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