<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 2000 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.75 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 in the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock, $.75 par value, held by
non-affiliates as of March 1, 2000, was $2,196,335,756. This calculation assumes
that all shares of Common Stock beneficially held by directors and executive
officers of the Registrant are owned by "affiliates".
As of March 1, 2000, there were 42,663,723 outstanding shares of Common
Stock, $.75 par value, the only authorized class of common stock of the
Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Exhibit Index on Page: 77
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FORM 10-K HANNAFORD BROS. CO. 1-7603 JANUARY 1, 2000
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF THE BUSINESS
Hannaford Bros. Co. (the "Registrant" or the "Company") was incorporated in
Maine in 1902 as the successor to a business established by the Hannaford family
in 1883.
Its principal executive offices are located at 145 Pleasant Hill Road,
Scarborough, Maine 04074. Its telephone number is 207-883-2911. Approximately
25.6% of the outstanding shares of the Registrant's common stock, par value $.75
per share, is owned by certain members of the Sobey family of Stellarton, Nova
Scotia, and certain companies and trusts controlled by them (the "Sobey
Parties").
Fiscal year 1999 consisted of 52 weeks of operations as compared to 52
weeks in 1998 and 53 weeks in 1997. The Company closes its fiscal year on the
Saturday closest to December 31.
Consolidated sales and other revenues for 1999 were $3.463 billion, an
increase of 4.2% over 1998 sales and other revenues of $3.324 billion. Identical
store sales were up 1.1% for fiscal year 1999 compared to an increase of 2.2% in
1998. Comparable store sales were up 1.7% for fiscal year 1999 compared to an
increase of 2.4% in 1998.
On August 18, 1999, the Registrant announced that it had entered into a
definitive Merger Agreement with Delhaize America, Inc., which will acquire all
of the outstanding shares of the Registrant. The merger is a cash and stock
transaction valued at approximately $3.6 billion including the assumption of
debt of the Registrant. In February 2000, the shareholders of the Company voted
to approve the terms of the Merger Agreement. Upon completion of the merger,
which is pending FTC approval and is expected to close in the second quarter of
2000, the Registrant will operate as a wholly-owned subsidiary of Delhaize
America.
The Registrant ships food and food-related products from its distribution
centers to an additional 23 independent retail food stores. Sales to these
wholesale accounts amounted to 2.2% of total sales in 1999. Other revenues from
such activities as home shopping, trucking, real estate and retail services
amounted to about 1.4% of total sales.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Registrant, through its operations and those of its subsidiaries, is
principally involved in the retail food business. The Registrant considers its
business a single segment under the applicable reporting rules. See Item 8,
Financial Statements and Supplementary Data.
NARRATIVE DESCRIPTION OF THE BUSINESS
The Registrant is a multi-regional food retailer, with 154 supermarkets
located throughout Maine, New Hampshire and Vermont, and in parts of New York,
Massachusetts, Virginia, North Carolina and South Carolina. Its stores are
operated primarily under the names Shop 'n Save7 and Hannaford7. The Registrant
offers consumers comprehensive product variety and outstanding freshness and
quality in perishables, at competitive prices, from modern and convenient
facilities. The Registrant also operates 108 pharmacies within the Registrant's
supermarkets and combination stores.
Of the Registrant's 105 supermarkets in the northeastern region of the
United States, more than 75% are either new or have been expanded or relocated
in the past 10 years. During this period, a number of smaller outdated
facilities have been closed or sold.
In addition, the Registrant operates 49 supermarkets located in Virginia,
North Carolina and South Carolina. Eleven of these stores were acquired by the
Registrant in July 1994, six were acquired in September 1995 and thirty-two were
newly constructed since 1995.
Of the Registrant's 154 supermarkets, 127 are combination stores with
selling areas ranging from 22,300 to 61,700 square feet. These combination
stores offer under one roof the traditional all-department supermarket, together
with other services and expanded lines of general merchandise.
<PAGE>
The following tables set forth certain statistical information regarding
the Registrant's operations at the dates indicated:
FISCAL YEAR
NUMBER OF STORES 1995 1996 1997 1998 1999
Beginning 118 134 139 148 150
Opened 13 13 15 11 4
Closed (3) (7) (6) (9) 0
Sold 0 (1) 0 0 0
Acquired 6 0 0 0 0
Ending 134 139 148 150 154
AVERAGE SQUARE FEET
OF SELLING AREA
PER STORE 31,100 32,300 33,400 34,500 34,800
TOTAL SQUARE FEET
OF SELLING AREA 4,166,000 4,490,000 4,947,000 5,171,000 5,360,000
<PAGE>
As illustrated by the foregoing tables, the Registrant has continued to
expand its food store operations.
During 1999, net selling square footage increased 3.7%. The Registrant
opened four new food stores with selling areas ranging from 40,600 square feet
to 41,300 square feet, expanded four existing stores, and conducted major
remodelling projects in a number of its other stores.
During 2000, the Registrant expects to open eight new food stores, six of
which will be located in a northeastern markets and two in southeastern markets.
The new stores will have from 25,600 to 40,200 square feet of selling area. The
Registrant will also expand two stores, and, in January 2000, acquired one
additional store from an independent wholesale customer. It is expected that net
retail selling area will increase approximately 4.8% in 2000.
The Registrant owns four distribution facilities which support its retail
operations, as follows:
1. Distribution facility in South Portland, Maine, which primarily services
certain store locations in Maine, New Hampshire and Massachusetts. This facility
warehouses grocery, fresh fruits and vegetables, frozen foods, meat, and dairy
products in approximately 521,000 square feet of floor area, and has dock
facilities for 89 highway trailers. This distribution center, as well as the
others, has a dedicated on-line computerized warehouse management system, which
efficiently controls the movement of product through the facility and schedules
labor for greater efficiency and productivity. Productivity in the distribution
facilities also has been enhanced through the use of employee incentive payment
programs.
2. Distribution center and office facility in Schodack, New York, which
primarily services certain store locations in New York, Vermont, New Hampshire
and Massachusetts. This facility warehouses grocery, fresh fruits and
vegetables, meat, dairy and frozen food products in approximately 489,000 square
feet of floor area and has dock facilities for 129 highway trailers. Although
approvals have been received to expand this facility to approximately 1,200,000
square feet, the Registrant has no current plans to do so.
<PAGE>
3. Distribution center in Butner, North Carolina, which services all of the
Registrant's store locations in North Carolina, South Carolina and Virginia.
This facility warehouses grocery, fresh fruits and vegetables, frozen foods,
meat and dairy products in approximately 431,000 square feet of floor area and
has dock facilities for 112 highway trailers. This facility was opened in
November 1996 and incorporates increased staging areas for crossdocking, a
mezzanine for slower moving items and other modern distribution techniques. The
site on which this distribution center is located includes land for additional
expansion of the distribution center to approximately 750,000 square feet.
4. A 200,000 square foot distribution facility in Winthrop, Maine. This
facility distributes health and beauty care products, specialty foods,
pharmaceuticals and some general merchandise to all of the Registrant's retail
outlets.
Hannaford Trucking Company, a wholly-owned subsidiary, transports
merchandise to and from the Registrant's distribution facilities and is licensed
as an irregular route common carrier with 48 state authority. Hannaford Trucking
Company also hauls products for third-party customers, thereby reducing the
number of miles that its trucks travel empty.
During 1999, the Registrant continued to operate a home shopping service
called HomeRuns.com (sm) in the Boston, Massachusetts market area. Consumers
shop from a catalog, placing their order via the Internet, fax or phone. Orders
are selected at a dedicated fulfillment center and delivered the next day.
Prices are competitive with those in local supermarkets. Early in 2000, an
agreement was reached with an investment group to sell a majority interest in
this subsidiary, and on February 12, 2000, this sale was completed.
Innovation in operating systems for competitive advantage is an important
component of the Registrant's strategy, and the Registrant is committed to
investing in new technology and the development of new systems. The Registrant
seeks to be an industry leader in the application of new technology and systems
to improve customer service, productivity and financial information.
Raw materials, as such, are not essential to the business of the
Registrant.
Seasonal business affects the Registrant's operations in that sales are
generally greater in the second half of the year than in the first. (See Note 9
of Notes to Consolidated Financial Statements.)
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Inventory levels are maintained at distribution centers and all retail
locations in amounts adequate to minimize "out of stock" conditions.
Backlog is not material to the Registrant's business.
No material portion of the business of the Registrant is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
At the retail level, the Registrant's supermarkets are in direct
competition with regional, national and local food and drug chains, as well as
"supercenters", "club stores" and military commissaries, some of which have
greater resources than the Registrant, and with other independent operators. In
addition, certain of the independent stores served by the Registrant as
wholesale customers are located in the same trade areas as the Registrant's own
stores.
In its wholesale operations, the Registrant directly competes with other
regional wholesalers, some of which supply franchised retail outlets. The loss
of any one or a few of the wholesale customers would not have a materially
adverse effect on the Registrant.
No material expenditures were made during fiscal 1997, 1998 or 1999 on
research activities relating to new or improved products, services or
techniques.
The Registrant does not foresee that material capital outlays will be
needed or that material increases in operating expenses will be incurred for the
purpose of compliance with any statutory requirement respecting environmental
quality.
As of January 1, 2000, the Registrant had approximately 9,200 full-time and
15,400 part-time employees.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES.
Neither the Registrant nor any of its subsidiaries engages in any
operations in foreign countries, nor is a material portion of sales and revenues
derived from retail customers in foreign countries.
<PAGE>
ITEM 2. PROPERTIES
The Registrant owns 64 of its 154 food stores and leases the remaining 90
locations. It owns all 4 of its distribution facilities and leases its general
office facility in Scarborough, Maine. The Registrant's properties are located
in Maine, New Hampshire, Vermont, northern Massachusetts, eastern upstate New
York, southern Virginia, North Carolina and South Carolina. The Registrant
believes that its properties are well maintained and are appropriate for its
business needs.
The number of stores and facilities operated and the square feet of space
at January 1, 2000, consisted of:
(In thousands)
Square Square Footage
Footage Selling
Units Gross Area Area
Stores 154 7,483 5,360
Distribution and
administrative facilities 5 1,860 --
Total 159 9,343 5,360
The following table sets forth expiration dates of leased facilities,
assuming exercise of all renewal options:
Lease Administrative
Expiration Food stores Facilities
2000-2009 1
2010-2019 7
2020-thereafter 82 1
90 1
Further information concerning the Registrant's distribution facilities
appears under Item 1 at pages 5-6 above, which information is incorporated
herein by reference.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings, including ordinary routine
litigation incidental to the business, to which the Registrant is a party or to
which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1999.
Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Registrant has been listed on the New York Stock
Exchange since July 18, 1986. The following table sets forth the dividends per
share and the high and low sales prices of the Common Stock on the New York
Stock Exchange composite tapes during each quarter of 1998 and 1999.
QUARTERLY
SALE PRICE DIVIDENDS
HIGH LOW PER SHARE
1st Quarter, 1999 $53.438 $44.505 .165
2nd Quarter, 1999 57.500 43.625 .165
3rd Quarter, 1999 73.375 53.125 .165
4th Quarter, 1999 73.125 65.938 .165
1st Quarter, 1998 $46.438 $38.750 .150
2nd Quarter, 1998 46.938 43.375 .150
3rd Quarter, 1998 47.000 41.250 .150
4th Quarter, 1998 53.000 40.063 .150
There are approximately 14,000 record holders of the Common Stock. Fiscal
1999 was the fifty-first consecutive year that dividends were paid on the Common
Stock and the thirty-seventh consecutive year that the aggregate dividend paid
per share (after adjusting for stock splits) has increased. Future dividends
will depend on the Registrant's earnings and financial condition.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
Fiscal Year
1999 1998 1997 1996 1995
(In thousands except per share amounts)
EARNINGS STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Sales and other revenues................................. $3,462,942 $3,323,588 $3,226,433 $2,957,559 $2,568,061
Cost of sales............................................ 2,544,623 2,480,346 2,427,287 2,242,784 1,951,248
Gross margin............................................. 918,319 843,242 799,146 714,775 616,813
Selling, general and administrative expenses............. 725,900 664,357 635,355 568,033 481,017
Merger related costs..................................... 9,453 - - - -
Impairment loss.......................................... - - 39,950 - -
Operating profit......................................... 182,966 178,885 123,841 146,742 135,796
Interest expense, net.................................... 23,468 26,577 26,425 22,204 19,368
Earnings before income taxes............................. 159,498 152,308 97,416 124,538 116,428
Income taxes............................................. 61,480 57,661 37,769 49,333 46,227
Net earnings............................................. $ 98,018 $ 94,647 $ 59,647 $ 75,205 $ 70,201
Per common share:
Basic earnings per share.............................. $ 2.32 $ 2.24 $ 1.41 $ 1.78 $ 1.67
Diluted earnings per share............................ $ 2.28 $ 2.21 $ 1.40 $ 1.76 $ 1.66
Cash dividends........................................ $ .66 $ .60 $ .54 $ .48 $ .42
January January January December December
1, 2000 2, 1999 3, 1998 28, 1996 30, 1995
BALANCE SHEET DATA: (Dollar amounts in thousands except per share data)
Working capital.......................................... $ 53,578 $ 36,279 $ 20,873 $ 21,796 $ 23,512
Total assets............................................. 1,329,990 1,284,538 1,227,190 1,183,727 961,830
Current maturities:
Long-term debt....................................... 20,391 19,296 18,155 14,213 11,246
Obligations under capital leases...................... 2,462 2,108 1,873 1,775 1,467
Long-term debt, excluding current maturities............. 185,126 220,130 235,850 227,525 150,648
Obligations under capital leases, excluding current
maturities............................................. 71,464 73,866 75,687 75,198 69,747
Shareholders' equity..................................... 727,188 663,350 601,029 569,156 518,677
Book value per share..................................... $ 17.20 $ 15.70 $ 14.22 $ 13.46 $ 12.26
</TABLE>
<PAGE>
FORM 10-K HANNAFORD BROS. CO. 1-7603 JANUARY 1, 2000
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
This analysis of the Company's results of operations and financial
condition should be read in conjunction with the accompanying consolidated
financial statements, including the notes thereto, and the information presented
in the summary of selected financial data. All footnote references are to Notes
to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Overview
Sales and other revenues for 1999 amounted to $3.463 billion, an increase
of 4.2% over last year's sales and other revenues of $3.324 billion. Fourth
quarter sales and other revenues in 1999 were $888 million, as compared to $850
million, an increase of 4.4%. Identical store sales were up 1.5% in the fourth
quarter and up 1.1% for the year. Comparable store sales were up 2.0% in the
fourth quarter and 1.7% for the year.
Before merger related costs, net earnings in 1999 were up 10.4% and fourth
quarter net earnings were up 8.2% over 1998 net earnings for the same periods.
Before merger related costs, diluted net earnings per common share for 1999 were
$2.43, as compared to $2.21 for 1998. Before merger related costs, diluted net
earnings per common share for the fourth quarter of 1999 were $.70, as compared
to $.65 reported for the fourth quarter of 1998.
In February, 2000 the Company sold a majority interest in HomeRuns.com,
Inc., its internet-based grocery delivery service (Note 3). The Company will
retain a minority interest and, subsequent to the sales date, will no longer
reflect the operating results of HomeRuns.com, Inc. in its consolidated
statement of earnings. This business generated a net loss of approximately $.25
per share in 1999 and $.16 per share in 1998.
<PAGE>
The following table sets forth, for the years indicated, the percentages
which selected items in the consolidated statements of earnings are to sales and
other revenues and the percentage change in the dollar values of such items as
compared to the indicated prior year:
YEAR-TO-YEAR PERCENTAGE
PERCENTAGE OF SALES CHANGE IN DOLLAR VALUES
AND OTHER REVENUES 1999 1998
EXCEPT PER SHARE AMOUNTS Compared to Compared to
1999 1998 1997 1998 1997
100.0% 100.0% 100.0% Sales and other revenues 4.2% 3.0%
26.5 25.4 24.8 Gross margin 8.9 5.5
Selling, general and
20.9 20.0 19.7 administrative expenses 9.3 4.6
0.3 - - Merger related costs - -
- - 1.3 Impairment loss - (100.0)
5.3 5.4 3.8 Operating profit 2.3 44.5
0.7 0.8 0.8 Interest expense, net (11.7) 0.6
4.6 4.6 3.0 Earnings before income taxes 4.7 56.3
1.8 1.7 1.2 Income taxes 6.6 52.7
2.8% 2.9% 1.8% Net earnings 3.6 58.7
Earnings per share:
$2.32 $2.24 $1.41 Basic 3.6 58.9
$2.28 $2.21 $1.40 Diluted 3.2 57.9
$ .66 $ .60 $ .54 Cash dividends per share 10.0 11.1
<PAGE>
Sales
Sales and other revenues rose 4.2% in 1999, to $3.463 billion, an increase
of $139 million over 1998 results. Sales from supermarkets that were open in
both periods presented ("identical store sales"), increased $36 million or 1.1%.
Additional supermarket sales of $90 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 $13 million. Comparable store sales, which include results
from expanded and relocated stores, increased 1.7% in 1999.
Identical store sales were up 1.5% in the fourth quarter of 1999 while
comparable store sales were up 2.0% in the quarter. The Company attributes these
increases to a strong holiday sales season coupled with sales generated by the
Year 2000 event.
Sales and other revenues rose 3.0% in 1998, to $3.324 billion, an increase
of $97 million over 1997 results. Fiscal year 1998 contained 52 weeks of
operations as compared to 53 weeks in 1997. This additional week accounted for
approximately $58 million of additional sales in 1997. The Company's real sales
growth in 1998 exceeded 6.7% after adjusting for the 53rd week of sales in 1997.
Identical store sales, adjusted to exclude the 53rd week of sales in 1997,
increased 1.3%. Comparable store sales, on a 52-week basis in both years
presented, increased 1.9% in 1998.
Gross Margin
Gross margins increased in 1999 to 26.5% of sales and other revenues in
comparison to 25.4% in 1998. These increases are the result of improved selling
margins in most of the Company's marketing territories. The Company continues to
focus on maintaining a competitive pricing strategy.
Gross margins increased in 1998 to 25.4% of sales and other revenues in
comparison to 24.8% in 1997. The 1998 increase is the result of improved selling
margins in a majority of the Company's marketing territories. A portion of this
increase was the result of an inventory shrinkage reduction initiative which
combined store level associates and vendor partners using integrated information
technology.
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to 20.9% of sales
and other revenues in 1999 as compared to 20.0% in 1998. Payroll and payroll
related expenses, which exceeded 50% of selling, general and administrative
expenses in both years, increased as a percentage of sales in 1999. In addition,
the Company incurred increased advertising costs during 1999 as it undertook
programs to build sales in several of its marketing areas. The Company also
incurred increased costs as it developed plans to grow HomeRuns.com, Inc., its
internet-based grocery delivery service.
Selling, general and administrative expenses increased to 20.0% of sales
and other revenues in 1998 as compared to 19.7% in 1997. Payroll and payroll
related expenses increased as a percentage of sales in 1998. In addition to
increased direct labor costs, the Company incurred increased costs related to
its employee benefit plans (Note 8).
Merger Related Costs
Charges for merger related costs of $9 million were incurred in 1999 as a
result of the pending merger with Delhaize America, Inc. (Note 2). The majority
of these costs represent fees for professional services provided by outside
parties. Additional merger related costs will be recorded in 2000 as
expenditures are incurred.
Impairment Loss
The Company recorded a non-cash charge of $40 million in the fourth quarter
of fiscal 1997 (Note 6). Expressed as a percentage of sales the impairment loss
was 1.3% of sales and other revenues. Approximately $24 million of the
impairment loss relates to supermarket assets and related costs for seven
southeastern stores in non-core markets that were closed in January 1998. The
remaining $16 million relates to supermarket assets which continue to be used in
the operations of the Company.
Interest Expense, Net
Net interest expense expressed as a percentage of sales and other revenues
was 0.7% in 1999 as compared to 0.8% in both 1998 and 1997. The 1999 decrease is
primarily the result of a decrease in average debt levels.
Net interest expense in 1998 was $27 million, an increase of 0.6% from 1997
interest expense of $26 million. This slight increase is primarily the result of
a decrease in capitalized interest from reduced construction activity offset by
a decrease in average debt levels.
