SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 19, 1999
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
FOOD LION, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0660192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 1330, 2110 Executive Drive, Salisbury, NC 28145-1330
(Address of principal executive office) (Zip Code)
(704) 633-8250
(Registrant's telephone number)
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
Outstanding shares of common stock of the Registrant as of July 23, 1999.
Class A Common Stock 242,890,915
Class B Common Stock 227,189,964
Page 1 of 45
The Exhibit index is located on page 21.
FOOD LION, INC.
INDEX TO FORM 10-Q
June 19, 1999
Part I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Statements of Income for the 12 and
24 weeks ended June 19, 1999 and June 20, 1998 3-4
Consolidated Balance Sheets as of June 19,
1999, January 2, 1999 and June 20, 1998 5
Consolidated Statements of Cash Flows for
24 weeks ended June 19, 1999 and June
20, 1998 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-17
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security
Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
Exhibit Index 21
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOOD LION, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the 12 Weeks ended June 19, 1999 and June 20, 1998
(Dollars in thousands except per share data)
June 19, 1999 June 20, 1998 June 19, 1999 June 20, 1998
% %
Net sales $2,509,240 $2,353,260 100.00 100.00
Cost of goods sold 1,933,085 1,826,657 77.04 77.62
Gross profit 576,155 526,603 22.96 22.38
Selling and administrative expenses 380,811 352,609 15.18 14.98
Depreciation and amortization 59,717 54,012 2.38 2.30
Operating income 135,627 119,982 5.40 5.10
Interest expense 25,384 23,154 1.01 0.99
Income before income taxes 110,243 96,828 4.39 4.11
Provision for income taxes 41,892 36,795 1.67 1.56
Net income $ 68,351 $ 60,033 2.72 2.55
Basic and diluted earnings per share $ 0.14 $ 0.13
Dividends per share $ 0.04 $ 0.04
Weighted average number
of shares outstanding:
Class A 245,114,162 244,777,891
Class B 229,261,156 232,727,364
Total 474,375,318 477,505,255
-3-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOOD LION, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the 24 Weeks ended June 19, 1999 and June 20, 1998
(Dollars in thousands except per share data)
June 19, 1999 June 20, 1998 June 19, 1999 June 20, 1998
% %
Net sales $4,916,286 $4,658,733 100.00 100.00
Cost of goods sold 3,789,947 3,626,772 77.09 77.85
Gross profit 1,126,339 1,031,961 22.91 22.15
Selling and administrative expenses 754,653 688,904 15.36 14.79
Depreciation and amortization 117,176 106,430 2.38 2.28
Operating income 254,510 236,627 5.17 5.08
Interest expense 49,737 50,768 1.01 1.09
Income before income taxes 204,773 185,859 4.16 3.99
Provision for income taxes 77,814 70,592 1.58 1.52
Net income $ 126,959 $ 115,267 2.58 2.47
Basic and diluted earnings per share $ 0.27 $ 0.24
Dividends per share $ 0.08 $ 0.07
Weighted average number
of shares outstanding:
Class A 246,510,337 240,556,329
Class B 230,045,760 232,727,364
Total 476,556,097 473,283,693
-4-
FOOD LION, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 19, 1999 January 2, 1999 June 19, 1998
Assets
Current assets:
Cash and cash equivalents $ 89,822 $ 123,592 $ 94,697
Receivables 167,358 199,101 157,905
Inventories 1,104,720 1,103,635 1,000,916
Prepaid expenses 27,215 20,552 48,562
Deferred tax asset 65,397 65,397 63,123
Total current assets 1,454,512 1,512,277 1,365,203
Property, at cost, less accumulated
depreciation 1,968,728 1,897,080 1,832,946
Deferred tax asset 4,707 4,707 51,980
Intangible assets 267,193 258,402 267,046
Other assets 3,346 3,495 4,069
Total assets $3,698,486 $3,675,961 $3,521,244
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $ 62,000 $ 61,000 $ -
Accounts payable, trade 559,399 545,015 557,580
Accrued expenses 353,137 360,105 321,621
Capital lease obligations - current 22,531 21,940 21,229
Long term debt - current 42,292 42,518 2,646
Other liabilities - current 11,272 9,839 9,911
Total current liabilities 1,050,631 1,040,417 912,987
