-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AQokMquYtgMU7o8iZrwJhVwzo2aPLGO5102oVSJQ2pK2TXsSWTz9+XIRMAd4bZ4L bZbL/KB9Ef+uPqtQBcvqqA== 0000950144-01-003877.txt : 20010326 0000950144-01-003877.hdr.sgml : 20010326 ACCESSION NUMBER: 0000950144-01-003877 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000731 ITEM INFORMATION: FILED AS OF DATE: 20010323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELHAIZE AMERICA INC CENTRAL INDEX KEY: 0000037912 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 560660192 STATE OF INCORPORATION: NC FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-15275 FILM NUMBER: 1577539 BUSINESS ADDRESS: STREET 1: PO BOX 1330 CITY: SALISBURY STATE: NC ZIP: 28145 BUSINESS PHONE: 7046338250 MAIL ADDRESS: STREET 1: PO BOX 1330 CITY: SALISBURY STATE: NC ZIP: 28145 FORMER COMPANY: FORMER CONFORMED NAME: FOOD LION INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FOOD TOWN STORES INC DATE OF NAME CHANGE: 19830510 8-K/A 1 g67896a3e8-ka.txt DELHAIZE AMERICA INC 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 3 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (Date of Earliest Event Reported): July 31, 2000 ------------- Delhaize America, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Commission File No. 001-15275 --------- North Carolina 56-0660192 - ---------------------------------------------- ------------------- (State or other Jurisdiction of incorporation) (I.R.S. Employer Identification No.) 2110 Executive Drive, P.O. Box 1330 Salisbury, North Carolina 28145-1330 - ---------------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (704) 633-8250 -------------- Not Applicable ------------------------------------------------------------- (Former name or former address, if changed since last report.) 2 This Amendment No. 3 on Form 8-K/A (this "Amendment") is being filed by Delhaize America, Inc., a North Carolina corporation ("Delhaize America" or the "Registrant"), to amend Item 7 of the Registrant's Current Report on Form 8-K dated July 31, 2000, filed with the Securities and Exchange Commission (the "SEC") on August 15, 2000 (the "Initial Report"), Amendment No. 1 filed with the SEC on October 16, 2000, and Amendment No. 2 filed with the SEC on March 16, 2001. This Amendment and the Initial Report relate to the merger (the "Merger") of FL Acquisition Sub, Inc., a Maine corporation wholly-owned by Delhaize America, with and into Hannaford Bros. Co., a Maine corporation ("Hannaford"), resulting in Hannaford becoming a wholly owned subsidiary of Delhaize America. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the complete text of Item 7, as amended, is set forth below. Item 7. Financial Statements and Exhibits Item 7(a). Financial Statements of Business Acquired The required financial information of Hannaford is hereby incorporated by reference to Hannaford's Annual Report on Form 10-K for the period ended January 1, 2000, filed with the SEC on March 10, 2000, Hannaford's Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2000, filed with the SEC on May 5, 2000, and Exhibit 99.3 hereto. Item 7(b). Pro Forma Financial Information The following unaudited pro forma consolidated condensed financial statements give effect to the Merger applying the purchase method of accounting in accordance with generally accepted accounting principles. The unaudited pro forma consolidated condensed statements of income also include adjustments to exclude the results of operations of HomeRuns.Com, an internet based grocery retail business, which prior to February 14, 2000, was a wholly owned subsidiary of Hannaford. On February 14, 2000, Hannaford sold HomeRuns.com retaining an 8% minority interest in the re-capitalized entity. Hannaford has since accounted for this investment using the cost method. Refer to Note 1, Basis of Presentation, included herein for further information regarding HomeRuns.com. The unaudited pro forma consolidated condensed financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial position that would have been realized had Delhaize America and Hannaford been a consolidated company during the specified periods, nor are they necessarily indicative of future consolidated results of operations or financial position. The unaudited pro forma consolidated condensed statements of income assumes that the Merger had occurred at the beginning of the earliest fiscal period presented. The six-month period of 2000 includes the 24-week period ended June 17, 2000 for Delhaize America and the 26-week period ended July 1, 2000 for Hannaford. The unaudited pro forma consolidated condensed balance sheet assumes that the Merger was completed as of June 17, 2000. The unaudited pro forma consolidated condensed financial statements are based on (i) the historical financial statements of Delhaize America as of and for the fiscal year ended January 1, 2000, as reported in Delhaize America's Annual Report