<PAGE>
Income Taxes
The provision for income taxes includes both federal and state income
taxes. The effective tax rate increased in 1999 to 38.5% from 37.9% in 1998.
This higher effective tax rate is primarily the result of non-deductible merger
related costs incurred by the Company. Excluding merger costs, the Company's
1999 effective tax rate would have approximated 38.1%.
The effective tax rate increased in the fourth quarter of 1999 to 39.4%
from 37.5% in the fourth quarter of 1998. This increase is primarily the result
of non-deductible merger related costs incurred during the fourth quarter of
1999.
The effective tax rate decreased in 1998 to 37.9% from 38.8% in 1997. This
lower effective tax rate is the result of reductions in the Company's overall
state income tax rate. In addition, the 1998 reduced rate was positively
impacted by a tax benefit related to the Company's donation of food products.
Net Earnings and Earnings Per Common Share
Net earnings increased 3.6% in 1999 to $98 million or 2.8% of sales and
other revenues, an increase of $3 million over 1998 net earnings of $95 million
or 2.9% of sales and other revenues. Before merger related costs, 1999 net
earnings increased by 10.4% to $104 million or 3.0% of sales and other revenues.
This increase is the result of increased sales and gross margin coupled with
reduced interest expense partially offset by an increase in selling, general and
administrative expenses.
Net earnings for both the fourth quarters of 1999 and 1998 were $28
million. Basic and diluted earnings per share were $.67 and $.65, respectively,
in the fourth quarter of 1999 versus $.66 and $.65, respectively, in the fourth
quarter of 1998. Before merger related costs, net earnings for the fourth
quarter of 1999 were $30 million or 3.4% of sales and other revenues, an 8.2%
increase over 1998 fourth quarter net earnings of $28 million or 3.3% of sales
and other revenues.
Net earnings increased 58.7% in 1998 to $95 million or 2.9% of sales and
other revenues, an increase of $35 million from 1997 net earnings of $60 million
or 1.8% of sales and other revenues. Before the 1997 impairment loss, net
earnings for 1998 increased 12.1% over 1997 results. This increase is the result
of increased sales and gross margin coupled with a reduced income tax provision,
partially offset by an increase in selling, general and administrative expenses.
Basic earnings per common share in 1999 were $2.32 as compared to $2.24 in
1998, an increase of 3.6%. Diluted earnings per common share (Note 1K) were
$2.28 in 1999, an increase of 3.2% from $2.21 reported for 1998. Before merger
related costs, diluted earnings per common share were $2.43 in 1999 as compared
to $2.21 in 1998, an increase of 10.0%.
<PAGE>
Basic earnings per common share in 1998 were $2.24 as compared to $1.41 in
1997, an increase of 58.9%. Diluted earnings per common share were $2.21 in
1998, an increase of 57.9% from $1.40 reported for 1997. Before the impairment
charge, diluted earnings per common share were $2.21 in 1998 as compared to
$1.99 in 1997, an increase of 11.1%. Management estimates that the extra week of
operations in the fourth quarter of 1997 increased net earnings by approximately
$0.04 per share.
In February, 2000 the Company sold a majority interest in HomeRuns.com,
Inc., its internet-based grocery business (Note 3). This business generated a
net loss of approximately $.25 per share in 1999, $.16 per share in 1998 and
$.11 per share in 1997. Following the sale, the Company will retain a minority
interest and account for its remaining investment in HomeRuns.com, Inc. on the
cost basis.
Year 2000 (Y2K)
The Company reported that all of its facilities and major systems were up
and running on January 1, 2000. Subsequent to this date, the Company has not
experienced any Y2K related events. The costs incurred by the Company to
implement its readiness plan were $2 million in 1999 and $3 million in 1998.
These costs were not material to the Company's results of operations, financial
condition or cash flows for 1999 and 1998.
<PAGE>
Other Items and Impact of Inflation
Seasonal business affects the Company's operations in that sales are
generally greater in the second half of the year (Note 11).
In recent years, the impact of inflation on the Company's operating results
has been minimal, reflecting generally lower rates of inflation in the economy.
The Company's business is characterized by large purchases and high sales
volumes extended across diverse product lines, rapid inventory turns and low
profit margins. In this environment, vendor price changes are typically passed
on to the customer. The Company does not believe inflation or deflation has
significantly affected its competitive position in the industry. However, since
price changes do cause sales dollars to fluctuate, the use of the LIFO method of
accounting for inventories reduces the impact of price changes on earnings by
matching current costs with current revenues.
CAPITAL RESOURCES AND LIQUIDITY
Overview
Measures of liquidity at the end of the last three fiscal years were as follows:
(Dollars in millions)
1999 1998 1997
Cash and cash equivalents $54 $60 $58
Working capital (FIFO inventory) $75 $56 $39
Unused lines of revolving credit $72 $58 $54
Unused lines of short-term credit $ 1 $ 1 $30
Current ratio (FIFO inventory) 1.27 1.22 1.15
<PAGE>
The Company continued to maintain a strong capital position at the end of
fiscal 1999. Cash and cash equivalents decreased $6 million to $54 million at
the end of the year. This decrease was the result of cash used in financing and
investing activities offset by cash provided by operating activities. Lines of
credit represent a continuing source of capital and are available for purposes
of short-term financing. At January 1, 2000, the Company had $20 million
outstanding on its revolving lines of credit. Not- withstanding its impending
merger with Delhaize America (Note 2), the Company is in a solid financial
position to carry out its current internal expansion and potential external
growth plans in 2000.
In February 1999, the Company renewed a stock repurchase program
authorizing the repurchase of up to $100 million in shares of Hannaford common
stock over the next three years. The program authorizes purchases on the open
market and through privately negotiated transactions. Shares repurchased by the
Company are held as treasury shares and are available to the Company for use in
funding its stock-based benefit plans and, when authorized, for other corporate
purposes. During 1999, the Company reacquired 405,000 shares at a cost of $20
million, all of which were used to fund issuances under stock-based benefit
plans.
Cash Flows from Operating Activities
Cash provided by operating activities was $181 million in 1999, a decrease
of $3 million from the $184 million provided in 1998. This decrease is primarily
attributable to an increase in inventories, partially offset by increases in net
earnings, depreciation and amortization and accounts payable and accrued
expenses. With the exception of inventories and their impact upon accounts
payable, the fluctuations within these accounts are part of the Company's normal
business activities. Inventory levels increased $29 million from year-end 1998
levels. This is primarily the result of the Company's Y2K contingency planning
to increase its retail and warehouse inventory levels of certain grocery,
pharmaceutical and general merchandise items in anticipation of consumer demand
and in planning for a possible Y2K external infrastructure problem. Since Y2K
infrastructure problems did not arise, management expects to sell most of this
excess inventory as part of its normal business operations during the first
quarter of 2000.
Cash provided by operating activities was $184 million in 1998, a slight
decrease from the $190 million provided in 1997. This decrease is primarily
attributable to an increase in inventories, receivables and prepayments,
partially offset by an increase in deferred taxes. The fluctuations within these
accounts are part of the Company's normal business operations.
<PAGE>
Cash Flows from Investing Activities
Cash used in investing activities decreased $21 million during 1999 to $112
million from $133 million in 1998. This decrease is primarily the result of the
Company's reduced capital investment during the year. Capital investments
totaled $133 million in 1999 and were composed of $115 million in additions to
property, plant and equipment, $10 million in computer software costs and
deferred charges and $8 million in non-cash asset additions. These 1999 capital
investments consist primarily of costs incurred in building and equipping new,
expanded and remodeled stores and for improvements necessary in maintaining
current facilities and systems.
Net retail selling space for supermarkets increased 3.7% in 1999 to
5,360,000 square feet at year-end, an increase of 189,000 square feet over 1998
year-end sales area. During 1999, the Company opened eight supermarkets
including four new stores and four expansions.
The number of supermarkets and square footage of selling area at year-ends
1999, 1998 and 1997 are summarized below:
SUPERMARKETS
Number of Square Footage
Units Selling Area
1999 154 5,360,000
1998 150 5,171,000
1997 148 4,947,000
<PAGE>
New, relocated and expanded supermarkets in 1999, together with their
square footage of selling area, are listed below:
Square Footage
Location Selling Area
Northeast
Bucksport, ME (expansion) 16,000
Ossipee, NH (expansion) 17,000
York, ME 41,000
Jay, ME (expansion) 17,000
Southeast
Richmond, VA (expansion) 38,000
Charlotte, NC 41,000
Apex, NC 41,000
Richmond, VA 41,000
The 1999 capital program also included eight major remodels and a number of
minor ones, which do not add square footage but are important to the Company's
presentation and ability to build sales. At the end of 1999, approximately
two-thirds of the Company's supermarkets have been newly constructed, expanded
or remodeled within the last five years.
Cash used in investing activities decreased $24 million during 1998 to $133
million from $157 million in 1997. This decrease is the result of the Company's
reduced capital investment coupled with the increased net book value of assets
sold during the year. During 1998, the Company completed the sale of certain
assets relating to supermarkets that were closed in January 1998 and written
down to their estimated fair values in 1997.
<PAGE>
Cash Flows from Financing Activities
Cash used in financing activities was $75 million in 1999, as compared to
$49 million in 1998. This reduction in cash flows of $26 million is primarily
the result of reduced proceeds from the issuance of long-term debt.
In 1999, the Company purchased 405,000 shares of common stock at a cost of
$20 million. The majority of 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 $14 million received during 1999 from the
issuance of 423,000 shares of treasury stock.
The Company paid $28 million in dividends to common shareholders in 1999.
Quarterly cash dividends declared during 1999 totaled $.66 per common share, an
increase of 10.0% over the $.60 per share declared during 1998. This was the
thirty-seventh consecutive year that the aggregate dividend paid per common
share, after adjustment for stock splits and stock dividends, has increased.
Common stock dividend payments in 1999 represented 28.4% of net earnings
available to common shareholders. In February 1999, the Company declared a
quarterly dividend on its common stock of $.165 per share, payable March 23,
2000.
Cash used in financing activities was $49 million in 1998 as compared to
$17 million in 1997. This reduction in cash flows of $32 million is primarily
the result of increased payments of long-term debt coupled with reduced proceeds
from the issuance of long-term debt.
<PAGE>
2000 Capital Program
Total capital expenditure commitments are projected to be in excess of $160
million in 2000, primarily for new store constructions, expansions and remodels,
equipment, vehicles and other asset expenditures. During 2000, this program will
be subject to continuing change and review as conditions warrant. Net square
footage of retail selling space is expected to increase by approximately 4.7%
during 2000. A number of projects scheduled to start in 2000 will not be
completed until 2001. The 2000 capital program is expected to be financed by
internally-generated funds, long-term debt and leases.
FORWARD-LOOKING STATEMENTS
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 pending merger with Delhaize America,
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, interest rates or the Company's cost of
borrowing, by increases in labor rates due to low unemployment or other factors,
by unanticipated costs related to the opening and closing of stores or by the
inability to control various expense categories.
(2) Hannaford's future growth is dependent on its ability to expand its
retail square footage, either de-novo or through acquisitions. 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 projected future expansion.
<PAGE>
(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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Presented below are the Registrant's Consolidated Balance Sheets,
Consolidated Statements of Earnings, Consolidated Statements of Changes in
Shareholders' Equity, Consolidated Statements of Cash Flows and accompanying
Notes to Consolidated Financial Statements.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of
Hannaford Bros. Co.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, changes in stockholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Hannaford Bros. Co. and Subsidiaries at January 1, 2000 and January 2, 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended January 1, 2000, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
s/PricewaterhouseCoopers, LLP
Portland, Maine
January 19, 2000
(except for Notes 2 and 3,
as to which the date is
February 12, 2000)
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
January 1, January 2,
2000 1999
Current assets:
Cash and cash equivalents $ 53,641 $ 59,722
Accounts receivable, net 26,633 22,869
Inventories (Note 1C) 230,416 201,219
Prepaid expenses 5,817 6,116
Deferred income taxes (Note 10) 10,325 5,952
Total current assets 326,832 295,878
Property, plant and equipment, net
(Notes 1D, 4 and 6) 841,335 818,106
Leased property under capital leases, net
(Note 5) 51,536 54,911
Other assets:
Goodwill, net (Notes 1F and 6) 58,154 63,517
Deferred charges, net (Note 1H) 24,055 25,074
Computer software costs, net (Note 1I) 26,149 24,580
Miscellaneous assets 1,929 2,472
Total other assets 110,287 115,643
$1,329,990 $1,284,538
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands except per share amounts)
January 1, January 2,
2000 1999
Current liabilities:
Current maturities of long-term debt (Note 4) $ 20,391 $ 19,296
Obligations under capital leases (Note 5) 2,462 2,108
Accounts payable 187,344 186,626
Accrued payroll 30,768 27,254
Other accrued expenses 31,033 23,873
Income taxes 1,256 442
Total current liabilities 273,254 259,599
Deferred income tax liabilities (Note 10) 32,676 28,859
Other liabilities 40,282 38,734
Long-term debt (Note 4) 185,126 220,130
Obligations under capital leases (Note 5) 71,464 73,866
Shareholders' equity (Notes 7 and 9):
Class A Serial Preferred stock, no par,
authorized 2,000 shares - -
Class B Serial Preferred stock, par value
$.01 per share, authorized 28,000 shares - -
Common stock, par value $.75 per share:
Authorized 110,000 shares;
42,338 and 42,338 shares
issued. 31,754 31,754
Additional paid-in capital 103,085 109,664
Preferred stock purchase rights 423 423
Retained earnings 595,478 525,344
730,740 667,185
Less common stock in treasury
68 and 85 shares 3,552 3,835
Total shareholders' equity 727,188 663,350
$1,329,990 $1,284,538
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share amounts)
FISCAL YEAR
1999 1998 1997
Sales and other revenues $3,462,942 $3,323,588 $3,226,433
Cost of sales 2,544,623 2,480,346 2,427,287
Gross margin 918,319 843,242 799,146
Selling, general and administrative
expenses 725,900 664,357 635,355
Merger related costs (Note 2) 9,453 - -
Impairment loss (Note 6) - - 39,950
Operating profit 182,966 178,885 123,841
Interest expense, net (Notes 1J and 4) 23,468 26,577 26,425
Earnings before income taxes 159,498 152,308 97,416
Income taxes (Note 10) 61,480 57,661 37,769
Net earnings $ 98,018 $ 94,647 $ 59,647
Earnings per share (Note 1K):
Basic $ 2.32 $ 2.24 $ 1.41
Diluted $ 2.28 $ 2.21 $ 1.40
Cash dividends per share $ .66 $ .60 $ .54
Weighted average number of common shares
outstanding Basic 42,224 42,277 42,287
Diluted 43,061 42,884 42,732
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
Additional
Common Stock Paid-in Preferred Stock Retained Treasury Stock
Shares Amount Capital Purchase Rights Earnings Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 28, 1996 42,338 31,754 119,399 423 419,459 ( 58) (1,879)
Net earnings 59,647
Cash dividends on common stock (23,043)
Shares issued under employee
benefit plans, net of tax benefits (4,269) 399 13,917
Treasury stock purchases (400) (14,379)
Balance, January 3, 1998 42,338 31,754 115,130 423 456,063 (59) (2,341)
Net earnings 94,647
Cash dividends on common stock (25,366)
Shares issued under employee
benefit plans, net of tax benefits (5,466) 392 16,514
Treasury stock purchases (418) (18,008)
Balance, January 2, 1999 42,338 31,754 109,664 423 525,344 ( 85) (3,835)
Net earnings 98,018
Cash dividends on common stock (27,884)
Shares issued under employee
benefit plans, net of tax benefits (6,579) 423 20,689
Treasury stock purchases (406) (20,406)
Balance, January 1, 2000 42,338 $31,754 $103,085 $423 $595,478 ( 68) $(3,552)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FORM 10-K HANNAFORD BROS. CO. 1-7603 JANUARY 1, 2000
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
1999 1998 1997
Cash flows from operating activities:
Net income $ 98,018 $ 94,647 $ 59,647
Adjustments to reconcile net
income to net cash provided
by operating activities:
Impairment loss - - 39,950
Depreciation and amortization 103,278 96,739 93,953
(Increase) decrease in inventories (29,197) (12,452) 2,891
(Increase) decrease in receivables and
prepayments (3,618) (6,202) 599
Increase in accounts payable and
accrued expenses 14,099 2,986 440
Increase (decrease) in income
taxes payable 814 (2 387) 297
Increase (decrease) in deferred taxes (556) 11,554 (7,815)
Other operating activities (1,494) (1,081) (446)
Net cash provided by
operating activities 181,344 183,804 189,516
Cash flows from investing activities:
Acquisition of property, plant
and equipment (114,917) (135,904) (152,862)
Sale of property, plant and equipment, net 12,762 9,156 6,143
Increase in computer software costs (8,562) (7,262) (6,205)
(Increase) decrease in deferred charges (1,627) 911 (4,054)
Net cash used in investing
activities (112,344) (133,099) (156,978)
Cash flows from financing activities:
Principal payments under capital
lease obligations (2,099) (1,740) (1,788)
Proceeds from issuance of long-term debt - 20,000 26,600
Payments of long-term debt (38,803) (34,580) (14,418)
Issuance of common stock 14,110 11,048 9,648
Purchase of treasury stock (20,406) (18,008) (14,379)
Dividends paid (27,883) (25,366) (23,043)
Net cash used in
financing activities (75,081) (48,646) (17,380)
Net increase (decrease) in cash and cash
equivalents (6,081) 2,059 15,158
Cash and cash equivalents at beginning
of year 59,722 57,663 42,505
Cash and cash equivalents at end of year $ 53,641 $ 59,722 $ 57,663
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information
(In thousands)
1999 1998 1997
Cash paid during the year for:
Interest (net of amount capitalized,
$1,870 in 1999, $1,935 in 1998 and
$3,463 in 1997) $24,807 $27,397 $26,396
Income taxes 59,022 47,658 41,202
Supplemental disclosure of noncash investing and financing activities
A non-cash debt obligation totalling $4,895,000 was assumed in 1999
when the Company acquired land and building at a previously leased
location.
Capital lease obligations totalling $2,663,000, $1,166,000 and
$4,550,000 were incurred during 1999, 1998 and 1997, respectively,
when the Company entered into real estate leases.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS
The Company and its subsidiaries are principally involved in the
distribution and retail sale of food, prescription drugs and related products
through supermarkets and combination stores. The Company's stores are located in
Maine, New Hampshire, Vermont, Massachusetts, upstate New York, Virginia, North
Carolina and South Carolina.
B. PRINCIPLES OF CONSOLIDATION
The Company's fiscal year ends on the Saturday closest to December 31. The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries as of January 1, 2000, for fiscal year 1999 (52
weeks), January 2, 1999, for fiscal year 1998 (52 weeks) and January 3, 1998,
for fiscal year 1997 (53 weeks). All significant intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
C. INVENTORIES
Inventories consist primarily of groceries, meat, produce, general
merchandise and pharmaceuticals. The majority of grocery, pharmaceutical and
general merchandise inventories are valued at the lower of cost, determined on
the last-in, first-out (LIFO) method, or market. Approximately 87% of
inventories were valued using the LIFO method in 1999 and 1998. Other
inventories are stated at the lower of cost (first-in, first-out) or market. The
current cost of groceries, general merchandise and pharmaceuticals exceeded the
LIFO valuation by $21,108,000 at January 1, 2000, $19,583,000 at January 2, 1999
and $18,037,000 at January 3, 1998. LIFO expense charged to cost of goods sold
was $1,525,000 in 1999, $1,546,000 in 1998 and $961,000 in 1997
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Leasehold
interests and improvements are amortized on the straight-line method over the
shorter of estimated useful life or lease term. The costs of repairs and
maintenance are expensed as incurred; renewals and betterments are capitalized.
Upon sale or retirement, the cost and related accumulated depreciation are
eliminated from the respective accounts and any resulting gain or loss is
included in the results of operations. Property, plant and equipment consists of
the following:
AVERAGE
DEPRECIATION (In thousands)
RATE 1999 1998
3% Land and improvements $ 164,068 $ 141,706
3% Buildings 325,070 300,708
12% Furniture, fixtures and equipment 505,769 500,364
4% Leasehold interests and improvements 328,250 324,106
Construction in progress 12,726 8,790
1,335,883 1,275,674
Less accumulated depreciation
and amortization 494,548 457,568
$ 841,335 $ 818,106
E. STORE OPENING COSTS
The noncapital expenditures incurred in opening new stores or remodeling
existing stores are expensed as they are incurred.
