FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
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 November 5, 1997, there were 42,284,784 outstanding shares of
Common Stock, $.75 par value, the only authorized class of common stock
of the Registrant.
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INDEX
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets, September 27, 1997 and
December 28, 1996 3-4
Consolidated Statements of Earnings, Three Months
Ended September 27, 1997 and September 28, 1996 5
Consolidated Statements of Earnings, Nine Months
Ended September 27, 1997 and September 28, 1996 6
Consolidated Statements of Cash Flows
Nine Months Ended September 27, 1997
and September 28, 1996 7-8
Notes and Schedules to Consolidated Financial
Statements 9-11
Item 2. Management's Discussion and Analysis of
Third Quarter 1997 Results 12-18
PART II - OTHER INFORMATION
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8K 19
Signatures 20
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HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in thousands)
(UNAUDITED)
September 27, December 28,
1997 1996
Current assets:
Cash and cash items $ 54,349 $ 42,505
Accounts receivable, net 13,428 17,384
Inventories 183,296 191,658
Prepaid expenses 8,575 5,834
Deferred income taxes 4,962 4,589
Total current assets 264,610 261,970
Property, plant and equipment, net 779,314 723,176
Leased property under capital leases, net 61,015 59,918
Other assets:
Goodwill, net 91,532 95,654
Deferred charges, net 34,616 26,332
Computer software costs, net 16,385 13,658
Miscellaneous assets 2,032 3,019
Total other assets 144,565 138,663
$1,249,504 $1,183,727
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands except share amounts)
(UNAUDITED)
September 27, December 28,
1997 1996
Current liabilities:
Current maturities of long-term debt $ 16,040 $ 14,213
Obligations under capital leases 1,908 1,775
Accounts payable 199,800 177,895
Accrued payroll 24,909 22,554
Other accrued expenses 24,234 21,205
Income taxes 4,685 2,532
Total current liabilities 271,576 240,174
Deferred income tax liabilities 27,300 23,757
Other liabilities 42,032 47,917
Long-term debt 223,854 227,525
Obligations under capital leases 77,928 75,198
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;
September 27, 1997: Issued, 42,338,316
shares, outstanding 42,290,226 shares.
December 28, 1996: Issued, 42,338,316
Shares, outstanding 42,280,695 shares 31,754 31,754
Additional paid-in capital 115,713 119,399
Preferred stock purchase rights 423 423
Retained earnings 460,590 419,459
608,480 571,035
Less common stock in treasury
(September 27, 1997: 48,090 shares at
cost. December 28, 1996: 57,621
shares at cost) 1,666 1,879
Total shareholders' equity 606,814 569,156
$1,249,504 $1,183,727
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
September 27, September 28,
1997 1996
Sales and other revenues $820,115 $773,271
Cost of sales 617,055 589,178
Gross margin 203,060 184,093
Selling, general and administrative
expenses 160,066 145,802
Operating profit 42,994 38,291
Interest expense, net 6,050 5,356
Earnings before income taxes 36,944 32,935
Income taxes 14,147 13,037
Net earnings $ 22,797 $ 19,898
Per share of common stock:
Net earnings $ .54 $ .47
Cash dividends $ .135 $ .120
Weighted average number of common shares
outstanding 42,290 42,284
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
September 27, September 28,
1997 1996
Sales and other revenues $2,355,725 $2,192,877
Cost of sales 1,772,400 1,664,603
Gross margin 583,325 528,274
Selling, general and administrative
expenses 469,183 422,684
Operating profit 114,142 105,590
Interest expense, net 19,635 16,075
Earnings before income taxes 94,507 89,515
Income taxes 36,242 35,434
Net earnings $ 58,265 $ 54,081
Per share of common stock:
Net earnings $ 1.38 $ 1.28
Cash dividends $ .405 $ .360
Weighted average number of common shares
outstanding 42,288 42,301
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
September 27, September 28,
1997 1996
Cash flows from operating activities:
Net income $ 58,265 $ 54,081
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 67,733 56,079
(Increase) decrease in inventories 8,362 (13,568)
(Increase) decrease in receivables and
prepayments 1,257 (1,647)
Increase in accounts payable
and accrued expenses 21,463 26,349