on Form 10-K for such period, and as of and for the 24-week period ended June 17, 2000, as reported in Delhaize America's Quarterly Report on Form 10-Q for such period, and (ii) the historical financial statements of Hannaford as of and for the fiscal year ended January 1, 2000, as reported in Hannaford's Annual Report on Form 10-K for such period, and the interim financial statements prepared by Hannaford as of and for the 26-week period ended July 1, 2000, as reported in Exhibit 99.3 hereto. These unaudited pro forma consolidated condensed financial statements should be read in conjunction with and are qualified by the above referenced historical consolidated financial statements of Delhaize America and Hannaford and related notes thereto. 3 Unaudited Pro Forma Consolidated Condensed Statement of Income (Dollars in thousands, except per share data)
Delhaize America Income Hannaford Income For the 24 Statement For the 26 Statement Weeks ended Reclassifica- Weeks ended Reclassifica- June 17, 2000 tions July 1, 2000 tions ------------- ------------- ------------ ------------- Net Sales 5,126,358 5,197 1,733,472 (15,115) Cost of goods sold 3,944,697 (79,829) 1,277,064 6,164 Selling and administrative expenses 925,222 85,026 470,293 (21,279) ----------- -------- ----------- ------- Operating income (loss) 256,439 (13,885) Interest expense 55,374 9,258 ----------- ----------- Income (loss) before income taxes 201,065 (23,143) Provision for income taxes 76,408 (8,404) ----------- ----------- Net Income (loss) 124,657 (14,739) Earnings per common shares and common share equivalents: Primary $ 0.80 $ (0.34) Fully diluted $ 0.80 $ (0.34) Weighted average common shares and common share equivalents: Primary 155,241 42,992 Fully diluted 155,367 43,726 Pro Forma Adjustments ------------------------------------------------------------------------------- To Exclude To Exclude Other Total Pro Forma Southeast HomeRuns Pro Forma Pro Forma Consolidated Market Adjustments Adjustments ---------- ---------- ----------- ----------- ------------ Net Sales (319,627)(a) (3,301) -- (322,928) 6,526,984 Cost of goods sold (247,153)(a) (2,245) -- (249,398) 4,898,698 Selling and administrative expenses (183,973)(a) (3,847) 67,028 (i) (120,792) 1,338,470 --------- -------- --------- --------- ---------- Operating income (loss) 111,499 2,791 (67,028) 47,262 289,816 Interest expense (606)(a) -- 96,675 (j) 96,069 160,701 --------- -------- --------- --------- ---------- Income (loss) before income taxes 112,105 2,791 (163,703) (48,807) 129,115 Provision for income taxes 42,600 1,061 (49,883) (6,223) (k) 61,781 --------- -------- --------- --------- ---------- Net Income (loss) 69,505 1,730 (113,820) (42,584) 67,334 Earnings per common shares and common share equivalents: Primary $ 0.37 Fully diluted $ 0.37 Weighted average common shares and common share equivalents: Primary 25,624 180,865 (l) Fully diluted 27,838 183,205 (m)
See accompanying notes to the unaudited pro forma consolidated condensed financial information. 4 Unaudited Pro Forma Consolidated Condensed Statement of Income For the year ended January 1, 2000 (Dollars in thousands, except per share data)
Historical Delhaize Income Historical Income America Statement Hannaford Statement For the year Reclassifica- For the year Reclassifica- ended tions ended tions January 1,2000 January 1,2000 -------------- ------------- -------------- ------------- Net Sales 10,878,684 12,547 3,462,942 (28,471) Cost of goods sold 8,370,894 (161,408) 2,544,623 15,189 Selling and administrative expenses 1,919,396 173,955 735,353 (43,660) ----------- -------- ---------- ------- Operating income (loss) 588,394 182,966 Interest expense 103,820 23,468 ----------- ---------- Income (loss) before income taxes 484,574 159,498 Provision for income taxes 184,139 61,480 ----------- ---------- Net Income (loss) 300,435 98,018 Earnings per common shares and common share equivalents: Primary $ 1.91 $ 2.32 Fully diluted $ 1.91 $ 2.28 Weighted average common shares and common share equivalents: Primary 157,109 42,224 Fully diluted 157,297 43,061 Pro Forma Adjustments ------------------------------------------------------------------------------ To Exclude To Exclude Other Total Pro Forma Southeast HomeRuns Pro Forma Pro Forma Consolidated Market Adjustments Adjustments ---------- ---------- ----------- ----------- ------------ Net Sales (655,789)(a) (15,973) -- (671,762) 13,653,940 Cost of goods sold (512,945)(a) (10,968) -- (523,913) 10,245,385 Selling and administrative expenses (165,078)(a) (22,324) 135,061 (i) (52,341) 2,732,703 -------- -------- --------- --------- ----------- Operating income (loss) 22,234 17,319 (135,061) (95,508) 675,852 Interest expense (1,106)(a) -- 169,193 (j) 168,087 295,375 -------- -------- --------- --------- ----------- Income (loss) before income taxes 23,340 17,319 (304,254) (263,595) 380,477 Provision for income taxes 8,869 6,581 (90,969) (75,519) (k) 170,100 -------- -------- --------- --------- ----------- Net Income (loss) 14,471 10,738 (213,285) (188,076) 210,377 Earnings per common shares and common share equivalents: Primary $ 1.15 Fully diluted $ 1.13 Weighted average common shares and common share equivalents: Primary 25,624 182,733 (l) Fully diluted 28,258 185,555 (m)