F. GOODWILL
Goodwill, which represents the excess of costs of assets acquired over the
fair value of their net assets at dates of acquisition, is being amortized on
the straight-line method over various periods not exceeding 20 years. Goodwill
amortization expense charged to operations was $4,164,000 in 1999, $4,035,000 in
1998 and $5,534,000 in 1997.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
G. IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews and evaluates long-lived assets for impairment when
events or circumstances indicate costs may not be recoverable (Note 6). The net
book value of long-lived assets is compared to expected undiscounted future cash
flows. The Company performs this evaluation on each supermarket location. An
impairment loss would be recorded for the excess of net book value over the fair
value of the impaired asset. Based on management expectations of future cash
flows at January 1, 2000, no impairment charge was recognized for the
non-current asset base of the Company's supermarkets for the year ended January
1, 2000.
H. DEFERRED CHARGES
Deferred charges consist primarily of costs of obtaining new store sites,
covenants-not-to-compete, tradenames and initial direct lease costs. Costs of
obtaining new store sites, if ultimately developed, are capitalized and
depreciated over the estimated useful lives of the related assets. Other
intangible assets acquired in connection with acquisitions are amortized on the
straight-line method over periods ranging from five to ten years. Lease costs
are amortized on the straight-line method over the base lease term. Amortization
expense related to these deferred charges was $3,515,000 in 1999, $3,715,000 in
1998 and $3,599,000 in 1997.
I. CAPITALIZED COMPUTER SOFTWARE COSTS
Capitalized computer software costs consist of costs to purchase and
develop software. The Company capitalizes internally developed software costs
based on a project-by-project analysis of each project's significance to the
Company and its estimated useful life. The majority of capitalized software
costs are amortized on a straight-line method over a period of five years.
Amortization expense charged to operations was $6,959,000 in 1999, $4,495,000 in
1998 and $3,312,000 in 1997.
In 1999, the Company implemented Statement of Position (SOP) 98-1,
Accounting For the Costs of Computer Software Developed For or Obtained For
Internal Use. SOP 98-1 requires the capitalization of certain costs incurred in
connection with developing or obtaining software for internal use. In 1999, the
Company made certain changes in its capitalization policy to conform to SOP
98-1, the impact of which was not material to its results of operations or
financial position.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
J. CAPITALIZED INTEREST
The Company capitalizes interest as part of the cost of acquiring and
constructing certain assets. Capitalized interest was $1,870,000 in 1999,
$1,935,000 in 1998 and $3,463,000 in 1997.
K. EARNINGS PER COMMON SHARE
Basic earnings per share of common stock have been determined by dividing
net earnings by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per share reflect the potential
dilution that would occur if existing stock options were exercised and have been
determined by dividing net earnings by the weighted average number of diluted
shares of common stock outstanding during the year.
L. FAIR VALUE DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents, accounts receivable and notes receivable:
The carrying amounts reported in the balance sheet for these items
approximate their fair values.
Long-term debt: The fair values of the Company's long-term debt are
estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing
arrangements. The carrying amount of the Company's long-term debt,
including current maturities, was approximately $205,517,000 at
January 1, 2000. The fair value of the long-term debt is estimated
to be $204,455,000 at January 1, 2000.
M. RECLASSIFICATIONS
Certain reclassifications have been made in the prior year's balance sheet
to conform to classifications made in the current year.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. MERGER AGREEMENT
In August 1999, the Company entered into an Agreement and Plan of
Merger among the Company, Food Lion, Inc. ("Food Lion") and FL
Acquisition Sub, Inc. ("Merger Sub"), a wholly-owned subsidiary of
Food Lion, pursuant to which Merger Sub would be merged with and into
the Company and the Company would continue as the surviving
corporation (the "Merger"). In September 1999, the shareholders
of Food Lion approved a number of proposals, including (1) the
conversion of Food Lion into a holding company, (2) an amendment to
its Articles of Incorporation to change the company name to Delhaize
America, Inc. (Delhaize), and (3) a one-for-three reverse stock split
of Food Lion's outstanding shares of common stock (Classes A and B).
Under the terms of the Merger Agreement and subject to certain
conditions, Delhaize will pay up to $79 per share through a
combination of cash and stock for all of the outstanding shares of the
Company. In addition, approximately $200 million of the Company's
debt will remain outstanding after the merger. Each share of
common stock of the Company issued and outstanding immediately prior
to the effective time of the Merger (excluding shares owned by
Delhaize which will include the shares received by Delhaize from the
Sobey Parties pursuant to a separate Stock Exchange Agreement
referred to below) will be converted, subject to proration as
described in the Merger Agreement, into a right to receive (A) $79.00
in cash, without interest, or (B) the number of shares of Class A
common stock of Delhaize equal to $79.00 divided by the greater of
(i) the average of the per share last sales prices of Delhaize Class A
common stock for the ten consecutive trading days prior to the closing
date of the merger or (ii) $27.00. This merger will be
accounted for under the purchase method of accounting and will be a
taxable transaction under the Internal Revenue Code.
In connection with the execution of the Merger Agreement, certain
shareholders (the "Sobey Parties") entered into a Stock Exchange Agreement with
Delhaize. Pursuant to the Stock Exchange Agreement, the Sobey Parties agreed to
exchange their shares in the Company for a combination of Delhaize common stock
and cash. The Sobey Parties also entered into a Voting Agreement with Delhaize
pursuant to which, among other things, the Sobey Parties agreed to vote their
shares of Company common stock (representing approximately 24.7% of the
outstanding
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Company common stock) in favor of the Merger. In February 2000, the
shareholders of the Company voted to approve the terms of the merger agreement
as outlined above. Upon completion of the merger, which is pending FTC approval
and is expected to close in the second quarter of 2000, the Company will operate
as a wholly-owned subsidiary of Delhaize. Merger related costs of $9 million
were incurred in 1999. The majority of these costs represent fees for
professional services provided by outside parties.
3. SALE OF HOMERUNS.COM, INC.
In February 2000, the Company sold a majority interest in HomeRuns.com,
Inc., its internet-based grocery delivery service through a $100,000,000
investment and recapitalization on the part of the Cypress Group L.L.C., a New
York-based private equity firm. The Company will retain a minority interest and
will account for the future results of this investment using the cost method.
The Company has also entered into a wholesale supply agreement with
HomeRuns.com, Inc.
4. EXTERNAL FINANCING
At January 1, 2000, the Company had revolving credit lines with several
banks totalling $92,000,000 with interest rates determined by different
borrowing options including prime, quoted money market or LIBOR plus a premium.
At January 1, 2000, there were $19,700,000 of outstanding borrowings under these
credit lines with a weighted-average interest rate of 6.5%. The agreements
provide for conversion of revolving credit loans to term loans with principal
payments due in quarterly installments over a period of one to four years. The
loan agreements contain certain restrictive covenants, which among other
provisions, require maintenance of certain levels of working capital, debt and
tangible net worth. The lines require a commitment fee of 0.21% on the unused
portion of the line. There are no compensating balances required during the
commitment period.
In addition, the Company had an unused, uncommitted short-term bank line of
credit of $11,000,000 at January 1, 2000. Of this amount, approximately
$10,204,000 is reserved to support outstanding standby letters of credit which
guarantee payment of certain insurance claims and premiums.
In December 1999, the Company assumed a mortgage loan in the amount of
$4,895,000 in connection with its acquisition of the Hannaford Plaza Shopping
Center in Bennington, VT. This loan has a 16 year term and an interest rate of
8.25%.
At January 1, 2000, real estate and equipment with a net book value of
approximately $82,043,000 served as collateral for debt of approximately
$57,201,000.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Net interest expense was as follows:
(In thousands)
1999 1998 1997
Interest on debt $16,327 $19,012 $20,108
Capital lease interest 9,639 9,630 9,902
Capitalized interest (1,870) (1,935) (3,463)
Interest income (628) (130) (122)
$23,468 $26,577 $26,425
Long-term debt consists of the following:
(In thousands)
1999 1998
Uncollateralized senior notes due in varying
annual installments through 2016 with interest
from 6.2% to 9.0%. $125,350 $139,600
Collateralized by real estate, due in
varying installments through 2011 with
interest from 7.5% to 10.3% 57,201 59,619
Uncollateralized revolving credit loans with
interest from 5.6% to 6.5% 19,700 34,100
Other 3,266 6,107
205,517 239,426
Less current portion 20,391 19,296
$185,126 $220,130
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The uncollateralized senior note agreements contain certain restrictive
covenants, which among other provisions, limit total debt and require minimum
levels of tangible net worth.
Maturities of long-term debt at January 1, 2000, are as follows:
(In thousands)
2000 $ 20,391
2001 40,151
2002 16,874
2003 17,310
2004 16,491
2005 and thereafter 94,300
$205,517
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
5. LEASED ASSETS AND LEASE COMMITMENTS
The Company's financial structure includes leases of certain stores, office
facilities, and equipment. Initial lease terms range from 3 to 45 years with the
majority of lease terms between 20 and 25 years. Substantially all leases
contain renewal options. Certain leases contain a provision for the payment of
contingent rentals based on a percentage of sales in excess of stipulated
amounts. Most of the real estate leases provide that the Company pay taxes,
insurance and maintenance applicable to the leased premises.
The Company's investment in real property under capital leases was as follows:
(In thousands)
1999 1998
Real property $82,810 $82,500
Less accumulated amortization 31,274 27,589
Net real property under capital leases $51,536 $54,911
Amortization of property under capital leases was $4,282,595 in 1999,
$4,217,342 in 1998 and $4,381,463 in 1997.
Future minimum rental payments under capital lease obligations and
operating leases at January 1, 2000, are as follows:
(In thousands)
Capital Operating
Leases Leases
2000 $ 11,756 $ 21,257
2001 11,677 20,123
2002 11,906 19,516
2003 12,074 18,318
2004 12,003 17,767
2005 and thereafter 97,698 187,308
Total minimum lease payments 157,114 $284,289
Less:
Imputed interest (at rates
from 8.50% to 21.13%) 83,188
Present value of net mini-
mum lease payments 73,926
Less current portion 2,462
Long-term portion of obligations $ 71,464
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Minimum payments for capital and operating leases have not been reduced by
minimum sublease rentals of $2,370,000 and $8,336,000, respectively, due in the
future under noncancellable subleases. They also do not include contingent
rentals that may be payable under certain leases.
Total rent expense, net of executory costs, was as follows:
(In thousands)
1999 1998 1997
Capital leases:
Contingent rentals $ 172 $ 123 $ 194
Operating leases:
Minimum rentals 22,526 21,439 20,584
Contingent rentals 198 2 714
Rentals from subleases (2,045) (1,843) (1,492)
20,679 19,598 19,806
$20,851 $19,721 $20,000
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. IMPAIRMENT LOSS
In December 1997, the Company determined that certain of its supermarket
assets and identifiable intangibles, including goodwill, were impaired. Based on
a review of Company locations and considering the expected operating cash flows
along with the estimated market value of the assets as if they were to be sold
or disposed of, an impairment loss of $39,950,000 was recognized. Approximately
$24,000,000 of the asset impairment loss related to supermarket assets and
associated costs for stores that were closed in January 1998 and being held for
sale or disposal, and $15,950,000 related to supermarket assets which the
Company continued to use in its operations. In 1997 the operating losses of
these closed supermarkets were not material.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7. CAPITAL STOCK
In May 1996, the Company amended and extended its existing standstill
agreement with certain shareholders ("the Sobey Parties"). The amendment
extended the term of the standstill agreement to December 31, 1998, subject to
automatic renewal for successive one-year periods (but not beyond December 31,
2000) unless by July 31 of a given year either the Company or any of the Sobey
Parties gave written notice of an intention not to further extend the term of
the standstill agreement. Under the agreement, whenever the Company issued
shares of voting stock to third parties, the Sobey Parties generally had the
right to purchase sufficient shares from the Company to maintain a 25.6% level
of ownership. Due to the Company's share repurchase program to fund stock-based
benefit plans no new shares were issued by the Company, and so the Sobey Parties
purchased no additional shares in 1997, 1998 or 1999. In May 1999, the Sobey
Parties informed the Company of their intention to not extend the terms of the
standstill agreement beyond December 31, 1999 and the agreement terminated in
August 1999, upon the Board of Director's approval of the Merger Agreement with
Delhaize America, Inc.
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 for this Plan by an additional 750,000 shares thereby
permitting continued use of the Plan in future years. This plan was terminated,
pursuant to the Merger Agreement, effective January 1, 2000.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
8. EMPLOYEE BENEFIT PLANS
The Company maintains a non-contributory, defined benefit pension plan
covering approximately 50% of its employees. The plan provides for payment of
retirement benefits on the basis of employees' length of service and earnings.
The Company's policy is to fund the plan based upon legal requirements and tax
regulations. Plan assets consist of common stocks, cash and cash equivalents and
fixed income investments.
The Company also maintains an unfunded supplemental executive retirement
plan that provides benefits in excess of those limited in the cash balance plan
by maximum compensation and benefit limitations.
The Company also provides a defined contribution 401(k) plan to
substantially all employees. Amounts charged to expense for this plan were
$6,398,000 in 1999, $6,561,000 in 1998 and $2,916,000 in 1997. Effective for
1998, the Company increased the percentage of its matching contribution to this
401(k) plan.
In addition, the Company provides certain health care and life insurance
benefits for retired employees ("postretirement benefits"). Substantially all
employees may become eligible for these benefits if they reach early or normal
retirement age and accrue 10 years of service while working for the Company. The
postretirement health care plan is contributory for most participants with
retiree contributions adjusted annually. Life insurance benefits are not
available for employees who retired after January 1, 1996.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following tables set forth the change in plans' benefit obligations and
assets as well as the plans' funded status reconciled with the amounts shown in
the Company's financial statements at January 1, 2000 (1999 plan year) and
January 2, 1999 (1998 plan year):
<TABLE>
(In thousands)
Pension Benefits Postretirement Benefits
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $97,992 $ 84,201 $3,145 $ 3,118
Service cost 5,224 4,690 35 36
Interest expense 6,187 6,247 190 228
Amendments - - - (369)
Actuarial loss (gain) (7,832) 8,462 279 571
Benefits paid (9,333) (5,608) (421) (439)
Benefit obligation at end of year $92,238 $ 97,992 $3,228 $ 3,145
Change in plan assets:
Fair value of plan assets at beginning
of year $90,718 $ 88,385 $ 0 $ 0
Actual return on plan assets 15,512 3,123 0 0
Employer contribution 3,305 4,818 421 439
Benefits paid (9,333) (5,608) (421) (439)
Fair value of plan assets at end of year $100,202 $ 90,718 $ 0 $ 0
Funded status $ 7,964 $ (7,274) $(3,228) $(3,145)
Unrecognized transition obligation (ass (195) (227) 6,848 7,381
Unrecognized prior service cost 2,228 2,549 0 0
Unrecognized net actuarial loss (gain) (10,926) 3,192 (4,387) (5,149)
Accrued benefit cost $ (929) $ (1,760) $ (767) $ (913)
</TABLE>
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For measurement purposes, a 5.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999. The rate was assumed
to decrease to 5.0% for 2000 and remain at that level thereafter.
<TABLE>
(In thousands)
Pension Benefits Postretirement Benefits
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 5,224 $4,690 $3,128 $ 35 $ 36 $ 35
Interest expense 6,187 6,247 5,793 190 228 248
Expected return on plan assets (9,236)(10,162) (7,062) 0 0 0
Amortization of transition
obligation (asset) (31) (31) (31) 533 533 552
Amortization of prior service cost 322 322 322 0 0 0
Recognized net actuarial loss (gain) 8 (318) 28 (483) (553) (612)
$ 2,474 $ 748 $ 2,178 $ 275 $ 244 $ 223
Weighted-average assumptions as of
September 30 (the plans measurement
date):
Discount rate 7.50% 6.50% 7.50% 7.50% 6.50% 7.50%
Expected return on plan assets 10.50% 10.50% 10.50% - - -
Rate of compensation increase 4.50% 4.50% 4.50% - - -
</TABLE>
The projected benefit obligation and accumulated benefit obligation for the
unfunded supplemental executive retirement plan were $2,216,000 and $2,207,000
respectively at January 1, 2000 and $2,192,000 and $2,176,000 respectively as of
January 2, 1999. The projected benefit obligation for the defined benefit plan
was $95,800,000 with a fair value of plan assets of $90,718,000 at January 2,
1999.
A 1% change in the assumed health care cost trend rates would not have a
material effect on the benefit obligation or expense of postretirement benefits.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. EMPLOYEE STOCK PLANS
The 1988 and 1998 Stock Plans provide for the granting to officers and
other key employees options to purchase common stock at 100% of the market price
on the date of grant. Under the 1988 Stock Plan 2,800,000 shares were authorized
for grant and under the 1998 Stock Plan 6,000,000 shares were authorized for
grant. The 1988 and 1998 Stock Plans allow the granting of both incentive stock
options and non-qualified stock options. Under the 1988 and 1998 Stock Plans,
both incentive stock options and non-qualified stock options may have various
vesting schedules, but generally none are exercisable until at least one year
following the grant. All options may be exercised for cash or by exchanging
currently owned shares, or both. Under the 1988 and 1998 Plans, exchanged shares
may trigger the granting of non-qualified "reload" options for the balance of
the original option term. Original option grants expire ten years from the date
of grant. Incentive stock option activity for the last three fiscal years was as
follows:
<TABLE>
(Share Amounts in Thousands)
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 1,735 $32.64 1,500 $27.53 1,415 $24.89
Granted 386 48.25 510 44.70 362 34.63
Exercised (296) 28.39 (224) 24.76 (261) 22.85
Cancelled (53) 43.84 (51) 37.33 (16) 30.89
Outstanding at end
of year 1,772 37.04 1,735 32.64 1,500 27.53
Exercisable at end
of year 947 29.00 915 25.98 911 24.02
</TABLE>
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
<TABLE>
Non-qualified stock option activity was as follows:
(Share Amounts in Thousands)
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 534 $32.74 487 $30.07 378 $28.23
Granted 120 49.86 102 44.81 122 35.52
Exercised (25) 33.15 (52) 30.82 (13) 27.89
Cancelled (15) 48.82 (3) 41.07 - -
Outstanding at end
of year 614 36.01 534 32.74 487 30.07
Exercisable at end
of year 401 32.74 304 28.74 297 27.61
Available for future
grants (all plans) 5,029 - 5,445 - 86 -
</TABLE>
Exercise prices for options outstanding as of January 1, 2000 ranged from
$18.81 to $72.81. The weighted-average remaining contractual life of these
options is approximately 6.6 years.
The Employee Stock Purchase Plan enables participating employees to
purchase common stock through payroll deduction of up to 5% of eligible
compensation. The Company pays interest on the accumulated withholdings. These
amounts may be used to purchase shares of company stock at the option price
(lesser of: (a) 85% of the fair market value at the date of grant or (b) the
greater of the market price at the close of business on the exercise date or
$10.00 per share). During 1998, employees purchased 112,000 shares, for which
$2,941,000 was paid to the Company. During 1999, employees purchased 99,000
shares, for which $3,109,000 was paid to the Company. As of January 1, 2000,
grants had been exercised by employees for the purchase of 106,000 shares and
624,000 shares remained available for issuance under the Plan. As of January 28,
2000, $3,880,000 had been received by the Company upon issuance of these shares
and the balance of shares available for future issuance was reduced to 519,000.
This plan was terminated, pursuant to the Merger Agreement, effective January 1,
2000.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The Company applies the disclosure-only provisions of Statement of
Accounting Standards (SFAS) No. 123. Accordingly, no compensation cost has been
recognized for stock plans granting common shares at market value, as defined by
SFAS No. 123, on the date of the grant. Had compensation cost for the Company's
stock plans been determined based on the fair value requirements of SFAS No.
