10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 1, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File number 0-6080

DELHAIZE AMERICA, INC.

(Exact name of registrant as specified in its charter)

NORTH CAROLINA	56-0660192
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2110 Executive Drive, Salisbury, NC 28147

(Address of principal executive office) (Zip Code)

(704) 633-8250

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act):    Yes  ¨    No  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x  

Outstanding shares of common stock of the Registrant as of May 16, 2006.

Class A Common Stock – 91,270,348,481

Class B Common Stock –        75,468,935

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

DELHAIZE AMERICA, INC.

INDEX TO FORM 10-Q

April 1, 2006

			Page
Cautionary Note Concerning Forward Looking Statements			3
PART I.		FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Statements of Income for the 13 weeks ended April 1, 2006 and April 2, 2005	4
		Condensed Consolidated Balance Sheets as of April 1, 2006 and December 31, 2005 (Audited)	5
		Condensed Consolidated Statements of Cash Flows for the 13 weeks ended April 1, 2006 and April 2, 2005	6
		Notes to Condensed Consolidated Financial Statements	7-15
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	16-22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
	Item 4.	Controls and Procedures	22
PART II.		OTHER INFORMATION
	Item 1.	Legal Proceedings	22
	Item 1A.	Risk Factors	22
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
	Item 3.	Defaults Upon Senior Securities	22
	Item 4.	Submission of Matters to a Vote of Security Holders	22
	Item 5.	Other Information	22
	Item 6.	Exhibits	22
Signature			23
Exhibit Index			24

Unless the context otherwise requires, the terms “Delhaize America,” the “Company,” “we,” “us” and “our” refer to Delhaize America, Inc., a North Carolina corporation, together with its consolidated subsidiaries.

2

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Statements included in, or incorporated by reference into, this quarterly report on Form 10-Q, other than statements of historical fact, that address activities, events or developments that Delhaize America expects or anticipates will or may occur in the future, including, without limitation, statements regarding the expansion and growth of Delhaize America’s business, anticipated store openings and renovations, future capital expenditures, projected revenue growth or synergies resulting from acquisitions, and business strategy, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities and Exchange Act of 1934, as amended (“Exchange Act”), and the Private Securities Litigation Reform Act of 1995 about Delhaize America that are subject to risks and uncertainties. These forward-looking statements generally can be identified as statements that include phrases such as “believe”, “project”, “estimate”, “strategy”, “may”, “expect”, “anticipate”, “intend”, “plan”, “foresee”, “likely”, “will”, “should” or other similar words or phrases.

Although we believe that these statements are based upon reasonable assumptions, we can give no assurance that our goals will be achieved. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Item 1A, “Risk Factors”, of Delhaize America’s annual report on Form 10-K for the year ended December 31, 2005. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

For the 13 weeks ended April 1, 2006 and April 2, 2005

(Dollars in millions)

	13 Weeks Ended April 1, 2006		13 Weeks Ended April 2, 2005
Net sales and other revenues	$	4,146.6	$	4,028.6
Cost of goods sold		3,007.2		2,935.8
Selling and administrative expenses		918.1		886.7
Operating income		221.3		206.1
Interest expense, net		78.0		81.5
Income from continuing operations before income taxes		143.3		124.6
Income taxes		58.8		52.9
Income before loss from discontinued operations		84.5		71.7
Loss from discontinued operations, net of tax		1.3		2.2
Net income	$	83.2	$	69.5

See notes to unaudited condensed consolidated financial statements.

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DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of April 1, 2006 and December 31, 2005

(Dollars in millions)

	April 1, 2006			December 31, 2005
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	813.3		$	668.3
Receivables, net		129.3			116.9
Receivable from affiliate		14.2			20.3
Inventories		1,165.6			1,198.3
Prepaid expenses		33.2			32.0
Other current assets		32.7			26.7
Total current assets		2,188.3			2,062.5
Property and equipment, net		3,075.7			3,069.4
Goodwill		3,076.2			3,074.0
Intangibles, net		765.2			771.4
Loan to affiliate		19.8			17.4
Reinsurance recoverable from affiliate		149.2			147.2
Other assets		71.9			80.2
Total assets	$	9,346.3		$	9,222.1
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	707.5		$	756.7
Payable to affiliate		17.4			4.5
Accrued expenses		297.2			271.1
Current portion of capital lease obligations		45.3			44.0
Current portion of long-term debt		580.8			581.3
Other current liabilities		152.2			127.5
Deferred income taxes, net		8.9			12.3
Income taxes payable		115.8			72.5
Total current liabilities		1,925.1			1,869.9
Long-term debt, net of current portion		2,272.5			2,279.9
Capital lease obligations, net of current portion		738.1			733.7
Deferred income taxes, net		203.4			211.6
Other liabilities, net		326.4			325.6
Total liabilities		5,465.5			5,420.7
Commitments and contingencies (Note 10)
Shareholders’ equity:
Class A non-voting common stock		163.1			163.1
Class B voting common stock		37.7			37.7
Accumulated other comprehensive loss, net of tax		(47.7	)		(49.0	)
Additional paid-in capital		2,524.6			2,516.5
Retained earnings		1,203.1			1,133.1
Total shareholders’ equity		3,880.8			3,801.4
Total liabilities and shareholders’ equity	$	9,346.3		$	9,222.1

See notes to unaudited condensed consolidated financial statements.

5

DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the 13 weeks ended April 1, 2006 and April 2, 2005

(Dollars in millions)

	13 Weeks Ended April 1, 2006			13 Weeks Ended April 2, 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	83.2		$	69.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		123.9			118.6
Amortization of debt costs/premium		0.9			0.9
Amortization of deferred loss on derivative		2.1			2.1
Transfer from escrow to fund interest, net of accretion		0.5			0.7
Accrued interest on interest rate swap		(0.1	)		(1.4	)
Net loss on disposals of property and capital lease terminations		2.5			1.0
Provision for losses on uncollectible receivables and write-off of receivables		4.3			3.5
Stock compensation expense		6.5			5.8
Deferred income tax benefit		(12.4	)		(10.7	)
Changes in operating assets and liabilities which provided (used) cash:
Receivables		(16.7	)		3.9
Net receivable from affiliate		18.9			3.9
Inventories		31.8			(7.6	)
Prepaid expenses		(1.1	)		(42.4	)
Other assets		(4.8	)		(3.2	)
Accounts payable		(37.0	)		(16.7	)
Accrued expenses		26.0			32.6
Income taxes payable		47.6			55.3
Excess tax benefits related to stock options		(4.3	)		(3.7	)
Other liabilities		21.3			9.0
Total adjustments		209.9			151.6
Net cash provided by operating activities		293.1			221.1
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(123.5	)		(101.6	)
Proceeds from sale of property		1.1			2.3
Other investment activity		(1.9	)		(0.3	)
Net cash used in investing activities		(124.3	)		(99.6	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt		(5.8	)		(5.9	)
Principal payments under capital lease obligations		(12.0	)		(11.1	)
Dividends paid		—			(25.0	)
Transfer from escrow to fund long-term debt		5.6			5.6
Parent common stock (ADSs) purchased		(16.7	)		(14.9	)
Proceeds from stock options exercised		0.8			2.5
Excess tax benefits related to stock options		4.3			3.7
Net cash used in financing activities		(23.8	)		(45.1	)
Net increase in cash and cash equivalents		145.0			76.4
Cash and cash equivalents at beginning of year		668.3			500.0
Cash and cash equivalents at end of period	$	813.3		$	576.4

See notes to unaudited condensed consolidated financial statements.

