable
store sales") and additional sales of $128.8 million from the net impact of
new, expanded and closed stores as well as the acquisition of Wilson's
Supermarkets in July, 1994. Other sales and revenues, which include
trucking, wholesale, real estate and miscellaneous retail operations,
decreased $3.7 million.
In the third quarter of 1994, sales and other revenues were $622.6 million,
an increase of $92.5 million or 17.4% over those reported for the same
period in 1993. Retail sales increased $93.3 million or 18.4% to $599.5
million. Comparable store sales increased $8.6 million or 1.8%, while the
net impact of new, expanded and closed stores as well as the acquisition of
Wilson's Supermarkets, resulted in additional sales of $84.7 million.
Other sales and revenues decreased $0.8 million during the quarter.
Excluding the sales and other revenues from Wilson's Supermarkets, the
Company's sales and other revenues were up 5.7% for the third quarter and
5.1% for the nine months.
Gross margins decreased in the first nine months of 1994 to 24.5% of sales
and other revenues from 25.0% in the first nine months of 1993. For the
third quarter of 1994, gross margins were 24.4% versus 25.1% for the third
quarter of 1993. This decrease in margins continues a trend that began in
the second half of 1993. These decreases reflect the ongoing competitive
pressures throughout the Company's marketing territories. The Company
continues to focus on maintaining a competitive pricing strategy in its
marketing areas by passing operating efficiencies on to its customers in
the form of lower prices. The third quarter decrease also reflects lower
gross margins earned by Wilson's Supermarkets.
Selling, general and administrative expenses decreased to 19.0% of sales
and other revenues in the first nine months of 1994 as compared to 19.6% in
the comparable period of 1993. This continues a significant downward trend
that began in 1992 when first nine months' selling, general and <PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1994 RESULTS
administrative expenses were 20.0% of sales and other revenues. For the
third quarter of 1994, selling, general and administrative expenses were
18.4% of sales and other revenues versus 19.0% for the third quarter of
1993. Payroll and payroll related expenses, which exceeded 50% of total
selling, general, and administrative expenses in all periods presented,
decreased as a percentage of sales and other revenues when comparing the
first nine months of 1994 with the first nine months of 1993 and when
comparing the third quarter of 1994 with the third quarter of 1993. This
resulted from continuing cost containment efforts relating to salaries and
wages and employer-related insurance costs. The third quarter reduction of
selling, general and administrative expenses expressed as a percentage of
sales was also favorably impacted by the operations of Wilson's
Supermarkets.
The combined federal and state income tax rate was 40.3% for the first nine
months of 1994, compared to 40.8% for the first nine months of 1993. The
higher effective rate in 1993 is due primarily to a temporary reduction in
1993 of certain state income tax credits. The effective income tax rate was
40.1% in the third quarter of 1994 versus 41.7% in the third quarter of
1993. The higher effective rate in the third quarter of 1993 was due to a
retroactive increase in the federal corporate income tax rate coupled with
the temporary reduction of certain state income tax credits.
Net earnings increased 7.6% in the first nine months of 1994 to $45.6
million or 2.7% of sales and other revenues, an increase of $3.2 million
from 1993 first nine months earnings of $42.4 million or 2.7% of sales and
other revenues. During the first quarter of 1993, the Company adopted, as
required, SFAS NO. 109 - ACCOUNTING FOR INCOME TAXES (Note 3). The
cumulative effect of this adjustment, which increased net earnings by $2.1
million or $.05 per share, was reflected in the 1993 first nine months
results. Excluding the change in accounting, net earnings for the first
nine months of 1994 increased 13.2% over 1993 first nine month results.
Third quarter 1994 net earnings were $19.1 million or 3.1% of sales and
other revenues as compared to $16.0 million or 3.0% of sales and other
revenues in the third quarter of 1993. These improvements reflect the
impact of reduced selling, general and administrative expenses expressed as
a percentage of sales, offset by a reduction in gross margins.
