-----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, FuxXiRHc+isJGvZBvxBlsMZPA5lmGmp3K1fRVhEFkpflaYReITfH3udseQZTNJ1r RA4k8BqU6bv/03LaV5Lwhg== 0000045379-97-000010.txt : 19971110 0000045379-97-000010.hdr.sgml : 19971110 ACCESSION NUMBER: 0000045379-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971107 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANNAFORD BROTHERS CO CENTRAL INDEX KEY: 0000045379 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 010085930 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07603 FILM NUMBER: 97709638 BUSINESS ADDRESS: STREET 1: 145 PLEASANT HILL RD CITY: SCARBOROUGH STATE: ME ZIP: 04074 BUSINESS PHONE: 2078832911 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 27, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-7603 HANNAFORD BROS. CO. (Exact name of Registrant as specified in its charter) Maine 01-0085930 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 145 Pleasant Hill Road, Scarborough, Maine 04074 (Address of principal executive offices; Zip Code) Registrant's telephone number, including area code: (207) 883-2911 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . As of November 5, 1997, there were 42,284,784 outstanding shares of Common Stock, $.75 par value, the only authorized class of common stock of the Registrant. INDEX PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Balance Sheets, September 27, 1997 and December 28, 1996 3-4 Consolidated Statements of Earnings, Three Months Ended September 27, 1997 and September 28, 1996 5 Consolidated Statements of Earnings, Nine Months Ended September 27, 1997 and September 28, 1996 6 Consolidated Statements of Cash Flows Nine Months Ended September 27, 1997 and September 28, 1996 7-8 Notes and Schedules to Consolidated Financial Statements 9-11 Item 2. Management's Discussion and Analysis of Third Quarter 1997 Results 12-18 PART II - OTHER INFORMATION Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8K 19 Signatures 20 HANNAFORD BROS. CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in thousands) (UNAUDITED) September 27, December 28, 1997 1996 Current assets: Cash and cash items $ 54,349 $ 42,505 Accounts receivable, net 13,428 17,384 Inventories 183,296 191,658 Prepaid expenses 8,575 5,834 Deferred income taxes 4,962 4,589 Total current assets 264,610 261,970 Property, plant and equipment, net 779,314 723,176 Leased property under capital leases, net 61,015 59,918 Other assets: Goodwill, net 91,532 95,654 Deferred charges, net 34,616 26,332 Computer software costs, net 16,385 13,658 Miscellaneous assets 2,032 3,019 Total other assets 144,565 138,663 $1,249,504 $1,183,727 See accompanying notes to consolidated financial statements. HANNAFORD BROS. CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY (In thousands except share amounts) (UNAUDITED) September 27, December 28, 1997 1996 Current liabilities: Current maturities of long-term debt $ 16,040 $ 14,213 Obligations under capital leases 1,908 1,775 Accounts payable 199,800 177,895 Accrued payroll 24,909 22,554 Other accrued expenses 24,234 21,205 Income taxes 4,685 2,532 Total current liabilities 271,576 240,174 Deferred income tax liabilities 27,300 23,757 Other liabilities 42,032 47,917 Long-term debt 223,854 227,525 Obligations under capital leases 77,928 75,198 Shareholders' equity: Class A Serial Preferred stock, no par, authorized 2,000,000 shares - - Class B Serial Preferred stock, par value $.01 per share, authorized 28,000,000 shares - - Common stock, par value $.75 per share: Authorized 110,000,000 shares; September 27, 1997: Issued, 42,338,316 shares, outstanding 42,290,226 shares. December 28, 1996: Issued, 42,338,316 Shares, outstanding 42,280,695 shares 31,754 31,754 Additional paid-in capital 115,713 119,399 Preferred stock purchase rights 423 423 Retained earnings 460,590 419,459 608,480 571,035 Less common stock in treasury (September 27, 1997: 48,090 shares at cost. December 28, 1996: 57,621 shares at cost) 1,666 1,879 Total shareholders' equity 606,814 569,156 $1,249,504 $1,183,727 See accompanying notes to consolidated financial statements. HANNAFORD BROS. CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands except per share data) (UNAUDITED) THREE MONTHS ENDED September 27, September 28, 1997 1996 Sales and other revenues $820,115 $773,271 Cost of sales 617,055 589,178 Gross margin 203,060 184,093 Selling, general and administrative expenses 160,066 145,802 Operating profit 42,994 38,291 Interest expense, net 6,050 5,356 Earnings before income taxes 36,944 32,935 Income taxes 14,147 13,037 Net earnings $ 22,797 $ 19,898 Per share of common stock: Net earnings $ .54 $ .47 Cash dividends $ .135 $ .120 Weighted average number of common shares outstanding 42,290 42,284 See accompanying notes to consolidated financial statements. HANNAFORD BROS. CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands except per share data) (UNAUDITED) NINE MONTHS ENDED September 27, September 28, 1997 1996 Sales and other revenues $2,355,725 $2,192,877 Cost of sales 