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Notes to Unaudited Condensed Consolidated Financial Statements

1) Basis of Presentation

The accompanying condensed consolidated financial statements are presented in accordance with the requirements for Form 10-Q and, consequently, do not include all the disclosures normally required by generally accepted accounting principles or those normally made in the Annual Report on Form 10-K of Delhaize America, Inc. Accordingly, the reader of this Form 10-Q should refer to the Company’s Form 10-K for the year ended December 31, 2005 for further information. Unless the context otherwise requires, references to “Delhaize America” or the “Company” in these unaudited condensed consolidated financial statements refers to Delhaize America, Inc. and its consolidated subsidiaries.

Certain accounts in the 2005 condensed consolidated financial statements were reclassified to conform to the 2006 condensed financial statement presentation. Major financial statement line items that were reclassified included:

Condensed Consolidated Statement of Income

(Dollars in millions)	From	To	13 weeks ended 4/2/05
Advertising expense	Cost of goods sold	Selling and administrative expenses	$	32.1

The financial information presented herein has been prepared in accordance with the Company’s customary accounting practices. In the opinion of management, the financial information includes all adjustments, including normal recurring items, necessary for a fair presentation of interim results.

2) Supplemental Disclosure of Cash Flow Information

Selected cash payments and non-cash activities during the period were as follows:

(Dollars in millions)	13 Weeks ended April 1, 2006		13 Weeks ended April 2, 2005
Cash payments for income taxes, net of refunds	$	22.8	$	7.0
Cash payments for interest, net of amounts capitalized		17.4		20.9
Non-cash investing and financing activities:
Capital lease obligations incurred for store properties and equipment		17.6		22.3
Capital lease obligations terminated for store properties and equipment		—		0.7
Change in construction in progress accruals		3.2		—
Change in reinsurance recoverable and other liabilities		—		3.3
Reduction of income taxes payable and goodwill for tax adjustments		—		0.2

3) Inventories

Inventories are stated at the lower of cost (Last-in, First-out (“LIFO”), First-in, First-out (“FIFO”) and Average Cost) or market. Inventories valued using LIFO method comprised approximately 75% and 74% of inventories on April 1, 2006 and December 31, 2005, respectively. If the Company did not report under the LIFO method, inventories would have been $55.9 million and $52.8 million greater as of April 1, 2006 and December 31, 2005, respectively. Application of the LIFO method resulted in an increase in cost of goods sold of $3.1 million and $3.2 million for the 13 weeks ended April 1, 2006 and April 2, 2005, respectively.

The Company evaluates inventory shrinkage throughout the year based on actual physical counts in its stores and distribution centers and records adjustments based on the results of these counts applied to the total inventory to provide for the estimated shrinkage as of the balance sheet date. Shrinkage refers to the difference in the amount of inventory the Company initially records and the actual inventory on hand. Shrinkage primarily occurs in perishable items, due to spoilage, breakage and other inventory losses.

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4) Supplier Allowances

The Company receives allowances, credits and income from suppliers primarily for volume incentives, new product introductions, in-store promotions and co-operative advertising. Volume incentives are based on contractual arrangements generally covering a period of one year or less and have been included in the cost of inventory and recognized as earned in cost of sales when the product is sold. New product introduction allowances compensate the Company for costs incurred associated with product handling and have been deferred and recognized as a reduction in cost of sales over the product introductory period.

Non-refundable credits from suppliers for in-store promotions such as product displays require related activities by the Company. Similarly, co-operative advertising requires the Company to conduct the related advertising. In-store promotion and co-operative advertising income is recorded as a reduction in the cost of inventory and recognized in cost of sales when the product is sold unless the allowance represents the reimbursement of a specific, incremental and identifiable cost incurred by the Company to sell the vendor’s product. The Company has reviewed the funding received from vendors for in-store promotions and co-operative advertising and concluded that these arrangements are primarily for general advertising purposes and not the reimbursement of a specific, incremental and identifiable cost incurred by the Company.

Total supplier allowances recognized in cost of sales for the 13 weeks ended April 1, 2006 and April 2, 2005, are shown below:

(Dollars in millions)	13 weeks ended April 1, 2006		13 weeks ended April 2, 2005
Allowances credited to cost of inventory sold	$	22.7	$	27.5
Other allowances		35.7		35.6
Total supplier allowances recognized in cost of sales	$	58.4	$	63.1

5) Accounting for Stock-Based Compensation

Stock Option Plans

The Company’s employees are eligible to participate in a stock option plan of its parent company, the Delhaize Group 2002 Stock Incentive Plan (the “Delhaize Group Plan”), under which options to purchase Delhaize Group American Depository Shares (“ADSs”) may be granted to officers and key employees at prices equal to fair market value on the date of the grant. The Board of Directors of Delhaize Group determines on the date of grant when options become exercisable provided that no option may be exercised more than ten years after the date of grant. Unlike option exercises under the Prior Plans (defined below), the exercise of options under the Delhaize Group Plan by an optionee results in the issuance of new Delhaize Group ordinary shares through a capital increase of the Company’s parent, Delhaize Group. In connection with the exercise of an option, the optionee pays the exercise price to Delhaize Group. Additionally, the Company pays Delhaize Group an amount equal to the difference between the exercise price of the option and the fair market value of the ADSs on the date of exercise, which totaled $13.0 million and $9.4 million for the 13 weeks ended April 1, 2006 and April 2, 2005, respectively. The Company records these payments with a charge to equity (Retained Earnings). These Company payments are included as part of parent common stock (ADSs) purchased under cash flows from financing activities on the Company’s condensed consolidated statements of cash flows.

Additionally, there are outstanding options to purchase Delhaize Group ADSs under the Company’s 1996 Food Lion Plan, 1988 and 1998 Hannaford Plans and 2000 Delhaize America Plan (collectively, the “Prior Plans”); however, the Company can no longer grant options under these Prior Plans. The terms and conditions of the Prior Plans are substantially consistent with the current Delhaize Group Plan, with the exception that the Company purchases ADSs to deliver to persons exercising options under the Prior Plans. For the 13 weeks ended April 1, 2006 and April 2, 2005, the Company acquired 24,900 ADSs for $1.7 million and 71,842 ADSs for $5.2 million, respectively, to support the exercise of options under the Prior Plans. These Company payments are included as part of parent common stock (ADSs) purchased under cash flows from financing activities on the Company’s condensed consolidated statements of cash flows. The Company records the purchase of such ADSs with a decrease to equity (Additional Paid in Capital) equal to the fair market value of the stock at the time of purchase. When an optionee exercises an option under a Prior Plan, the Company records a cash receipt for the exercise price with an increase to equity (Additional Paid in Capital). The difference between the exercise price received and the cost to the Company of the ADSs is recorded in equity accounts (Additional Paid in Capital and Retained Earnings). The Company received proceeds from stock options exercised under the Prior Plans totaling $0.8 million and $2.5 million for the 13 weeks ended April 1, 2006 and April 2, 2005, respectively.