See accompanying notes to the unaudited pro forma consolidated condensed information. 5 Unaudited Pro Forma Consolidated Condensed Balance Sheet (Dollars in thousands) (Page 1 of 2)
Pro Forma Adjustments ----------------------------------------------------------- Delhaize Hannaford To record the To record To conform To record America as of divestiture deferred inventory long-term as of July 1, of the tax valuation assets at June 17, 2000 Southeast liability methods fair market 2000 market value and eliminate historical basis of intangible assets (a) (b) (c) (d) ---------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents 100,573 130,463 99,332 -- -- -- Receivables 222,586 26,694 (316) -- -- -- Inventories 1,178,395 197,278 (37,973) -- 16,015 -- Prepaid expenses 57,812 4,705 -- -- -- -- Deferred tax asset 55,611 14,492 -- (6,090) -- -- --------- --------- -------- -------- ------ ------- Total current assets 1,614,977 373,632 61,043 (6,090) 16,015 -- --------- --------- -------- -------- ------ ------- Property, at cost, less accumulated depreciation 2,107,368 805,440 (191,806) -- -- (11,995) Leased property under capital leases, net -- 39,865 -- -- -- -- Intangible assets, less accumulated amortization 250,360 50,088 (40,879) -- -- (9,209) Other assets 20,775 72,978 50,379 -- -- (34,176) --------- --------- -------- -------- ------ ------- Total assets 3,993,480 1,342,003 (121,263) (6,090) 16,015 (55,380) --------- --------- -------- -------- ------ ------- Liabilities and Shareholders' Equity Current Liabilities Short term borrowings 235,000 20,651 -- -- -- -- Accounts payable 590,038 206,061 6,952 -- -- -- Accrued expenses 327,880 45,833 4,680 -- -- -- Income taxes payable -- 81 -- -- -- -- Capital lease obligations - current 25,137 2,430 -- -- -- -- Long term debt - current 1,987 -- -- -- -- -- Other liabilities - current 13,100 60 -- -- -- (60) --------- --------- -------- -------- ------ ------- Total current liabilities 1,193,142 275,116 11,632 -- -- (60) --------- --------- -------- -------- ------ ------- Long-term debt 426,654 156,380 -- -- -- -- Capital lease obligations 505,322 59,107 -- -- -- -- Deferred income tax liabilities 7,421 (1,016) -- 166,960 -- -- Other liabilities 101,124 84,951 500 -- -- -- --------- --------- -------- -------- ------ ------- Total liabilities 2,233,663 574,538 12,132 166,960 -- (60) --------- --------- -------- -------- ------ ------- Shareholders' equity Common stock, par value $.75 per share -- 32,819 -- -- -- -- Common stock A, par value $.50 per share 39,983 -- -- -- -- -- Common stock B, par value $.50 per share 37,645 -- -- -- -- -- Additional paid-in-capital 156,097 167,747 (133,395) (173,050) 16,015 (55,320) Preferred stock purchase rights -- 438 -- -- -- -- Retained earnings 1,526,092 566,461 -- -- -- -- --------- --------- -------- -------- ------ ------- Total shareholders' equity 1,759,817 767,465 (133,395) (173,050) 16,015 (55,320) --------- --------- -------- -------- ------ ------- Total liabilities and shareholders' equity 3,993,480 1,342,003 (121,263) (6,090) 16,015 (55,380) --------- --------- -------- -------- ------ -------
See accompanying notes to the unaudited pro forma consolidated condensed financial information. 6 Unaudited Pro Forma Consolidated Condensed Balance Sheet (Dollars in thousands) (Page 2 of 2)
Pro Forma Adjustments (continued) ------------------------------------------------------------- To record To record To record To eliminate Pro Forma identified liabilities bridge investment in Consolidated intangible at fair financing Hannaford and assets market and investment record goodwill value in Hannaford (e) (f) (g) (h) ----------------------------------------------------------------------------- Current Assets Cash and cash equivalents -- -- -- -- 330,368 Receivables -- -- -- -- 248,964 Inventories -- -- -- -- 1,353,715 Prepaid expenses -- -- -- -- 62,517 Deferred tax asset -- -- -- -- 64,013 -------- ------- --------- ---------- --------- Total current assets -- -- -- -- 2,059,577 -------- ------- --------- ---------- --------- Property, at cost, less accumulated depreciation -- -- -- -- 2,709,007 Leased property under capital leases, net -- -- -- -- 39,865 Intangible assets, less accumulated amortization 479,912 -- -- 2,594,459 3,324,731 Other assets -- -- 3,487,665 (3,487,665) 109,956 -------- ------- --------- ---------- --------- Total assets 479,912 -- 3,487,665 (893,206) 8,243,136 -------- ------- --------- ---------- --------- Liabilities and Shareholders' Equity Current Liabilities Short term borrowings -- (1,250) 2,772,294 -- 3,026,695 Accounts payable -- -- -- -- 803,051 Accrued expenses -- -- -- -- 378,393 Income taxes payable -- -- -- -- 81 Capital lease obligations - current -- 1,300 -- -- 28,867 Long term debt - current -- -- -- -- 1,987 Other liabilities - current -- -- -- -- 13,100 -------- ------- --------- ---------- --------- Total current liabilities -- 50 2,772,294 -- 4,252,174 -------- ------- --------- ---------- --------- Long-term debt -- (7,541) -- -- 575,493 Capital lease obligations -- 12,498 -- -- 576,927 Deferred income tax liabilities -- -- -- -- 173,365 Other liabilities -- 3,415 -- -- 189,990 -------- ------- --------- ---------- ---------- Total liabilities -- 8,422 2,772,294 -- 5,767,949 -------- ------- --------- ---------- --------- Shareholders' equity Common stock, par value $.75 per share -- -- -- (32,819) -- Common stock A, par value $.50 per share -- -- -- 12,816 52,799 Common stock B, par value $.50 per share -- -- -- -- 37,645 Additional paid-in-capital 479,912 (8,422) 715,371 (306,304) 858,651 Preferred stock purchase rights -- -- -- (438) -- Retained earnings -- -- -- (566,461) 1,526,092 -------- ------- --------- ---------- --------- Total shareholders' equity 479,912 (8,422) 715,371 (893,206) 2,475,187 -------- ------- --------- ---------- --------- Total liabilities and shareholders' equity 479,912 -- 3,487,665 (893,206) 8,243,136 -------- ------- --------- ---------- ---------
See accompanying notes to the unaudited pro forma consolidated condensed financial information. 7 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION NOTE 1 - BASIS OF PRESENTATION The unaudited pro forma consolidated condensed financial information has been prepared applying the purchase method of accounting assuming the Merger, effective July 31, 2000, occurred, as of the beginning of the earliest fiscal period presented, with respect to the pro forma statements of income, and, as of June 17, 2000 with respect to the pro forma balance sheet. Under the purchase method of accounting, the purchase cost is allocated to acquired assets and liabilities based on their relative fair values at the effective date of the Merger. The amount by which the purchase price exceeds the fair value of the net assets acquired has been allocated to goodwill, which will be amortized over forty years. Such allocations are subject to final adjustments within a one-year period from the closing date of the transaction. Management does not presently expect the final allocations to differ materially from the amounts presented herein. The amounts and components of the estimated purchase price reflected in the unaudited pro forma consolidated condensed financial information are as follows: (i) approximately $2.3 billion in cash and approximately 13.7 million shares of Delhaize America Class A common stock valued at approximately $352 million exchanged in the Merger for all the outstanding shares of Hannaford common stock, (ii) fully vested options to purchase approximately 4.2 million shares of Delhaize America Class A common stock valued at approximately $40 million, which were converted from options to acquire shares of Hannaford common stock, and (iii) approximately $0.5 billion in cash and 11.9 million shares of Delhaize America Class A common stock valued at approximately $306 million paid to Empire Company Limited and E.C.L. Investments Limited (the "Empire Group") in a transaction immediately preceding the Merger in exchange for all of the shares of Hannaford common stock held by the Empire Group. The estimated fair value of assets acquired and liabilities assumed relating to the acquisition is summarized below (in thousands):
Consideration and Acquisition Costs Cash consideration $ 2,772,294 Stock consideration $ 658,471 Fair value of options exchanged $ 39,861 Other acquisition costs $ 17,039 ----------- $ 3,487,665 Allocation of Purchase Price Current assets $ 444,603 Property, plant, and equipment $ 641,503 Identified intangible and other (non-current) $ 569,092 Goodwill $ 2,594,459 Current liabilities $ (286,738) Non-current liabilities $ (475,254) ----------- $ 3,487,665
As previously mentioned, the unaudited pro forma consolidated condensed financial statements give effect to the Merger applying the purchase method of accounting in accordance with generally accepted accounting principles. The Company engaged an independent valuation firm to perform an appraisal of the fair market values of certain tangible and intangible assets of Hannaford Bros. Co. This valuation was used in the allocation of the purchase price to acquired assets and liabilities. The unaudited pro forma consolidated condensed financial information reflects pro forma adjustments for (i) the allocation of the purchase cost to acquired assets and liabilities, (ii) the sale of 38 Hannaford stores and closing of 13 Hannaford stores in the southeastern United States in response to the