CAPITAL RESOURCES AND LIQUIDITY
The current ratio (FIFO basis) at October 1, 1994, was 1.39 while working
capital (FIFO basis) at October 1, 1994 was $56.7 million, or 6.6% of total
assets. On January 1, 1994, the current ratio (FIFO basis) was 1.98 while
working capital (FIFO basis) was $133.6 million, or 16.8% of total assets.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1994 RESULTS
These decreases in current ratio and working capital are the result of the
Company's acquisition of Wilson's Supermarkets (Note 2). The Company values
the majority of its inventories using the LIFO method. The current cost of
inventories exceeded the LIFO valuation by approximately $15.4 million on
October 1, 1994 and $14.8 million at January 1, 1994. The Company's
liquidity position is stronger than indicated by stated working capital and
current ratios because of available unused lines of revolving credit of $46
million and available lines of short-term credit of $20 million on October
1, 1994. Cash and cash items decreased $58.8 million to $18.7 million at
October 1, 1994 from $77.5 million at January 1, 1994. This decrease is
primarily the result of the Company's acquisition of Wilson's Supermarkets.
The cash used for this acquisition was partially provided by cash from
operating activities in the first three quarters of 1994.
Cash provided by operating activities was $96.6 million in the first nine
months of 1994, an increase of $33.2 million over the $63.4 million
provided in the first nine months of 1993. This increase is due primarily
to decreases in inventories and receivables coupled with an increase in
accounts payable. In addition, depreciation and amortization increased
$4.0 million in the first nine months of 1994 over the first nine months of
1993.
Cash used in investing activities increased $70.4 million during the first
nine months of 1994 to $145.1 million from $74.7 million in the first nine
months of 1993. This increase is primarily the result of acquiring
Wilson's Supermarkets. The acquisition, net of the shift in short-term
investments used to finance it, accounted for $65.1 million of the
increase. Capital expenditures totalled $100.1 million during the period
and were composed of $53.7 million in additions of property, plant and
equipment, $41.0 million of property, plant and equipment in the
acquisition of Wilson's Supermarkets and $5.4 in non-cash capital lease
additions. In January 1994, the Company opened a new supermarket in
Saratoga Springs, New York, with approximately 48,000 square feet of retail
selling space. In February 1994, the Company opened a new supermarket in
Rotterdam, New York, with approximately 47,000 square feet of retail
selling space. In May 1994, the Company opened a new supermarket in
Bennington, Vermont, with approximately 38,000 square feet of retail
selling space. In June 1994, the Company opened two new supermarkets, one
in Kingston, New York, with approximately 47,000 square feet of retail
selling space and one in Oxford, Maine, with approximately 38,000 square
feet of retail selling space, which replaced two smaller outdated
facilities in the same marketing area. In addition, during June 1994, the
Company held a grand reopening for an expanded supermarket in <PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1994 RESULTS
Rumford, Maine. In September 1994, the Company opened a new supermarket in
Fayetteville, North Carolina, with approximately 29,000 square feet of
retail selling space. The construction of this store was significantly
completed by Wilson's Supermarkets prior to the Company's acquisition.
During the next three months, the Company expects to open four new
supermarkets.
Including the acquisition of Wilson's Supermarkets (Note 2) and expansion
plans in the southeastern United States, the Company expects to spend in
the range of $120 million in 1994 for capital expenditures. This program,
which is subject to continuing change and review, is primarily composed of
new supermarket construction and the expansion or relocation of currently
existing supermarkets. Including the stores acquired in the Wilson's
acquisition, net square footage of retail selling space is expected to
increase by approximately 28% by year-end 1994. The 1994 capital program
is expected to be financed by cash and cash items, internally generated
funds, lines of credit and leases.