The Company recorded compensation expense related to stock options of $5.0 million ($4.5 million, net of tax) and $4.7 million ($4.4 million, net of tax) for the 13 weeks ended April 1, 2006 and April 2, 2005, respectively. As of April 1 2006, there was $14.1 million of unrecognized compensation cost related to nonvested option shares that is expected to be recognized over a weighted average period of 1.4 years.

8

The following table summarizes the stock option transactions for the 13 weeks ended April 1, 2006:

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (Dollars in millions)
Outstanding at January 1, 2006	5,038,861		$	45.49	—		—
Granted	2,946			71.03	—		—
Exercised	(426,368	)		37.95	—		—
Forfeited	(40,201	)		48.33	—		—
Outstanding at April 1, 2006	4,575,238		$	46.18	7.2	$	116.2
Options exercisable at April 1, 2006	1,847,452		$	43.61	5.7	$	51.9

The total intrinsic value of options exercised during the 13 weeks ended April 1, 2006 and April 2, 2005 was $13.4 million and $10.9 million, respectively.

Restricted Stock Units and Restricted Stock Plan

The Company also has restricted stock (Delhaize Group Restricted ADSs) awards and restricted stock unit awards outstanding for executive employees. Restricted stock unit awards represent the right to receive the number of ADSs set forth in the award at the vesting date. Unlike awards of restricted stock, no ADSs are issued with respect to these awards until the applicable vesting dates. In May 2002, the Company ceased granting restricted stock awards and began granting restricted stock unit awards under its 2002 Restricted Stock Unit Plan. The Company purchases ADSs on the open market to support vesting of restricted stock unit awards under the 2002 Restricted Stock Unit Plan. For the 13 weeks ended April 1, 2006, the Company acquired 27,500 ADSs on the open market at a cost of $1.8 million to support vesting of 1,884 restricted stock units awarded under the 2002 Restricted Stock Unit Plan. This amount is included as part of parent common stock (ADSs) purchased under cash flows from financing activities on the Company’s condensed consolidated statements of cash flows. No ADSs were acquired for the restricted stock plan for the 13 weeks ended April 2, 2005. In addition, the Company withheld and paid on employees’ behalf related taxes on restricted ADSs vested of $0.2 million and $0.3 million for the 13 weeks ended April 1, 2006 and April 2, 2005, respectively. These amounts are included as part of parent common stock (ADSs) purchased under cash flows from financing activities on the Company’s condensed consolidated statements of cash flows.

The Company recorded compensation expense related to restricted stock of $1.5 million ($.9 million, net of tax) and $1.1 million ($.7 million, net of tax) for the 13 weeks ended April 1, 2006 and April 2, 2005, respectively. As of April 1, 2006, there was $12.4 million of unrecognized compensation cost related to restricted share and restricted stock unit compensation arrangements. This cost is expected to be recognized over a weighted average period of 2.3 years.

The following table summarizes the restricted share and restricted stock unit transactions for the 13 weeks ended April 1, 2006:

	Shares and Units Outstanding		Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2006	495,892		$	45.26
Granted	—			—
Vested	(11,096	)		48.99
Forfeited	(2,872	)		46.43
Outstanding at April 1, 2006	481,924		$	45.17

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6) Goodwill and Intangible Assets

Goodwill and intangible assets are comprised of the following:

(Dollars in millions)	April 1, 2006		December 31, 2005
Goodwill	$	3,076.2	$	3,074.0
Trademarks		476.9		476.9
Favorable lease rights		350.3		353.2
Prescription files		19.5		18.9
Liquor licenses		4.5		4.3
Software		142.7		134.6
Other		29.1		28.5
		4,099.2		4,090.4
Less accumulated amortization		257.8		245.0
	$	3,841.4	$	3,845.4

Amortization expense totaled $13.1 million for the 13 weeks ended April 1, 2006 and $15.4 million for the 13 weeks ended April 2, 2005. Amortization expense is included in selling and administrative expenses.

The following represents a summary of changes in goodwill for the periods presented:

(Dollars in millions)	April 1, 2006		December 31, 2005
Balance at beginning of year	$	3,074.0	$	3,049.6
Acquisitions and adjustments to initial purchase accounting		2.2		27.7
Reduction of goodwill		—		(3.3	)
Balance at end of period	$	3,076.2	$	3,074.0

The carrying amount of goodwill and trademarks (indefinite lived intangible assets) at each of the Company’s reporting units follows:

	April 1, 2006				December 31, 2005
(Dollars in millions)	Goodwill		Trademarks		Goodwill		Trademarks
Food Lion	$	1,149.2	$	249.3	$	1,147.0	$	249.3
Hannaford		1,923.0		222.8		1,923.0		222.8
Harveys		4.0		4.8		4.0		4.8
	$	3,076.2	$	476.9	$	3,074.0	$	476.9

As of April 1, 2006 and December 31, 2005, the Company’s intangible assets with finite lives consist of favorable lease rights, prescription files, liquor licenses and software. The components of its intangible assets with finite lives are as follows:

	April 1, 2006							December 31, 2005
(Dollars in millions)	Gross Carrying Value		Accumulated Amortization			Net		Gross Carrying Value		Accumulated Amortization			Net
Favorable lease rights	$	350.3	$	(172.2	)	$	178.1	$	353.2	$	(166.2	)	$	187.0
Other		195.8		(85.6	)		110.2		186.3		(78.8	)		107.5
Total	$	546.1	$	(257.8	)	$	288.3	$	539.5	$	(245.0	)	$	294.5

7) Comprehensive Income

Comprehensive income includes net income and other comprehensive loss. Other comprehensive loss includes items that are currently excluded from the Company’s net income and recorded directly to shareholders’ equity. Included in other comprehensive loss are deferred loss on hedges, minimum pension liability adjustments and unrealized gains (losses) on available-for-sale securities. Comprehensive income was $84.5 million and $70.9 million for the 13 weeks ended April 1, 2006 and April 2, 2005, respectively.

8) Store Closings

The following table reflects activity in the number of stores closed for the 13 weeks ended April 1, 2006:

	Closed Stores Included In Discontinued Operations	Closed Stores Included In Continuing Operations		Total
As of December 31, 2005	44	147		191
Store closings added	—	9		9
Stores sold/lease terminated	—	(7	)	(7	)
As of April 1, 2006	44	149		193

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The following table reflects closed store liabilities as of April 1, 2006 and activity during the quarter, including additions to closed store liabilities charged to operations or discontinued operations and adjustments to liabilities based on changes in facts and circumstances and payments made:

(Dollars in millions)	Closed Stores Included In Discontinued Operations			Closed Stores Included In Continuing Operations			Total
Balance at December 31, 2005	$	40.2		$	84.6		$	124.8
Additions:
Store closings – lease obligations		—			0.9			0.9
Store closings – other exit costs		—			0.1			0.1
Total additions		—			1.0			1.0
Adjustments to estimates:
Lease obligation		0.5			(1.1	)		(0.6	)
Other exit costs		0.2			(0.3	)		(0.1	)
Total adjustments		0.7			(1.4	)		(0.7	)
Reductions:
Lease/termination payments made		(1.0	)		(3.8	)		(4.8	)
Payments for other exit costs		(0.4	)		(0.5	)		(0.9	)
Total reductions		(1.4	)		(4.3	)		(5.7	)
Balance at April 1, 2006	$	39.5		$	79.9		$	119.4