123, the Company's net income and basic earnings per share would have been
reduced to the proforma amounts indicated below:
(In thousands except earnings per share)
1999 1998 1997
Net earnings As reported $98,018 $94,647 $59,647
Proforma 93,224 90,585 56,436
Basic earnings per share As reported $2.32 $2.24 $1.41
Proforma 2.21 2.14 1.33
The fair value of each stock option grant has been estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
1999 1998 1997
Risk-free interest rate 5.54% 5.65% 6.85%
Dividend yield 1.30% 1.40% 1.55%
Expected volatility 20.00% 20.17% 19.42%
Expected life 4.1 yrs. 4.4 yrs. 4.5 yrs.
The weighted-average grant date fair values of options granted during 1999,
1998 and 1997 were $11.72, $10.33 and $8.84, respectively.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
10. INCOME TAXES
The components of the provision for income taxes were as follows:
(In thousands)
1999 1998 1997
Current
Federal $51,904 $39,944 $37,028
State 6,934 6,135 4,790
58,838 46,079 41,818
Deferred
Federal 2,392 10,514 (2,801)
State 250 1,068 (1,248)
2,642 11,582 (4,049)
Total income tax expense $61,480 $57,661 $37,769
The reconciliation of income tax computed at the United States Federal
statutory tax rate to income tax expense was as follows:
(In thousands)
1999 1998 1997
Tax at U.S.
statutory rate $55,825 35.00% $53,307 35.00% $34,096 35.00%
State income taxes,
net of federal tax
benefit 4,673 2.93 4,630 3.04 3,487 3.58
Other - net 982 .62 (276) (.18) 186 .19
$61,480 38.55% $57,661 37.86% $37,769 38.77%
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Deferred income taxes arise because of differences in the treatment of
income and expense items for financial reporting and income tax purposes.
Significant components of the Company's deferred tax assets and liabilities at
the end of the last two fiscal years were as follows:
(In thousands)
1999 1998
Deferred Tax Liabilities:
Depreciation and amortization $48,524 $43,824
Other 3,999 2,880
52,523 46,704
Deferred Tax Assets:
Capital leases (8,473) (8,027)
Insurance reserves (10,855) (10,314)
Associate benefit plans (5,730) (4,681)
Other (5,114) (775)
(30,172) (23,797)
22,351 22,907
Net current deferred tax assets 10,325 5,952
Net non-current deferred tax liabilities $32,676 $28,859
The Company expects to realize the deferred tax assets in the ordinary
course of business operations in subsequent years, and, accordingly, has not
established a valuation reserve relative to these amounts.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a presentation of selected financial data for each of the
four quarters of fiscal years 1999, 1998 and 1997.
<TABLE>
(In thousands except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1999
<S> <C> <C> <C> <C>
Sales and other revenues.......... $839,124 $854,325 $881,934 $887,559
Gross margin...................... 217,725 226,216 235,644 238,734
Net earnings...................... 19,990 25,414 24,325 28,289
Earnings per share:
Basic........................ $ .47 $ .60 $ .58 $ .67
Diluted...................... $ .47 $ .59 $ .56 $ .65
1998
Sales and other revenues.......... $788,296 $830,371 $854,675 $850,246
Gross margin...................... 198,317 207,614 217,649 219,662
Net earnings...................... 17,815 23,019 25,832 27,981
Earnings per share:
Basic........................ $ .42 $ .54 $ .61 $ .66
Diluted...................... $ .42 $ .54 $ .60 $ .65
1997
Sales and other revenues.......... $759,923 $775,687 $820,115 $870,708
Gross margin...................... 185,650 194,615 203,060 215,821
Net earnings...................... 15,590 19,878 22,797 1,382
Earnings per share:
Basic........................ $ .37 $ .47 $ .54 $ .03
Diluted...................... $ .37 $ .47 $ .53 $ .03
</TABLE>
<PAGE>
ITEM 9: DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
Part III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) DIRECTORS OF THE REGISTRANT
The Articles of Incorporation of the Company provide for a Board of
Directors of not fewer than seven nor more than eighteen members, as from time
to time may be determined by resolution of the shareholders or the Directors.
The Board of Directors is divided into three classes, each such class having a
three-year term of office with the term of office of one such class expiring at
the Annual Meeting of Shareholders each year.
The following table sets forth for each Director, his or her name,
principal occupations or employment for at least the past five years, class of
directorship, age on March 1, 2000, and year first elected a Director.
Principal Occupation Director
Name or Employment Age Since
CLASS I (Last elected in May 1997)
William T. End(1) Chairman and Chief Executive Officer, 52 1995
Cornerstone Brands, Inc.,
Portland, Maine (Catalog Retailer);
President and Chief Executive Officer,
Lands' End, Inc., 1991 to 1995.
Claudine B. Malone(2) President, Financial & Management 63 1991
Consulting, Inc., McLean, Virginia
Dr. Walter J. Salmon(3) Stanley Roth, Sr., Professor 69 1964
of Retailing, Emeritus, Harvard
University Graduate School
of Business Administration,
Boston, Massachusetts
John Robert Sobey(4 President & Chief Operating Officer, 51 1998
Sobeys Inc., Stellarton,
Nova Scotia
<PAGE>
CLASS II (Last elected in May 1998)
Hugh G. Farrington(5) Chief Executive Officer since 55 1981
May 1992; President since 1984;
Executive Vice President
1981 to 1984; Senior Vice
President 1980 to 1981; Vice
President 1977 to 1980
David F. Sobey(6) Chairman of the Board, 68 1981
Sobeys Inc., Stellarton,
Nova Scotia
Robert L. Strickland(7) Retired Chairman of the Board, 68 1994
Lowe's Companies, Inc., Winston-Salem,
North Carolina
Robert J. Tarr, Jr.(8) Consultant; formerly President, Chief 56 1998
Executive Officer and Chief Operating
Officer, Harcourt General, Inc. and
The Neiman Marcus Group, Inc., Boston,
Massachusetts from 1991 to 1997
CLASS III (Last elected in May 1999)
Robert D. Bolinder(9) President, Robert D. Bolinder 68 1984
Associates, Management Consultants,
Boise, Idaho; retired Executive
Vice President, Smith's Food and
Drug Centers, Inc., Salt Lake City,
Utah
Richard K. Lochridge(10 President, Lochridge & Company, Inc., 56 1993
Boston, Massachusetts (Management
Consulting)
Renee M. Love(11) Chairman and Chief Executive Officer, 54 1996
Omega Group, Inc., Bryn Mawr,
Pennsylvania (Strategic Consulting)
Robert J. Murray(12) Chairman, President and Chief 57 1997
Executive Officer, New England
Business Service, Inc., Groton,
Massachusetts; formerly Executive
Vice President of the North Atlantic
Group of The Gillette Company,
Boston, Massachusetts, from 1991 to 1995
<PAGE>
(1) Mr. End is Chairperson of the Human Resources Committee of the Board
and is a member of the Corporate Governance Committee of the Board.
Prior to rejoining the Board in 1995, Mr. End served as a Hannaford
Director from 1983 to 1993.
(2) Ms. Malone is Chairperson of the Audit Committee of the Board and a
member of the Corporate Governance Committee of the Board. She is also a
Director of Hasbro, Inc.; Houghton Mifflin Company; The Limited, Inc.;
Union Pacific Resources; Dell Computer Corporation; Lowe's Companies,
Inc.; Lafarge Corporation; Mallinckrodt Group; and SAIC. She is a
Trustee of the Massachusetts Institute of Technology and is Chairperson
of the Federal Reserve Bank of Richmond.
(3) Dr. Salmon is Chairman of the Board, Chairperson of the Executive
Committee of the Board and a member of the Finance and Corporate
Governance Committees of the Board. He is also a Director of Luby's
Cafeterias, Inc.; Circuit City Stores, Inc.; The Neiman Marcus Group,
Inc.; The Quaker Oats Company; Harrah's Entertainment, Inc; Cole
National Corporation; and PetsMart, Inc. He is also a Director of the
Tufts Health Plan and the Harvard Business School Publishing Company.
(4) Mr. John Robert Sobey is a member of the Audit Committee of the Board.
He is also a Director of Empire Company Limited and Sobeys Inc.
He is a cousin of Director David F. Sobey.
(5) Mr. Farrington is a member of the Executive Committee of the Board.
He is also a Director of Sobeys , Inc.
(6) Mr. David Sobey is a member of the Executive Committee of the Board. He
is also a Director of Empire Company Limited; Sobeys Inc.; and
CHC Helicopter Corporation. He is a cousin of Director John Robert
Sobey.
(7) Mr. Strickland is Chairperson of the Corporate Governance Committee of
the Board and is a member of the Human Resources and Executive Committees
of the Board. He is also a Director of Lowe's Companies, Inc.; Krispy
Kreme Corp.; and T. Rowe Price Associates, Inc.
(8) Mr. Tarr is a member of the Audit and Finance Committees of the Board.
He is also a Director of Houghton Mifflin Company; and John Hancock
Mutual Life Insurance Company.
(9) Mr. Bolinder is Chairperson of the Finance Committee of the Board and a
member of the Corporate Governance Committee of the Board. He is also
a Director of Idaho Power Company.
(10) Mr. Lochridge is a member of the Executive, Finance and Human Resources
Committees of the Board. He is also a Director of Lowe's Companies,
Inc.; and PetsMart, Inc.
(11) Ms. Love is a member of the Audit and Finance Committees of the Board.
(12) Mr. Murray is a member of the Human Resources and Finance Committees
of the Board. He is also a Director of Allmerica Financial Corporation;
Fleet National Bank; LoJack Corporation; and New England Business
Service, Inc.
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934, certain persons
associated with the Company (directors, executive officers, and beneficial
owners of more than 10% of the outstanding Common Stock) are required to file
with the Securities and Exchange Commission and the New York Stock Exchange
various reports disclosing their ownership of Company securities and changes in
such ownership. To the Company's knowledge, all requisite reports for 1999 were
filed in a timely manner.
<PAGE>
(b) EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Executive Officers of the Registrant is set
forth below.
Under the by-laws of the Registrant, all Executive Officers hold office, at
the pleasure of the Board of Directors, until the Annual Meeting of the
Directors next following their election or until others are elected and
qualified in their stead.
There are no family relationships between any of the Executive Officers of
the Registrant nor were there any special arrangements or understandings
regarding the selection of any officer.
SERVED AS AN EXECU-
NAME AGE POSITION TIVE OFFICER SINCE:
HUGH G. FARRINGTON 55 President 09/30/77
Chief Executive Officer
Mr. Farrington was elected President in 1984 and designated Chief Executive
Officer in 1992. He had held the position of Chief Operating Officer from 1984
to 1992. He had been Executive Vice President from 1981 until his election as
President. He has been employed by the Registrant in various operating,
supervisory and executive capacities since 1968.
RICHARD A. ANICETTI 42 Executive Vice President - 08/10/94
Southeast Operations
Mr. Anicetti was elected Executive Vice President - Southeast Operations in
May 1998. He had been Senior Vice President and General Manager, Southeast
Operations since December 1995, Senior Vice President, Retail Operations for the
southeast from 1994 to 1995, and Vice President - Retail Operations/General
Manager, New Hampshire and Massachusetts from 1989 to 1994. He has been employed
by the Registrant since 1980 in various retail management capacities.
PAUL A. FRITZSON 46 Executive Vice President, 01/02/92
Chief Financial Officer
Mr. Fritzson was elected Executive Vice President & Chief Financial Officer
in June 1999. Since May 1998, he had been Executive Vice President - Strategic
Development, Senior Vice President, Marketing, Merchandising and Distribution
since December 1995, Senior Vice President, Marketing from 1994 to 1995, Vice
President - Marketing from 1992 to 1994 and Vice President, General Merchandise
from 1990 to 1992. He had served previously in various staff and merchandising
and retail operations capacities since 1978.
<PAGE>
SERVED AS AN EXECU-
NAME AGE POSITION TIVE OFFICER SINCE:
ANDREW P. GEOGHEGAN, ESQ. 49 Senior Vice President, 09/14/87
Secretary & General Counsel
Mr. Geoghegan was elected Senior Vice President, Secretary and General
Counsel in May 1996. He joined the Registrant as Vice President, General Counsel
in September 1987. He was elected Secretary in 1992. From 1979 to 1987 he was in
private law practice with the firm of Kassoy, Lopez & Geoghegan Law Corporation,
Beverly Hills, California, specializing in corporate, tax and real estate law.
RONALD C. HODGE 52 Executive Vice President - 08/10/94
Chief Operating Officer
Mr. Hodge was elected Executive Vice President & Chief Operating Officer in
June 1999. He had been Executive Vice President - Sales & Northeast Operations
since May 1998, Senior Vice President, Northeast Operations since December 1995,
Senior Vice President, Retail Operations from 1994 to 1995 and Vice President -
Retail Operations/General Manager, New York and Vermont from 1989 to 1994. He
has been employed by the Registrant in various retail management capacities
since 1980.
MICHAEL J. STROUT 45 Executive Vice President, 12/19/94
Human Resources and
Information Technology
Mr. Strout was elected Executive Vice President - Human Resources &
Information Technology in June 1999. He had served as Executive Vice President -
Human Resources since May 1998, Senior Vice President - Human Resources since
rejoining the Registrant in December 1994. From 1990 through 1994 he was Vice
President - Human Resources and later Senior Vice President - Human Resources at
Tops Markets, Inc., Buffalo, New York. From 1985 to 1990 Mr. Strout had been
employed by the Registrant in various Human Resource management positions.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors
Each non-management Director is paid an annual retainer of $26,000 for
services as a Director. Non-management Directors (other than Dr. Walter J.
Salmon) receive fees of $1,000 for each Board meeting attended and $1,000 for
each committee meeting attended. Committee Chairpersons receive an additional
annual retainer of $2,500 for such services. Hugh G. Farrington (the only
management member of the Board) receives no additional compensation for his
services as a Director. All Directors are reimbursed for any out-of-pocket
expenses incurred in attending Board and committee meetings.
Dr. Salmon also receives $84,000 per year, which covers his services as
Chairman of the Board and Chairperson of the Executive Committee, his Board and
committee meeting attendance fees and the additional consulting services he
provides.
The Company maintains a Stock Ownership Plan for Outside Directors which
offers non-management Directors a potential source of performance-based deferred
compensation tied to the long-term performance of the Company as measured by the
price of its Common Stock.
Performance Shares. Under the Plan, each non-management Director is
credited annually with a specified number of "performance shares", whose
value will be determined over a five-year "performance period". (In the
event that a Director leaves the Board before age 70, except in the case
of death or disability, the performance period for each outstanding award
will terminate at the end of the fiscal year in which the Director ceases
to be a member of the Board.) At the end of the performance period for a
given award, the number of performance shares is multiplied by the
increase (if any) in the trading price of the Common Stock over such
period. The resulting figure (in dollars) is then credited to a
deferral account for the Director, where it is treated as if it were
invested in Common Stock of the Company (with adjustments to reflect
reinvestment of dividends paid on such stock and changes in the trading
price of the stock). The following Directors hold the number of common
share equivalents indicated: Mr. Bolinder, 4,935; Mr. End, 1,121;
Mr. Lochridge, 2,037; Ms. Malone, 3,410; Dr. Salmon, 5,487;
Mr. D. Sobey, 5,119; and Mr. Strickland, 1,015.
Generally, amounts credited to a Director's deferral account will be
paid to her or him in a lump sum or in monthly installments over a period
not to exceed 10 years. Payments may not begin until the Director leaves
the Board or reaches age 70, whichever is later. All payments from
the Plan are made in cash.
For 1999 each non-management Director received an award under the Plan
of 1,000 performance shares. The number of performance shares
presently held by the non-management Directors are: Mr. Bolinder, 5,300;
Mr. End, 5,300; Mr. Lochridge, 5,300; Ms. Love, 3,600; Ms. Malone, 5,300;
Mr. Murray, 2,200; Dr. Salmon, 5,300; Mr. D. Sobey, 5,300; Mr. J. Sobey,
1,000; Mr. Strickland, 5,300; and Mr. Tarr, 1,000. As described above,
the ultimate value of the performance shares will vary depending upon
the future market price of the Company's Common Stock.
<PAGE>
The Plan also allows non-management Directors to receive stock options in
lieu of their annual retainers or to defer their compensation, as described
below.
Stock Options. Each non-management Director may elect to receive his
or her annual retainer in the form of a stock option rather than cash.
This election must be made by the Director before January 1 of the
relevant year, and cannot be made for less than the entire annual
retainer for that year. If so elected, the stock option is granted as
of the first trading day of the new year. The option entitles the
Director to purchase Common Stock at an exercise price equal to 100%
of the closing price of Hannaford Common Stock on the New York Stock
Exchange as of the grant date. The number of shares covered by the
option is set by formula and equals (i) three times the annual
retainer, divided by (ii) the closing price per share of the Common
Stock on the grant date. The exercise price is payable in cash or
previously acquired stock (or any combination thereof) at the time of
exercise. The option becomes exercisable one year after the date of
grant, but will be forfeited if for any reason (other than a "change in
control event" as defined) the Director's service on the Board
terminates before December 31 of that year. (If the option is forfeited,
the Director will receive a cash payment for the portion of the annual
retainer earned through the termination date.) Each option will expire
ten years from the date of grant if not exercised.
Deferral of Compensation. Each non-management Director may at any time
(but not more frequently than once a year) elect to defer receipt of
any Director compensation (i.e., annual retainer, meeting fees,
committee chairperson retainer, and consulting fees) that would otherwise
be paid to him or her in cash. The deferral period expires upon
termination of the Director's service on the Board. The Director must
designate at the time of the deferral election whether the compensation
deferred is ultimately to be paid in stock or in cash.
Stock Deferral. Whenever the Director would otherwise receive
payment of compensation, the Company will credit to his or her
account that number of stock units which equals (i) the amount
deferred, divided by (ii) the closing price per share of the
Common Stock on the deferral date. Payout of the deferred amounts
will be made in the form of Common Stock.
Cash Deferral. Whenever the Director would otherwise receive
payment of compensation, the Company will credit the payment
amount to the Director's account and will thereafter credit the
account with interest at the rate paid on five-year Treasury
notes.
The Company has established stock ownership guidelines for Directors. The
guidelines encourage each Director to acquire and maintain an interest in
Hannaford stock having a value of at least five times the annual retainer. The
stock equivalents, stock options and stock deferral units, described above,
under the Stock Ownership Plan are counted toward this target. The guidelines
and the Stock Ownership Plan are intended to further align the interests of the
Directors and shareholders. (See Item 12. Security Ownership of Certain
Beneficial Owners and Management on Page 73).
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table provides information concerning compensation paid to
the named executive officers for the past three years.
<TABLE>
Long Term Compensation
Annual Compensation Awards Payouts
Name and Securities LTIP All Other
Principal Salary Bonus Underlying Payouts(1) Compensation
Position Year ($) ($) Options (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Hugh G. Farrington 1999 460,000 263,097 27,026 372,896 26,248(2)
President and 1998 437,000 233,402 24,448 89,030 19,010
Chief Executive Officer 1997 428,077 213,847 30,981 111,462 2,625
Ronald C. Hodge 1999 291,046 166,184 10,811 99,702 17,952(3)
Executive Vice President and 1998 242,277 128,881 9,310 21,192 11,333
Chief Operating Officer 1997 203,846 101,779 8,717 24,060 2,625
Paul A. Fritzson 1999 249,600 142,740 9,369 90,851 15,888(4)
Executive Vice President and 1998 218,723 116,651 9,985 20,353 9,812
Chief Financial Officer 1997 203,846 101,779 6,256 23,931 2,625
Richard A. Anicetti 1999 239,200 136,841 9,369 89,839 15,465(4)
Executive Vice President - 1998 221,877 118,285 8,235 20,460 9,945
Southeast Operations 1997 203,846 101,779 6,256 23,926 6,000
Michael J. Strout 1999 221,000 126,415 8,304 81,219 13,438(6)
Executive Vice President - 1998 196,661 104,888 7,240 18,508 8,798
Human Resources & Information 1997 183,462 91,365 5,631 20,180 2,625
Technology
</TABLE>
(1) Reflects payouts under the Long Term Incentive Plan for the three-year
award period ending in the stated year.
(2) Reflects contributions of $4,800 under the qualified Savings and
Investment Plan, contributions of $13,582 and interest of $7,866 under the
Nonqualified Savings and Investment Plan.
(3) Reflects contributions of $4,800 under the qualified Savings and
Investment Plan, contributions of $6,811 and interest of $6,341 under the
Nonqualified Savings and Investment Plan.