Long-term debt 428,641 429,763 470,797
Capital lease obligations 492,327 492,660 491,178
Other liabilities 109,576 114,199 120,686
Total liabilities 2,081,175 2,077,039 1,995,648
Shareholders' Equity:
Class A non-voting common stock, $.50 par value 121,813 123,946 125,299
Class B voting common stock, $.50 par value 114,039 115,415 116,364
Additional capital - 60,332 105,999
Retained earnings 1,381,459 1,299,229 1,177,934
Total shareholders' equity 1,617,311 1,598,922 1,525,596
Total liabilities and shareholders' equity $3,698,486 $3,675,961 $3,521,244
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FOOD LION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 24 Weeks ended June 19, 1999 and June 20, 1998
(Dollars in thousands)
24 Weeks
June 19, 1999 June 20,1998
Cash flows from operating activities
Net income $126,959 $115,267
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 117,176 106,430
Gain on disposals of property and
capital lease terminations (1,571) (1,841)
Changes in operating assets and liabilities:
Receivables 31,743 8,885
Inventories (1,085) (18,172)
Prepaid expenses (6,663) (26,048)
Other assets 149 1,651
Accounts payable and accrued expenses 7,416 30,121
Other liabilities (3,190) (4,039)
Total adjustments 143,975 96,987
Net cash provided by operating activities 270,934 212,254
Cash flows from investing activities
Capital expenditures (185,851) (141,878)
Proceeds from disposal of property 1,279 66,895
Net cash used in investing activities (184,572) ( 74,983)
Cash flows from financing activities
Net proceeds (payments) under short-term borrowings 1,000 (80,000)
Principal payments on long-term debt (1,348) (4,992)
Principal payments under capital lease obligations (11,214) (17,621)
Dividends paid (39,884) (35,248)
Repurchase of common stock (69,546) -
Proceeds from issuance of common stock 860 1,947
Net cash used in financing activities (120,132) (135,914)
Net (decrease) increase in cash and cash
equivalents (33,770) 1,357
Cash and cash equivalents at beginning
of period 123,592 93,340
Cash and cash equivalents at end of period $ 89,822 $ 94,697
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Notes to Consolidated Financial Statements (Dollars in thousands)
1) Basis of Presentation:
The accompanying financial statements are presented in accordance
with the requirements of 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 Food Lion, Inc. (the "Company").
Accordingly, the reader of this Form 10-Q should refer to the
Company's Form 10-K for the year ended January 2, 1999 for
further information.
The financial information has been prepared in accordance with
the Company's customary accounting practices and has not been
audited. In the opinion of management, the financial information
includes all adjustments consisting of normal recurring
adjustments 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:
June 19, 1999 June 20, 1998
Cash payments for income taxes $ 86,923 $93,273
Cash payments for interest,
net of amounts capitalized 51,332 52,952
Non-cash investing and financing activities:
Capitalized lease obligations
incurred for store properties 28,878 31,975
Capitalized lease obligations
terminated for store properties 17,406 12,302
Conversion of long-term debt
to stock 0 110,445
The Company considers all highly liquid investment instruments
purchased with an original maturity of three months or less to
be cash equivalents.
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3) Inventories
Inventories are stated at the lower of cost or market. Inventories
valued using the last-in, first-out(LIFO) method comprised
approximately 85% and 84% of inventories as of June 19, 1999 and
June 20, 1998, respectively. Meat, produce and deli inventories
are valued on the first-in, first-out (FIFO) method. If the FIFO
method were used entirely, inventories would have been $141.5
million and $119.9 million greater as of June 19, 1999 and
June 20, 1998, respectively. Application of the LIFO method
resulted in increases in the cost of goods sold of $2.4
million and $5.5 million for the 24 weeks ended June 19, 1999
and June 20, 1998, respectively.