1,772,400 1,664,603 Gross margin 583,325 528,274 Selling, general and administrative expenses 469,183 422,684 Operating profit 114,142 105,590 Interest expense, net 19,635 16,075 Earnings before income taxes 94,507 89,515 Income taxes 36,242 35,434 Net earnings $ 58,265 $ 54,081 Per share of common stock: Net earnings $ 1.38 $ 1.28 Cash dividends $ .405 $ .360 Weighted average number of common shares outstanding 42,288 42,301 See accompanying notes to consolidated financial statements. HANNAFORD BROS. CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (UNAUDITED) NINE MONTHS ENDED September 27, September 28, 1997 1996 Cash flows from operating activities: Net income $ 58,265 $ 54,081 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 67,733 56,079 (Increase) decrease in inventories 8,362 (13,568) (Increase) decrease in receivables and prepayments 1,257 (1,647) Increase in accounts payable and accrued expenses 21,463 26,349 Increase in income taxes payable 2,153 2,720 Increase in deferred taxes 3,170 1,453 Other operating activities (202) 103 Net cash provided by operating activities 162,201 125,570 Cash flows from investing activities: Acquisition of property, plant and equipment (116,086) (148,116) Sale of property, plant and equipment, net 2,145 3,061 Increase in deferred charges (7,591) (6,945) Increase in computer software costs (4,958) (4,402) Net cash used in investing activities (126,490) (156,402) Cash flows from financing activities: Principal payments under capital lease obligations (1,330) (1,076) Proceeds from issuance of long-term debt 20,000 75,000 Issuance of common stock 7,381 7,300 Payments of long-term debt (21,929) (21,423) Purchase of Treasury Stock (10,855) (11,708) Dividends paid (17,134) (15,223) Net cash provided by (used in) financing activities (23,867) 32,870 Net increase in cash and cash items 11,844 2,038 Cash and cash items at beginning of period 42,505 7,017 Cash and cash items at end of period $ 54,349 $ 9,055 See accompanying notes to consolidated financial statements. HANNAFORD BROS. CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Supplemental disclosures of cash flow information (in thousands) (UNAUDITED) NINE MONTHS ENDED September 27, September 28, 1997 1996 Cash paid during the first nine months for: Interest (net of amount capitalized, $2,616 in 1997 and $2,493 in 1996) $18,643 $15,100 Income taxes $30,049 $30,019 Supplemental disclosure of non-cash investing and financing activity Capital lease obligations of $4,550,000 and $7,652,000 were incurred during the nine month period ended September 27, 1997 and September 28, 1996 respectively, when the Company entered into real estate leases. Disclosure of accounting policy For the purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments with maturities of three months or less when purchased to be cash items. HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the amounts shown reflect all adjustments necessary to present fairly the financial position and results of operations for the periods presented. All such adjustments are of a normal recurring nature. The year-end consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Earnings per share of common stock have been determined by dividing net earnings by the weighted average number of shares of common stock outstanding. The assumed exercise of existing employee stock options has been excluded since it does not result in any material dilution. It is suggested that the financial statements be read in conjunction with the financial statements and notes included in the Company's latest annual report. HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 2. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: (in thousands) (Unaudited) September 27, December 28, 1997 1996 Land and improvements $ 126,998 $ 117,218 Buildings 279,503 252,228 Furniture, fixtures & equipment 453,322 404,725 Leasehold interests & improvements 284,157 245,490 Construction in progress 13,935 31,850 1,157,915 1,051,511 Less accumulated depreciation and amortization 378,601 328,335 $ 779,314 $ 723,176 3. LEASED PROPERTY Leased property under capital leases consists of the following: (in thousands) (Unaudited) September 27, December 28, 1997 1996 Real property $86,780 $83,047 Less accumulated amortization 25,765 23,129 $61,015 $59,918 HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. LONG-TERM DEBT In February 1997, the Company received the proceeds of a $20 million senior uncollateralized debt financing. The term of the debt is 12 years with an average life of 10 years and an interest rate of 7.4%. 