Increase in income taxes payable 2,153 2,720
Increase in deferred taxes 3,170 1,453
Other operating activities (202) 103
Net cash provided by operating
activities 162,201 125,570
Cash flows from investing activities:
Acquisition of property, plant and
equipment (116,086) (148,116)
Sale of property, plant and
equipment, net 2,145 3,061
Increase in deferred charges (7,591) (6,945)
Increase in computer software costs (4,958) (4,402)
Net cash used in investing activities (126,490) (156,402)
Cash flows from financing activities:
Principal payments under capital
lease obligations (1,330) (1,076)
Proceeds from issuance of long-term debt 20,000 75,000
Issuance of common stock 7,381 7,300
Payments of long-term debt (21,929) (21,423)
Purchase of Treasury Stock (10,855) (11,708)
Dividends paid (17,134) (15,223)
Net cash provided by (used in)
financing activities (23,867) 32,870
Net increase in cash and cash items 11,844 2,038
Cash and cash items at beginning of period 42,505 7,017
Cash and cash items at end of period $ 54,349 $ 9,055
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information
(in thousands)
(UNAUDITED)
NINE MONTHS ENDED
September 27, September 28,
1997 1996
Cash paid during the first nine months for:
Interest (net of amount capitalized,
$2,616 in 1997 and $2,493 in 1996) $18,643 $15,100
Income taxes $30,049 $30,019
Supplemental disclosure of non-cash investing and financing activity
Capital lease obligations of $4,550,000 and $7,652,000 were incurred
during the nine month period ended September 27, 1997 and September
28, 1996 respectively, when the Company entered into real estate
leases.
Disclosure of accounting policy
For the purposes of the Consolidated Statements of Cash Flows, the
Company considers all highly liquid debt instruments with maturities
of three months or less when purchased 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. The year-end consolidated balance
sheet was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting
principles.
Earnings per share of common stock have been determined by dividing
net earnings 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.
It is suggested that the financial statements be read in conjunction
with the financial statements and notes included in the
Company's latest annual report.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
(in thousands)
(Unaudited)
September 27, December 28,
1997 1996
Land and improvements $ 126,998 $ 117,218
Buildings 279,503 252,228
Furniture, fixtures & equipment 453,322 404,725
Leasehold interests & improvements 284,157 245,490
Construction in progress 13,935 31,850
1,157,915 1,051,511
Less accumulated depreciation and
amortization 378,601 328,335
$ 779,314 $ 723,176
3. LEASED PROPERTY
Leased property under capital leases consists of the following:
(in thousands)
(Unaudited)
September 27, December 28,
1997 1996
Real property $86,780 $83,047
Less accumulated amortization 25,765 23,129
$61,015 $59,918
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
4. LONG-TERM DEBT
In February 1997, the Company received the proceeds of a $20 million
senior uncollateralized debt financing. The term of the debt is
12 years with an average life of 10 years and an interest rate
of 7.4%.
5. ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 128 -
Earnings per Share. This Statement is effective for financial
statements issued for periods ending after December 15, 1997 with
earlier application not permitted. The Statement requires dual
presentation of basic and diluted earnings per share on the income
statement. The Company's basic earnings per share for fiscal 1997
will be calculated similar to its currently disclosed earnings per
share. Diluted earnings per share will not be materially different
from basic earnings per share.
In June 1997, the FASB issued SFAS No. 130 - Reporting Comprehensive
Income, which requires the separate reporting of all changes to
shareholders' equity, and SFAS No. 131 - Disclosures about Segments
of an Enterprise and Related Information, which revises existing
guidelines about the level of financial disclosure of a Company's
operations. Both Statements are effective for financial statements
issued for fiscal years beginning after December 15, 1997. The
Company has not determined the impact of the new standards, but does
not expect them to have a material impact to existing financial
reporting.