(4) Reflects contributions of $4,800 under the qualified Savings and
Investment Plan, contributions of $5,704 and interest of $5,384 under the
Nonqualified Savings and Investment Plan.
(5) Reflects contributions of $4,800 under the qualified Savings and
Investment Plan, contributions of $5,246 and interest of $5,419 under the
Nonqualified Savings and Investment Plan.
(6) Reflects contributions of $4,800 under the qualified Savings and
Investment Plan, contributions of $4,032 and interest of $4,606 under the
Nonqualified Savings and Investment Plan.
<PAGE>
Option Grants in Last Fiscal Year
The following table provides information on option grants to the named
executive officers during the past year. No stock appreciation rights ("SARs")
were granted during this period.
<TABLE>
Individual Grants(1)
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise or Grant Date
Granted Employees in Base Price Expiration Present
Name (#) Fiscal year ($/Share) Date Value(2)
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 27,026 5.4% $51.0625 05/19/09 $352,689
143(3) .03% 71.875 05/13/01 $ 1,747
1,340(3) .27% 71.875 05/14/02 $ 16,442
Ronald C. Hodge 10,811 2.2% 51.0625 05/19/09 141,084
Paul A. Fritzson 9,369 1.9% 51.0625 05/19/09 122,265
Richard A. Anicetti 9,369 1.9% 51.0625 05/19/09 122,265
Michael J. Strout 8,304 1.7% 51.0625 05/19/09 108,367
2,010(3) .40% 45.625 05/24/05 17,125
</TABLE>
(1) All options were granted under the 1998 Stock Plan at 100% of market
price at the date of grant. All options (other than reload options) are fully
exercisable three years after grant (with one- third becoming exercisable each
year after grant). The exercise price may be paid in cash or by surrender of
currently owned Common Stock (valued at 100% of market price). Payment in shares
entitles the holder to a "reload" option for that number of shares. Each reload
option generally becomes exercisable one year after grant and carries the same
expiration date as the original option.
(2) Computed under the Black-Scholes method based on one-half of the full
stated option term. For options expiring 5/19/09, assumes an interest rate of
5.68%, annual dividend yield of 1.42% and volatility of 20.67%. For reload
options expiring 5/13/01, assumes an interest rate of 5.76%, annual dividend
yield of 1.31% and volatility of 24.02%; reloads expiring 5/14/02, assumes an
interest rate of 5.84%, annual dividend yield of 1.31% and volatility of 24.02%
and reloads expiring 5/24/05, assumes an interest rate of 5.39%, annual dividend
yield of 1.43% and volatility of 20.62%.
(3) Reload option granted upon exercise of the underlying option through a
surrender of Common Stock. See note (1) above.
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
The following table provides information on option exercises by the named
executive officers during the past year and the value of such officers'
unexercised options at January 1, 2000, the last day of the Company's fiscal
year. No SARs were outstanding during this period.
<TABLE>
Number of Value of
Securities Underlying Unexercised
Value Unexercised Options In-the-Money
Shares Acquired on Realized At FY-End (#) Options at FY-End (2)($)
Name Exercise (#) (1)($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Hugh G. Farrington 4,738 233,885 158,641 53,904 6,414,065 1,210,115
Ronald C. Hodge 0 0 38,226 49,873 1,380,190 1,555,202
Paul A. Fritzson 0 0 40,459 47,595 1,537,585 1,508,299
Richard A. Anicetti 1,199 32,673 39,817 47,715 1,590,514 1,511,254
Michael J. Strout 0 0 20,561 17,017 669,003 383,109
</TABLE>
(1) Amounts in this column reflect the market price of the Common Stock at
the date of exercise, minus the exercise price of the option.
(2) Amounts in this column reflect the market price of the Common Stock on
December 31, 1999 ($69.3125 per share), minus the exercise price of the option.
All options were granted at 100% of market price on the date of grant. The term
"in-the-money" refers to options having an exercise price less than the year-end
market price.
<PAGE>
Long Term Incentive Plan - Awards in Last Fiscal Year
The following table provides information on long term incentive awards
granted to the named executive officers. All awards were granted under the 1993
Long Term Incentive Plan and cover the three-year performance period beginning
in 1999.
<TABLE>
Estimated Future Payouts
Number of Shares, Performance or Under Non-Stock Price-Based Plans
Units or Other Other Period
Rights(1)(#) Until Threshold(2) Target(2) Maximum(2)
Maturation or ($) ($) ($)
Payout
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 16.67% of Cash Fiscal 118,488 359,056 538,584
Compensation 1999-2001
Ronald C. Hodge 8% of Cash Fiscal 36,730 111,303 166,955
Compensation 1999-2001
Paul A. Fritzson 8% of Cash Fiscal 31,728 96,146 144,219
Compensation 1999-2001
Richard A. Anicetti 8% of Cash Fiscal 29,569 89,602 134,404
Compensation 1999-2001
Michael J. Strout 8% of Cash Fiscal 28,075 85,076 127,614
Compensation 1999-2001
</TABLE>
(1) The Plan provides for a "basic award" equal to a specified percentage
of the executive officer's salary and annual incentive compensation over the
three-year award period (Fiscal 1999-2001). The "actual award" subject to payout
is based on after-tax cumulative earnings per share (EPS) growth over the
three-year period.
(2) "Threshold", "target" and "maximum" refer, respectively, to 33%, 100%
and 150% of the basic award. The target amount will be paid if the targeted EPS
growth is achieved. The threshold amount will be paid upon achievement of 67% of
the targeted EPS growth. The maximum amount will be paid upon achievement of
125% of the targeted EPS growth. Since the actual award is a function of future
compensation paid over three years, the amount of a potential award cannot
presently be determined. The amounts set forth are for illustrative purposes
only and are computed on the assumptions that (i) cash compensation for each
officer during the award period increases by 4% per year and (ii) the Company
meets the relevant performance goal. The Human Resources Committee may decrease
an executive officer's payout if it determines his or her performance to be
inconsistent with the amount of the award.
<PAGE>
Pension Plan
Under the Retirement Plan, renamed the Cash Balance Plan, effective January
1, 1998, benefits are expressed as cash balance accounts. The conversion to a
cash balance design included an adjustment for participants who have fewer years
to accrue future benefits under the cash balance formula. The Cash Balance Plan
provides each month for (i) a contribution credit equal to 3% of a participant's
base compensation for the month, and (ii) an interest credit at the one year
U.S. Treasury bill rate as of October of the preceding year, plus 1/2 of 1%, on
the beginning account balance for the month. For the 1999 plan year the interest
rate was 4.68%. Plan benefits are payable in a lump sum or as a monthly pension
of equivalent actuarial value.
The following table sets forth aggregate estimated annual benefits payable
to the named executive officers under the Cash Balance Plan and the Supplemental
Executive Retirement Plan. The table reflects benefits accrued through 1999 and
payable at the normal retirement age of 65 in the form of a single life annuity.
The Supplemental Executive Retirement Plan provides a contribution credit and an
interest credit, like those provided in the tax-qualified Cash Balance Plan,
that are based on compensation not taken into account under the Cash Balance
Plan because of Internal Revenue Code requirements for tax-qualified plans.
NAME ESTIMATED ANNUAL BENEFIT
Hugh G. Farrington $175,860
Ronald C. Hodge 39,870
Richard A. Anicetti 20,941
Paul A. Fritzson 42,167
Michael J. Strout 12,243
<PAGE>
Other Contracts with Executive Officers
Set forth below is a summary of other employment-related contracts with
the executive officers named in the Summary Compensation Table.
Employment Continuity Agreements
The Company has Employment Continuity Agreements with each of the named
executive officers. The agreements provide for severance benefits upon
termination of employment within two years after a "change in control", unless
the termination is "for cause," or is voluntary without "good reason," as those
terms are defined in the agreements.
The severance benefit for Mr. Farrington includes a cash payment equal to
three times his base salary and annual incentive award, continuation of employee
benefits for 36 months, and an additional 36 months of employer contributions
under the Nonqualified Savings and Investment Plan and the Supplemental
Executive Retirement Plan. The severance benefit for the other named executive
officers includes a cash payment equal to two times the officer's base salary
and annual incentive award, continuation of employee benefits for 24 months, and
an additional 24 months of employer contributions under the Nonqualified Savings
and Investment Plan and the Supplemental Executive Retirement Plan. The
severance benefit also includes acceleration of payments under the Deferred
Compensation Plan, payment of awards earned under the Annual Incentive Plan
prior to termination, and such benefits and rights as are provided under the
Company's Long Term Incentive Plan and stock plans.
Upon the occurrence of a change in control, the Company is required to
place sufficient assets in a separate trust to secure the payment of benefits
under the Employment Continuity Agreements, the Nonqualified Savings and
Investment Plan and the Supplemental Executive Retirement Plan. These trust
assets will, however, remain subject to the claims of other creditors of the
Company. If and to the extent that trust assets are insufficient to meet the
Company's obligations under the agreements and plans, the Company will be
required to pay such benefits from its general assets. In February 2000 the
shareholders of Hannaford approved the proposed merger transaction with Delhaize
America, Inc. Such approval constitutes a "change in control" event for purposes
of these arrangements, and obligates Hannaford to fund the trust.
<PAGE>
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
Compensation should be:
- - Aligned with the Company's business strategies and shareholder interests.
- - Based on performance by the Company, the business unit (where
applicable), and the individual.
- - Competitive in the marketplace in which the Company competes for
executives.
- - Based on the same principles that apply to other salaried associates,
except that executives should have a greater portion of their
compensation at risk.
Therefore:
- - A significant portion of compensation for executives is tied to measures
of performance of the business as a whole.
- - Executive compensation is tied to both short and long-term business
results. In addition to rewards for annual results, executives are
rewarded for achieving sustained long-term results.
- - The interests of executives are linked to those of shareholders through
Company stock ownership and options. The Company has established stock
ownership guidelines for executives as a multiple of salary depending on
position (CEO: 5; Executive Vice President and Senior Vice President: 3;
Vice President: 2).
In addition:
- - Special benefits and perquisites for executives are minimized and based
on business necessity.
- - The income tax deductibility of executive compensation is preserved to
the extent consistent with the Company's compensation philosophy.
<PAGE>
Compensation Structure
Executive pay consists of base salary, annual incentives, stock options and
other long-term incentives, and benefits. If the Company achieves its short and
long-term goals, long-term incentive plan awards and stock options account for
fifty percent of total compensation for the CEO, and forty percent of total
compensation for other senior officers.
Salary. Salary ranges for each position reflect the skills required and the
scope of responsibility for the position. Salary increases are based on
individual performance and competitive data. Overall, 1999 salary levels
corresponded to approximately the median level of surveyed companies. The salary
of the CEO is below median because a greater portion of his compensation is paid
through performance-based awards.
Annual Incentive Plan. If the Company achieves an annual performance goal
based on profit objectives set by the Board of Directors, executives receive
target awards equal to 50% of their salary. Actual award payments range from 0%
to 125% of the targeted amount, depending on Company performance. No awards are
earned unless the Company attains at least 85% of the performance goal
(representing 94% of its annual profit objective for 1999). The Board may adjust
the amount awarded to any executive to reflect individual performance, but no
such adjustment has been made for the last three fiscal years.
Stock Options. Executives receive stock options each year entitling them to
purchase shares of Hannaford stock at an option price equal to the fair market
value of the stock on the date of grant. The number of shares that each
executive may purchase pursuant to the option is determined by multiplying the
executive's salary by a percentage (CEO: 300%; Executive Vice President: 200%;
Senior Vice President: 150%; and Vice President: 100% - 150%) and dividing the
result by the market price of the stock on the date of grant.
Long Term Incentive Plan. The Long Term Incentive Plan rewards senior
executives for sustained growth in earnings per share (EPS) over a designated
three-year period. Actual award payments vary from 0% to 150% of the "basic
award" depending on the Company's growth in EPS relative to performance goals.
The basic award is expressed as a percentage of salary and incentive pay for the
three-year period (CEO: 16.67%; Executive Vice President and Senior Vice
President: 8%; Vice President: 4.5 - 8%). Executives generally receive 50% of
their award in Company stock which must be held for at least two years, and the
remainder in cash to meet tax withholding requirements. Due to the pending
merger with Delhaize America, payouts in 2000 will be made entirely in cash. The
Committee may adjust any executive's payout if their performance is inconsistent
with the amount of the award, but no such adjustment has been made for the last
three fiscal years.
Retirement Plans. Because current law limits the retirement benefits
payable to executives from tax-qualified plans, the Company maintains a
nonqualified Supplemental Executive Retirement Plan and a Nonqualified Savings
and Investment Plan in addition to the tax-qualified pension and 401(k) plans.
The combined benefits from these plans equal the amount that would be payable to
executives under the tax-qualified plans if no tax law limits were in place.
Other Benefit Plans. Executives may participate in a number of other
broad-based benefit plans, including the Employee Stock Purchase Plan and
various health and welfare benefit plans.
Compensation of CEO in 1999
Salary. Hugh G. Farrington, CEO, received a 5.26% increase in salary to
$460,000 per year, effective January 1, 1999. The increase was based on:
- his performance
- the desired mix of salary, short-term and long-term compensation
- a review of competitive data.
Annual Incentive Plan. Because the Company achieved 105.5% of its annual
profit objective in 1999, Mr. Farrington, like other senior executives, received
114.5% of the target award ($263,097), equal to 57.1% of his 1999 salary.
Long Term Incentive Plan. The Company's growth in earnings per share for
the period 1997-1999 entitled Mr. Farrington to a payout of 109.9% of the basic
award ($372,896) paid in cash. Pursuant to its authority under the Plan, the
Committee determined earnings per share without regard to a 1997 non-cash
impairment charge during the period arising under SFAS No. 121.
<PAGE>
Mr. Farrington's basic award level for the next three-year period
(2000-2002) is set at 16.67% of his salary and annual incentive pay during that
period.
Stock Option Plan. In 1999, Mr. Farrington received a stock option grant
equal to 300% of his salary, entitling him to purchase 27,026 shares of
Hannaford stock at a price equal to market price of the stock on the date of
grant.
Governance
The Human Resources Committee of the Board of Directors reviews and
approves all compensation arrangements for executives. The Committee, which
consists entirely of non-management Directors, retains independent consultants
for advice on compensation matters. It also considers recommendations from
management and the Board.
Each year, the Committee reviews the Company's compensation practices and
the level of compensation of the Chief Executive Officer in light of the Board's
annual performance evaluation.
The Committee sets compensation at levels appropriate to attract and retain
high-quality individuals. For competitive reference, the Committee uses surveys
of executive compensation at a variety of food industry and other retail
companies, as well as comparisons of pay levels and financial performance at
companies included in the stock performance graph shown on page 72.
As the Committee, we believe the Company's compensation programs during
1999 have met our objectives.
Respectfully submitted,
WILLIAM T. END, Chairman
ROBERT J. MURRAY
ROBERT L. STRICKLAND
<PAGE>
MARKET PRICE PERFORMANCE
OF THE COMPANY'S COMMON STOCK
The following graph provides information on the five-year cumulative total
return on Hannaford Bros. Co. Common Stock as compared to the S&P 500 Index, and
an index consisting of retail food and grocery companies having shares listed on
a national securities exchange.
DATA POINTS
1994 1995 1996 1997 1998 1999
Hannaford Bros. Co. 100 99 138 179 221 293
S&P 500 100 138 169 226 290 351
Retail Food/Grocery 100 132 166 224 337 209
Assumes $100 invested on December 31, 1993 in Hannaford Bros. Co. Common
Stock, the S&P 500 Index, and a retail food and grocery index, with reinvestment
of all dividends.
The retail food and grocery index includes the following companies:
Albertson's, Inc. Marsh Supermarkets, Inc.
Eagle Food Centers, Inc. Penn Traffic Company
Delhaize America, Inc. Ruddick Corporation
Great Atlantic & Pacific Tea Co. Safeway, Inc.
Hannaford Bros. Co. Weis Markets, Inc.
Ingles Markets, Inc. Winn Dixie Stores, Inc.
Kroger Company
The list of companies included in the retail food and grocery index was
revised this year. American Stores, Inc., and Fred Meyer, Inc., which were
previously included in the index, are no longer publicly traded companies.
For purposes of computing this index, the returns of the companies have
been weighted according to their respective stock market capitalizations.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Each of the following were beneficial holders of more than 5% of the
outstanding Common Stock of the Company at the close of business on March 1,
2000. Unless indicated to the contrary, the persons or parties shown as
beneficial holders have the sole power to vote and dispose of the shares shown
as owned by them.
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Holder Ownership of Class
Sobey Parties(1) 10,835,921 25.4
115 King Street
Stellarton, Nova Scotia, Canada B0K 1S0
(1) The Sobey Parties include Donald R. Sobey, David F. Sobey, the Estate
of William M. Sobey, Empire Company Limited, E.C.L. Investments Limited,
the Pension Plan for Employees of Sobeys Inc., the Deferred Profit
Sharing Plan for Eligible Employees of Sobeys Inc. and Pauljan Limited.
Information regarding ownership by the Sobey Parties is given in
reliance on their latest Schedule 13D filing, made on or about August
20, 1999, with the Securities and Exchange Commission.
<PAGE>
The following table sets forth the beneficial ownership of Common Stock by
each Director, the other executive officers named in the Summary Compensation
Table on page , and all Directors and executive officers of the Company as a
group, at the close of business on February 11, 2000. Except as otherwise
indicated, each person owns less than 1% of the outstanding Common Stock.
SHARES OF
COMMON STOCK PERCENT OF
NAME BENEFICIALLY OWNED CLASS
Directors
Robert D. Bolinder 15,312(1)
William T. End 7,230(2)
Hugh G. Farrington 430,102(3)
Richard K. Lochridge 9,267(4)
Renee M. Love 5,312(5)
Claudine B. Malone 1,917
Robert J. Murray 5,162(6)
Dr. Walter J. Salmon 135,560(7)
John Robert Sobey 0(8)
David F. Sobey 10,835,921(9) 25.4
Robert L. Strickland 3,000
Robert J. Tarr, Jr. 9,000(10)
Other Named Executive Officers
Richard A. Anicetti 94,072(11)
Paul A. Fritzson 98,474(12)
Ronald C. Hodge 97,351(13)
Michael J. Strout 41,848(14)
All Executive Officers and Directors
as a Group 11,837,958(15) 27.7
<PAGE>
(1) Includes 5,312 shares that Mr. Bolinder has the right to acquire
within 60 days by exercise of stock options.
(2) Includes 3,830 shares that Mr. End has the right to acquire
within 60 days by exercise of stock options.
(3) Includes 23,366 shares owned by Mr. Farrington's wife. Also includes
212,545 shares that Mr. Farrington has the right to acquire within 60
days by exercise of stock options.
(4) Includes 6,267 shares that Mr. Lochridge has the right to acquire
within 60 days by exercise of stock options.
(5) Includes 5,312 shares that Ms. Love has the right to acquire within
60 days by exercise of stock options.
(6) Includes 3,162 shares that Mr. Murray has the right to acquire within
60 days by exercise of stock options.
(7) Includes 1,500 shares owned by Dr. Salmon's wife.
(8) John Robert Sobey, because of business and family relationships, may be
deemed to be the beneficial owner of some or all of 10,835,921 shares
of Hannaford Common Stock held by the Sobey Parties. John Robert Sobey
expressly disclaims any beneficial ownership.
(9) David F. Sobey, because of business and family relationships, may be
deemed to be the beneficial owner of some or all of 10,835,921 shares
of Hannaford Common Stock held by the Sobey Parties. David F. Sobey
expressly disclaims beneficial ownership of all except 36,110 of said
shares.
(10) Includes 1,500 shares held in a family charitable trust.
(11) Includes 87,532 shares that Mr. Anicetti has the right to acquire
within 60 days by exercise of stock options.
(12) Includes 88,054 shares that Mr. Fritzson has the right to acquire
within 60 days by exercise of stock options.
(13) Includes 75,359 shares that Mr. Hodge has the right to acquire within
60 days by exercise of stock options.
(14) Includes 37,578 shares that Mr. Strout has the right to acquire
within 60 days by exercise of stock options.