4) Reclassification
Certain financial statement items have been reclassified to
conform to the current year's format.
-8-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS (12 and 24 weeks ended June 19, 1999 compared
to 12 and 24 weeks ended June 20, 1998)
The Company recorded earnings for the second quarter and
year to date for 1999 of $68.4 million and $127.0 million,
respectively, resulting in increases of 13.9% and 10.1% over the
corresponding periods of 1998. The second quarter of 1999
includes an after-tax charge of $2 million related to executive
post-employment benefits (see discussion below). Excluding this
charge, earnings would have been $70.4 million for the second
quarter and $129.0 million year to date, representing increases
of 17.2% and 11.9% over the respective periods of 1998.
Sales for the second quarter and year to date of 1999 were
$2.5 billion and $4.9 billion, respectively, resulting in
increases of 6.6% and 5.5% over the corresponding periods of
1998. The Company's second quarter 1999 sales are not
comparable to 1998 due to a change in the method of collecting
sales tax on products discounted through the MVP customer
("MVP") and Preferred Customer Club ("PCC") loyalty card
programs (see discussion below). On a comparable basis, 1999
second quarter and year to date sales increased 7.5% and 7.0%
over the corresponding periods of last year. Same store sales
increased 2.4% for the second quarter.
Beginning in May 1998, after receiving permission from all
state departments of revenue, the Company began collecting
sales tax on the net sales price, after considering the MVP/PCC
discount granted, rather than the full retail price of the
MVP/PCC items. The related impact to the second quarter and
year to date of 1999 was to reduce reported sales by
approximately $20.4 million and $70.4 million, respectively.
This change does not impact the same store sales calculation or
the Company's net income, as gross profit and expense dollars
are the same under either method. The only difference is that
under the new method the discount granted is reflected in sales
rather than cost of goods sold under the original method. The
following table illustrates the impact of the change.
-9-
Second Quarter of
1999 1999
Dollars %
1999 Comparable % Comparable
Dollars to As to
As Qtr. 2- Reported Qtr. 2-
Reported 1998 1998
(Dollars and (New (Original (New (Original
shares in Method) Method) Method) Method)
thousands)
Net sales $ 2,509,240 $2,529,658 100.00% 100.00%
Cost of goods sold 1,933,085 1,953,503 77.04 77.22
Gross profit 576,155 576,155 22.96 22.78
Selling and
administrative
expenses 380,811 380,811 15.18 15.05
Depreciation and 59,717 59,717 2.38 2.37
amortization
Operating income 135,627 135,627 5.40 5.36
Interest expense 25,384 25,384 1.01 1.00
Income before 110,243 110,243 4.39 4.36
income taxes
Provision for 41,892 41,892 1.67 1.66
income taxes
Net income $ 68,351 $68,351 2.72% 2.72%
Basic and diluted
earnings per share $ 0.14 $ 0.14
Weighted average
number of shares 474,375 474,375
outstanding
The Company's 1999 business plan includes opening 94 new
stores, closing 35 existing stores (approximately 20 of these
closings will be relocations) and renovating approximately 140
existing stores. With this growth plan, the Company anticipates a
net increase in store square footage of approximately 8.5% in
1999. As of June 19, 1999, the Company had opened 53 new
stores, closed 13 stores (of which 12 were relocations), and
completed renovations of 52 existing stores.
Gross profits of 22.96% for the second quarter and 22.91%
year to date (or 22.78% and 22.59%, respectively, adjusted to the
original method of reporting sales tax) compared favorably
against prior year gross profits of 22.38% of sales in the second
quarter and 22.15% of sales year to date. The increase in gross
profit is due to continued category management initiatives
particularly in the perishable and non-grocery categories. In
addition, The Company benefited from continued efficient
warehouse operations which led to lower operating costs. The
second quarter LIFO charge was $1 million. The Company's
internal testing for the second quarter indicated minimal
inflation; however, given the difficulty in predicting
inflationary trends, the Company has provided a $2.4 million LIFO
provision through the second quarter of 1999.