6. COMMON STOCK
In May 1997, the shareholders of the Company approved an amendment to
the Hannaford Bros. Co. Employee Stock Purchase Plan. This amendment
increased the total authorized shares by an additional 750,000
thereby permitting continued use of the Plan during 1997 and future
years.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997
RESULTS
RESULTS OF OPERATIONS
SALES
Sales and other revenues rose 7.4% for the first three quarters of
1997, to $2,355.7 million, an increase of $162.8 million over the first
three quarters of 1996. Sales from supermarkets that were open in both
periods presented ("identical store sales") increased $11.9 million or
0.6%. Additional supermarket sales of $143.1 million resulted from the
net impact of new, expanded, relocated and closed stores. Other sales
and revenues, which include wholesale, trucking, home delivery, real
estate and miscellaneous retail operations, increased $7.8 million.
In the third quarter of 1997, sales and other revenues were $820.1
million, an increase of $46.8 million or 6.1% over those reported for
the same period of 1996. Identical store sales decreased $1.7 million
or 0.2%. Additional supermarket sales of $47.4 million resulted from
the net impact of new, expanded, relocated and closed stores. Other
sales and revenues increased $1.1 million.
Identical store sales were up 0.6% for three quarters and down 0.2% for
the third quarter this year as compared to increases of 3.3% in the
first three quarters of 1996 and 3.2% for the full year 1996. The
Company attributes a portion of this decline to a very low inflation
rate in food prices, the current competitive environment and a decrease
in the availability of food stamps. Comparable store sales, which
include results from expanded and relocated stores in both periods
presented, increased 1.5% in the third quarter of 1997 and 2.1% for
the first three quarters of 1997.
GROSS MARGIN
Gross margins increased in the first three quarters of 1997 to 24.8% of
sales and other revenues in comparison to 24.1% in the first three
quarters of 1996. For the third quarter of 1997, gross margin was
24.8% versus 23.8% for the third quarter of 1996. The 1997 increases
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS
are the result of improved selling margin in certain of the Company's
marketing territories coupled with better operations in the Southeast,
including the Company's new distribution facility which began product
delivery in November 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to 19.9% of
sales and other revenues in the first nine months of 1997 as compared
to 19.3% in the comparable period of 1996. For the third quarter of
1997, selling, general and administrative expenses were 19.5% of sales
and other revenues up from 18.9% for the third quarter of 1996, but
down from the 20.0% reported in the second quarter of 1997. Payroll
and payroll related expenses, which exceeded 50% of selling, general
and administrative expenses in all periods presented, increased as a
percentage of sales in the 1997 reporting periods. In addition to
rising payroll costs, the 1997 increases reflect higher advertising
costs and depreciation charges. These increases reflect the high level
of store openings in the quarter coupled with the continuing costs of
establishing the Company's position in the Southeast.
INTEREST EXPENSE, NET
Net interest expense expressed as a percentage of sales and other
revenues was 0.8% in the first three quarters of 1997 versus 0.7% in
the first three quarters of 1996. Net interest expense was 0.7% of
sales and other revenues in both the third quarter of 1997 and the
third quarter of 1996. Net interest expense in the first three
quarters of 1997 was $19.6 million, an increase of 22.1% from the 1996
first three quarters net interest expense of $16.1 million. This
increase is primarily the result of an increase in average debt levels
coupled with a decrease in invested cash which is reflected as a
decrease in interest income.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS
INCOME TAXES
The effective income tax rate decreased in both the first three
quarters and third quarter of 1997 to 38.3% from 39.6% in the
corresponding periods of 1996. This lower rate is the result of
a reduction in the Company's overall state income tax rate.
Assuming there are no federal or state income tax rate changes, the
Company expects the effective tax rate for fiscal 1997 to be in the
38.2% to 38.4% range.
NET EARNINGS AND EARNINGS PER COMMON SHARE
Net earnings increased 7.7% in the first three quarters of 1997 to
$58.3 million or 2.5% of sales and other revenues, an increase of $4.2
million from 1996 first three quarters earnings of $54.1 million or
2.5% of sales and other revenues. Third quarter 1997 net earnings were
$22.8 million or 2.8% of sales and other revenues as compared to $19.9
million or 2.6% of sales and other revenues in the third quarter of
1996. Expressed as a percentage of sales, net earnings increased in
the third quarter of 1997 as increased margins and a reduction in the
Company's income tax provision were only partially offset by increased
selling, general and administrative expenses.