antitrust review of the Merger by the Federal Trade Commission ("FTC") and (iii) the sale by Hannaford of a majority interest in HomeRuns.com, Inc. ("HomeRuns") on February 14, 2000. The expected synergies to be achieved as a result of the Merger, estimated at approximately $40 million in the first year following consummation of the Merger and $75 million annually by year three, are excluded from the pro forma data. 8 In response to an antitrust review of the Merger by the Federal Trade Commission ("FTC"), Hannaford sold 38 stores and closed 13 stores in the southeastern United States. Hannaford received proceeds of $70 million for divested assets with a net book value of approximately $191 million. The estimated loss realized on the closure of the 13 stores by Hannaford was accounted for and reflected in Hannaford's accounts at the time the closing decisions were made prior to the consummation date of the merger and is included in the pro forma adjustments to eliminate the Southeast market. With regard to the 38 stores sold, these properties were adjusted to their net realizable values in purchase accounting, based on the contractual sales transactions which were completed concurrent with the merger consummation, and resulted in no gain or loss upon sale of the properties. The pro forma adjustments for the sale of the 38 stores and the closing of 13 stores are intended to reflect the operating results and balance sheet of Hannaford as if these transactions had occurred at the beginning of the fiscal periods presented. Hannaford held a 100% interest in HomeRuns and its results of operations through February 14, 2000 were included in Hannaford's consolidated financial statements. Subsequent to the transaction, Hannaford retained an 8% minority interest in the re-capitalized entity and has accounted for this investment using the cost method. The pro forma adjustments related to HomeRuns are intended to reflect the operating results of Hannaford as if the HomeRuns transaction had occurred at the beginning of the fiscal periods presented. A third party investment group acquired approximately 3.2 million newly issued common shares of HomeRuns for a purchase price of $100 million, or approximately $30.86 per share. Hannaford continues to hold shares of HomeRuns' common stock valued at approximately $8.1 million and in connection with the recapitalization received warrants to purchase 843,362 common shares of HomeRuns at a purchase price of $30.86 per share. Utilizing a Black Scholes valuation model, these warrants were valued at approximately $9.23 per share or approximately $7.8 million in the aggregate. The significant assumptions used in this valuation model included an interest rate of 6.89% based on a US Treasury note as of the valuation date maturing at the approximate warrant expiration date, the average number of years to expiration of the warrants was assumed at 10 years and the estimated discount for lack of marketability of the underlying stock was set at 30%. On an overall basis the recapitalization resulted in shareholders' equity of HomeRuns of approximately $101.8 million. At an 8% stated minority interest, Hannaford's beginning investment value was approximately $8.1 million. That coupled with the warrant value of $7.8 million generated an opening investment basis of $15.9 million. Comparing the basis subsequent to recapitalization with Hannaford's carrying value of this investment generated a pretax gain of $6.3 million. This gain was not recognized for accounting purposes but was recorded, net of taxes, as an increase to paid-in capital. The increase to paid-in capital was $3.9 million. Historically Hannaford and Delhaize America had different classifications for certain income statement amounts. Beginning in the third quarter of fiscal 2000 (the first fiscal period after the Hannaford acquisition), the Company revised classification of certain other revenues, consistent with classification previously used by Hannaford, to include revenues generated from miscellaneous store services that were previously classified in selling and administrative expenses. In conforming presentation of cost of sales and selling and administrative expenses, the Company advises that Delhaize America and Hannaford adjusted cost of sales and expense structures such that cost of sales includes costs of procurement, merchandising, distribution and logistics and expenses include store operations expenses and administrative expenses. The pro forma consolidated income statements for the periods ended June 17, 2000 and January 1, 2000 include merger and other non-recurring expenses of $5.0 million and $10.9 million, respectively, that mainly consist of legal and investment banking fees. NOTE 2 - PRO FORMA ADJUSTMENTS The following pro forma adjustments have been made to the historical financial statements of Delhaize America and Hannaford based upon assumptions made by