-10-
For the second quarter of 1999, selling and administrative
expenses were $380.8 million or 15.18% of sales (15.05% adjusted
for the original method of reporting sales tax) as compared to
$352.6 million or 14.98% of sales in the corresponding period of
the prior year. Excluding the one-time charge of $3.3 million
(pre tax) related to the executive post-employment benefits (see
discussion below), selling and administrative expenses would have
been 15.05% of sales for the second quarter (14.93% adjusted for
the original method of reporting sales tax). The Company posted
an improvement in selling and administrative expenses on a
comparable basis despite continued increases in labor related
costs due to the low unemployment rate in the Southeast market,
and an increase in occupancy costs resulting from the Company's
new store opening and renovation program. This improvement was
accomplished through strong sales posted during the quarter and
good cost control across all remaining expense categories.
During the second quarter, the Company recorded a $3.3
million pre-tax charge ($2 million after-tax) related to
executive post-employment benefits. These benefits relate to the
resignation of the Company's former Senior Vice President of
Merchandising and finalization of amounts due upon retirement of
the Company's former President and Chief Executive Officer
("CEO"). These costs are included in selling and administrative
expenses.
Depreciation and amortization of $59.7 million was 2.38% of
sales compared to 2.30% of sales in the second quarter of 1998.
Year to date depreciation and amortization was $117.2 million or
2.38% of sales compared to 2.28% of sales for the same period of
the prior year. The quarter and year to date increases are
primarily due to leasehold improvements and equipment purchases
for new stores and renovations.
Interest expense of $25.4 million for the second quarter of
1999 and $49.7 million year to date compares to $23.2 million and
$50.8 million for the respective periods of 1998 due to higher
interest expense on store capital leases.
Net income for the quarter was $68.4 million or 2.72% of sales as
compared to $60.0 million or 2.55% of sales in the second quarter of
the prior year. Basic and diluted earnings per share were $0.14 for
the second quarter of 1999 compared to $0.13 last year. Excluding the
one-time after-tax charge related to post-employment benefits of $2.0
million (see discussion above), net income for the second quarter of
1999 would have been $70.4 million or 2.80% of sales, and basic and
diluted earnings per share would have been $0.15.
-11-
Store Closing Costs
(Dollars in millions)
Reduction
of Asset Lease Accrued
Values Liabilities Expenses Total
Balance at March 27, 1999 $15.4 $110.5 $1.2 $127.1
Additions .6 3.8 1.6 6.0
Reductions 0.0 -3.6 -2.7 -6.3
Balance at June 19, 1999 $16.0 $110.7 $.1 $126.8
The Company recorded $3.5 million in store closing costs (included
in Selling and Administrative Expenses on the Company's Consolidated
Statement of Income) during the second quarter of 1999. These costs
are included in the "Additions" line in the table above. Significant
additions also include $2.1 million related to 12 acquired stores that
will not re-open as Food Lion locations. The costs associated with
closing these stores were charged against Goodwill.
Reductions include fees totaling $1.9 million related to the
termination of three store leases. The remaining $4.4 million relates
to on-going rent payments made on lease obligations and payment of
expenses arising from contractual obligations.
During the second quarter of 1999, the Company closed 8 stores in
the normal course of business, all 8 stores were relocated. The
revenues and operating results of these stores were not significant to
the Company's total revenues and operating results.
During the second quarter of 1999, the Company completed
disposition efforts related to 4 closed stores.
At the end of the second quarter of 1999 the Company had $126.8
million in store closing costs related to 142 stores (137 leased and 5
owned) and one distribution center. Disposition efforts on the
properties related to these facilities (leases, equipment, and
buildings) will continue until all related properties are disposed.
Liquidity and Capital Resources
Cash provided by operating activities totaled $270.9 million
for the 24 weeks ended June 19, 1999, compared with $212.3
million for the same period last year. The increase was primarily
due to an increase in operating income and improved receivable
management.