5. ACCOUNTING PRONOUNCEMENT In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128 - Earnings per Share. This Statement is effective for financial statements issued for periods ending after December 15, 1997 with earlier application not permitted. The Statement requires dual presentation of basic and diluted earnings per share on the income statement. The Company's basic earnings per share for fiscal 1997 will be calculated similar to its currently disclosed earnings per share. Diluted earnings per share will not be materially different from basic earnings per share. In June 1997, the FASB issued SFAS No. 130 - Reporting Comprehensive Income, which requires the separate reporting of all changes to shareholders' equity, and SFAS No. 131 - Disclosures about Segments of an Enterprise and Related Information, which revises existing guidelines about the level of financial disclosure of a Company's operations. Both Statements are effective for financial statements issued for fiscal years beginning after December 15, 1997. The Company has not determined the impact of the new standards, but does not expect them to have a material impact to existing financial reporting. 6. COMMON STOCK In May 1997, the shareholders of the Company approved an amendment to the Hannaford Bros. Co. Employee Stock Purchase Plan. This amendment increased the total authorized shares by an additional 750,000 thereby permitting continued use of the Plan during 1997 and future years. HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS RESULTS OF OPERATIONS SALES Sales and other revenues rose 7.4% for the first three quarters of 1997, to $2,355.7 million, an increase of $162.8 million over the first three quarters of 1996. Sales from supermarkets that were open in both periods presented ("identical store sales") increased $11.9 million or 0.6%. Additional supermarket sales of $143.1 million resulted from the net impact of new, expanded, relocated and closed stores. Other sales and revenues, which include wholesale, trucking, home delivery, real estate and miscellaneous retail operations, increased $7.8 million. In the third quarter of 1997, sales and other revenues were $820.1 million, an increase of $46.8 million or 6.1% over those reported for the same period of 1996. Identical store sales decreased $1.7 million or 0.2%. Additional supermarket sales of $47.4 million resulted from the net impact of new, expanded, relocated and closed stores. Other sales and revenues increased $1.1 million. Identical store sales were up 0.6% for three quarters and down 0.2% for the third quarter this year as compared to increases of 3.3% in the first three quarters of 1996 and 3.2% for the full year 1996. The Company attributes a portion of this decline to a very low inflation rate in food prices, the current competitive environment and a decrease in the availability of food stamps. Comparable store sales, which include results from expanded and relocated stores in both periods presented, increased 1.5% in the third quarter of 1997 and 2.1% for the first three quarters of 1997. GROSS MARGIN Gross margins increased in the first three quarters of 1997 to 24.8% of sales and other revenues in comparison to 24.1% in the first three quarters of 1996. For the third quarter of 1997, gross margin was 24.8% versus 23.8% for the third quarter of 1996. The 1997 increases HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS are the result of improved selling margin in certain of the Company's marketing territories coupled with better operations in the Southeast, including the Company's new distribution facility which began product delivery in November 1996. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased to 19.9% of sales and other revenues in the first nine months of 1997 as compared to 19.3% in the comparable period of 1996. For the third quarter of 1997, selling, general and administrative expenses were 19.5% of sales and other revenues up from 18.9% for the third quarter of 1996, but down from the 20.0% reported in the second quarter of 1997. Payroll and payroll related expenses, which exceeded 50% of selling, general and administrative expenses in all periods presented, increased as a percentage of sales in the 1997 reporting periods. In addition to rising payroll costs, the 1997 increases reflect higher advertising costs and depreciation charges. These increases reflect the high level of store openings in the quarter coupled with the continuing costs of establishing the Company's position in the Southeast. INTEREST EXPENSE, NET Net interest expense expressed as a percentage of sales and other revenues was 0.8% in the first three quarters of 1997 versus 0.7% in the first three quarters of 1996. Net interest expense was 0.7% of sales and other revenues in both the third quarter of 1997 and the third quarter of 1996. Net interest expense in the first three quarters of 1997 was $19.6 million, an increase of 22.1% from the 1996 first three quarters net interest expense of $16.1 million. This increase is primarily the result of an increase in average debt levels coupled with a decrease in invested cash which is reflected as a decrease in interest income. HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS INCOME TAXES The effective income tax rate decreased in both the first three quarters and third quarter of 1997 to 38.3% from 39.6% in the corresponding periods of 1996. This lower rate is the result of a reduction in the Company's overall state income tax