9) Guarantor Subsidiaries

Delhaize America, Inc. has issued 7.375% notes due 2006, 7.55% notes due 2007, 8.125% notes due 2011, 8.05% notes due 2027 and 9.000% debentures due 2031. Substantially all of Delhaize America’s subsidiaries (the “Guarantor Subsidiaries”) have fully and unconditionally and jointly and severally guaranteed this debt. The Guarantor Subsidiaries and non-guarantor subsidiaries are wholly-owned subsidiaries of the Company. The non-guaranteeing subsidiaries represent less than 3% on an individual and aggregate basis of consolidated assets, pretax earnings, cash flow, and equity. Therefore, the non-guarantor subsidiaries’ information is not separately presented in the tables below but rather is included in the column labeled “Guarantor Subsidiaries.” Consolidated financial information for the Company and its Guarantor Subsidiaries is as follow:

Delhaize America, Inc.

Condensed Consolidated Statements of Income

For the 13 Weeks ended April 1, 2006

(Dollars in millions)	Parent (Issuer)			Guarantor Subsidiaries		Eliminations			Consolidated
Net sales and other revenues	$	—		$	4,146.6	$	—		$	4,146.6
Cost of goods sold		—			3,007.2		—			3,007.2
Selling and administrative expenses		7.1			911.0		—			918.1
Equity in earnings of subsidiaries		(120.7	)		—		120.7			—
Operating income		113.6			228.4		(120.7	)		221.3
Interest expense, net		53.3			24.7		—			78.0
Income from continuing operations before income taxes		60.3			203.7		(120.7	)		143.3
Income taxes (benefit)		(22.9	)		81.7		—			58.8
Income before loss from discontinued operations		83.2			122.0		(120.7	)		84.5
Loss from discontinued operations, net of tax		—			1.3		—			1.3
Net income	$	83.2		$	120.7	$	(120.7	)	$	83.2

Delhaize America, Inc.

Condensed Consolidated Statements of Income

For the 13 Weeks ended April 2, 2005

(Dollars in millions)	Parent (Issuer)			Guarantor Subsidiaries		Eliminations			Consolidated
Net sales and other revenues	$	—		$	4,028.6	$	—		$	4,028.6
Cost of goods sold		—			2,935.8		—			2,935.8
Selling and administrative expenses		7.9			878.8		—			886.7
Equity in earnings of subsidiaries		(109.5	)		—		109.5			—
Operating income		101.6			214.0		(109.5	)		206.1
Interest expense, net		56.6			24.9		—			81.5
Income (loss) from continuing operations before income taxes		45.0			189.1		(109.5	)		124.6
Income taxes (benefit)		(24.5	)		77.4		—			52.9
Income before loss from discontinued operations		69.5			111.7		(109.5	)		71.7
Loss from discontinued operations, net of tax		—			2.2		—			2.2
Net income	$	69.5		$	109.5	$	(109.5	)	$	69.5

11

Delhaize America, Inc.

Condensed Consolidated Balance Sheets

As of April 1, 2006

(Dollars in millions)	Parent (Issuer)		Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	668.3	$	145.0	$	—		$	813.3
Receivables, net		—		129.3		—			129.3
Receivable from affiliate		11.2		55.1		(52.1	)		14.2
Inventories		—		1,165.6		—			1,165.6
Prepaid expenses		1.3		31.9		—			33.2
Other current assets		—		32.7		—			32.7
Total current assets		680.8		1,559.6		(52.1	)		2,188.3
Property and equipment, net		22.5		3,053.2		—			3,075.7
Goodwill		—		3,076.2		—			3,076.2
Intangibles, net		—		765.2		—			765.2
Loan to affiliate		19.8		—		—			19.8
Reinsurance recoverable from affiliate		—		149.2		—			149.2
Deferred tax asset		61.1		—		(61.1	)		—
Other assets		20.9		51.0		—			71.9
Investment in and advances to subsidiaries		6,134.1		—		(6,134.1	)		—
Total assets	$	6,939.2	$	8,654.4	$	(6,247.3	)	$	9,346.3
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	—	$	707.5	$	—		$	707.5
Payable to affiliate		42.4		27.1		(52.1	)		17.4
Accrued expenses		112.5		184.7		—			297.2
Current portion of capital lease obligations		—		45.3		—			45.3
Current portion of long-term debt		567.4		13.4		—			580.8
Other current liabilities		—		152.2		—			152.2
Deferred income taxes, net		—		4.7		4.2			8.9
Income taxes payable		112.8		3.0		—			115.8
Total current liabilities		835.1		1,137.9		(47.9	)		1,925.1
Long-term debt, net of current portion		2,216.9		55.6		—			2,272.5
Capital lease obligations, net of current portion		—		738.1		—			738.1
Deferred income taxes, net		—		268.7		(65.3	)		203.4
Other liabilities, net		6.4		320.0		—			326.4
Total liabilities		3,058.4		2,520.3		(113.2	)		5,465.5
Commitments and contingencies		—		—		—			—
Total shareholders’ equity		3,880.8		6,134.1		(6,134.1	)		3,880.8
Total liabilities and shareholders’ equity	$	6,939.2	$	8,654.4	$	(6,247.3	)	$	9,346.3

12

Delhaize America, Inc.

Condensed Consolidated Balance Sheets

As of December 31, 2005

(Dollars in millions)	Parent (Issuer)		Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	513.3	$	155.0		$	—		$	668.3
Receivables, net		—		116.9			—			116.9
Receivable from affiliate		18.5		72.7			(70.9	)		20.3
Inventories		—		1,198.3			—			1,198.3
Prepaid expenses		1.8		30.2			—			32.0
Deferred tax asset		—		(8.7	)		8.7			—
Other current assets		—		26.7			—			26.7
Total current assets		533.6		1,591.1			(62.2	)		2,062.5
Property and equipment, net		23.0		3,046.4			—			3,069.4
Goodwill		—		3,074.0			—			3,074.0
Intangibles, net		—		771.4			—			771.4
Loan to affiliate		17.4		—			—			17.4
Reinsurance recoverable from affiliate		—		147.2			—			147.2
Deferred tax asset		61.9		—			(61.9	)		—
Other assets		22.0		58.2			—			80.2
Investment in and advances to subsidiaries		6,117.8		—			(6,117.8	)		—
Total assets	$	6,775.7	$	8,688.3		$	(6,241.9	)	$	9,222.1
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	0.6	$	756.1		$	—			756.7
Payable to affiliate		60.7		14.7			(70.9	)		4.5
Accrued expenses		53.6		217.5			—			271.1
Current portion of capital lease obligations		—		44.0			—			44.0
Current portion of long-term debt		567.9		13.4			—			581.3
Other current liabilities		—		127.5			—			127.5
Deferred income taxes, net		—		—			12.3			12.3
Income taxes payable		68.9		3.6			—			72.5
Total current liabilities		751.7		1,176.8			(58.6	)		1,869.9
Long-term debt, net of current portion		2,218.5		61.4			—			2,279.9
Capital lease obligations, net of current portion		—		733.7			—			733.7
Deferred income taxes, net		—		277.1			(65.5	)		211.6
Other liabilities, net		4.1		321.5			—			325.6
Total liabilities		2,974.3		2,570.5			(124.1	)		5,420.7
Commitments and contingencies		—		—			—			—
Total shareholders’ equity		3,801.4		6,117.8			(6,117.8	)		3,801.4
Total liabilities and shareholders’ equity	$	6,775.7	$	8,688.3		$	(6,241.9	)	$	9,222.1

13

Delhaize America, Inc.