Capital expenditures totaled $186 million for the 24 weeks
ended June 19, 1999, compared with $142 million for the same
period in 1998. The Company opened 53 new stores, closed 13
stores (including 12 relocations), and completed the renovation
of 52 existing stores through the end of the second quarter of
-12-
1999. Food Lion plans to open a total of 94 new stores in 1999
and renovate approximately 140 stores. The Company anticipates
that the majority of the new stores will be opened under
conventional leasing arrangements.
Capital expenditures currently estimated for 1999 are $390
million. Capital expenditures for 1999 will be financed through
funds generated from operations and existing bank and credit
lines.
The Company maintains the following bank and credit lines:
$250.0 million commercial paper program under which no borrowings
were outstanding during the first and second quarters of 1999 and 1998.
A revolving credit facility with a syndicate of commercial banks
providing $625.0 million in committed lines of credit which expires in
December 1999. There were no outstanding borrowings as of the end of
the second quarter of 1999 or 1998.
Additional short-term committed lines of credit totaling $20.0
million which are available when needed. The Company is not required
to maintain compensating balances related to these lines of credit, and
borrowings may occur periodically. As of June 19, 1999, the
outstanding borrowings from this line totaled $20 million. There were
no outstanding borrowings as of June 20, 1998. During the second
quarter of 1999, the Company had average borrowings of $8.04 million at
a daily weighted average interest rate of 5.01% with a maximum amount
outstanding of $20.0 million.
Periodic short-term borrowings may be placed under informal credit
arrangements, which are available to the Company at the discretion of
the lender. Borrowings for the second quarter were as follows:
Informal Credit Arrangements
(Dollars in millions)
1999 1998
Outstanding borrowings
at the end of the second quarter $42.0 $0.0
Average borrowings $26.8 $15.8
Maximum amount outstanding $105.0 $72.0
Daily weighted average interest rate 5.09% 5.62%
-13-
During the second quarter of 1999, the Company repurchased $69.5
million of Company stock, representing approximately 4.4 million Class
A shares and approximately 2.8 million Class B shares. In July 1999,
The Board of Directors approved a $100 million as the amount available
for share repurchase going forward. Purchases of Class A and/or Class
B Common Stock may be made in the open market, as deemed in the best
interest of shareholders.
Year 2000
In 1996, the Company began evaluating both its information
technology systems, and other systems and equipment in order to
identify and adjust date sensitive systems for Year 2000
compliance. As part of this undertaking, the Company created a
Year 2000 Project Team to address the issues related to Year 2000
compliance. The Year 2000 Team is led by representatives from
the Company's Information Technology department and includes key
representatives from other areas of the Company. The Year 2000
Team has developed a three-phase plan to identify and remediate
all existing systems to ensure the Company's readiness for the
century change. These phases consist of assessment, system
remediation and integration testing.
Project Phase One primarily focused on assessing the
business impact of the century change on the Company's operating
environment. This assessment included information technology
systems, non-information technology systems and supply chain
readiness. The assessment was conducted based on an analysis of
the Company's individual business processes and the potential
material risks associated with the Company's operations. Project
Phase Two primarily focused on code and system conversion
(remediation) of date impacted applications and systems.
Remediation or replacement was conducted for all information
technology and embedded systems impacted by Year 2000 issues.
Project Phase Three involves the execution of various testing
protocol, analysis of test results and the development of
contingency plans for each of the impacted systems.
The Company has completed Project Phase One for all systems
and Project Phase Two for all systems not scheduled for
replacement. Installation of replacement systems impacted by Year
2000 issues is progressing with completion expected in fall,
1999. The Company has included the cost of these systems in its
estimates for the Year 2000 Project. The Company has commenced
Project Phase Three, which includes testing and validation of
impacted systems, and anticipates this phase, as well as
development of contingency plans, will continue throughout 1999.