Net earnings per common share in the first three quarters of 1997 were
$1.38 as compared to $1.28 in the first three quarters of 1996, an
increase of 7.8%. Net earnings per common share increased 14.9% to
$0.54 in the third quarter of 1997 versus $0.47 in the third quarter of
1996.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS
CAPITAL RESOURCES AND LIQUIDITY
GENERAL
The current ratio (FIFO basis) at September 27, 1997, was 1.04 while
working capital (FIFO basis) was $10.5 million, or 0.8% of total
assets. The Company values the majority of its inventories using the
LIFO method. The current cost of inventories exceeded the LIFO
valuation by approximately $17.7 million on September 27, 1997 and
$17.1 million on December 28, 1996. 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 $81.1 million
and available unused lines of short-term credit of $35.0 million on
September 27, 1997. Cash and cash items increased $11.8 million to
$54.3 million from $42.5 million at December 28, 1996. This increase
is primarily the result of cash provided by operating activities
partially offset by cash used in investing and financing activities.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash provided by operating activities was $162.2 million in the first
three quarters of 1997, an increase of $36.6 million over the $125.6
million provided in the first three quarters of 1996. This increase is
attributable to a decrease in inventories coupled with higher
depreciation and amortization.
CASH FLOWS FROM INVESTING ACTIVITIES
Cash used in investing activities decreased $29.9 million during the
first three quarters of 1997 to $126.5 million from $156.4 million
in the first three quarters of 1996. This decrease is primarily the
result of lower capital expenditures during the current period. Total
capital expenditures totaled $133.2 million in the first three quarters
of 1997 and were composed of $116.1 million in additions to property,
plant and equipment, $9.5 million in deferred charges and computer
software costs and $4.5 million in non-cash capital lease additions.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS
These capital expenditures are primarily composed of costs incurred
in meeting the Company's 1997 capital program. The Company expects to
spend in excess of $170 million on new, relocated and expanded stores
to open in 1997 and 1998, and improvements necessary to maintain
current facilities and systems.
During the first three quarters of 1997, the Company opened seventeen
supermarkets including ten new stores, five relocations and two
expansions, and temporarily closed one supermarket as it undergoes a
substantial expansion. The 1997 store openings, together wth their
square footage of selling area, are listed below:
Square Footage
Location Selling Area
Northeast
Chelmsford, MA 35,000
Dracut, MA 30,000
Guilderland, NY 33,000
Rutland, VT 34,000
Southeast
Shallotte, NC 35,000
Danville, VA 41,000
Wilmington, NC (Murrayville Rd.) 35,000
Wilmington, NC (Carolina Beach) 41,000
Richmond, VA (Rt. 1 and Parham) 44,000
Charlotte, NC (Independence Blvd.) 41,000
Virginia Beach, VA (Shore Drive) 35,000
Virginia Beach, VA (Princess Anne) 40,000
Newport News, VA 37,000
Rock Hill, SC 40,000
Charlotte, NC (Eastland Mall) 41,000
Richmond, VA (Willow Lawn) 34,000
Virginia Beach, VA (Republic Drive) 40,000
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS
During the fourth quarter of 1997, the Company does not expect to open
any additional supermarkets. Net square footage of retail selling
space is expected to increase by approximately 11% in 1997.
Construction is ongoing for a number of stores to be opened in 1998.
