SALISBURY, N.C. Delhaize America, Inc. (NYSE: DZA, DZB) announced today that the Company’s consolidated sales for the twelve weeks ended Sept. 9, 2000, were $3.1 billion. Third-quarter sales increased 18% over the prior year and comparable store sales were up 1%. Quarterly financial data includes the operating results of Hannaford Bros. Co. for six weeks of the quarter since its acquisition on July 31, 2000.
In the third quarter, cash earnings were $46.4 million or $.28 per share. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $208.7 million or 6.8% of sales. Before merger costs and one-time adjustments, third-quarter earnings were $36.3 million or $.22 per basic share outstanding.
Third quarter earnings, before merger costs and one-time adjustments, were impacted by higher interest expense, net of tax, of $18.6 million or $.11 per share, and amortization of intangible assets related to the acquisition of Hannaford of $8.7 million, net of tax, or $.05 per share. In addition, the Company continued its promotional activity in its Food Lion banner through the third quarter in response to a highly competitive environment in the Southeast United States. While this promotional activity has adversely affected the Company’s gross profit on product sold in the quarter, sales trends have met the Company’s targets and Food Lion’s market share of the supermarket industry in core Southeast markets is growing. Comparable store sales trends are expected to be in the range of 2% for the fourth quarter of fiscal 2000 and into next year.
“We are pleased with the progress in the comparable store sales trend we have established in this highly competitive environment and the progress we are making in developing our marketing strategy as a newly combined entity,” said Bill McCanless, Delhaize America’s chief executive officer. “We will continue to respond to the market’s highly competitive environment in the Southeast in order to grow our market share in our Food Lion banner. To this end, our combined management teams are already working together to pursue strategies designed to enhance the Company’s gross margins and profitability in future quarters. These opportunities include enhancing the merchandise offering, pursuing reduction in inventory shrinkage, procurement opportunities, and refining our retail pricing and promotional strategies.”
During the third quarter, the Company undertook a strategic review of its total operations to identify business units that did not meet its long-term performance expectations. As a result of this review, the Company has elected to dedicate its resources to grow its three primary store banners, Food Lion, Hannaford and Kash n’ Karry, and will not continue to develop the Save ‘n Pack banner in Florida. Of the 18 Save ‘n Pack stores, 13 locations will close and 5 locations will be converted to the Kash n’ Karry banner. A store closing charge of $30.5 million, net of tax, has been recognized in the third quarter related to the closing of 15 locations, including the 13 Save n’ Pack stores, two Food Lion stores and the relocation of 14 stores.
The Company continues to pursue its growth plans for its three primary store banners. For the year ending December 2000, the Company will have added 140 store locations to its store base, net of closures, and will have renovated more than 130 stores under the Food Lion, Hannaford, and Kash n’ Karry banners. Delhaize America expects to end fiscal 2000 with 1,418 store locations. Its growth plans in 2001 include a capital expenditure program of approximately $450 million with the objective of increasing square footage by 4% to 5% and renovating approximately 200 store locations.
Continuing, Mr. McCanless said, “We will be pursuing a growth strategy that promotes the continued expansion and development of our three banners while focusing on cash flow and reduction of debt. Our strategic review of our operations noted that all of our markets are providing positive cash flow and plans are in place to reduce investment in working capital.”
Additional one-time adjustments incurred in the quarter included a non-cash asset impairment charge related to store locations of $9.7 million, after tax. Merger costs incurred during the third quarter of $6.8 million, after tax, related primarily to amortization of fees incurred prior to the third quarter to arrange bridge financing to fund the Hannaford acquisition. After considering merger-related costs and one-time adjustments, the Company reported a loss for the third quarter of $10.6 million, or a loss of $0.06 per basic share outstanding.
Sales were $8.2 billion with earnings of $114.0 million, or $0.71 per basic share outstanding for the first 36 weeks of fiscal 2000.
Delhaize America is making steady progress toward the integration of its new Hannaford Bros. unit, since its acquisition at the end of July. The Company continues to expect first-year synergies of approximately $40 million and $75 million of synergies on an annual basis in its third year of combined operating results.
“The plans developed over the past year by the management teams of our three store banners have been launched during the past few weeks since the merger was consummated and we will see benefits from these efforts immediately,” said Hugh Farrington, vice chairman of Delhaize America. “Communication across the management teams at all three banners is working effectively. We have created a very talented and deep management bench at Delhaize America to manage this Company. Immediate benefits will be realized from synergies in our private label programs and sharing of best practices in shrinkage reduction, procurement, administrative functions and information technology. Over the long-term, this merger will provide us with improved purchasing power, greater efficiencies, and enhanced growth opportunities.”
Delhaize America is the parent company of Food Lion, Hannaford Bros. and Kash n’ Karry. With more than 1,400 stores on the Eastern seaboard, the combined companies form the fifth-largest supermarket operator in the United States, with stores from Maine to Florida.
Certain statements contained in this press release and related statements by management may be deemed to be forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including those described in Delhaize America’s filings with the Securities and Exchange Commission. Delhaize America undertakes no obligation to update this forward-looking information except as required by law.
Contact: Wendy Melton (704) 633-8250, Ext. 2892