-14-
Except for the cost of replacement systems, the Company will
expense the cost of the Year 2000 Project as incurred. The
Company is funding the costs associated with the Year 2000
Project through operating cash flows and has not deferred any
Information Technology projects in order to complete the Year
2000 Project.
The Company estimates the total incremental cost of the Year
2000 Project is approximately $17 million which includes
equipment and software replacements, reprogramming, systems
testing, and outside consulting services. Approximately $4.0
million of the total cost for the Year 2000 Project is related to
reprogramming or remediation of existing software and new
systems, while the remaining cost of approximately $13.0 million
is related to the implementation of certain replacement systems.
At the end of the second quarter of fiscal 1999, the Company had
incurred approximately $11 million of the total cost of the Year
2000 project of which $3.1 million had been expensed as incurred
and $7.9 million had been capitalized for replacement systems.
The Company has not materially increased the number of its
employees in order to complete the Year 2000 Project. Although
the Company has utilized external contractors in various phases
of the Year 2000 Project, the Company does not consider any of
these contracts or relationships material for the completion of
the Year 2000 Project. The Company has assigned certain employees
from its Information Technology department to the Year 2000
Project (averaging approximately 20 employees during Phase One,
22 employees during Phase Two, and 19 employees during Phase
Three of the project and less than 15 employees from its user
departments). As discussed above, the Company has created a Year
2000 Project Team composed of representatives from all areas of
the Company. Members of the Year 2000 Project Team have
completed the tasks associated with the Year 2000 Project as part
of their normal duties. Although the Company has discussed its
Year 2000 Project with certain of its consultants, third parties
were not retained to perform independent verification and
validation processes regarding the risks and cost estimates of
the Year 2000 Project.
As part of the Year 2000 Project, the Company has identified
relationships with third parties, including vendors, suppliers,
and service providers, which the Company believes are critical to
its business operations. Although the Company considered several
factors in identifying these critical relationships, the Company
has concentrated its communication efforts, as discussed below,
with suppliers and vendors from whom the Company makes annual
purchases in excess of $10 million. The Company continues to
communicate with these third parties through questionnaires,
letters, and interviews in an effort to determine the extent to
which they are addressing their Year 2000 compliance issues.
Based on the responses received to date from these efforts, the
-15-
Company understands that all critical suppliers have indicated
they anticipate being Year 2000 compliant. A substantial
percentage of these critical suppliers have indicated they are
Year 2000 compliant while the remaining suppliers have indicated
they are still addressing Year 2000 issues. Where appropriate,
the Company has developed strategies to work with its suppliers
to verify Year 2000 readiness and create contingency plans as
discussed below.
The Company has identified its operational and supply chain
activities as its most critical functions potentially impacted by
Year 2000 issues. The Company will conduct testing within a
parallel operating environment created to simulate business
processes and integrated systems functionality, including front-
end operations and supply chain activities. Validation of
integrated systems functionality will be performed by comparing
test results to actual processes and data.
The Company cannot assure that there will not be an adverse
impact on the Company if third parties do not appropriately
address their Year 2000 issues in a timely manner. Such other
possible consequences include, but are not limited to, loss of
communications with stores, loss of electric power, and an
inability to process customer transactions or otherwise engage in
similar normal business activities. As discussed below, the
Company has developed contingency plans with its critical
suppliers in order to arrange for the timely delivery of
inventory. The Company will continue to communicate with, assess
and monitor the progress of these third parties in resolving Year
2000 issues.
Although the Company does not believe the actual impact of
any system failures related to the century change will be
material, the Company has developed various contingency plans
with its critical suppliers and certain other vendors in order to
assure the timely delivery of inventory and prepare for normal
business activities following the century change. In the event
the Company or a key supplier is adversely impacted by the
century change, the Company will implement its contingency plan
for such situation. These plans include alternate means of
communication with suppliers, such as facsimile, telephone and
hand delivery, manual operation of certain systems, as well as
the implementation of certain established ordering procedures.
Under the terms of these established ordering procedures, the
Company's critical suppliers will provide inventory to the
Company based on historical ordering patterns. These suppliers
will also substitute products and adjust inventory levels of
substitute items based on the availability of certain products.
The Company will continue to develop and finalize the
implementation of its contingency plans with third parties
throughout 1999.