(15) Includes 26,066 shares held by immediate family members. Also includes
591,690 shares which may be acquired within 60 days by exercise of
stock options.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Agreement with Sobey Parties
Between September 16, 1981 and August 20, 1999, the Company and the Sobey
Parties were parties to an agreement (the "Standstill Agreement"), which was
amended and extended from time to time.
Under the Standstill Agreement as amended and extended, the Sobey Parties
agreed not to increase their percentage ownership of the Company's voting stock
above a level of approximately 25.6% of the outstanding shares, except in
certain circumstances specified by the Standstill Agreement. The Sobey Parties
also agreed that they would not purchase any shares of the Company's voting
stock except as contemplated by the Standstill Agreement, engage in a proxy
contest relating to election of the Company's directors or certain other matters
or enter into a voting trust agreement for the purpose of acquiring control of
the Company. In addition, the Sobey Parties were restricted in their right to
sell shares of the Company's voting stock owned by them.
Under the Standstill Agreement, the Sobey Parties had certain rights to
purchase securities from the Company to maintain their percentage ownership of
the Company's voting stock and to maintain specified percentage ownership
margins between their percentage ownership and that of the next largest
shareholder. The Company also agreed to use its best efforts to cause two
nominees of the Sobey Parties to be elected as Directors of the Company and to
place one nominee of the Sobey Parties on the Executive Committee of the Board.
Presently, David F. Sobey and John Robert Sobey serve as the Sobey Parties'
designees on the Board and David F. Sobey as the designee on the Executive
Committee.
On August 20, 1999, the Standstill Agreement was terminated by the Sobey
Parties in accordance with its terms following Board approval of the merger with
Delhaize America, Inc. The Agreement is no longer in effect.
<PAGE>
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a) 1., 2. Consolidated Financial Statements and Related
Schedules PAGES
Report of Independent Accountants............................. 25
Consolidated Balance Sheets - January 1, 2000 and
January 2, 1999............................................ 26-27
Consolidated Statements of Earnings - Fiscal Years Ended,
Janaury 1, 2000, January 2, 1999 and January 3, 1998....... 28
Consolidated Statements of Changes in Shareholders'
Equity - Fiscal Years Ended, January 1, 2000,
January 2, 1999 and January 3, 1998........................ 29
Consolidated Statements of Cash Flows
- Fiscal Years Ended, January 1, 2000,
January 2, 1999 and January 3, 1998........................ 30-31
Notes to Consolidated Financial Statements.................... 32-52
Schedules I, II, III and IV are not included as they are not applicable.
3. Exhibits Required by Item 601 of Regulation S-K
SEQUENTIAL
PAGE NUMBER
IN ORIGINAL 10-K
3.1 - Articles of Incorporation
Incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1999 (SEC File
No. 1-7603).
3.2 - By-Laws of the Registrant
Incorporated by reference to Exhibit 3.2 to the
Registrant's Current Report on Form 8-K, filed
June 17, 1999 (SEC File No. 1-7603).
<PAGE>
PAGES
4.1 - Instruments Defining the Rights of Included in
Security Holders Exhibit 3
4.2 - There are incorporated herein by reference a (i) Rights
Agreement dated as of February 4, 1998 between the
Registrant and Continental Stock Transfer & Trust Company,
as Rights Agent, a copy of which was filed as Exhibit 4.1
to the Registrant's Registration Statement on Form 8-A,
dated January 23, 1998 (SEC File No. 1-7603).
10.1 - There is incorporated herein by reference an Agreement and
Plan of Merger, dated as of August 17, 1999, among Food Lion,
Inc., Hannaford Bros. Co. and FL Acquisition Sub, Inc., a copy
of which was filed as Exhibit 2.1 to the Registrant's Current
Report on Form 8-K, filed August 19, 1999 (SEC File No. 1-7603).
10.2 - There are incorporated herein by reference (i) an Amended
and Restated Agreement, dated as of February 4, 1988, among
the Registrant and various Sobey Parties, a copy of which
was filed as Exhibit 1 to the Registrant's Current Report on
Form 8-K, dated February 16, 1988 (SEC File No. 1-7603);
(ii) an Amendment Agreement dated as of January 1, 1992 to
said Agreement with the Sobey Parties, substituting certain
Sobeys Inc. employee benefit plans as parties thereto, a
copy of which was filed as Exhibit 10.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January
2, 1993 (SEC File No. 1-7603) and (iii) a Second Amendment
Agreement dated as of May 14, 1996, which extends the term of
the agreement and makes other technical changes, a copy of
which was filed as Exhibit 1 to the Registrant's current report
on Form 8-K, dated May 14, 1996 (SEC File No. 1-7603).
10.3 - There are incorporated herein by reference (i) the Hannaford Cash
Balance Plan, a copy of which was filed as Exhibit 10.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 2, 1999 (SEC File No. 1-7603) and (ii) the
First Amendment to the Hannaford Cash Balance Plan, a copy of
which was filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 4, 1998
(SEC File NO. 1-7603).
NOTE: Compensatory plans and arrangements and management contracts are
filed as Exhibits 10.3 through 10.34 below.
<PAGE>
PAGES
10.4 - Proposed Amendment to the Hannaford Cash Balance Plan,
submitted to the Internal Revenue Service for approval. 85
10.5 - The Second Amendment to The Hannaford Cash Balance Plan. 86-87
10.6 - Third Amendment to the Hannaford Cash Balance Plan. 88
10.7 - There are incorporated herein by reference (i) the amended and
restated Supplemental Executive Retirement Plan, a copy of
which was filed as Exhibit 10.5 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 2,
1993 (SEC File No. 1-7603); (ii) the First Amendment to said
Plan, a copy of which was filed as Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (SEC File No. 1-7603) and (iii)
the Second Amendment to said Plan, a copy of which was filed
as Exhibit 10.4 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1995 (SEC
File No. 1-7603).
10.8 - There is incorporated herein by reference the Hannaford Bros. Co.
Supplemental Executive Retirement Plan, effective January 1, 1998,
a copy of which was filed as Exhibit 10.6 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 2, 1999
(SEC File No. 1-7603).
10.9 - There are incorporated herein by reference (i) the Amended
and Restated Hannaford Bros. Co. Employee Stock Purchase
Plan, a copy of which was filed as Exhibit 10.6 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (SEC File No. 1-7603); (ii)
the First Amendment to said Plan, a copy of which was
filed as Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended July 1, 1995
(SEC File No. 1-7603); (iii) the Second Amendment to
said Plan, a copy of which was filed as Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1995 (SEC File
No. 1-7603); (iv) the Third Amendment to said Plan,
a copy of which was filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 28, 1996 (SEC File No. 1-7603)
and (v) the Fourth Amendment to said Plan, a copy of
which was filed as Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996 (SEC File No. 1-7603).
<PAGE>
PAGES
10.10 - There are incorporated herein by reference (i) the
Registrant's 1993 Long Term Incentive Plan, a copy of
which was filed as Exhibit 10.8 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 1, 1994 (SEC File No. 1-7603); (ii) the
First Amendment to said Plan, a copy of which was
filed as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January
1, 1994 (SEC File No. 1-7603); (iii) the Second
Amendment to said Plan, a copy of which was filed as
Exhibit 10.8 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996
(SEC File No. 1-7603) and (iv) the Third Amendment to
said Plan, a copy of which was filed as Exhibit 10.8
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998 (SEC File No. 1-7603).
10.11 - There is incorporated herein by reference the Amended
and Restated Hannaford Bros. Co. 1993 Long Term Incentive
Plan, a copy of which was filed as Exhibit 10.9 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998 (SEC File NO. 1-7603).
10.12 - There is incorporated herein by reference the Amended and
Restated Hannaford Bros. Co. Annual Incentive Plan,
effective December 7, 1995, a copy of which was filed as
Exhibit 10.8 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 30, 1995 (SEC File
No. 1-7603).
10.13 - There is incorporated herein by reference an Amended and
Restated Employment Continuity Agreement between the
Registrant and Hugh G. Farrington, a copy of which was
filed as Exhibit 10.13 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 3, 1998
(SEC File No. 1-7603).
10.14 - First Amendment to Amended and Restated Employment
Continuity Agreement with Hugh G. Farrington. 89-90
10.15 - There is incorporated herein by reference an amended and
restated standard form of Employment Continuity Agreement
between the Registrant and various of its executive officers,
a copy of which was filed as Exhibit 10.15 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January
3, 1998 (SEC File No. 1-7603).
<PAGE>
PAGES
10.16 - First Amendment to amended and restated standard form of
Employment Continuity Agreement with various executive
Officers. 91-92
10.17 - There is incorporated herein by reference a standard form
Deferred Compensation Agreement available to outside
directors of the Registrant, a copy of which was filed as
Exhibit 10.2 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 29, 1984 (SEC File
No. 1-7603).
10.18 - There is incorporated herein by reference the Hannaford Savings
and Investment Plan, a copy of which was filed as Exhibit 10.16
to the Registrant's Annual Report on Form 10-K, for the fiscal
year ended January 2, 1999 (SEC File No. 1-7603).
10.19 - Proposed First Amendment to the Hannaford Savings and
Investment Plan, submitted to the Internal Revenue Service
for approval. 93-94
10.20 - Second Amendment to the Hannaford Savings and Investment Plan. 95
10.21 - Third Amendment to the Hannaford Savings and Investment Plan. 96
10.22 - There is incorporated herein by reference the Hannaford
Nonqualified Savings and Investment Plan, a copy of which
was filed as Exhibit 10.5 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 28,
1997 (SEC File No. 1-7603).
10.23 - First Amendment to the Hannaford Nonqualified Savings and
Investment Plan. 97-98
10.24 - There is incorporated herein by reference the Amended and
Restated Hannaford Bros. Co. Deferred Compensation Plan for
Officers, a copy of which was filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 27, 1997 (SEC File No. 1-7603).
10.25 - There is incorporated herein by reference a standard form
of Deferred Compensation Agreement available to certain
management employees, a copy of which was filed as Exhibit
10.19 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993 (SEC File No. 1-7603).
<PAGE>
PAGES
10.26 - There is incorporated herein by reference the Amended and
Restated Hannaford Bros. Co. 1988 Stock Plan, a copy of
which was filed as Exhibit 4.5 to the Registrant's
Registration Statement on Form S-8, dated June 27, 1995 (SEC
Registration No. 33-60655).
10.27 - There is incorporated herein by reference the Hannaford Bros.
Co. 1998 Stock Option Plan, a copy of which was filed as
Exhibit 10.25 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 3, 1998 (SEC File No. 1-7603).
10.28 - There is incorporated herein by reference the Hannaford Bros.
Co. 1998 Restricted Stock Plan, a copy of which was filed as
Exhibit 10.26 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 3, 1998 (SEC File No. 1-7603).
10.29 - There is incorporated herein by reference (i) the Hannaford
Bros. Co. Stock Ownership Plan for Outside Directors,
approved by shareholders May 24, 1995 and effective
January 1, 1996, a copy of which was filed as Exhibit 4.5
to the Registrant's Registration Statement on Form S-8,
dated June 27, 1995 (SEC Registration No. 33-60691) and
(ii) the First Amendment to said Plan, a copy of which was
filed as Exhibit 10.21 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 28, 1996
(SEC File No. 1-7603).
10.30 - Second Amendment to the Hannaford Bros. Co. Stock Ownership
Plan for Outside Directors. 99-100
10.31 - There is incorporated herein by reference a Letter
Agreement between the Registrant and James J. Jermann, dated
July 8, 1996, a copy of which was filed as Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 29, 1996 (SEC File No. 1-7603).
10.32 - There is incorporated herein by reference a Consulting and
Non-Competition Agreement between the Registrant and Larry A.
Plotkin, dated June 11, 1998, a copy of which was filed as
Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended July 4, 1998 (SEC File
No. 1-7603).
<PAGE>
PAGES
10.33 - Trust under the Hannaford Nonqualified Deferred Compensation
Plan and Employment Continuity Agreements, dated January 30,
2000. 101-115
10.34 - First Amendment to the Trust under the Hannaford Nonqualified
Deferred Compensation Plan and Employment Continuity
Agreements, Dated January 31, 2000. 116-118
21 - Subsidiaries of the Registrant............................ 119
23 - Consent of Accountants.................................... 120
27 - Financial Data Schedule................................... 121
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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.
s/Paul A. Fritzson
Paul A. Fritzson
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
March 8, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
s/Walter J. Salmon s/William T. End
Walter J. Salmon Robert D. Bolinder William T. End
Chairman of the Board Director Director
Director March , 2000 March 8, 2000
March 8, 2000
s/Renee M. Love
s/Paul A. Fritzson Richard K. Lochridge Renee M. Love
Paul A. Fritzson Director Director
Exec. Vice President, March , 2000 March 8, 2000
Chief Financial Officer
(Principal Accounting Officer)
March 8, 2000
s/Claudine B. Malone s/Robert J. Murray
Claudine B. Malone Robert J. Murray
s/Hugh G. Farrington Director Director
Hugh G. Farrington March 8, 2000 March 8, 2000
President
Chief Executive Officer
Director s/David F. Sobey s/John R. Sobey
March 8, 2000 David F. Sobey John R. Sobey
Director Director
March 8, 2000 March 8, 2000
s/Robert L. Strickland s/Robert J. Tarr, Jr.
Robert L. Strickland Robert J. Tarr, Jr.
Director Director
March 8, 2000 March 8, 2000
Exhibit 10.4
PROPOSED AMENDMENT
TO THE
HANNAFORD CASH BALANCE PLAN
The Hannaford Cash Balance Plan (the "Plan") was last amended and restated
effective generally January 1, 1998. The Plan was thereafter amended by a First
Amendment, effective generally February 18, 1998. The Plan is hereby further
amended in the following respects:
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. The first paragraph of Section 1.11 is amended to read as follows:
"1.11 'Compensation' shall mean the basic compensation paid,
before any reduction pursuant to a deferral election under a Code
Section 401(k) Plan or a benefit election under a Code Section 125
Plan sponsored by an Employer, to a Participant by an Employer,
Including compensation for incentive hours and excluding
reimbursements or other expense allowances, fringe benefits (cash and
non-cash), moving expenses, deferred compensation, welfare benefits
(other than short term disability payments), unguaranteed overtime
pay, bonuses and other irregular payments."
3. The second to the last paragraph of Section 1.23 is amended to read as
follows:
"In the case of any salaried or salaried nonexempt Employee or,
with respect to service after December 31, 1982, any Driver Employee
or any full-time Employee of Progressive Distributors, Inc. who is
employed as a truck driver, such an Employee shall be credited with
forty-five (45) Hours of Service for each week for which such Employee
is required to be credited with at least one (1) Hour of Service in
accordance with paragraphs (i), (ii), or (iii) of subsection (c) of
this Section or in accordance with paragraph (ii) of subsection (b) of
this Section."
4. Part 2 of this Amendment shall be effective January 1, 2000, and Part 3
of this Amendment shall be effective January 1, 1998.
Exhibit 10.5
SECOND AMENDMENT
TO THE
HANNAFORD CASH BALANCE PLAN
The Hannaford Cash Balance Plan, formerly named the Employees' Retirement
Plan, was last amended and restated effective generally January 1, 1998. The
Plan was thereafter amended on one occasion and is hereby amended in the
following respects:
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. The first paragraph of Section 1.11 is hereby amended to read as
follows:
"1.11 'Compensation' shall mean the basic compensation paid,
before any reduction pursuant to a deferral election under a Code
Section 401(k) plan or a benefit election under a Code Section 125
plan sponsored by an Employer, to a Participant by an Employer,
including compensation for incentive hours and excluding
reimbursements or other expense allowances, fringe benefits (cash and
noncash), moving expenses, deferred compensation, welfare benefits
(other than short term disability payments), unguaranteed overtime
pay, bonuses and other irregular payments."
3. The first paragraph of Section 2.1 is hereby amended to read as follows:
"2.1 DATE OF PARTICIPATION. Each Employee who is a Participant
on the Effective Date shall continue to participate in the Plan in
accordance with its terms. Each Employee who is in the employ of an
Employer on the Effective Date and who meets the requirements of
Section 2.2 on or before December 31, 1997, shall commence
participation as of the Effective Date. Each other Employee who
thereafter satisfies the minimum age and service requirements
specified in Section 2.2 shall commence participation in the Plan as
of the first day of the second month following the month in which such
Employee satisfies such requirements, provided such Employee is still
in the employ of an Employer on such date. In no event shall an
Employee who is employed in the Southeast Division commence
participation prior to the Effective Date, unless such Employee
commenced participation prior to being transferred to such division.
Effective January 1, 2000, each Employee who was previously employed
by Pic-n-Pay, Inc., shall be eligible to participate in the Plan as of
<PAGE>
the later of the closing date of the acquisition by the Company of
Pic-n-Pay, Inc., or the first day of the second month following the
month in which he or she meets the requirements of Section 2.2. For
purposes of determining whether such Employee has completed a Year of
Participation Service, his or her service with Pic-n-Pay shall be
taken into account."
4. This Amendment generally shall be effective January 1, 2000.
Exhibit 10.6
THIRD AMENDMENT
TO THE
HANNAFORD CASH BALANCE PLAN
The Hannaford Cash Balance Plan was last amended and restated effective
generally January 1, 1998. The Plan was thereafter amended on two occasions and
is hereby amended in the following respects:
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. Section 1.43 is amended by adding a new paragraph at the end thereof to
read as follows:
"In the case of an Employee whose employment with an Employer is
terminated by reason of the sale of a store in the Southeast Division,
in connection with the merger of Hannaford Bros. Co. and Delhaize
America, Inc., the term 'Year of Vesting Service' shall mean for the
2000 Plan Year that such Employee is credited with at least the
applicable number of Hours of Service. For purposes of the preceding
sentence, the applicable number for an hourly Employee shall be the
product of 870 and a fraction, the numerator of which is the number of
days in the Plan Year as of the effective date of the merger (or
closing date of the sale of the store, if earlier) and the denominator
of which is 365; and the applicable number for a salaried or salaried
nonexempt Employee shall be the product of 1000 and such fraction."
3. Section 8.2 is amended to read as follows:
"8.2 VESTED BENEFIT. If a Terminated Participant, a
Terminated Warehouse Participant, or a Terminated Driver Participant
is credited with at least five (5) Years of Vesting Service at his or
her Termination of Employment Date, he or she shall be entitled to
receive a Vested Benefit determined as of his or her Termination of
Employment Date in accordance with Section 4.1 or 4.2.
Notwithstanding the foregoing provisions of this Section to the
contrary, each Participant who is an Employee of Hannaford HomeRuns on
the closing date of the sale of Hannaford HomeRuns shall be entitled
to receive a Vested Benefit determined as of his or her Termination of
Employment Date in accordance with Section 4.1 or 4.2."
4. Part 2 of this Amendment shall be effective as of the effective date of
the merger of Hannaford Bros. Co. and Delhaize America, Inc. Part 3 of this
Amendment shall be effective as of the closing date of the sale of Hannaford
HomeRuns.
Exhibit 10.14
FIRST AMENDMENT TO EMPLOYMENT CONTINUITY AGREEMENT
THIS AMENDMENT made this day of , 1999, between HANNAFORD BROS. CO., a
Maine corporation (the "Company") and HUGH G. FARRINGTON ("Farrington"), of Cape
Elizabeth, Maine.
WHEREAS, the Company and Farrington have entered into an Employment
Continuity Agreement ("Agreement") dated ; and
WHEREAS, the parties desire to amend the Agreement (i) to extend from 12
months to 24 months the period, following a change in control, during which
Farrington has a right to receive additional compensation and benefits in the
event of Farrington's involuntary termination of employment without good cause
or voluntary termination of employment for good reason, (ii) to describe the
benefit provided under the Nonqualified Savings and Investment Plan, and (iii)
to clarify that no benefits are payable upon Farrington's death prior to
termination of employment; and
WHEREAS, Section 9 of the Agreement provides that the Agreement may be
amended in writing by the parties;
NOW, THEREFORE, in consideration of the mutual promises and other
consideration recited in the Agreement, IT IS AGREED:
1. The terms used in this Amendment shall have the meanings set forth in
the Agreement.