rate. Assuming there are no federal or state income tax rate changes, the Company expects the effective tax rate for fiscal 1997 to be in the 38.2% to 38.4% range. NET EARNINGS AND EARNINGS PER COMMON SHARE Net earnings increased 7.7% in the first three quarters of 1997 to $58.3 million or 2.5% of sales and other revenues, an increase of $4.2 million from 1996 first three quarters earnings of $54.1 million or 2.5% of sales and other revenues. Third quarter 1997 net earnings were $22.8 million or 2.8% of sales and other revenues as compared to $19.9 million or 2.6% of sales and other revenues in the third quarter of 1996. Expressed as a percentage of sales, net earnings increased in the third quarter of 1997 as increased margins and a reduction in the Company's income tax provision were only partially offset by increased selling, general and administrative expenses. Net earnings per common share in the first three quarters of 1997 were $1.38 as compared to $1.28 in the first three quarters of 1996, an increase of 7.8%. Net earnings per common share increased 14.9% to $0.54 in the third quarter of 1997 versus $0.47 in the third quarter of 1996. HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS CAPITAL RESOURCES AND LIQUIDITY GENERAL The current ratio (FIFO basis) at September 27, 1997, was 1.04 while working capital (FIFO basis) was $10.5 million, or 0.8% of total assets. The Company values the majority of its inventories using the LIFO method. The current cost of inventories exceeded the LIFO valuation by approximately $17.7 million on September 27, 1997 and $17.1 million on December 28, 1996. The Company's liquidity position is stronger than indicated by stated working capital and current ratios because of available unused lines of revolving credit of $81.1 million and available unused lines of short-term credit of $35.0 million on September 27, 1997. Cash and cash items increased $11.8 million to $54.3 million from $42.5 million at December 28, 1996. This increase is primarily the result of cash provided by operating activities partially offset by cash used in investing and financing activities. CASH FLOWS FROM OPERATING ACTIVITIES Cash provided by operating activities was $162.2 million in the first three quarters of 1997, an increase of $36.6 million over the $125.6 million provided in the first three quarters of 1996. This increase is attributable to a decrease in inventories coupled with higher depreciation and amortization. CASH FLOWS FROM INVESTING ACTIVITIES Cash used in investing activities decreased $29.9 million during the first three quarters of 1997 to $126.5 million from $156.4 million in the first three quarters of 1996. This decrease is primarily the result of lower capital expenditures during the current period. Total capital expenditures totaled $133.2 million in the first three quarters of 1997 and were composed of $116.1 million in additions to property, plant and equipment, $9.5 million in deferred charges and computer software costs and $4.5 million in non-cash capital lease additions. HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS These capital expenditures are primarily composed of costs incurred in meeting the Company's 1997 capital program. The Company expects to spend in excess of $170 million on new, relocated and expanded stores to open in 1997 and 1998, and improvements necessary to maintain current facilities and systems. During the first three quarters of 1997, the Company opened seventeen supermarkets including ten new stores, five relocations and two expansions, and temporarily closed one supermarket as it undergoes a substantial expansion. The 1997 store openings, together wth their square footage of selling area, are listed below: Square Footage Location Selling Area Northeast Chelmsford, MA 35,000 Dracut, MA 30,000 Guilderland, NY 33,000 Rutland, VT 34,000 Southeast Shallotte, NC 35,000 Danville, VA 41,000 Wilmington, NC (Murrayville Rd.) 35,000 Wilmington, NC (Carolina Beach) 41,000 Richmond, VA (Rt. 1 and Parham) 44,000 Charlotte, NC (Independence Blvd.) 41,000 Virginia Beach, VA (Shore Drive) 35,000 Virginia Beach, VA (Princess Anne) 40,000 Newport News, VA 37,000 Rock Hill, SC 40,000 Charlotte, NC (Eastland Mall) 41,000 Richmond, VA (Willow Lawn) 34,000 Virginia Beach, VA (Republic Drive) 40,000 HANNAFORD BROS. CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS During the fourth quarter of 1997, the Company does not expect to open any additional supermarkets. Net square footage of retail selling space is expected to increase by approximately 11% in 1997. Construction is ongoing for a number of stores to be opened in 1998. This program is subject to continuing change and review as conditions warrant. The 1997 capital program is being financed by internally generated funds, long-term debt, leases and lines of credit. CASH FLOWS FROM FINANCING ACTIVITIES Cash used in financing activities was $23.9 million in the first three quarters of 1997 as compared to $32.9 million of cash provided by financing activities in the first three quarters of 1996. This decrease in cash flows of $56.8 million is principally the result of reduced proceeds from the issuance of long-term debt. The Company purchased 312,398 shares of common stock during the first three quarters of 1997 at a cost of $10.9 million. This repurchased stock was used to fund the Company's stock based benefit plans with the balance being held in treasury. This amount was offset by proceeds of $7.4 million received during the first three quarters of 1997 from the issuance of 321,929 shares of treasury stock. The Company paid $17.1 million in dividends to common shareholders in the first three quarters of 1997. These dividend amounts represent 29.4% of net earnings available to common shareholders. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER 1997 RESULTS FORWARD-LOOKING INFORMATION From time to time, information provided by the Company or statements made by its associates may contain forward-looking information, as defined in the Private Securities Litigation Reform Act of 1995. Examples of such statements in this report include those concerning the Company's expected future tax rates, construction schedules and capital expenditures. The Company cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors and risks including, but not limited to the following: (1) Hannaford's future operating results are dependent on its ability to achieve increased sales and to control expenses. Factors such as lower than expected inflation, product cost fluctuations particularly in perishable categories, changes in product mix or the use of promotional items, both of which may affect pricing strategy, continued or increased competitive pressures from existing competitors and new entrants, including price cutting strategies, and deterioration in general or regional economic conditions are all factors which could adversely affect sales projections. Other components of operating results could be adversely affected by state or federal legislation or regulation that increases costs, increases in interest rates or the Company's cost of borrowing, increases in labor rates due to low unemployment or other factors, unanticipated costs related to the opening of new stores or the inability to control various expense categories. (2) Hannaford's future growth is dependent on its ability to expand its retail square footage. Increases in interest rates or the Company's cost of capital, the unavailability of funds for capital expenditures and the inability to develop new stores or convert existing stores as rapidly as planned are all risks to our projected future expansion. (3) Adverse determinations with respect to pending or future litigation or other material claims against Hannaford could affect actual results. Furthermore, the market price of Hannaford common stock could be subject to fluctuations in response to quarter to quarter variations in operating results, changes in analysts' earnings estimates, market conditions in the retail sector, especially in the supermarket industry, as well as general economic conditions and other factors external to Hannaford. PART II Item 5: Other Information A limited review was made of the results of the three-month and nine-month periods ended September 27, 1997, by Coopers & Lybrand. Item 6: Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation SK 10.1 Amended and Restated Hannaford Bros. Co. Deferred Compensation Plan for Officers, effective January 1, 1998. 15 Letter of Coopers & Lybrand L.L.P. furnished pursuant to Regulation SX. 23 Letter of Coopers & Lybrand L.L.P. regarding incorporation by reference to certain Forms S-8 of the Registrant 27 Financial Data Schedule (b) There were no reports on Form 8-K filed during the quarter ended September 27, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HANNAFORD BROS. CO. Date November 6, 1997 s/Blythe J. McGarvie Blythe J. McGarvie Senior Vice President (Chief Financial Officer) Date November 6, 1997 s/Charles H. Crockett Charles H. Crockett Assistant Secretary EX-10 2 Exhibit 10.1 HANNAFORD BROS. CO. DEFERRED COMPENSATION PLAN FOR OFFICERS EFFECTIVE JANUARY 1, 1998 PREAMBLE The purpose of the Hannaford Bros. Co. Deferred Compensation Plan for Officers (formerly the Hannaford Bros. Co. Deferred Compensation Plan) is to permit a select group of management employees to defer a portion of their base salary, annual incentive compensation, or both, as hereinafter set forth. ARTICLE I DEFINITIONS 1.1 "Board" or "Board of Directors" shall mean the Board of Directors of the Company. 1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.3 "Committee" shall mean the committee appointed by the Human Resources Committee of the Board to administer the Savings and Investment Plan. 1.4 "Company" shall mean Hannaford Bros. Co. 1.5 "Effective Date" shall mean January 1, 1998, with respect to this amendment and restatement. 1.6 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.7 "Participant" shall mean an officer of the Company who is a vice president or a more senior officer. 