management for the purpose of preparing the unaudited pro forma consolidated condensed financial statements. (a) Includes adjustments related to Hannaford's sale or closure of its 51 Southeastern United States retail locations. The pro forma adjustments reflect (i) elimination of sales, cost of sales and operating costs directly associated with these former Hannaford operations as well as related assets and liabilities, and (ii) inclusion of proceeds received upon sale of divested assets of Southeast stores. The following balance sheet pro forma entry, which only relates to the divestiture of the Southeast market, was recorded : Cash and cash equivalents $ 99,332 Deferred tax asset - non-current (Other Assets) $ 54,864 Shareholders' equity $ 133,395
9 Receivables $ 316 Inventories $ 37,973 Property $ 191,806 Intangible assets -(Goodwill) $ 40,879 Other assets $ 4,485 Accounts payable $ 6,952 Accrued expenses $ 4,680 Other liabilities - non-current $ 500
(b) To provide deferred taxes of $173 million related to the temporary differences between the book and tax basis of assets and liabilities acquired which arose as a result of the purchase price allocation. The Company assumed a 38% statutory tax rate for deferred tax purposes as this is the historical effective tax rate for 1999. The pro forma entry recorded is as follows: Shareholders' equity $ 173,050 Deferred Tax Asset-current $ 6,090 Deferred Tax liability-long term $ 166,960
The temporary differences between the book and tax basis of the assets and liabilities acquired and the resulting deferred income tax assets and liabilities at June 17, 2000 are as follows:
Temporary Deferred tax difference asset between tax and (liability) book basis Deferred tax assets: Property, plant & equipment $ 11,995 $ 4,558 Other assets $ 34,176 $ 12,987 Capital lease obligations-current $ 1,300 $ 494 Capital lease obligations-non-current $ 12,498 $ 4,749 ---------- ---------- Total deferred tax assets $ 22,788 ---------- ---------- Deferred tax liabilities: Inventories $ (16,015) $ (6,086) Intangible assets $ (479,912) $ (182,366) Short term borrowings $ (1,250) $ (475) Other liabilities - current $ (60) $ (23) Long term debt $ (7,541) $ (2,866) Other liabilities $ (10,585) $ (4,022) ---------- ---------- Total deferred tax liabilities $ (195,838) ---------- ---------- Net deferred tax liability $ (173,050)
(c) To conform Hannaford's inventory accounting method to that used by Delhaize America and to eliminate Hannaford's LIFO reserve to properly reflect the current fair value of its inventory. The following entry was recorded in the pro forma balance sheet: Inventories $ 16,015 Shareholders' equity $ 16,015
(d) To adjust Hannaford's long-term assets to current estimated fair market value based principally on independent appraisals and values realized through the sales of store assets which were under contract as of the merger date. Additionally, Hannaford's historical basis in certain intangible and other assets was eliminated. The application of purchase accounting establishes a new basis of accounting for all assets acquired and liabilities assumed in the Merger. Consequently, based on fair market value appraisals, the historical basis was 10 eliminated since all of Hannaford's intangible and other assets were identified and recorded at fair value (See footnote `e'). The following pro forma entry was recorded: Shareholders' equity $ 55,320 Other liabilities - current $ 60 Intangible assets $ 9,209 Other assets $ 34,176 Property $ 11,995
(e) To record identifiable intangible assets acquired in the Merger, principally consisting of trademarks, distribution network, work force, favorable lease rights, and prescription files, having an aggregate value, based on independent appraisal, of approximately $480 million. The following pro forma entry was recorded: Intangible assets $ 479,912 Shareholders' equity $ 479,912
(f) To adjust liabilities assumed in the acquisition to estimated fair value based on estimates of current interest rates and market values. Capital lease obligations were increased $1.2 million (current) and $12.5 million (long-term) to adjust to fair value using the current Delhaize America discount rates. Long-term debt was reduced $7.5 million to fair value using the current Delhaize America long-term borrowing rates. Pension and medical plan liabilities were adjusted to the difference between plan obligations and plan assets based on actuarial analysis. The following pro forma entry was recorded : Short term borrowings $ 1,250 Notes payable non-current $ 7,541 Shareholders' equity $ 8,422 Capital lease obligation current $ 1,300 Capital lease obligation non-current $ 12,498 Other liabilities $ 3,415