Condensed Consolidated Statements of Cash Flows

For the 13 Weeks ended April 1, 2006

(Dollars in millions)	Parent (Issuer)			Guarantor Subsidiaries			Consolidated
Net cash provided by operating activities	$	4.1		$	289.0		$	293.1
Cash flows from investing activities
Capital expenditures		—			(123.5	)		(123.5	)
Proceeds from sale of property		—			1.1			1.1
Other investment activity		(2.0	)		0.1			(1.9	)
Net cash used in investing activities		(2.0	)		(122.3	)		(124.3	)
Cash flows from financing activities
Principal payments on long-term debt		—			(5.8	)		(5.8	)
Principal payments under capital lease obligations		—			(12.0	)		(12.0	)
Transfer from escrow to fund long-term debt		—			5.6			5.6
Net change in advances to subsidiaries		164.5			(164.5	)		—
Parent common stock (ADSs) purchased		(16.7	)		—			(16.7	)
Proceeds from stock options exercised		0.8			—			0.8
Excess tax benefits related to stock options		4.3			—			4.3
Net cash provided by (used in) financing activities		152.9			(176.7	)		(23.8	)
Net increase (decrease) in cash and cash equivalents		155.0			(10.0	)		145.0
Cash and cash equivalents at beginning of year		513.3			155.0			668.3
Cash and cash equivalents at end of period	$	668.3		$	145.0		$	813.3

Delhaize America, Inc.

Condensed Consolidated Statements of Cash Flows

For the 13 Weeks ended April 2, 2005

(Dollars in millions)	Parent (Issuer)			Guarantor Subsidiaries			Consolidated
Net cash (used in) provided by operating activities	$	(5.7	)	$	226.8		$	221.1
Cash flows from investing activities
Capital expenditures		(1.7	)		(99.9	)		(101.6	)
Proceeds from sale of property		—			2.3			2.3
Other investment activity		(3.7	)		3.4			(0.3	)
Net cash used in investing activities		(5.4	)		(94.2	)		(99.6	)
Cash flows from financing activities
Principal payments on long-term debt		—			(5.9	)		(5.9	)
Dividends paid		(25.0	)		—			(25.0	)
Principal payments under capital lease obligations		—			(11.1	)		(11.1	)
Transfer from escrow to fund long- term debt		—			5.6			5.6
Net change in advances to subsidiaries		143.1			(143.1	)		—
Parent common stock (ADSs) purchased		(14.9	)		—			(14.9	)
Proceeds from stock options exercised		2.5			—			2.5
Excess tax benefits related to stock options		3.7			—			3.7
Net cash provided by (used in) financing activities		109.4			(154.5	)		(45.1	)
Net increase (decrease) in cash and cash equivalents		98.3			(21.9	)		76.4
Cash and cash equivalents at beginning of year		351.3			148.7			500.0
Cash and cash equivalents at end of period	$	449.6		$	126.8		$	576.4

14

The wholly-owned direct subsidiaries named below fully and unconditionally and jointly and severally guarantee Delhaize America’s 7.375% notes due 2006, 7.55% notes due 2007, 8.125% notes due 2011, 8.05% notes due 2027 and 9.00% debentures due 2031.

• Food Lion, LLC is a North Carolina limited liability company that operates substantially all of the Company’s Food Lion stores. Food Lion’s executive offices are located at 2110 Executive Drive, Salisbury, North Carolina 28147.

• Hannaford Bros. Co. is a Maine corporation that operates substantially all of the Company’s Hannaford’s stores. Hannaford’s executive offices are located at 145 Pleasant Hill Road, Scarborough, Maine 04074.

• Kash n’ Karry Food Stores, Inc. is a Delaware corporation that operates all the Company’s Kash n’ Karry and Sweetbay stores. Kash n’ Karry’s executive offices are located at 3801 Sugar Palm Drive, Tampa, Florida 33619.

• J.H. Harvey Co., LLC is a Georgia limited liability company that operates all of the Company’s Harveys stores. Harveys’ executive offices are located at 727 S. Davis St., Nashville, Georgia 31639.

10) Commitments and Contingencies

The Company is involved in various claims and lawsuits arising out of the normal conduct of its business. Although the ultimate outcome of these legal proceedings cannot be predicted with certainty, the Company’s management believes that the resulting liability, if any, would not have a material effect upon the Company’s consolidated results of operation, financial position or liquidity.

The Company continues to experience both federal and state audits of its income tax filings, which it considers to be part of its ongoing business activity. In particular, the Company has experienced an increase in audit and assessment activity over the past several years, which it expects to continue. While the ultimate outcome of these federal and state audits is not certain, the Company considers the merits of its filing positions in its overall evaluation of potential tax liabilities and believes it has adequate liabilities recorded in its consolidated financial statements for exposures on these matters. Based on its evaluation of the potential tax liabilities and the merits of its filing positions, the Company also believes it is unlikely that potential tax exposures over and above the amounts currently recorded as liabilities in its consolidated financial statements will be material to its financial condition or future results of operation.

11) Subsequent Event

On April 17, 2006, the Company repaid $563.5 million of Notes (7.375%) in full. In addition, in April 2006, the Company borrowed $50.0 million from its $500 million five-year unsecured revolving credit facility to partially fund this repayment.

15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation (13 weeks ended April 1, 2006 compared to the 13 weeks ended April 2, 2005)

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto in this quarterly report on Form 10-Q and the audited financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operation contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

Executive Summary

Our company, a wholly-owned subsidiary of Delhaize Group, engages in one line of business: the operation of retail food supermarkets in the eastern United States. We are a holding company that does business primarily under the banners of Food Lion, Hannaford, Kash n’ Karry, Sweetbay and Harveys. Our stores sell a wide variety of groceries, produce, meats, dairy products, seafood, frozen food and deli-bakery products, as well as non-food items such as health and beauty care products, prescriptions, and other household and personal products. We offer nationally and regionally advertised brand name merchandise, as well as products manufactured and packaged for us, primarily under the private labels of “Food Lion,” “Hannaford,” “Kash n’ Karry,” “Sweetbay” and “Harveys.”

Our business is highly competitive and characterized by narrow profit margins. We compete with national, regional and local supermarket chains, supercenters, discount food stores, specialty stores, convenience stores, warehouse clubs, drug stores and restaurants. We continue to develop and evaluate new retailing strategies at each of our banners in the eastern United States to respond to local consumer needs and maintain and increase our market share.

First Quarter of 2006 Highlights:

During the first quarter of 2006, Delhaize America posted increases in sales and improved gross margins, as compared to the first quarter of 2005.