1.8 "Plan" shall mean the Hannaford Bros Co. Deferred Compensation Plan for Officers set forth herein and hereafter amended. 1.9 "Plan Year" shall mean the calendar year. ARTICLE II Deferred Compensation 2.1 DEFERRAL ELECTION. Participants may elect to defer, in accordance with the terms of this Plan, a specified portion of their base salary, incentive compensation awarded under the Hannaford Bros. Co. Annual Incentive Plan, or both. Once each Plan year a Participant may at any time elect to defer base salary payable for services to be performed after the date of the deferral election. At the same time a Participant may elect to defer annual incentive compensation payable for services to be performed after the date of the deferral election. An election to defer shall be made by executing and delivering to the Committee a deferred compensation agreement, in the form prescribed by the Committee. An election to defer shall continue in effect until the Participant terminates the election or ceases to be a Participant. A deferral election may not be modified within a Plan Year. A Participant may make a new deferral election on or before December 31 of any year to increase or decrease the amount to be deferred during the following Plan Year and succeeding Plan Years. A participant may terminate an election to defer base salary at any time by providing to the Committee such written, telephonic or electronic notice of termination as the Committee may prescribe. Such notice shall specify the effective date, and deferrals shall cease as soon as practicable thereafter. Such notice shall not be effective with regard to amounts previously deferred. At the same time and in the same manner a Participant may terminate an election to defer annual incentive compensation, and no annual incentive compensation earned for services performed thereafter shall be deferred. Such notice shall not be effective with regard to annual incentive compensation earned for services performed before said effective date that is subject to a deferral election. If a Participant ceases to be a member of a select group of management or highly compensated employees, within the meaning of ERISA, his or her deferral election shall terminate, provided that the loss of such status shall not cause amounts previously deferred to become payable. 2.2 ACCOUNTS. The Company shall establish a "Deferred Compensation Account" for each Participant who makes a deferral election, and shall adjust such account as follows: (a) At the end of each calendar month, credit the account with the amount deferred by the Participant during such month; and (b) As of the first day of each calendar month: (i) Debit the account by the amount, if any, paid to the Participant or his or her beneficiary during the preceding calendar month in accordance with the terms hereof; and (ii) Credit the account with interest on the balance as of the first day of the preceding month, at the rate paid on ten-year U.S. Treasury notes on the first day of the calendar year in which the interest is to be credited, or at such other rate as is prescribed in a deferred compensation agreement and approved by the Human Resources Committee of the Board. ARTICLE III DISTRIBUTIONS 3.1 FORM AND TIME. A Participant's Deferred Compensation Account shall be distributed in cash in the form of a lump sum, annual installments over a period not exceeding ten (10) years, or such other form specified in a deferred compensation agreement and approved by the Human Resources Committee of the Board. Unless distribution is made prior to termination of employment, payment shall be made or commence to the Participant as soon as practicable following termination of employment and not later than the last business day of the calendar month following the month in which the Participant terminates employment, or January 31 of the calendar year following the calendar year in which the Participant terminates employment. Each Participant shall elect the form and time of payment in each deferred compensation agreement he or she executes pursuant to Section 2.1, and such election shall apply to all amounts deferred pursuant to such agreement. A Participant may elect to receive a distribution as of January 31 of any calendar year prior to termination of employment, provided that such date is at least twelve (12) months after the date amounts are first deferred under the deferred compensation agreement. For purposes of this Plan, a termination of employment occurs on the date a Participant ceases to be employed by the Company or one of its subsidiaries and is no longer employed by any of them. In the event of a Participant's death, his or her Deferred Compensation Account shall be distributed to his or her designated beneficiary in a form described in the preceding paragraph. Payment of death benefits shall be made or commence as soon as practicable following a Participant's death and not later than the last business day of the calendar month following the month in which the Participant dies. If payment had commenced prior to the Participant's death, payment shall continue in accordance with the form of payment then in effect. Except as provided in Section 3.2, distribution shall be made under this Plan only on account of a Participant's retirement, death, or other termination of service, and no loans to Participants shall be permitted. 