This program is subject to continuing change and review as conditions
warrant. The 1997 capital program is being financed by internally
generated funds, long-term debt, leases and lines of credit.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash used in financing activities was $23.9 million in the first
three quarters of 1997 as compared to $32.9 million of cash provided by
financing activities in the first three quarters of 1996. This
decrease in cash flows of $56.8 million is principally the result of
reduced proceeds from the issuance of long-term debt. The Company
purchased 312,398 shares of common stock during the first three
quarters of 1997 at a cost of $10.9 million. This repurchased stock
was used to fund the Company's stock based benefit plans with the
balance being held in treasury. This amount was offset by proceeds of
$7.4 million received during the first three quarters of 1997 from the
issuance of 321,929 shares of treasury stock. The Company paid $17.1
million in dividends to common shareholders in the first three quarters
of 1997. These dividend amounts represent 29.4% of net earnings
available to common shareholders.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS
FORWARD-LOOKING INFORMATION
From time to time, information provided by the Company or statements made
by its associates may contain forward-looking information, as defined in
the Private Securities Litigation Reform Act of 1995. Examples of such
statements in this report include those concerning the Company's expected
future tax rates, construction schedules and capital expenditures. The
Company cautions investors that there can be no assurance that actual
results or business conditions will not differ materially from those
projected or suggested in such forward-looking statements as a result of
various factors and risks including, but not limited to the following:
(1) Hannaford's future operating results are dependent on its ability to
achieve increased sales and to control expenses. Factors such as lower
than expected inflation, product cost fluctuations particularly in
perishable categories, changes in product mix or the use of promotional
items, both of which may affect pricing strategy, continued or increased
competitive pressures from existing competitors and new entrants,
including price cutting strategies, and deterioration in general or
regional economic conditions are all factors which could adversely affect
sales projections. Other components of operating results could be
adversely affected by state or federal legislation or regulation that
increases costs, increases in interest rates or the Company's cost of
borrowing, increases in labor rates due to low unemployment or other
factors, unanticipated costs related to the opening of new stores or the
inability to control various expense categories.
(2) Hannaford's future growth is dependent on its ability to expand its
retail square footage. Increases in interest rates or the Company's cost
of capital, the unavailability of funds for capital expenditures and the
inability to develop new stores or convert existing stores as rapidly as
planned are all risks to our projected future expansion.
(3) Adverse determinations with respect to pending or future litigation
or other material claims against Hannaford could affect actual results.
Furthermore, the market price of Hannaford common stock could be subject
to fluctuations in response to quarter to quarter variations in operating
results, changes in analysts' earnings estimates, market conditions in
the retail sector, especially in the supermarket industry, as well as
general economic conditions and other factors external to Hannaford.
<PAGE>
PART II
Item 5: Other Information
A limited review was made of the results of the three-month and
nine-month periods ended September 27, 1997, by Coopers & Lybrand.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation SK
10.1 Amended and Restated Hannaford Bros. Co. Deferred
Compensation Plan for Officers, effective January 1, 1998.
15 Letter of Coopers & Lybrand L.L.P. furnished pursuant to
Regulation SX.
23 Letter of Coopers & Lybrand L.L.P. regarding incorporation
by reference to certain Forms S-8 of the Registrant
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the quarter ended
September 27, 1997.
<PAGE>
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 6, 1997 s/Blythe J. McGarvie
Blythe J. McGarvie
Senior Vice President
(Chief Financial Officer)
Date November 6, 1997 s/Charles H. Crockett
Charles H. Crockett
Assistant Secretary
Exhibit 10.1
HANNAFORD BROS. CO.
DEFERRED COMPENSATION PLAN
FOR OFFICERS
EFFECTIVE JANUARY 1, 1998
<PAGE>
PREAMBLE
The purpose of the Hannaford Bros. Co. Deferred Compensation Plan for
Officers (formerly the Hannaford Bros. Co. Deferred Compensation Plan) is
to permit a select group of management employees to defer a portion of
their base salary, annual incentive compensation, or both, as hereinafter
set forth.
ARTICLE I
DEFINITIONS
1.1 "Board" or "Board of Directors" shall mean the Board of Directors of
the Company.
1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.3 "Committee" shall mean the committee appointed by the Human
Resources Committee of the Board to administer the Savings and Investment
Plan.
1.4 "Company" shall mean Hannaford Bros. Co.
1.5 "Effective Date" shall mean January 1, 1998, with respect to this
amendment and restatement.