2. The first clause of Section 3 of the Agreement is hereby amended to read
as follows:
"3. RIGHTS UPON INVOLUNTARY TERMINATION OF EMPLOYMENT. If,
within twenty-four (24) months after the occurrence of a Change in
Control Event, the Company terminates Farrington's employment for any
reason other than Good Cause as defined in Paragraph 5, or if
Farrington voluntarily terminates employment for Good Reason as
defined in Paragraph 4, the Company shall provide Farrington with the
following:"
3. Subsection (c) of Section 3 of the Agreement is hereby amended to read
as follows:
"(c) Immediately upon such termination, Farrington shall be
entitled to acceleration of any payments to be made to him under the
Hannaford Bros. Co. Deferred Compensation Plan for Officers, the
<PAGE>
Hannaford Nonqualified Savings and Investment Plan or any other
deferred compensation arrangement for his benefit. For purposes of
calculating any benefit payable with respect to Farrington under the
Hannaford Nonqualified Savings and Investment Plan, his account
balance shall be increased by the product of (i) the sum of the
matching contributions credited to his account under the Hannaford
Nonqualified Savings and Investment Plan and the Hannaford Savings and
Investment Plan for his last full month of employment or, if greater,
his last full month of employment prior to the Change in Control
Event, and (ii) thirty-six (36). Payment under any such plan or
arrangement pursuant to this Paragraph 3(c) shall be made in a lump
sum within ninety (90) days after Farrington's employment terminates."
4. Section 5 of the Agreement is hereby amended by revising the heading and
adding a new first sentence to read as follows:
"5. TERMINATION BY REASON OF DEATH OR FOR GOOD CAUSE.
Notwithstanding any provision of this Agreement to the contrary, no
benefits are payable hereunder upon Farrington's death prior to his
involuntary termination of employment pursuant to Paragraph 3 or
voluntary termination of employment for Good Reason pursuant to
Paragraph 4."
5. This amendment shall be effective as of January 1, 1999.
WITNESS HANNAFORD BROS. CO.
By
Its
Company
Hugh G. Farrington
Exhibit 10.16
FIRST AMENDMENT TO EMPLOYMENT CONTINUITY AGREEMENT
THIS AMENDMENT made this day of , 1999, between HANNAFORD BROS. CO., a
Maine corporation (the "Company") and , of , ("Officer").
WHEREAS, the Company and the Officer have entered into an Employment
Continuity Agreement ("Agreement") dated ; and
WHEREAS, the parties desire to amend the Agreement (i) to extend from 12
months to 24 months the period, following a change in control, during which the
Officer has a right to receive additional compensation and benefits in the event
of the Officer's involuntary termination of employment without good cause or
voluntary termination of employment for good reason, (ii) to describe the
benefit provided under the Nonqualified Savings and Investment Plan, and (iii)
to clarify that no benefits are payable upon the Officer's death prior to
termination of employment; and
WHEREAS, Section 9 of the Agreement provides that the Agreement may be
amended in writing by the parties;
NOW, THEREFORE, in consideration of the mutual promises and other
consideration recited in the Agreement, IT IS AGREED:
1. The terms used in this Amendment shall have the meanings set forth in
the Agreement.
2. The first clause of Section 3 of the Agreement is hereby amended to read
as follows:
"3. RIGHTS UPON INVOLUNTARY TERMINATION OF EMPLOYMENT. If,
within twenty-four (24) months after the occurrence of a Change in
Control Event, the Company terminates the Officer's employment for any
reason other than Good Cause as defined in Paragraph 5, or if the
Officer voluntarily terminates employment for Good Reason as defined
in Paragraph 4, the Company shall provide the Officer with the
following:"
3. Subsection (c) of Section 3 of the Agreement is hereby amended to read
as follows:
"(c) Immediately upon such termination, the Officer shall be
entitled to acceleration of any payments to be made to him under the
Hannaford Bros. Co. Deferred Compensation Plan for Officers, the
<PAGE>
Hannaford Nonqualified Savings and Investment Plan or any other
deferred compensation arrangement for his benefit. For purposes of
calculating any benefit payable with respect to the Officer under the
Hannaford Nonqualified Savings and Investment Plan, his account
balance shall be increased by the product of (i) the sum of the
matching contributions credited to his account under the Hannaford
Nonqualified Savings and Investment Plan and the Hannaford Savings and
Investment Plan for his last full month of employment or, if greater,
his last full month of employment prior to the Change in Control
Event, and (ii) twenty-four (24). Payment under any such plan or
arrangement pursuant to this Paragraph 3(c) shall be made in a lump
sum within ninety (90) days after the Officer's employment
terminates."
4. Section 5 of the Agreement is hereby amended by revising the heading and
adding a new first sentence to read as follows:
"5. TERMINATION BY REASON OF DEATH OR FOR GOOD CAUSE.
Notwithstanding any provision of this Agreement to the contrary, no
benefits are payable hereunder upon the Officer's death prior to his
involuntary termination of employment pursuant to Paragraph 3 or
voluntary termination of employment for Good Reason pursuant to
Paragraph 4."
5. This amendment shall be effective as of January 1, 1999.
WITNESS HANNAFORD BROS. CO.
By
Its
Exhibit 10.19
PROPOSED FIRST AMENDMENT
TO THE
HANNAFORD SAVINGS AND INVESTMENT PLAN
The Hannaford Savings and Investment Plan, formerly named the Hannaford
Northeast Savings and Investment Plan, was last amended and restated effective
generally January 1, 1998. The Plan is hereby amended in the following respects:
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. The first paragraph of Section 2.11 is amended to read as follows:
"2.11 'Compensation' shall mean the basic compensation paid,
before any reduction pursuant to a Deferral Election or a benefit
election under an Employer's Code Section 125 Plan, by an Employer to
an Employee for services rendered while a Participant, including
compensation for incentive hours and excluding reimbursements or other
expense allowances, fringe benefits (cash and noncash), moving
expenses, deferred compensation, welfare benefits (other than short
term disability payments), unguaranteed overtime pay, bonuses and
other irregular payments."
3. Section 2.21 is amended to read as follows:
"2.21 'Employee' shall mean any individual who is employed by an
Employer, excluding Leased Employees and any person who is classified
by an Employer (without regard to the classification of such person by
a third party) as an independent contractor."
4. Subsection (c) of Section 9.5 is amended by adding the following
paragraph at the end thereof:
"Effective March 22, 1999, notwithstanding the foregoing
provisions of this Section to the contrary, if the value of the vested
portion of a Participant's Account does not exceed Five Thousand
Dollars ($5,000.00) as of the Valuation Date following the date he or
she ceases to be employed by an Employer or a Related Employer and is
no longer employed by any of them, his or her Account shall be
distributed in a lump sum as soon as practicable after such Valuation
Date."
<PAGE>
5. Section 9.14(e)(ii)(ee) is amended to read as follows:
"(ee)effective for distributions made after December 31, 1999,
a distribution of Elective Contributions pursuant to Section
9.12."
6. This Amendment shall be effective generally January 1, 1999, provided
Part 2 shall be effective January 1, 2000, Part 4 shall be effective March 22,
1999, and Part 5 shall be effective for distributions made after December 31,
1999.
Exhibit 10.20
SECOND AMENDMENT
TO THE
HANNAFORD SAVINGS AND INVESTMENT PLAN
The Hannaford Savings and Investment Plan, formerly named the Hannaford
Northeast Savings and Investment Plan, was last amended and restated effective
generally January 1, 1998. A Proposed First Amendment was submitted to the
Internal Revenue Service on September 15, 1999. The Plan is hereby further
amended in the following respects:
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. Section 3.1 is amended to read as follows:
"3.1 DATE OF PARTICIPATION. Except as hereinafter provided,
each Employee who is in the employ of an Employer on the Effective
Date and who meets the requirements of Section 3.2 on or before
November 30, 1997, shall be eligible to participate in the Plan as of
the Effective Date. Each other Employee who thereafter meets the
requirements of Section 3.2 shall be eligible to participate in the
Plan as of the first day of the second month following the month in
which he or she meets such requirements, provided he or she is still
in the employ of an Employer on such date. Notwithstanding the
foregoing provisions to the contrary, each Employee who was a
participant in the Hannaford Southeast Savings and Investment Plan as
of December 31, 1997, shall be eligible to participate in the Plan as
of the Effective Date, provided he or she is still in the employ of an
Employer on the Effective Date. Effective January 1, 2000, each
Employee who was previously employed by Pic-n-Pay, Inc., shall be
eligible to participate in the Plan as of the later of the closing
date of the acquisition by the Company of Pic-n-Pay, Inc., or the
first day of the second month following the month in which he or she
meets the requirements of Section 3.2. For purposes of determining
whether such Employee has completed a Year of Participation Service,
his or her service with Pic-n-Pay shall be taken into account."
3. Section 7.2 is hereby deleted.
4. This Amendment shall be effective January 1, 2000.
Exhibit 10.21
THIRD AMENDMENT
TO THE
HANNAFORD SAVINGS AND INVESTMENT PLAN
The Hannaford Savings and Investment Plan was last amended and restated
effective generally January 1, 1998. A Proposed First Amendment was submitted to
the Internal Revenue Service on September 15, 1999, and a Second Amendment was
adopted effective January 1, 2000. The Plan is hereby further amended in the
following respects:
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. Section 2.63 is amended by adding a new paragraph at the end thereof to
read as follows:
"In the case of a Participant whose employment with an Employer
is terminated by reason of the sale of a store in the Southeast
Division, in connection with the merger of Hannaford Bros. Co. and
Delhaize America, Inc., the term 'Year of Vesting Service' shall mean
for the 2000 Plan Year that such Participant is credited with at least
the applicable number of Hours of Service. For purposes of the
preceding sentence, the applicable number for an hourly Participant
shall be the product of 870 and a fraction, the numerator of which is
the number of days in the Plan Year as of the effective date of the
merger (or closing date of the sale of the store, if earlier) and the
denominator of which is 365; and the applicable number for a salaried
or salaried nonexempt Participant shall be the product of 1000 and
such fraction."
3. Section 9.3 is amended by adding a new paragraph at the end thereof to
read as follows:
"Notwithstanding the foregoing provisions of this Section to the
contrary, each Participant who is an Employee of Hannaford HomeRuns on
the closing date of the sale of Hannaford HomeRuns shall have a fully
vested and nonforfeitable right to his or her Account."
4. Part 2 of this Amendment shall be effective as of the effective date of
the merger of Hannaford Bros. Co. and Delhaize America, Inc. Part 3 of this
Amendment shall be effective as of the closing date of the sale of Hannaford
HomeRuns.
Exhibit 10.23
FIRST AMENDMENT
TO THE
HANNAFORD NONQUALIFIED SAVINGS AND INVESTMENT PLAN
The Hannaford Nonqualified Savings and Investment Plan ("Plan") was adopted
effective January 1, 1998. The Plan is hereby amended in the following respects:
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. Article V is hereby amended by adding a new Section 5.8 to read as
follows:
"5.8 CHANGE IN CONTROL EVENT.
(a) Upon the termination of a Participant's employment
with the Company following the occurrence of a Change in Control
Event, the benefits payable with respect to the Participant
shall be determined in accordance with the applicable provisions
of the Plan and any employment continuity agreement then in
effect between the Participant and the Company. To the extent
the provisions of any such agreement conflict with the
provisions of the Plan, the agreement shall govern.
(b) Each of the following events shall constitute a Change
in Control Event for purposes of this Section:
(i) Any person acquires beneficial ownership of
Company securities and is or thereby becomes a beneficial
owner of securities entitling such person to exercise
twenty-seven percent (27%) or more of the combined voting
power of the Company's then outstanding stock.
'Beneficial ownership' shall be determined in
accordance with Regulation 13D under the Securities
Exchange Act of 1934, or any similar successor regulation
or rule; and the term 'person' shall include any natural
person, corporation, partnership, trust or association, or
any group or combination thereof, whose ownership of
Company securities would be required to be reported under
such Regulation 13D, or any similar successor regulation or
rule.
<PAGE>
(ii) Within any twenty-five (25) month period,
individuals who were Outside Directors at the beginning of
such period, together with any other Outside Directors
first elected as directors of the Company pursuant to
nominations approved or ratified by at least two-thirds
(2/3) of the Outside Directors in office immediately prior
to such respective elections, cease to constitute a
majority of the Board of Directors.
'Outside Director' as of a given date shall mean
a member of the Company's Board who has been a director of
the Company throughout the six (6) months prior to such
date and who has not been an employee of the Company at any
time during such six (6) month period.
(iii) The Company ceases to be a reporting
company pursuant to Section 13(a) of the Securities
Exchange Act of 1934 or any similar successor provision.
(iv) The Company's stockholders approve:
(A) any consolidation or merger of the
Company in which the Company is not the continuing
or surviving corporation or pursuant to which shares
of Company common stock would be converted into
cash, securities or other property, other than a
merger or consolidation of the Company in which the
holders of the Company's common stock immediately
prior to the merger or consolidation have
substantially the same proportionate ownership and
voting control of the surviving corporation
immediately after the merger or consolidation; or
(B) any sale, lease, exchange, liquidation
or other transfer (in one transaction or a series of
transactions) of all or substantially all of the
assets of the Company.
Notwithstanding subparagraphs (A) and (B) above, the
term 'Change in Control Event' shall not include a
consolidation, merger, or other reorganization if upon
consummation of such transaction all of the outstanding
voting stock of the Company is owned, directly or
indirectly, by a holding company, and the holders of the
Company's common stock immediately prior to the
transaction have substantially the same proportionate
ownership and voting control of the holding company."
3. This Amendment shall be effective January 1, 2000.
Exhibit 10.30
SECOND AMENDMENT
TO THE
HANNAFORD BROS. CO.
STOCK OWNERSHIP PLAN FOR OUTSIDE DIRECTORS
The Hannaford Bros. Co. Stock Ownership Plan for Outside Directors (the
"Plan") was adopted by the Board of Directors, subject to shareholder approval,
on March 3, 1995, and approved by shareholders on May 24, 1995. The Plan was
thereafter amended on one occasion and is hereby amended in the following
respects.
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. The first paragraph of subsection (d) of Section 6 is hereby amended to
read as follows:
"(d) PERFORMANCE PERIOD. Except as hereinafter provided, a
Performance Period shall be the five (5) consecutive Fiscal Years
commencing on the date Performance Shares are granted, and a new
Performance Period shall begin on the first day of each Fiscal Year.
For the 1991 Fiscal Year, five (5) Performance Periods shall begin
concurrently, one ending with such Fiscal Year, one ending after two
(2) consecutive Fiscal Years, one ending after three (3) consecutive
Fiscal Years, one ending after four (4) consecutive Fiscal Years, and
one ending after five (5) consecutive Fiscal Years. Upon the
occurrence of a Change in Control Event described in Section 4(c)(v),
all Performance Periods then in effect shall end on the effective date
of such event; provided, however, that where the event is shareholder
approval of a consolidation, merger or other transaction, the
Performance Periods shall end on the effective date of such
transaction."
3. Subsection (g) of Section 6 is hereby amended to read as follows:
"(g) DISTRIBUTION TO DIRECTOR. The amount credited to a
Director's Performance Share Deferral Account shall be paid to him or
her in a lump sum, substantially equal consecutive monthly
installments over a period not to exceed ten (10) years, or in such
other form as the Committee may permit. Each Director shall, prior to
resigning from the Board, specify on such written form as the
Committee may prescribe, the manner in which and the time distribution
is to be made or commence to him or her. Except as hereinafter
provided in this Section and in Section 8(f), distribution with
respect to a Director shall not be made or commence before the later
<PAGE>
of the Director's resignation from the Board or attainment of age
seventy (70). Upon the occurrence of a Change in Control Event
described in Section 4(c)(v), distribution with respect to a Director
shall not be made or commence before the later of the Director's
resignation from the Board or the effective date of such event;
provided, however, that where the event is shareholder approval of a
consolidation, merger or other transaction, distribution shall not be
made prior to the effective date of such transaction."
4. Section 8 is amended by adding a new subsection (j) to read as follows:
"(j) CALENDAR YEAR AND FISCAL YEAR 2000. Notwithstanding any
provision of the Plan to the contrary, a Director may not elect to
receive his or her Annual Retainer for calendar year 2000 in the form
of Options in lieu of cash, and may not elect to defer his or her
Annual Retainer for calendar year 2000, and the Company shall not
grant Performance Shares to any Director for the Fiscal Year
commencing in 2000."
5. This Amendment shall be effective December 15, 1999.
Exhibit 10.33
TRUST UNDER THE HANNAFORD
NONQUALIFIED DEFERRED COMPENSATION PLANS
AND EMPLOYMENT CONTINUITY AGREEMENTS
(a) THIS AGREEMENT, made this day of , 2000, by and between HANNAFORD BROS.
CO., a corporation organized under the laws of the State of Maine ("Company"),
and STATE STREET BANK AND TRUST COMPANY, a banking association organized and
existing under the laws of the Commonwealth of Massachusetts ("Trustee");
(b) WHEREAS, Company has adopted the nonqualified deferred compensation
plans listed in Appendix A and has entered into certain Employment Continuity
Agreements, also listed in Appendix A (hereinafter collectively called the
"Plans");
(c) WHEREAS, Company has incurred or expects to incur liability under the
terms of such Plans with respect to the individuals participating in such plans;
(d) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plans;
(e) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of each of
the Plans as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
("ERISA");
(f) WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
SECTION 1
ESTABLISHMENT OF TRUST
(a) Company hereby deposits with the Trustee in trust One Hundred Dollars
($100.00), which shall become the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this Trust Agreement.
<PAGE>
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of Plan participants and general creditors as herein set
forth. Plan participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plans and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time to time,
make additional deposits of cash or other property in trust with Trustee to
augment the principal to be held, administered, and disposed of by Trustee as
provided in this Trust Agreement. Neither the Trustee nor any Plan participant
or beneficiary shall have any right to compel such additional deposits.
(f) Upon a Change in Control Event, Company shall, as soon as possible, but
in no event longer than 30 days following the Change in Control Event, as
defined herein, make an irrevocable contribution to the Trust in an amount that
is sufficient to pay each Plan participant or beneficiary the benefits to which
Plan participants or their beneficiaries would be entitled pursuant to the terms
of the Plans as of the date on which the Change in Control Event occurred.
An amount is "sufficient," within the meaning of the preceding sentence if,
when added to any cash or other property previously contributed to the Trust by
the Company, the fair market value of the Trust assets as of the date the
contribution is made equals or exceeds the sum of (1) the present value of all
accrued and unpaid benefits to which participants or their beneficiaries would
be entitled under the terms of the Plans as of the date the Change in Control
Event occurred, and (2) all compensation owed and expenses incurred but unpaid
of the Trustee, pursuant to Section 9, as of such date. For purposes of this
Section, present value shall be determined in the same manner that the present
value of benefits is then determined under the Hannaford Cash Balance Plan.
<PAGE>
SECTION 2
PAYMENT TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule")
that indicates the amounts payable in respect of each Plan participant (and his
or her beneficiaries), that provides a formula or other instructions acceptable
to Trustee for determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plans), and the time of
commencement for payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state, or local taxes that may be
required to be withheld with respect to the payment of benefits pursuant to the
terms of the Plans and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld, and
paid by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plans shall be determined by Company or such party as it
shall designate under the Plans, and any claim for benefits shall be considered
and reviewed under the procedures set out in the Plans.
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plans. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plans, Company shall make the balance of each such payment as it falls due.
Trustee shall notify Company where principal and earnings are not sufficient.
SECTION 3
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if Company is Insolvent. Company shall be considered "Insolvent"
for purposes of this Trust Agreement if (i) Company is unable to pay its debts
as they become due, or (ii) Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
<PAGE>
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of Company
shall have the duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of Company alleges
in writing to Trustee that Company has become Insolvent, Trustee shall
determine whether Company is Insolvent and, pending such determination,
Trustee shall discontinue payment of benefits to Plan participants or
their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all events rely
on such evidence concerning Company's solvency as may be furnished to
Trustee and that provides Trustee with a reasonable basis for making a
determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent,
Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall in
any way diminish any rights of Plan participants or their beneficiaries
to pursue their rights as general creditors of Company with respect to
benefits due under the Plans or otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants
or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that Company is not
Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plans for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
<PAGE>
SECTION 4
PAYMENTS TO COMPANY
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all payment of
benefits have been made to Plan participants and their beneficiaries pursuant to
the terms of the Plans.