-16-
The projections and project completion dates are based on
management's best estimates and may be updated from time to time
as additional information becomes available. This section
discussing Year 2000 issues contains forward-looking statements
(refer to "Other" below which addresses forward-looking
statements made by the Company).
Other
Information provided by the Company, including written or
oral statements made by its representatives, may contain forward-
looking information as defined in the Private Securities
Litigation Reform Act of 1995. All statements, other than
statements of historical facts, which address activities, events
or developments that the Company expects or anticipates will or
may occur in the future, including such things as expansion and
growth of the Company's business, future capital expenditures and
the Company's business strategy, are forward-looking statements.
In reviewing such information, it should be kept in mind that
actual results may differ materially from those projected or
suggested in such forward-looking statements. This forward-
looking information is based on various factors and was derived
utilizing numerous assumptions. Many of these factors have
previously been identified in filings or statements made by or on
behalf of the Company, including filings with the Securities and
Exchange Commission of Forms 10-Q, 10-K and 8-K.
Important assumptions and other important factors that could
cause actual results to differ materially from those set forth in
the forward-looking statements include: changes in the general
economy or in the Company's primary markets, changes in consumer
spending, competitive factors, the nature and extent of continued
consolidation in the industry, changes in the rate of inflation,
changes in state or federal legislation or regulation, adverse
determinations with respect to litigation or other claims,
inability to develop new stores or complete remodels as rapidly
as planned, stability of product costs -- supply or quality
control problems with the Company's vendors, and issues and
uncertainties related to Year 2000 detailed from time-to-time in
the Company's filings with the Securities and Exchange
Commission.
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Part II OTHER INFORMATION
Item 1. Legal Proceedings
The Company has had no significant developments related to
legal matters since the Item 1 disclosure included in the
Company's Form 10Q filed May 5, 1999 for the quarter ended
March 27, 1999.
Item 2. Change in Securities
This item is not applicable.
Item 3. Defaults Upon Senior Securities
This item is not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a). The Company held its Annual Meeting of Shareholders on May 6,
1999.
(b). Not applicable
(c). Matters voted upon at the meeting.
Election of Directors For Withheld Broker
Non-Votes
Pierre-Olivier Beckers 195,608,525 4,848,998 30,372,841
Dr. J. Kelly Collamore 196,305,905 4,151,618 30,372,841
JC Coppieters`T Wallant 195,619,021 4,838,502 30,372,841
Pierre Dumont 195,615,704 4,841,819 30,372,841
William G. Ferguson 196,207,350 4,250,173 30,372,841
Dr.Bernard W. Franklin 196,221,278 4,236,245 30,372,841
Joseph C. Hall, Jr. 196,301,520 4,156,003 30,372,841
Margaret H. Kluttz 196,185,035 4,272,488 30,372,841
Bill McCanless 196,337,033 4,120,490 30,372,841
Dominique Raquez 195,620,013 4,837,510 30,372,841
Appointment of For Against Abstain Broker
Independent Accountants Non-votes
PricewaterhouseCoopers 199,865,894 380,374 211,255 30,372,841
LLP
Item 5. Other Information
This item is not applicable.
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Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
10A Employment Severance Agreement and Mutual Release dated
April 14, 1999 between The Company and Pamela K. Kohn.
10B Employment Agreement dated April 7, 1999 between The
Company and R. William McCanless.
27 Financial Data Schedule
(b). The Company did not file a report on Form 8-K during the
period ended June 19, 1999.
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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.
FOOD LION, INC.
Registrant
DATE: July 29, 1999 BY:\s\Laura Kendall
Laura Kendall
Vice President of Finance
Chief Financial Officer
Principal Accounting Officer
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Exhibit Index
Exhibit Description Page
No.
10A Employment Severance Agreement and Mutual Release
dated April 14, 1999 between The Company and
Pamela K. Kohn. 22-29
10B Employment Agreement dated April 7, 1999 between
the Company and R. William McCanless. 30-43
27 Financial Data Schedule 44-45
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