Improvements in sales and gross margins in 2006 as compared to 2005 were the result of a combination of several initiatives, including:

• strong promotional and marketing activities focusing on consumer preferences to increase transaction counts and same store sales;

• pricing optimization through the use of multiple price zones;

• continued improvements in margin, shrink management and inventory level management through the use of item-level data provided by our inventory management system (“ACIS”);

• expanded offerings in higher-margin departments such as Produce and Deli/Bakery; and

• strengthened execution of standard operating practices in our stores, which has improved our in-stock percentages.

Sales also improved in the first quarter of 2006 as compared to the first quarter of 2005 due to the exiting of one of our competitors, Winn-Dixie, from several Food Lion, Kash n’ Karry and Sweetbay markets during the second half of 2005.

Selling and administrative expenses increased from last year due primarily to increases in wage rates, health care costs and other benefit costs.

Food Lion continues to remodel stores in its core markets, with ten store remodelings completed during the first quarter of 2006. In addition, one new Food Lion store was opened and two Food Lion stores were converted to Harveys stores during the first quarter of 2006. The conversions served to further strengthen Harveys’ presence in its existing markets.

Hannaford sales were soft in the first quarter of 2006 due to weaker consumer spending associated with higher energy spending and less winter tourism. Harveys performed well in the first quarter, while in Florida the non-converted Kash n’ Karry stores continued to suffer.

At Hannaford, six new stores were opened and one store was remodeled within Hannaford’s existing markets during the first quarter of 2006.

At Sweetbay, one new store was opened and one Kash n’ Karry store was converted to a Sweetbay store during the first quarter of 2006.

Outlook for the Remainder of 2006:

• Food Lion has selected the Washington, D.C. area for its fifth market renewal. The Washington, D.C. area market renewal will entail the remodeling of approximately 80 stores which will reopen under three different banners of Food Lion, including 40 Bloom stores, 26 Food Lion stores and 14 Bottom Dollar stores. The market renewal is scheduled to be completed by the end of 2006.

16

• Food Lion will enter a new market in Greenville-Spartanburg, South Carolina, opening three Food Lion stores and six Bloom stores by the end of 2006. This will mark the first time since 1991 that Food Lion has entered a new geographic market.

• Hannaford will continue to open new stores in its existing markets (approximately eight stores for the remainder of 2006) and to evolve its Festival Strategy, which is founded on the principle of listening to consumers and anticipating their needs. In addition, Hannaford will expand or remodel approximately 11 stores during the remainder of 2006.

• Kash n’ Karry will complete the rebranding of 42 of its remaining 82 Kash n’ Karry stores (primarily located in the Tampa/St. Petersburg, Florida area) to Sweetbay Supermarket by the end of 2006.

• An additional four Food Lion stores will be converted to Harveys during the remainder of 2006. In addition, two new Harveys stores will be opened during 2006. These conversions and new store openings are expected to further leverage the strength of the Harveys brand in its primary markets in Georgia and northern Florida.

Critical Accounting Policies

We have chosen accounting policies we believe are appropriate to accurately and fairly report our operating results and financial position and we apply these accounting policies in a consistent manner. Our critical accounting policies are summarized in our Annual Report on Form 10-K for the year ended December 31, 2005.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis and may retain outside consultants, lawyers and actuaries to assist in our evaluation.

Results of Operation

The following tables set forth the unaudited condensed consolidated statements of income for the 13 weeks ended April 1, 2006 and for the 13 weeks ended April 2, 2005 for informational purposes.

Certain accounts in the 2005 condensed consolidated financial statements were reclassified to conform with 2006 condensed consolidated financial statements.

(Dollars in millions)	13 Weeks ended April 1, 2006 (unaudited)		13 Weeks ended April 2, 2005 (unaudited)
Net sales and other revenues	$	4,146.6	$	4,028.6
Cost of goods sold		3,007.2		2,935.8
Selling and administrative expenses		918.1		886.7
Operating income		221.3		206.1
Interest expense, net		78.0		81.5
Income from continuing operations before income taxes		143.3		124.6
Income taxes		58.8		52.9
Income before loss from discontinued operations		84.5		71.7
Loss from discontinued operations, net of tax		1.3		2.2
Net income	$	83.2	$	69.5

17

(Percent of net sales and other revenues)	13 Weeks ended April 1, 2006 % (unaudited)	13 Weeks ended April 2, 2005 % (unaudited)
Net sales and other revenues	100.00	100.00
Cost of goods sold	72.52	72.88
Selling and administrative expenses	22.14	22.01
Operating income	5.34	5.11
Interest expense, net	1.88	2.02
Income from continuing operations before income taxes	3.46	3.09
Income taxes	1.42	1.31
Income before loss from discontinued operations	2.04	1.78
Loss from discontinued operations, net of tax	0.03	0.05
Net income	2.01	1.73

Net Sales and Other Revenues

(Dollars in billions)	13 weeks ended April 1, 2006		13 weeks ended April 2, 2005
Net sales and other revenues	$	4.1	$	4.0

We record revenues primarily from the sale of products in our retail stores. Net sales and other revenues for the 13 weeks ended April 1, 2006 increased by 2.9% in comparison with the corresponding period of 2005. Comparable store sales increased 1.4% during the first quarter of 2006. Comparable store sales excluding the effect of the timing of Easter increased 1.7% in the first quarter of 2006 (compared to 0.3% for the first quarter of 2005). The 2006 sales increase was primarily driven by (i) strong promotional and marketing activities focusing on consumer preferences; and (ii) the exiting of one of our competitors, Winn-Dixie, from several Food Lion, Kash n’ Karry and Sweetbay markets in the Southeast. Hannaford sales were soft in the first quarter of 2006 due to weaker consumer spending associated with higher energy spending and less winter tourism. Harveys performed well in the first quarter, while in Florida the non-converted Kash n’ Karry stores continued to suffer. During the first quarter of 2006, we had a net decrease of one store, and we remodeled 12 stores.

We continue to see significant competitive activity thru pricing and promotion initiatives as retailers battle for consumer dollars. During the first quarter of 2006, our Food Lion and Hannaford banners experienced 22 competitive store openings offset by four competitive closings. In addition, many competitors continued to invest heavily in promotional spending in the form of aggressive advertised pricing, buy one and get one or two free offers, double and triple couponing and other aggressive pricing strategies. The activities and initiatives described in the previous paragraph, particularly at Food Lion, have resulted in improved sales momentum despite this competitive activity.

As of April 1, 2005, we operated 1,536 stores. Our retail store square footage totaled 57.0 million square feet at April 1, 2006, resulting in a 0.8% increase over the comparable period of 2005. Detail of store activity for the 13 weeks ended April 1, 2006 is shown below:

	Food Lion		Hannaford	Kash n’ Karry		Sweetbay	Harveys		Total
Stores at beginning of year	1,217		145	83		25	67		1,537
Stores opened	1		6	—		1	—		8
Stores closed	(7	)	—	—		—	(2	)	(9	)
Stores closed for relocation	—		—	—		—	—		—
Stores converted	(2	)	—	(1	)	1	2		—
Stores at April 1, 2006	1,209		151	82		27	67		1,536
Net change year to date	(8	)	6	(1	)	2	—		(1	)
Stores remodeled	10		1	—		1	—		12

Gross Margin

(Percent of net sales and other revenues)	13 weeks ended April 1, 2006		13 weeks ended April 2, 2005
Gross margin	27.48	%	27.12	%

18

Gross margin as a percentage of sales increased in the first quarter of 2006 compared with the corresponding period in 2005 due primarily to (i) improvement in margin and inventory management; (ii) expanded offerings in higher-margin departments such as Produce and Deli/Bakery (particularly with respect to the market renewals at Food Lion and Kash n’ Karry conversions to Sweetbay); and (iii) improved shrink management at Food Lion.