(g) To record the bridge financing of approximately $2.8 billion. The cash consideration required to complete the merger will be funded through (i) a 364 day capital markets bridge facility for up to $2.5 billion and (ii) a $500 million five-year syndicated revolving credit facility. A public bond offering is planned for long-term financing of the transaction. The following pro forma entry was recorded : Other assets - Hannaford investment $3,487,685 Short term borrowings $2,772,294 Shareholders' equity $ 715,371
(h) To eliminate the Hannaford equity accounts and record the increase in shareholders' equity for the fair value of shares of Delhaize America Class A common stock issued in exchange for shares of Hannaford common stock and the fair value of the Delhaize America fully vested employee stock options which were given in exchange for Hannaford options in connection with the Merger. The following pro forma entry was recorded to eliminate the investment and record goodwill : Common stock par value $75 $ 32,819 Preferred stock purchase rights $ 438 Retained earnings $ 566,461 Goodwill $2,594,459 Additional paid in capital $ 306,304 Common stock A $ 12,816 Other assets - Hannaford investments $3,487,665
The average share price from 3 days before and 3 days after the measurement date of August 24, 1999 ($25.69) was used to value the Delhaize Class A shares issued as consideration to Hannaford shareholders. The fully vested Hannaford options converted to options to acquire 4.2 million shares of Delhaize America Class A common stock were valued at fair value using the Black-Scholes model. 11 (i) Represents the amortization on a straight line basis, of the acquired identifiable intangible assets and goodwill resulting from the acquisition over the estimated useful lives which range from 2 to 40 years and the effect on property and equipment depreciation resulting from the adjustment to fair market value in the application of purchase accounting. Goodwill is amortized over 40 years on a straight-line basis. The total amortization related to acquired identifiable intangible assets and goodwill is approximately $43 million and $85 million for the 24-week period ended June 17, 2000 and year ended January 1, 2000, respectively. The total depreciation related to property and equipment is approximately $24 million and $50 million for the 24-week period ended June 17, 2000 and year ended January 1, 2000, respectively. Refer to footnote "e" above for a schedule indicating the asset lives the Company is using to calculate amortization expense associated with each material category of intangible assets recognized in connection with the acquisition. The following table summarizes the useful lives (straight line method) used for goodwill and the identified intangible assets.
VALUATION USEFUL LIFE --------------- ------------ Trademarks $ 229 million 40 years Distribution network $ 123 million 40 years Workforce $ 61 million 2-13 years Favorable lease rights $ 39 million Lease term Prescription files $ 28 million 15 years Goodwill $ 2,594 million 40 years --------------- TOTAL $ 3,074 MILLION ---------------
(j) Represents the interest expense effect of approximately $2.6 billion of additional debt as a result of the transaction. Management has assumed the average interest rate (based on 30 day LIBOR + 1.25%) associated with the bridge financing secured for the initial financing of the cash consideration in the Merger. The effect of an interest rate change of 1/8th of one percent would increase/decrease interest expense approximately $3.2 million per year for the year ended January 1, 2000 and $1.6 million for the first 6 months of 2000. (k) Represents the anticipated tax effect of the pro forma adjustments listed above (excluding goodwill amortization). The principal difference in the effective tax rate for the consolidated pro forma statements of income relates to the amortization of goodwill. The company assumed a 38% statutory tax rate for deferred tax purposes. 12 (l) Includes shares issued to Hannaford shareholders upon closing of the Merger. (m) Includes the common stock equivalents associated with Delhaize America stock options issued in exchange for fully vested Hannaford stock options held by Hannaford employees. Each share of Hannaford common stock was converted into the right to receive either 1) $79.00 in cash, without interest or 2) the number of shares of Delhaize America Class A common stock equal to $79.00 divided by the greater of (a) the DZA price or (b) $27.00. Approximately 2.2 million options (directly attributable to the Merger) were included in the calculation of dilutive earnings per share. These options represent the options issued in connection with the merger to replace formerly issued Hannaford options. The 2.2 million options were computed using the treasury stock method. The following table represents a reconciliation of net income and weighted average common shares outstanding for purposes of calculating basic and diluted net income per share:
24 week period 52 week period ended June 17, ended January 2000 1, 2000 Earnings per basic share: Net income $ 67,334 $ 210,377 Weighted average common shares outstanding (thousands) 180,865 182,733 Basic earnings per share $ 0.37 $ 1.15 Earnings per diluted share: Net income $ 67,334 $ 210,377 Weighted average common shares outstanding (thousands) 180,865 182,733 Dilutive employee stock options 2,340 2,822 Weighted average common shares outstanding for purposes of computing diluted net income per share 183,205 185,555 Diluted earnings per share $ 0.37 $ 1.13
13 Item 7(c). Exhibits 2 Agreement and Plan of Merger, dated as of August 17, 1999, among Delhaize America, Hannaford and FL Acquisition Sub, Inc., as amended, which is incorporated herein by reference to Exhibit 2.1 to Delhaize America's Registration Statement on Form S-4 filed with the SEC on November 17, 1999, as amended by Amendment No. 1 to Delhaize America's Registration Statement on Form S-4 filed with the SEC on January 3, 2000. 23.1 Consent of Independent Accountants, PricewaterhouseCoopers LLP (for Delhaize America). 23.2 Consent of Independent Accountants, PricewaterhouseCoopers LLP (for Hannaford). 99.1 Press Release, dated July 31, 2000, which is incorporated herein by reference to Exhibit 99.1 to Delhaize America's Current Report on Form 8-K, dated July 31, 2000, filed with the SEC on August 15, 2000. 99.2 Stock Exchange Agreement, dated August 17, 1999, among Delhaize America, Empire Company Limited and E.C.L. Investments Limited, which is incorporated by reference to Exhibit 99.2 to Delhaize America's Registration Statement on Form S-4 filed with the SEC on November 17, 1999, as amended by Amendment No. 1 to Delhaize America's Registration Statement on Form S-4 filed with the SEC on January 3, 2000. 99.3 Unaudited Financial Statements of Hannaford Bros. Co., which is incorporated herein by reference to Exhibit 99.3 to Amendment No. 2 to Delhaize America's Current Report on Form 8-K, dated July 31, 2000, filed with the SEC on March 16, 2001. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DELHAIZE AMERICA, INC. Dated: March 23, 2001 By: /s/ Michael R. Waller ---------------- ------------------------------------------- Michael R. Waller Executive Vice President and General Counsel 15 EXHIBIT INDEX Exhibit No. Description 2 Agreement and Plan of Merger, dated as of August 17, 1999, among Delhaize America, Hannaford and FL Acquisition Sub, Inc., as amended, which is incorporated herein by reference to Exhibit 2.1 to Delhaize America's Registration Statement on Form S-4 filed with the SEC on November 17, 1999, as amended by Amendment No. 1 to Delhaize America's Registration Statement on Form S-4 filed with the SEC on January 3, 2000. 23.1 Consent of Independent Accountants, PricewaterhouseCoopers LLP (for Delhaize America). 23.2 Consent of Independent Accountants, PricewaterhouseCoopers LLP (for Hannaford). 99.1 Press Release, dated July 31, 2000, which is incorporated herein by reference to Exhibit 99.1 to Delhaize America's Current Report on Form 8-K, dated July 31, 2000, filed with the SEC on August 15, 2000. 99.2 Stock Exchange Agreement, dated August 17, 1999, among Delhaize America, Empire Company Limited and E.C.L. Investments Limited, which is incorporated by reference to Exhibit 99.2 to Delhaize America's Registration Statement on Form S-4 filed with the SEC on November 17, 1999, as amended by Amendment No. 1 to Delhaize America's Registration Statement on Form S-4 filed with the SEC on January 3, 2000. 99.3 Unaudited Financial Statements of Hannaford Bros. Co., which is incorporated herein by reference to Exhibit 99.3 to Amendment No. 2 to Delhaize America's Current Report on Form 8-K, dated July 31, 2000, filed with the SEC on March 16, 2001. EX-23.1 2 g67896a3ex23-1.txt CONSENT INDEPENDENT ACCOUNTANTS/DELHAIZE 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-42882) and on Form S-8 (No. 333-46500) and Post-Effective Amendment No. 1 on Form S-8 to Form S-4 Registration Statement (No. 333-91123) of Delhaize America, Inc. of our report dated February 9, 2000, relating to the consolidated financial statements of Delhaize America Inc., which are incorporated by reference in Amendment No. 3 to the Current Report on Form 8-K/A of Delhaize America, Inc. dated July 31, 2000. /s/ PricewaterhouseCoopers LLP Charlotte, North Carolina March 23, 2001 EX-23.2 3 g67896a3ex23-2.txt CONSENT INDEPENDENT ACCOUNTANTS/HANNAFORD 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-42882) and on Form S-8 (No. 333-46500) and Post-Effective Amendment No. 1 on Form S-8 to Form S-4 Registration Statement (No. 333-91123) of Delhaize America, Inc. of our report dated January 19, 2000, relating to the consolidated financial statements of Hannaford Bros. Co., which are incorporated by reference in Amendment No. 3 to the Current Report on Form 8-K/A of Delhaize America, Inc. dated July 31, 2000. /s/ PricewaterhouseCoopers LLP Portland, Maine March 23, 2001 -----END PRIVACY-ENHANCED MESSAGE-----