3.2 ACCELERATION BY COMMITTEE. In the event a Participant suffers a severe financial hardship as a result of an unforeseeable emergency, the Committee may, in its discretion, accelerate payment of the Participant's Deferred Compensation Account to the extent necessary to eliminate such hardship. An "unforeseeable emergency" means a sudden and unexpected illness, accident, loss of property due to casualty, or other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the Participant. 3.3 DESIGNATION OF BENEFICIARY. Each Participant may from time to time, by completing and signing a form furnished by the Committee, designate any person or persons (who may be designated concurrently, contingently or successively), the Participant's estate or any trust or trusts created by the Participant to receive amounts which are payable under this Plan to the Participant's designated beneficiary or beneficiaries. Each beneficiary designation shall revoke all prior designations and will be effective only when filed in writing with the Committee. If a Participant fails to designate a beneficiary or if a beneficiary dies before the date of such Participant's death and no contingent beneficiary has been designated, then the amounts which are payable as aforesaid shall be paid to his or her estate. If payment of benefits to a beneficiary commences and such beneficiary is entitled have been paid, the remaining benefits shall be paid to the successive beneficiary or beneficiaries, if any, designated by the Participant, otherwise to the beneficiary's estate. ARTICLE IV ADMINISTRATION 4.1 ADMINISTRATIVE COMMITTEE. The Committee shall have complete discretionary authority to control and manage the operation and administration of the Plan and to construe Plan provisions. Subject to the provisions of the Plan, the Committee from time to time may establish rules for the administration and interpretation of the Plan. The final determination of the Committee as to any disputed questions shall be conclusive. All actions, decisions and interpretations of the Committee in administering the Plan shall be made in a uniform and nondiscriminatory manner. 4.2 ACTION BY COMMITTEE. A majority of the Committee shall constitute a quorum, and an action of the majority present at any meeting shall be deemed the action of the Committee. Any member of the Committee may participate in a meeting of the Committee through conference telephone or similar communications equipment by means of which all individuals participating in the meeting can hear each other. Any action of the Committee may be taken without a meeting if all members of the Committee sign written consents setting forth the action taken or to be taken, at any time before or after the intended effective date of such action. 4.3 DELEGATION. The Committee may authorize one or more of its members to execute or deliver any instrument, make any payment or perform any other act which the Plan authorizes or requires the Committee to do. The Committee may employ counsel and other agents, may delegate ministerial duties to such agents or to employees of the Company and may procure such clerical, accounting, actuarial, consulting and other services as it may require in carrying out the provisions of the Plan. 4.4 CLAIMS PROCEDURE. If an application for a benefit ("claim") is denied by the Committee, the Committee shall give written notice of such denial to the applicant, by certified or registered mail, within 90 days after the claim was filed with the Committee; provided, however, that such 90-day period may be extended to 180 days by the Committee if it determines that special circumstances exist which require an extension of the time required for processing the claim. Such denial shall set forth: (a) the specific reason or reasons for the denial; (b) the specific Plan provisions on which the denial is based; (c) any additional material or information necessary for the applicant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the Plan's claim review procedure. Following receipt of such denial, the applicant or his or her duly authorized representative may: (a) request a review of the denial by filing a written application for review with the Committee within 60 days after receipt by the applicant of such denial; (b) review documents pertinent to the claim at such reasonable time and location as shall be mutually agreeable to the applicant and the Committee; and (c) submit issues and comments in writing to the Committee relating to its review of the claim. The Committee shall, after consideration of the application for review, render a decision and shall give written notice thereof to the applicant, by certified or registered mail, within 60 days after receipt by the Committee of the application for review; provided, however, that such 60-day period may be extended to 120 days by the Committee if it determines that special circumstances exist which require an extension of the time required for processing the application for review. Such notice shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based. 