1.6 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.7 "Participant" shall mean an officer of the Company who is a vice
president or a more senior officer.
1.8 "Plan" shall mean the Hannaford Bros Co. Deferred Compensation Plan
for Officers set forth herein and hereafter amended.
1.9 "Plan Year" shall mean the calendar year.
<PAGE>
ARTICLE II
Deferred Compensation
2.1 DEFERRAL ELECTION. Participants may elect to defer, in accordance
with the terms of this Plan, a specified portion of their base salary,
incentive compensation awarded under the Hannaford Bros. Co. Annual
Incentive Plan, or both.
Once each Plan year a Participant may at any time elect to defer base
salary payable for services to be performed after the date of the deferral
election. At the same time a Participant may elect to defer annual
incentive compensation payable for services to be performed after the date
of the deferral election. An election to defer shall be made by executing
and delivering to the Committee a deferred compensation agreement, in the
form prescribed by the Committee. An election to defer shall continue in
effect until the Participant terminates the election or ceases to be a
Participant.
A deferral election may not be modified within a Plan Year. A
Participant may make a new deferral election on or before December 31 of
any year to increase or decrease the amount to be deferred during the
following Plan Year and succeeding Plan Years. A participant may terminate
an election to defer base salary at any time by providing to the Committee
such written, telephonic or electronic notice of termination as the
Committee may prescribe. Such notice shall specify the effective date, and
deferrals shall cease as soon as practicable thereafter. Such notice shall
not be effective with regard to amounts previously deferred. At the same
time and in the same manner a Participant may terminate an election to
defer annual incentive compensation, and no annual incentive compensation
earned for services performed thereafter shall be deferred. Such notice
shall not be effective with regard to annual incentive compensation earned
for services performed before said effective date that is subject to a
deferral election. If a Participant ceases to be a member of a select group
of management or highly compensated employees, within the meaning of ERISA,
his or her deferral election shall terminate, provided that the loss of
such status shall not cause amounts previously deferred to become payable.
2.2 ACCOUNTS. The Company shall establish a "Deferred Compensation
Account" for each Participant who makes a deferral election, and shall
adjust such account as follows:
(a) At the end of each calendar month, credit the account with the
amount deferred by the Participant during such month; and
<PAGE>
(b) As of the first day of each calendar month:
(i) Debit the account by the amount, if any, paid to the
Participant or his or her beneficiary during the preceding calendar
month in accordance with the terms hereof; and
(ii) Credit the account with interest on the balance as of the
first day of the preceding month, at the rate paid on ten-year U.S.
Treasury notes on the first day of the calendar year in which the
interest is to be credited, or at such other rate as is prescribed in
a deferred compensation agreement and approved by the Human Resources
Committee of the Board.
ARTICLE III
DISTRIBUTIONS
3.1 FORM AND TIME. A Participant's Deferred Compensation Account shall
be distributed in cash in the form of a lump sum, annual installments over
a period not exceeding ten (10) years, or such other form specified in a
deferred compensation agreement and approved by the Human Resources
Committee of the Board. Unless distribution is made prior to termination of
employment, payment shall be made or commence to the Participant as soon as
practicable following termination of employment and not later than the last
business day of the calendar month following the month in which the
Participant terminates employment, or January 31 of the calendar year
following the calendar year in which the Participant terminates employment.
Each Participant shall elect the form and time of payment in each deferred
compensation agreement he or she executes pursuant to Section 2.1, and such
election shall apply to all amounts deferred pursuant to such agreement. A
Participant may elect to receive a distribution as of January 31 of any
calendar year prior to termination of employment, provided that such date
is at least twelve (12) months after the date amounts are first deferred
under the deferred compensation agreement. For purposes of this Plan, a
termination of employment occurs on the date a Participant ceases to be
employed by the Company or one of its subsidiaries and is no longer
employed by any of them.
In the event of a Participant's death, his or her Deferred Compensation
Account shall be distributed to his or her designated beneficiary in a form
described in the preceding paragraph. Payment of death benefits shall be
made or commence as soon as practicable following a Participant's death and
not later than the last business day of the calendar month following the
month in which the Participant dies. If payment had commenced prior to the
Participant's death, payment shall continue in accordance with the form of
payment then in effect.