Selling and Administrative Expenses

(Percent of net sales and other revenues)	13 weeks ended April 1, 2006		13 weeks ended April 2, 2005
Selling and administrative expenses	22.14	%	22.01	%
Selling and administrative expenses excluding depreciation and amortization	19.15	%	19.06	%

Selling and administrative expenses as a percent of sales increased over the 13 weeks of 2005 primarily due to (i) an increase in health care costs resulting from an increase in both the number of claims filed and the costs per claim; (ii) an increase in store utility costs due to rising fuel costs; (iii) an increase in the contribution rate for retirement plans; and (iv) the conversion of stores from Kash n’ Karry to Sweetbay in Florida. These increases to selling and administrative expenses were partially offset by lower advertising costs.

Depreciation and Amortization Expense

(Dollars in millions)	13 weeks ended April 1, 2006			13 weeks ended April 2, 2005
Depreciation and amortization expense	$	123.9		$	118.6
Percent of net sales and other revenues		2.99	%		2.95	%

Depreciation and amortization increased for the 13 weeks ended April 1, 2006 in comparison with the corresponding period in 2005 primarily due to equipment purchases made for new stores, remodeled stores and converted stores since the first quarter of 2005.

Income Taxes

(Dollars in millions)	13 weeks ended April 1, 2006			13 weeks ended April 2, 2005
Income taxes	$	58.8		$	52.9
Effective tax rate		41.05	%		42.4	%

The effective tax rate decreased for the 13 weeks ended April 1, 2006 compared to the corresponding period last year due primarily to the favorable resolution of tax audits in several states where our company operates.

The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items.

We continue to experience both federal and state audits of our income tax filings, which we consider to be part of our ongoing business activity. In particular, we have experienced an increase in audit and assessment activity over the past several years, which we expect to continue. While the ultimate outcome of these federal and state audits is not certain, we have considered the merits of our filing positions in our overall evaluation of potential tax liabilities and believe we have adequate liabilities recorded in our consolidated financial statements for exposures on these matters. Based on our evaluation of the potential tax liabilities and the merits of our filing positions, we also believe it is unlikely that potential tax exposures over and above the amounts currently recorded as liabilities in our consolidated financial statements will be material to our financial condition or future results of operation.

Liquidity and Capital Resources

(Dollars in millions)	13 weeks ended April 1, 2006		13 weeks ended April 2, 2005
Cash provided by operating activities	$	293.1	$	221.1

We have funded our operations and acquisitions from cash generated from our operations and borrowings.

19

At April 1, 2006, we had cash and cash equivalents of $813.3 million compared with $576.4 million at April 2, 2005 in anticipation of our debt repayment on April 17, 2006 (see Note 11 of our Condensed Consolidated Financial Statements). We have historically generated positive cash flow from operations. Cash provided by operating activities increased over the comparable period in 2005 primarily due to decreases in inventory as a result of better managed inventory levels and the timing of our annual premium payment for self-insurance (annual premiums of $55.8 million and $57.1 million were paid in the first quarter of 2005 and the second quarter of 2006, respectively) offset by an increase in income tax payments ($22.8 million in 2006 and $7.0 million in 2005).

(Dollars in millions)	13 weeks ended April 1, 2006		13 weeks ended April 2, 2005
Cash flows used in investing activities	$	124.3	$	99.6

The increase in investing activities was primarily due to an increase in capital expenditures of $123.5 million for the 13 weeks ended April 1, 2006 compared to $101.6 million for the comparable period of 2005. The increase in capital expenditures is primarily due to the opening of eight new stores and renovations of 12 existing stores.

(Dollars in millions)	13 weeks ended April 1, 2006		13 weeks ended April 2, 2005
Cash flows used in financing activities	$	23.8	$	45.1

Cash used in financing activities decreased for the 13 weeks ended April 1, 2006 compared to the 13 weeks ended April 2, 2005 resulting primarily from a dividend payment made during the first quarter of 2005 of $25.0 million.

Debt

We have a $500 million unsecured revolving credit agreement (the “Credit Agreement”) with a syndicate of commercial banks. The Credit Agreement provides for a $500 million five-year unsecured revolving credit facility, with a $100 million sublimit for the issuance of letters of credit, and a $35 million sublimit for swingline loans. Upon the Company’s election, the aggregate maximum principal amount available under the Credit Agreement may be increased to an aggregate amount not exceeding $650 million. The Credit Agreement will mature on April 22, 2010, unless we exercise our option to extend it for up to two additional years.

The Credit Agreement contains affirmative and negative covenants. Negative covenants include a minimum fixed charge coverage ratio, a maximum leverage ratio and a dividend restriction test. We must comply with all covenants in order to have access to funds under the Credit Agreement. As of April 1, 2006, we were in compliance with all covenants contained in the Credit Agreement. A deteriorating economic or operating environment may subject us to a risk of non-compliance with the covenants.

We had no outstanding borrowings under the Credit Agreement as of April 1, 2006. Funds are available under the Credit Agreement for general corporate purposes.

At April 1, 2006, we had long–term debt as follows:

(Dollars in millions)
Notes, 7.375%, due 2006	$	563.0	(a)(b)
Notes, 7.55%, due 2007		144.9	(a)
Notes, 8.125%, due 2011		1,094.4	(a)
Notes, 8.05%, due 2027		121.9	(a)
Debentures, 9.00%, due 2031		855.0
Medium-term notes, 8.67% to 8.73%, due 2006		5.0	(a)
Other notes, 6.31% to 7.41%, due 2006 to 2016		45.2	(a)
Mortgage payables, 7.55% to 8.65%, due 2006 to 2016		8.4	(a)
Other debt, 7.25% to 14.15%, due 2006 to 2018		15.5
Total long-term debt		2,853.3
Less current portion		580.8
Long-term debt, net of current portion	$	2,272.5

(a) Net of associated discount and premium

(b) These notes were paid on April 17, 2006 (see Note 11 of our Condensed Consolidated Financial Statements).

In October 2003, the Hannaford banner invoked the defeasance provisions of its outstanding 8.54% Senior Notes due November 15,

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2004, 6.50% Senior Notes due May 15, 2008, 6.31% Senior Notes due May 15, 2008, 7.41% Senior Notes due February 15, 2009, 6.58% Senior Notes due February 15, 2011, and 7.06% Senior Notes due May 15, 2016 (collectively, the “Notes”) and placed sufficient funds in an escrow account to satisfy the remaining principal and interest payments due on the Notes. As a result of this defeasance, Hannaford is no longer subject to the negative covenants contained in the agreements governing these Notes. As of April 1, 2006 and December 31, 2005, $47.8 million and $53.4 million in the aggregate principal amount of these Notes was outstanding. Cash committed to fund the escrow and not available for general corporate purposes is considered restricted. As of April 1, 2006 restricted funds of $12.8 million and $39.8 million are recorded in Current Other Assets and Non-current Other Assets, respectively. As of December 31, 2005 restricted funds of $12.9 million and $45.9 million are recorded in Current Other Assets and Non-current Other Assets, respectively.