4.5 INDEMNIFICATION. The Company shall indemnify and hold harmless each member of the Committee against all expenses and liabilities arising out of his or her acts or omissions with respect to the Plan, provided such member would be entitled to indemnification pursuant to the bylaws of the Company. ARTICLE V Miscellaneous 5.1 AMENDMENT AND TERMINATION OF PLAN. The Company, through the Human Resources Committee of the Board, may at any time, in its sole discretion, terminate this Plan or amend the Plan in whole or in part. No such termination or amendment shall affect the right of any Participant or his or her surviving spouse or designated beneficiary to receive a benefit under the terms of this Plan on the date immediately preceding such termination or amendment. 5.2 EMPLOYEE STATUS. Nothing contained herein shall confer upon any Participant the right to be retained in the service of the Company or any other right not expressly provided for herein, nor shall the existence of this Plan impair the right of the Company to discharge or otherwise deal with a Participant. 5.3 FUNDING. This Plan is unfunded for purposes of the Code and Title I of ERISA and is not intended to meet the requirements of Code Section 401(a). The Plan constitutes the Company's mere promise to pay benefits in the future, and a Participant hereunder shall have no greater rights than a general, unsecured creditor of the Company. 5.4 ASSIGNMENT. To the maximum extent permitted by law, no benefit under this Plan shall be assignable or subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, claims of creditors, attachment, or encumbrance of any kind. 5.5 TAXES. Any and all taxes that may be due and owing with respect to any payment under the Plan shall be the sole responsibility of the persons to whom and for whose benefit such payment is made; provided, however, that the Company shall withhold from any amount payable under the Plan all amounts that are required by law to be withheld. 5.6 PLAN DOCUMENTS. Each Participant shall receive a copy of this Plan and the Committee shall make available for inspection by the Participant a copy of any rules and regulations adopted by the Committee in administering the Plan. 5.7 GOVERNING LAW. This Plan is established under and shall be construed according to the laws of the State of Maine, except to the extent such laws may be preempted by ERISA. IN WITNESS WHEREOF, Hannaford Bros. Co. has caused this document to be executed by its duly authorized officer on this day of , 1997. HANNAFORD BROS. CO. By: Its EX-15 3 Exhibit 15 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Hannaford Bros. Co.: We have reviewed the accompanying consolidated balance sheet of Hannaford Bros. Co. and Subsidiaries as of September 27, 1997, and the related consolidated statements of earnings for the three month and nine month periods ended September 27, 1997 and September 28, 1996 and the related consolidated statements of cash flows for the nine month periods then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We previously audited and expressed an unqualified opinion on the Company's consolidated financial statements for the year ended December 28, 1996 (not presented herein). In our opinion, the information set forth in the accompanying balance sheet as of December 28, 1996, is fairly stated in all material respects, in relation to the statement of financial position from which it has been derived. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. s/Coopers & Lybrand L.L.P. Portland, Maine October 16, 1997 EX-23 4 Exhibit 23 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 RE: Hannaford Bros. Co. Registrations on Form S-8 We are aware that our report dated October 16, 1997, on our review of interim financial information of Hannaford Bros. Co. and Subsidiaries as of September 27, 1997 and for the three month and nine month periods ended September 27, 1997 and September 28, 1996, and included in this Form 10-Q is incorporated by reference in the Company's registration statements on Form S-8 (Numbers 2-77902, 2-98387, 33-1281, 33-22666, 33-31624, 33-45273, 33-60119, 33-60655 and 33-60691). Pursuant to rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the Registration Statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. s/Coopers & Lybrand L.L.P. Portland, Maine November 5, 1997 EX-27 5
5 1,000 9-MOS JAN-03-1998 SEP-27-1997 54,349 0 14,302 874 183,296 264,610 1,157,915 378,601 1,249,504 271,576 301,782 0 0 31,754 575,060 1,249,504 2,355,725 2,355,725 1,772,400 1,772,400 469,183 0 19,635 94,507 36,242 58,265 0 0 0 58,265 1.38 1.38
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