<PAGE>
Except as provided in Section 3.2, distribution shall be made under this
Plan only on account of a Participant's retirement, death, or other
termination of service, and no loans to Participants shall be permitted.
3.2 ACCELERATION BY COMMITTEE. In the event a Participant suffers a
severe financial hardship as a result of an unforeseeable emergency, the
Committee may, in its discretion, accelerate payment of the Participant's
Deferred Compensation Account to the extent necessary to eliminate such
hardship. An "unforeseeable emergency" means a sudden and unexpected
illness, accident, loss of property due to casualty, or other similar
extraordinary and unforeseeable circumstance arising as a result of events
beyond the control of the Participant.
3.3 DESIGNATION OF BENEFICIARY. Each Participant may from time to time,
by completing and signing a form furnished by the Committee, designate any
person or persons (who may be designated concurrently, contingently or
successively), the Participant's estate or any trust or trusts created by
the Participant to receive amounts which are payable under this Plan to the
Participant's designated beneficiary or beneficiaries. Each beneficiary
designation shall revoke all prior designations and will be effective only
when filed in writing with the Committee. If a Participant fails to
designate a beneficiary or if a beneficiary dies before the date of such
Participant's death and no contingent beneficiary has been designated, then
the amounts which are payable as aforesaid shall be paid to his or her
estate. If payment of benefits to a beneficiary commences and such
beneficiary is entitled have been paid, the remaining benefits shall be
paid to the successive beneficiary or beneficiaries, if any, designated by
the Participant, otherwise to the beneficiary's estate.
ARTICLE IV
ADMINISTRATION
4.1 ADMINISTRATIVE COMMITTEE. The Committee shall have complete
discretionary authority to control and manage the operation and
administration of the Plan and to construe Plan provisions. Subject to the
provisions of the Plan, the Committee from time to time may establish rules
for the administration and interpretation of the Plan. The final
determination of the Committee as to any disputed questions shall be
conclusive. All actions, decisions and interpretations of the Committee in
administering the Plan shall be made in a uniform and nondiscriminatory
manner.
4.2 ACTION BY COMMITTEE. A majority of the Committee shall constitute a
quorum, and an action of the majority present at any meeting shall be
deemed the action of the Committee. Any member of the Committee may
<PAGE>
participate in a meeting of the Committee through conference telephone or
similar communications equipment by means of which all individuals
participating in the meeting can hear each other. Any action of the
Committee may be taken without a meeting if all members of the Committee
sign written consents setting forth the action taken or to be taken, at any
time before or after the intended effective date of such action.
4.3 DELEGATION. The Committee may authorize one or more of its members
to execute or deliver any instrument, make any payment or perform any other
act which the Plan authorizes or requires the Committee to do. The
Committee may employ counsel and other agents, may delegate ministerial
duties to such agents or to employees of the Company and may procure such
clerical, accounting, actuarial, consulting and other services as it may
require in carrying out the provisions of the Plan.
4.4 CLAIMS PROCEDURE. If an application for a benefit ("claim") is
denied by the Committee, the Committee shall give written notice of such
denial to the applicant, by certified or registered mail, within 90 days
after the claim was filed with the Committee; provided, however, that such
90-day period may be extended to 180 days by the Committee if it
determines that special circumstances exist which require an extension of
the time required for processing the claim. Such denial shall set forth:
(a) the specific reason or reasons for the denial;
(b) the specific Plan provisions on which the denial is based;
(c) any additional material or information necessary for the
applicant to perfect the claim and an explanation of why such material
or information is necessary; and
(d) an explanation of the Plan's claim review procedure.
Following receipt of such denial, the applicant or his or her duly
authorized representative may:
(a) request a review of the denial by filing a written application
for review with the Committee within 60 days after receipt by the
applicant of such denial;
(b) review documents pertinent to the claim at such reasonable time
and location as shall be mutually agreeable to the applicant and the
Committee; and
(c) submit issues and comments in writing to the Committee relating
to its review of the claim.
