Fourth quarter earnings above expectations
Salisbury, N.C. Delhaize America, Inc. (NYSE: DZA, DZB) reported today the Company earned $56.9 million in the sixteen weeks ended December 30, 2000, before merger costs or $0.31 per basic share outstanding. The Company posted annual earnings of $224.5 million before merger costs and one-time adjustments or $1.35 per basic share for fiscal 2000.
In the fourth quarter, cash earnings were $82.3 million or $0.45 per basic share outstanding and $262.7 million or $1.58 per basic share outstanding for the year then ended. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $349.4 million or 7.8 % of sales for the fourth quarter and 7.6% of sales for 2000.
Fourth quarter 2000 sales of $4.5 billion were an increase of 32.5% from fourth quarter 1999 sales of $3.4 billion. For fiscal 2000, sales were $12.7 billion, up 16.3% from the previous year. Comparable store sales for the quarter increased 2.1%, and the Company finished the year with an annual comparable store sales increase of 0.8%. All three Delhaize America supermarket banners, Food Lion, Hannaford and Kash n’ Karry, achieved positive comparable store sales growth in fiscal 2000. Fourth quarter and fiscal 2000 sales and earnings include results for Hannaford Bros., Inc. acquired on July 31, 2000. Total proforma sales for 2000 were $14.3 billion.
“Fourth quarter’s strong results reflected good sales momentum at all three banners, gross margin improvement and good cost controls. In this quarter, our first full quarter after the merger with Hannaford, we saw the benefit of all three of our supermarket banners working together to produce strong operating results across the board,” said Bill McCanless, Delhaize America’s Chief Executive Officer.
Delhaize America is starting to realize the benefits of the synergy teams formed over the past year to pursue best practices between Food Lion, Hannaford, which was acquired on July 31, 2000, and Kash n’ Karry. The Company is highly confident it will achieve synergies of approximately $40 million in the first year from the acquisition date and $75 million by year three. The Company achieved approximately $10 million in benefits from best practices and synergy development in the fourth quarter.
“The best practices identified by our cross functional, inter-company teams have been beyond our expectations,” noted Hugh Farrington, Vice Chairman of Delhaize America and CEO of Hannaford. “Our focus is on continuous sales and gross margin enhancement rather than isolated one-time cost reductions. This approach has led us to a strategic outlook on our businesses and better operating performance. Our banners are teaching each other how to increase gross margin productivity, which will lead to a stronger company as a whole.”
Fourth quarter earnings reflect interest expense and the amortization of intangible assets associated with the acquisition of Hannaford Bros Co. of approximately $39.9 million and $23.6 million, after tax, respectively. In addition, merger costs incurred in the fourth quarter of $ 15.4 million, after tax, related primarily to amortization of fees paid in prior periods to arrange financing to fund the Hannaford acquisition.
As previously reported, the Company added 66 new stores during the year, including 55 Food Lion, two Hannaford and nine Kash n’ Karry stores. The Company relocated 10 Food Lion stores and closed five Food Lion and 13 Save n’ Pack stores. The Company remodeled 173 supermarkets, including 134 Food Lion, 34 Kash n’ Karry and 5 Hannaford stores. Retail square footage increased 19.4% during the year to approximately 51.4 million square feet.
In 2001, Delhaize America plans to invest $450 million in capital expenditures. The Company will open a total of 44 new stores and remodel and/or expand approximately 200 existing supermarkets, increasing square footage by 4.0 % to 53.4 million square feet. Total sales are expected to grow approximately 17-18% in 2001, with comparable store sales growth estimated to be 1-2%.
On November 16, 2000 Delhaize Group and Delhaize America announced an agreement for a share exchange pursuant to which Delhaize Group will exchange each outstanding share of Delhaize America common stock not currently held by Delhaize Group for 0.4 shares of Delhaize Group. The transaction is expected to be consummated in Spring 2001.
Delhaize America is the 5th largest supermarket company in the US, operating 1,420 supermarkets in 16 states along the eastern seaboard under the Food Lion, Hannaford and Kash n’ Karry store banners. Delhaize America employs more than 116,000 full-time and part-time associates.
This document contains forward-looking statements that involve uncertainties. Factors that could cause results to differ materially from those in the forward-looking statements are detailed from time to time in reports filed by the Company with the SEC, including Forms 8K, 10Q and 10K.
Investor Relations Contact: Amy Shue (704) 633-8250, Ext. 2529
Media Contact: Tawn Earnest (704) 633-8250, Ext. 2185