We enter into significant leasing obligations related to our store properties. Capital lease obligations outstanding at April 1, 2006 were $783.4 million compared with $773.3 million at April 2, 2005. Lease agreements provide for initial terms of 20 and 25 years, with renewal options ranging from five to 20 years. We also had significant operating lease commitments at the end of 2005.

We also have periodic short-term borrowings under other arrangements that are available to us at the lenders’ discretion. We had no borrowings outstanding under these arrangements as of April 1, 2006 or April 2, 2005.

Market Risk

We are exposed to changes in interest rates primarily as a result of our long-term debt requirements. Our interest rate risk management objectives are to limit the effect of interest rate changes on earnings and cash flows and to lower overall borrowing costs. We maintain certain variable-rate debt to take advantage of favorable interest-rate fluctuations. We have not entered into any of our financial instruments for trading purposes.

We maintain interest rate swaps against certain debt obligations, effectively converting a portion of the debt from fixed to variable rates. The notional principal amounts of interest rate swap arrangements as of April 1, 2006 were $300 million maturing in 2006 and $100 million maturing in 2011. Maturity dates of interest rate swap arrangements match those of the underlying debt. These agreements involve the exchange of fixed rate payments for variable rate payments without the exchange of the underlying principal amounts. Variable rates for our agreements are based on six-month or three-month U.S. dollar LIBOR and are reset on a semiannual basis or a quarterly basis. The differential between fixed and variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and recognized over the life of the agreements as an adjustment to interest expense. The $100 million notional swaps maturing in 2011 meet the criteria for using the short-cut method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133, “Derivative Instruments and Hedging Activities.”

A table representing the expected principal payments and related interest rates of our long-term debt by year of maturity as of December 31, 2005 was included under the heading “Market Risk” on page 26 of our annual report on Form 10-K for the year ended December 31, 2005.

We do not trade in foreign markets or in commodities, nor do we have significant concentrations of credit risk. Accordingly, we do not believe that foreign exchange risk, commodity risk or credit risk pose a significant threat to our company.

Contractual Obligations and Commitments

We assume various financial obligations and commitments in the normal course of our operating and financing activities. Financial obligations are considered to represent known future cash payments that we are required to make under existing contractual arrangements, such as debt and lease agreements. A table representing the scheduled maturities of our contractual obligations as of December 31, 2005 was included under the heading “Contractual Obligations and Commitments” on page 27 of our annual report on Form 10-K for the year ended December 31, 2005. At April 1, 2006, there were no significant changes to the table referenced above.

Self-Insurance

We are self-insured for workers’ compensation, general liability, vehicle accident and druggist claims. The self-insurance liability is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Maximum retention, including defense costs per occurrence, is (i) from $0.5 million to $1.0 million per accident for workers’ compensation, (ii) $5.0 million per accident for automobile liability and (iii) $3.0 million per accident for general liability, with additional $2.0 million retention in excess of the primary $3.0 million general liability retention for druggist liability. We are insured for costs related to covered claims, including defense costs, in excess of these retentions. It is possible that the final resolution of some of these claims may require us to make significant expenditures in excess of our existing reserves over an extended period of time and in a range of amounts that cannot be reasonably estimated.

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We implemented a captive insurance program in 2001 pursuant to which the self-insured reserves related to workers’ compensation, general liability and automobile coverage were reinsured by Pride, an Irish reinsurance captive owned by an affiliated company of Delhaize Group. The purpose for implementing the captive insurance program is to provide Delhaize Group continuing flexibility in its risk management program while providing certain excess loss protection through anticipated reinsurance contracts with Pride. Premiums are transferred annually to Pride through our subsidiary, Delhaize Insurance Co. (“DIC”). Prior to January 1, 2006, 100% of the risk was reinsured by Pride; however, beginning on January 1, 2006, Pride reinsures 90% of the risk and the remaining 10% is retained by DIC.

Our property insurance includes self-insured retentions per occurrence of (i) $5.0 million for named storms, (ii) $5.0 million for Zone A flood losses, (iii) $5.0 million for earthquakes and (iv) $2.5 million for all other losses.

We also are self-insured for health care which includes medical, pharmacy, dental and short-term disability. Our self-insurance liability for claims incurred but not yet reported (“IBNR”) is estimated quarterly by management based on available information and takes into consideration actuarial evaluations determined annually based on historical claims experience, claims processing procedures and medical cost trends.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information set forth under the heading “Market Risk” under Item 2 of this Form 10-Q is hereby incorporated herein by reference.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Accounting Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Accounting Officer have concluded that, as of such date, our disclosure controls and procedures are effective. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Information about material developments that may have occurred since December 31, 2005 is described in Note 11, “Commitments and Contingencies”, under “Notes to Unaudited Condensed Consolidated Financial Statements” in Part I, Item 1 of this Form 10-Q and is incorporated herein by reference.

Item 1A. Risk Factors

There are no material changes to risk factors previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2005.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Omitted pursuant to General Instruction H.1 and H.2 of Form 10-Q.

Item 3. Defaults Upon Senior Securities

Omitted pursuant to General Instruction H.1 and H.2 of Form 10-Q.

Item 4. Submission of Matters to a Vote of Security Holders

Omitted pursuant to General Instruction H.1 and H.2 of Form 10-Q.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit		Description
31	(a)	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)
31	(b)	Certification of Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)
32		Certifications of Chief Executive Officer and Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

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SIGNATURE

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.

		DELHAIZE AMERICA, INC
DATE: May 16, 2006	BY:	/s/ Carol M. Herndon
		Carol M. Herndon
		Executive Vice President of
		Accounting and Analysis and
		Chief Accounting Officer

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Exhibit Index

Exhibit		Description
31	(a)	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)
31	(b)	Certification of Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)
32		Certifications of Chief Executive Officer and Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

24

EX-31.(A)

Exhibit 31(a)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)

I, Pierre-Olivier Beckers, certify that:

1) I have reviewed this Quarterly Report on Form 10-Q of Delhaize America, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 16, 2006

/s/ Pierre-Olivier Beckers

Pierre-Olivier Beckers

Chief Executive Officer

EX-31.(B)

Exhibit 31(b)

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)

I, Carol M. Herndon, certify that:

1) I have reviewed this Quarterly Report on Form 10-Q of Delhaize America, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 16, 2006

/s/ Carol M. Herndon

Carol M. Herndon

Chief Accounting Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Delhaize America, Inc. (the Company) on Form 10-Q for the quarter ended April 1, 2006, as filed with the Securities and Exchange Commission on the date hereof (the Form 10-Q), we, Pierre-Olivier Beckers and Carol M. Herndon, Chief Executive Officer and Chief Accounting Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(i) the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: May 16, 2006.

/s/ Pierre-Olivier Beckers

Pierre-Olivier Beckers

Chief Executive Officer

/s/ Carol M. Herndon

Carol M. Herndon

Chief Accounting Officer

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO THE COMPANY AND WILL BE RETAINED BY THE COMPANY AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.