<PAGE>
The Committee shall, after consideration of the application for review,
render a decision and shall give written notice thereof to the applicant,
by certified or registered mail, within 60 days after receipt by the
Committee of the application for review; provided, however, that such
60-day period may be extended to 120 days by the Committee if it
determines that special circumstances exist which require an extension of
the time required for processing the application for review. Such notice
shall include specific reasons for the decision and specific references to
the pertinent Plan provisions on which the decision is based.
4.5 INDEMNIFICATION. The Company shall indemnify and hold harmless each
member of the Committee against all expenses and liabilities arising out of
his or her acts or omissions with respect to the Plan, provided such member
would be entitled to indemnification pursuant to the bylaws of the Company.
ARTICLE V
Miscellaneous
5.1 AMENDMENT AND TERMINATION OF PLAN. The Company, through the Human
Resources Committee of the Board, may at any time, in its sole discretion,
terminate this Plan or amend the Plan in whole or in part. No such
termination or amendment shall affect the right of any Participant or his
or her surviving spouse or designated beneficiary to receive a benefit
under the terms of this Plan on the date immediately preceding such
termination or amendment.
5.2 EMPLOYEE STATUS. Nothing contained herein shall confer upon any
Participant the right to be retained in the service of the Company or any
other right not expressly provided for herein, nor shall the existence of
this Plan impair the right of the Company to discharge or otherwise deal
with a Participant.
5.3 FUNDING. This Plan is unfunded for purposes of the Code and Title I
of ERISA and is not intended to meet the requirements of Code Section
401(a). The Plan constitutes the Company's mere promise to pay benefits in
the future, and a Participant hereunder shall have no greater rights than a
general, unsecured creditor of the Company.
5.4 ASSIGNMENT. To the maximum extent permitted by law, no benefit
under this Plan shall be assignable or subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, claims of
creditors, attachment, or encumbrance of any kind.
<PAGE>
5.5 TAXES. Any and all taxes that may be due and owing with respect to
any payment under the Plan shall be the sole responsibility of the persons
to whom and for whose benefit such payment is made; provided, however, that
the Company shall withhold from any amount payable under the Plan all
amounts that are required by law to be withheld.
5.6 PLAN DOCUMENTS. Each Participant shall receive a copy of this Plan
and the Committee shall make available for inspection by the Participant a
copy of any rules and regulations adopted by the Committee in administering
the Plan.
5.7 GOVERNING LAW. This Plan is established under and shall be
construed according to the laws of the State of Maine, except to the extent
such laws may be preempted by ERISA.
IN WITNESS WHEREOF, Hannaford Bros. Co. has caused this document to be
executed by its duly authorized officer on this day of
, 1997.
HANNAFORD BROS. CO.
By:
Its
Exhibit 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Hannaford Bros. Co.:
We have reviewed the accompanying consolidated balance sheet of Hannaford
Bros. Co. and Subsidiaries as of September 27, 1997, and the related
consolidated statements of earnings for the three month and nine month
periods ended September 27, 1997 and September 28, 1996 and the related
consolidated statements of cash flows for the nine month periods then
ended. 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
procedures 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. We previously audited and expressed an
unqualified opinion on the Company's consolidated financial statements
for the year ended December 28, 1996 (not presented herein). In our
opinion, the information set forth in the accompanying balance sheet as
of December 28, 1996, is fairly stated in all material respects, in
relation to the statement of financial position from which it has been
derived.
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 16, 1997
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 16, 1997, on our review of
interim financial information of Hannaford Bros. Co. and Subsidiaries as
of September 27, 1997 and for the three month and nine month periods
ended September 27, 1997 and September 28, 1996, and included in this
Form 10-Q is incorporated by reference in the Company's registration
statements on Form S-8 (Numbers 2-77902, 2-98387, 33-1281, 33-22666,
33-31624, 33-45273, 33-60119, 33-60655 and 33-60691). 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
November 5, 1997
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<PERIOD-END> SEP-27-1997
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0
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