SECTION 5
INVESTMENT AUTHORITY
(a) In no event may Trustee invest in securities (including stock or rights
to acquire stock) or obligations issued by Company, other than a de minimis
amount held in common investment vehicles in which Trustee invests. All rights
associated with assets of the Trust shall be exercised by Trustee or the person
designated by Trustee, and shall in no event be exercisable by or rest with Plan
participants.
(b) Trustee shall invest and reinvest the principal and income of the Trust
and keep the Trust invested, without distinction between principal and income,
in such instruments as Trustee in its sole discretion shall determine consistent
with such written investment guidelines as the Finance Committee of Company's
Board of Directors may from time to time provide. Trustee may rely on such
written guidelines and, except as otherwise provided by law, shall have no
liability for following such guidelines. In the event Company fails to provide
written investment guidelines, Trustee shall invest the Trust in one or more of
the following instruments, as Trustee in its sole discretion shall determine:
U.S. Treasury bills, notes or bonds; U.S. Government agency securities; time
deposits; certificates of deposit (issued by financial institutions rated A or B
by Keefe, Bruyette & Woods); commercial paper (rated A-1 by Standard & Poors or
P-1 or better by Moody's Investor Service); bankers' acceptances; repurchase
agreements; and pooled short-term investment funds. In addition, Trustee may
invest or reinvest all or any specified portion of the Trust in any common,
collective or commingled trust fund which has been or may hereafter be
established and maintained by Trustee. Notwithstanding the foregoing provisions
of this paragraph (b) to the contrary, Trustee shall, from time to time,
liquidate Trust investments to the extent necessary to make a payment required
under this Trust Agreement.
(c) Company shall have the right, at any time, and from time to time in its
sole discretion, to substitute assets of equal fair market value for any asset
held by the Trust.
<PAGE>
SECTION 6
DISPOSITION OF INCOME
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
SECTION 7
ACCOUNTING BY TRUSTEE
(a) Trustee shall keep or cause to be kept accurate and detailed accounts
of any receipts, investments, disbursements and other transactions hereunder and
all necessary and appropriate records required to identify correctly and reflect
accurately the condition of the Trust. All such accounts and records shall be
open to inspection and audit at all reasonable times by any person, including an
independent public accountant, designated by Company, and shall be preserved (in
original form or on microfilm, magnetic tape or any other similar process) for
such period as Trustee may determine. Trustee may destroy such accounts and
records only after notifying Company in writing of its intention to do so and
transferring to Company any of such documents requested in writing by Company.
(b) Within 30 days after the close of each calendar year, and within 30
days after the removal or resignation of Trustee or the termination of the
Trust, Trustee shall file with Company a written account setting forth all
investments, receipts, disbursements, and other transactions effected by it
during the preceding calendar year, or during the period from the close of the
preceding calendar year to the date of such removal, resignation, or
termination. Such account shall include a description of all investments and
securities purchased and sold with the cost of such purchase or net proceeds of
such sales and showing all cash, securities, and other property held at the end
of such calendar year or other period.
(c) Nothing contained in this Trust Agreement shall be construed as
depriving Trustee, Company, or Plan participants or their beneficiaries of the
right to have a judicial settlement of Trustee's accounts. Upon any proceeding
for a judicial settlement of Trustee's accounts or for instructions, the only
necessary parties thereto, in addition to Trustee, shall be Company and the Plan
participants or their beneficiaries.
(d) In addition to any returns required of Trustee by law, Trustee shall
prepare and file such tax returns and other reports as Company and Trustee may
from time to time agree in writing are necessary or advisable.
<PAGE>
SECTION 8
RESPONSIBILITY OF TRUSTEE
(a) Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of like
character and with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a direction, request or
approval given by Company which is contemplated by, and in conformity with, the
terms of the Plans or this Trust and is given in writing by Company. In the
event of a dispute between Company and a party, Trustee may apply to a court of
competent jurisdiction to resolve the dispute.
(b) Trustee may commence or defend suits or legal proceedings, represent
the Trust in all such actions, and settle, compromise, or submit to arbitration
any disputes involving the Trust. If Trustee undertakes or defends any
litigation arising in connection with this Trust, Company agrees to indemnify
Trustee against Trustee's costs, expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating thereto and to be primarily
liable for such payments. If Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, Trustee may obtain payment from the
Trust.
(c) Trustee may engage or consult with legal counsel (who may also be
counsel for Company generally), accountants, enrolled actuaries, or any other
suitable agents to assist it in performing any of its duties or obligations
hereunder; rely upon the advice of such counsel, accountants, actuaries, or
agents; and pay the reasonable fees, expenses, and compensation of such counsel,
accountants, actuaries, or agents from the Trust to the extent that they are not
paid by Company.
(d) Trustee shall have, without exclusion, all powers conferred on Trustees
by applicable law, unless expressly provided otherwise herein, provided,
however, that if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the Trust, to
assign the policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any person the proceeds
of any borrowing against such policy.
(e) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
<PAGE>
SECTION 9
COMPENSATION AND EXPENSES OF TRUSTEE
(a) Company shall pay Trustee such reasonable compensation for its services
hereunder as may be agreed upon in writing from time to time by Company and
Trustee. Company shall also pay the reasonable expenses incurred by Trustee in
the performance of its duties under this Trust Agreement. Such compensation and
expenses shall be paid from the Trust to the extent that they are not paid by
Company.
(b) Company shall pay any taxes which are lawfully levied or assessed upon
or become payable with respect to the Trust. To the extent that any taxes
lawfully levied or assessed upon the Trust are not paid by Company, Trustee
shall pay such taxes out of the Trust. Trustee shall contest the validity of
taxes in any manner deemed appropriate by Company, but at Company's expense. In
the alternative, Company itself may contest the validity of any such taxes.
SECTION 10
Resignation and Removal of Trustee
(a) Trustee may resign at any time by written notice to Company, which
shall be effective 60 days after receipt of such notice unless Company and
Trustee agree otherwise.
(b) Trustee may be removed by Company with or without cause at any time
upon at least 60 days' notice in writing to Trustee, or upon shorter notice
accepted by Trustee. In the event of such removal, or a resignation in
accordance with Section 10(a) hereof, Trustee shall duly file with Company a
written account as provided in Section 7(b) hereof.
(c) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within 60 days after receipt of notice of
resignation, removal, or transfer, unless Company extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraphs (a) or (b) of this Section. If no such appointment has
been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
<PAGE>
SECTION 11
APPOINTMENT OF SUCCESSOR
(a) Within 60 days after the date of a notice of resignation or removal of
Trustee, in accordance with Section 10(a) or (b) hereof, Company shall designate
any third party, such as a bank trust department or other party that may be
granted corporate trust powers under state law, as a successor to replace
Trustee upon resignation or removal. The appointment shall be effective when
accepted in writing by the new Trustee, who shall have all of the rights and
powers of the former Trustee, including ownership rights in the Trust assets.
The former Trustee shall execute any instrument necessary or reasonably
requested by Company of the successor Trustee to evidence the transfer. The word
"Trustee" wherever used herein, except where the context otherwise requires,
shall be deemed to include any successor Trustee.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and
Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
(c) Any corporation into which Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger, reorganization,
or consolidation to which Trustee may be a party, or any corporation to which
all or substantially all the trust business of Trustee may be transferred shall
be the successor of Trustee hereunder without the execution or filing of any
instrument or the performance of any act.
SECTION 12
AMENDMENT OR TERMINATION
(a) This Trust Agreement may be amended by a written instrument executed by
Trustee and Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Plans or shall make the Trust revocable after it
has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan participants
and their beneficiaries are no longer entitled to benefits pursuant to the terms
of the Plans. Upon termination of the Trust any assets remaining in the trust
shall be returned to Company.
<PAGE>
SECTION 13
MISCELLANEOUS
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Maine.
(d) For purposes of this Trust, Change in Control Event shall mean one of
the following events:
(1) Any person acquires beneficial ownership of Company securities and
is or thereby becomes a beneficial owner of securities entitling such
person to exercise 27 percent or more of the combined voting power of
Company's then outstanding stock.
For purposes of this paragraph (d)(1), "beneficial ownership" shall be
determined in accordance with Regulation 13D under the Securities
Exchange Act of 1934, or any similar successor regulation or rule; and
the term "person" shall include any natural person, corporation,
partnership, trust or association, or any group or combination
thereof, whose ownership of Company securities would be required to be
reported under such Regulation 13D, or any similar successor
regulation or rule.
(2) Within any 25-month period, individuals who were Outside
Directors at the beginning of such period, together with any other
Outside Directors first elected as directors of Company pursuant to
nominations approved or ratified by at least two thirds (2/3) of the
Outside Directors in office immediately prior to such respective
elections, cease to constitute a majority of the Board of Directors of
Company.
For purposes of this paragraph (d)(2), an "Outside Director" as of a
given date shall mean a member of Company's Board of Directors who has
been a director of Company throughout the 6 months prior to such date
and who has not been an employee of Company at any time during such
6-month period.
<PAGE>
(3) Company ceases to be a reporting Company pursuant to Section 13(a) of
the Securities Exchange Act of 1934 or any similar successor provision.
(4) Company's stockholders approve:
(A) any consolidation or merger of Company in which Company is
not the continuing or surviving corporation or pursuant to which shares
of Company common stock would be converted into cash, securities, or
other property, other than a merger or consolidation of Company in
which the holders of Company's common stock immediately prior to the
merger or consolidation have substantially the same proportionate
ownership and voting control of the surviving corporation immediately
after the merger and consolidation; or
(B) any sale, lease, exchange, liquidation or other transfer (in
one transaction or a series of transactions) or all or substantially
all of the assets of Company.
Notwithstanding (A) and (B) above, the term "Change in Control Event" shall
not include a consolidation, merger, or other reorganization if upon
consummation of such transaction all of the outstanding voting stock of Company
is owned, directly or indirectly, by a holding Company, and the holders of
Company's common stock immediately prior to the transaction have substantially
the same proportionate ownership and voting control of the holding Company.
(e) Trustee accepts the Trust established under this Trust Agreement on the
terms and conditions set forth herein and agrees to discharge fully all of the
duties and perform faithfully all of the obligations imposed upon it under this
Trust Agreement.
(f) Trustee assumes no obligation or responsibility with respect to any
action required under this Trust Agreement on the part of Company.
(g) Except as otherwise required by law, a third party dealing with Trustee
shall not be required to inquire as to the authority of Trustee to take any
action or the validity or propriety of any act of Trustee, nor be under any
obligation to see to the proper application by Trustee of any Trust property.
(h) The Trust shall in no manner be liable for or subject to the debts or
liabilities of any Plan participant or beneficiary.
<PAGE>
SECTION 14
EFFECTIVE DATE
The effective date of this Trust Agreement shall be the date first written
above.
IN WITNESS WHEREOF, this Trust Agreement has been duly executed by the
parties hereto as of the day and year above written.
Witness: HANNAFORD BROS. CO.
By
Its
Witness: STATE STREET BANK AND TRUST COMPANY,
TRUSTEE
By
Its
<PAGE>
APPENDIX A
Nonqualified Deferred Compensation Plans
of Hannaford Bros. Co.
1. The Hannaford Bros. Co. Deferred Compensation Plan for Officers, as the
same may be amended from time to time.
1. The Hannaford Nonqualified Savings and Investment Plan, as the same may
be amended from time to time.
1. The Hannaford Supplemental Executive Retirement Plan, as the same may be
amended from time to time.
1. The Employment Continuity Agreement with Richard A. Anicetti, dated
April 26, 1999.
1. The Employment Continuity Agreement with Hugh G. Farrington, dated May
19, 1998, and amended February 17, 1999, as the same may be amended from
time to time.
1. The Employment Continuity Agreement with Paul A. Fritzson, dated May 19,
1998, and amended April 20, 1999, as the same may be amended from time
to time.
1. The Employment Continuity Agreement with Andrew P. Geoghegan, dated May
19, 1998, and amended April 2, 1999, as the same may be amended from
time to time.
1. The Employment Continuity Agreement with Ronald C. Hodge, dated May 19,
1998, and amended May 3, 1999, as the same may be amended from time to
time.
1. The Employment Continuity Agreement with Blythe J. McGarvie, dated May
19, 1998, and amended February 17, 1999, as the same may be amended from
time to time.
1. The Employment Continuity Agreement with Michael J. Strout, dated May
19, 1998, and amended April 2, 1999, as the same may be amended from
time to time.
1. The Employment Continuity Agreement with Arthur A. Aleshire, dated
February 17, 1999.
1. The Employment Continuity Agreement with Garrett D. Bowne, IV, dated
February 17, 1999.
<PAGE>
1. The Employment Continuity Agreement with Steven H. Brinn, dated February
17, 1999.
1. The Employment Continuity Agreement with Shelley G. Broader, dated
February 17, 1999.
1. The Employment Continuity Agreement with Thomas B. Furber, dated
February 17, 1999.
1. The Employment Continuity Agreement with Margaret M. Ham, dated
February 17, 1999.
1. The Employment Continuity Agreement with Michael A. Harris, dated
February 17, 1999.
1. The Employment Continuity Agreement with Steven G. Hitchcock, dated
February 17, 1999.
1. The Employment Continuity Agreement with William L. Homa, dated
May 17, 1999.
1. The Employment Continuity Agreement with Kenneth C. Johnson, dated
February 17, 1999.
1. The Employment Continuity Agreement with Lisa R. Kranc, dated
February 17, 1999.
1. The Employment Continuity Agreement with Karen L. Mank, dated
February 17, 1999.
1. The Employment Continuity Agreement with Amos E. Merrow, dated
February 17, 1999.
1. The Employment Continuity Agreement with Beth M. Newlands Campbell,
dated February 17, 1999.
1. The Employment Continuity Agreement with Cindy A. Schlaepfer,
February 18, 1999.
1. The Employment Continuity Agreement with Robert J. Stapleton,
dated April 1, 1999.
1. The Employment Continuity Agreement with Charles F. Wilson, dated
February 17, 1999.
1. The Employment Continuity Agreement with Joyce Wilson-Sanford,
dated February 17, 1999.
<PAGE>
1. The Employment Continuity Agreement with Bradford A. Wise, dated
February 17, 1999.
1. The Employment Continuity Agreement with Brian E. Zappala, dated
February 17, 1999.
Exhibit 10.34
FIRST AMENDMENT TO THE TRUST
UNDER THE HANNAFORD
NONQUALIFIED DEFERRED COMPENSATION PLANS
AND EMPLOYMENT CONTINUITY AGREEMENTS
This Amendment made this day of , 2000, by and between HANNAFORD BROS. CO.,
a corporation organized under the laws of the State of Maine ("Company"), and
STATE STREET BANK AND TRUST COMPANY, a banking association organized and
existing under the laws of the Commonwealth of Massachusetts ("Trustee").
W I T N E S S E T H:
WHEREAS, Company and Trustee have established the Trust under the Hannaford
Nonqualified Deferred Compensation Plans and Employment Continuity Agreements
(the "Trust") to hold assets which, subject to the claims of Company's creditors
in the event of Company's Insolvency, may be used to fund Company's obligations
under certain nonqualified deferred compensation plans and certain employment
continuity agreements; and
WHEREAS, Section 12 of the Trust provides that the parties may amend the
Trust; and
WHEREAS, the parties desire to amend the Trust to provide for distribution
to the Company, at the expiration of the 24-month protection period under the
employment continuity agreements, of any assets not required to satisfy the
Company's obligations under the Nonqualified Deferred Compensation Plans;
NOW, THEREFORE, the Trust is hereby amended in the following respects:
1. The terms used herein shall have the meanings set forth in the Trust,
unless the context indicates otherwise;
2. Subsection (f) of Section 1 is amended to read as follows:
"(f) Upon a Change in Control Event, Company shall, as soon as
possible, but in no event longer than 30 days following the Change in
Control Event, as defined herein, make an irrevocable contribution to
the Trust in an amount that is sufficient to pay each Plan participant
or beneficiary the benefits to which Plan participants or their
beneficiaries would be entitled pursuant to the terms of the Plans as
of the date on which the Change in Control Event occurred.
<PAGE>
An amount is 'sufficient,' within the meaning of the preceding
sentence if, when added to any cash or other property previously
contributed to the Trust by the Company, the fair market value of the
Trust assets as of the date the contribution is made equals or exceeds
the sum of (1) the present value of all accrued and unpaid benefits to
which participants or their beneficiaries would be entitled, assuming
that the employment of all participants would be involuntarily
terminated without cause within 24 months after the Change in Control
Event, under the terms of the Plans as of the date the Change in
Control Event occurred, and (2) all compensation owed and expenses
incurred but unpaid of the Trustee, pursuant to Section 9, as of such
date. For purposes of this Section, present value shall be determined
in the same manner that the present value of benefits is then
determined under the Hannaford Cash Balance Plan."
3. Section 2 is hereby amended by adding a new subsection (d) to read as
follows:
"(d) Twenty-four months after the occurrence of a Change in
Control Event, the Company shall determine the benefits to which Plan
participants or their beneficiaries would be entitled pursuant to the
terms of the Plans as of the date such determination is made. In the
event that the Company determines that the principal of the Trust (plus
any earnings thereon) exceeds the amount that is sufficient to pay all
such benefits, the Company shall notify the Trustee of the amount of
the excess, and the Trustee shall distribute promptly the excess amount
to the Company.
The principal of the Trust (plus any earnings thereon) shall be
'sufficient,' within the meaning of the preceding sentence, if, as of
the date the determination is made, the fair market value of the Trust
assets equals or exceeds the sum of (1) the present value of all
accrued and unpaid benefits to which participants or their
beneficiaries would be entitled under the terms of the Plans, and (2)
all compensation owed and expenses incurred but unpaid of the Trustee,
pursuant to Section 9. For purposes of this Section, present value
shall be determined in the same manner that the present value of
benefits is then determined under the Hannaford Cash Balance Plan."
<PAGE>
4. This Amendment shall be effective on the date first written above.
IN WITNESS WHEREOF, Company and Trustee have caused this Amendment to be
executed by their duly authorized officers, all as of the day and year first
above written.
WITNESS: HANNAFORD BROS. CO.
By:
Its
STATE STREET BANK & TRUST
COMPANY, TRUSTEE
By:
Its
Exhibit 21
Hannaford Bros. Co. Parents and Subsidiaries
Percentage
of Voting
State Securities
of Owned by the
Registrant Incorporation Registrant
Hannaford Bros. Co. Maine
Subsidiaries (1)
Athenian Real Estate Development, Inc. Virginia 100.00%(2)
Hannbro Company Maine 100.00%(2)
Boney Wilson & Sons, Inc. North Carolina 100.00%(3)
Hannaford Licensing Corp. Maine 100.00%(3)
Hannaford Procurement Corp. Maine 100.00%(3)
Hannaford Trucking Company Maine 100.00%(3)
Martin's Foods of South Burlington, Inc. Vermont 100.00%(3)
Progressive Distributors, Inc. Maine 100.00%(3)
Shop 'n Save-Mass., Inc. Massachusetts 100.00%(3)
Hanncot Company Maine 100.00%(2)
HomeRuns.com, Inc. Massachusetts 100.00%(2)
Plain Street Properties, Inc. Maine 100.00%(2)
(1) Each of the subsidiaries is included in the consolidated financial
statements of the Registrant.
(2) Percentage of voting securities shown is that owned by the
Registrant.
(3) Percentage of voting securities shown is that owned by the
subsidiaries' immediate parent and not that owned by the
Registrant.
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Hannaford Bros. Co. and Subsidiaries on Form S-8 (Numbers 2-77902, 2-98387,
33-1281, 33-22666, 33-31624, 33-41273, 33-60119, 33-60655, 33-60691, 333-41381,
and 333-53109) of our report dated January 19, 2000 (except for Notes 2 and 3 as
to which the date is February 12, 2000) relating to the consolidated financial
statements, which is included in this Annual Report on Form 10-K.
s/PricewaterhouseCoopers, LLP
Portland, Maine
March 3, 2000
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<PERIOD-TYPE> YEAR
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<PERIOD-END> JAN-01-2000
<CASH> 53,641
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<RECEIVABLES> 27,918
<ALLOWANCES> 1,285
<INVENTORY> 230,416
<CURRENT-ASSETS> 326,832
<PP&E> 1,335,883
<DEPRECIATION> 494,548
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0
0
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<SALES> 3,462,942
<TOTAL-REVENUES> 3,462,942
<CGS> 2,544,623
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<INCOME-TAX> 61,480
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