The acquisition of Wilson's Supermarkets (Note 2) was financed by cash and
cash items, the Company's common stock and a promissory note. This
acquisition will have no adverse impact on the Company's ability to fund
its other planned capital expenditures. In addition to this acquisition,
the Company is negotiating options and acquiring land to control other
supermarket sites in North Carolina and southern Virginia.
Cash used for financing activities was $10.3 million in the first nine
months of 1994 as compared to $12.7 million in the first nine months of
1993. The Company continues to maintain a solid capital structure.
Management believes that maintaining such financial flexibility provides a
significant competitive advantage and allows the Company to be
opportunistic in terms of acquisitions and expansions.
<PAGE>
PART II
Item 5: Other Information
A limited review was made of the results of the three-month and nine-month
periods ended October 1, 1994, by Coopers & Lybrand.
Item 6: Exhibits and Reports on Form 8-K
(a) A letter from Coopers & Lybrand furnished pursuant to Regulation S-X
is filed as Exhibit 15.
(b) A letter from Coopers & Lybrand furnished pursuant to Rule 436(c)
under the Securities Act of 1933 is filed as Exhibit 23.
(c) On August 5, 1994, a Form 8-K was filed reporting under Item 2, the
acquisition of Wilson's Supermarkets, a chain of 20 stores headquartered in
Wilmington, NC. Also included in this filing under Item 7 were the financial
statements for the acquired business for its year ended December 31, 1993.
On September 30, 1994, an amendment to the above mentioned Form 8-K
was filed including under Item 7 the financial statements of Wilson's
Supermarkets through June 18, 1994, the effective date of the acquisition, and
the required financial information.
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.
HANNAFORD BROS. CO.
Date November 8, 1994 s/Norman E. Brackett
Norman E. Brackett
Senior Vice President
(Chief Financial Officer)
Date November 8, 1994 s/Charles H. Crockett
Charles H. Crockett
Assistant Secretary
Exhibit 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Hannaford Bros. Co.:
We have reviewed the accompanying consolidated balance sheet of Hannaford
Bros. Co. and subsidiaries as of October 1, 1994, and the related consolidated
statements of earnings and cash flows for the three-month and nine-month
periods ended October 1, 1994 and October 2, 1993. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
rocedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
s/Coopers & Lybrand L.L.P.
Portland, Maine
October 17, 1994
Exhibit 23
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Hannaford Bros. Co.
Registrations on Form S-8
We are aware that our report dated October 17, 1994, on our review of interim
financial information of Hannaford Bros. Co. and subsidiaries for the
three-month and nine-month periods ended October 1, 1994, and included in
the Company's quarterly report on Form 10-Q for the quarter then ended is
incorporated by reference in the Registration Statements on Form S-8
(Numbers 2-77902, 2-77903, 2-98387, 33-1281, 33-22666, 33-31624 and
33-45273). Pursuant to Rule 436(c) under the Securities Act of 1933,
this report should not be considered a part of the Registration Statements
prepared or certified by us within the meaning of Sections 7 and 11 of
that Act.
s/Coopers & Lybrand L.L.P.
Portland, Maine
October 31, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-01-1994
<CASH> 18,666
<SECURITIES> 0
<RECEIVABLES> 22,111
<ALLOWANCES> 228
<INVENTORY> 133,307
<CURRENT-ASSETS> 186,017
<PP&E> 733,894
<DEPRECIATION> 240,101
<TOTAL-ASSETS> 847,393
<CURRENT-LIABILITIES> 144,677
<BONDS> 0
<COMMON> 31,284
0
0
<OTHER-SE> 409,127
<TOTAL-LIABILITY-AND-EQUITY> 847,393
<SALES> 1,679,848
<TOTAL-REVENUES> 1,679,848
<CGS> 1,268,359
<TOTAL-COSTS> 1,268,359
<OTHER-EXPENSES> 319,811
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,337
<INCOME-PRETAX> 76,341
<INCOME-TAX> 30,771
<INCOME-CONTINUING> 45,570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,570
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
