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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended July 3, 2004



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



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DELHAIZE AMERICA, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|NORTH CAROLINA                                                 |  | 56-0660192                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer 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, including area code)



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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 ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act):    Yes ̈No  x



Outstanding shares of common
stock of the Registrant as of August 17 , 2004.



Class A
Common Stock  91,270,348,481

Class B Common Stock -         75,468,935



THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) and (b) OF
FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.



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DELHAIZE AMERICA, INC.

INDEX TO FORM 10-Q

July 3, 2004



|                           |  |                       |  |                                                                                                       |  |      
|-------------------------- |  | --------------------- |  | ----------------------------------------------------------------------------------------------------- |  | -----
|                           |  |                       |  |                                                                                                       |  | Page 
|Forward Looking Statements |  | 3-4                  
|                           |  |                      
|PART I.                    |  | FINANCIAL INFORMATION |  |                                                                                                      
|                           |  |                       | 
|                           |  | Item 1.               |  | Financial Statements (Unaudited)                                                                      |  |      
|                           |  |                       | 
|                           |  |                       |  | Condensed Consolidated Statements of Income for the 13 weeks ended July 3, 2004 and June 28, 2003     |  | 5    
|                           |  |                       | 
|                           |  |                       |  | Condensed Consolidated Statements of Income for the 26 weeks ended July 3, 2004 and June 28, 2003     |  | 6    
|                           |  |                       | 
|                           |  |                       |  | Condensed Consolidated Balance Sheets as of July 3, 2004 and January 3, 2004 (Audited)                |  | 7    
|                           |  |                       | 
|                           |  |                       |  | Condensed Consolidated Statements of Cash Flows for the 26 weeks ended July 3, 2004 and June 28, 2003 |  | 8    
|                           |  |                       | 
|                           |  |                       |  | Notes to Condensed Consolidated Financial Statements                                                  |  | 9-18 
|                           |  |                       | 
|                           |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operation                  |  | 18-28
|                           |  |                       | 
|                           |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                                            |  | 28   
|                           |  |                       | 
|                           |  | Item 4.               |  | Controls and Procedures                                                                               |  | 28   
|                           |  |                      
|PART II.                   |  | OTHER INFORMATION     |  |                                                                                                      
|                           |  |                       | 
|                           |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                      |  | 28   
|                           | 
|Signature                  |  | 29                   
|                           | 
|Exhibit Index              |  | 30                   



Unless the context otherwise requires,
the terms Delhaize America, the Company, we, us and our refer to Delhaize America, Inc., a North Carolina corporation together with its consolidated subsidiaries.



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FORWARD-LOOKING STATEMENTS



This quarterly report
on Form 10-Q includes or incorporates by reference forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (Exchange Act), and the Private Securities Litigation
Reform Act of 1995 about Delhaize America that are subject to risks and uncertainties. All statements included in this quarterly report on Form 10-Q, other than statements of historical fact, which address activities, events or developments that
Delhaize America expects or anticipates will or may occur in the future, including, without limitation, statements regarding expansion and growth of its business, anticipated store openings and renovations, future capital expenditures, projected
revenue growth or synergies resulting from the share exchange transaction with Delhaize Group, and business strategy, are forward-looking statements. These forward-looking statements generally can be identified as statements that include phrases
such as believe, expect, anticipate, intend, plan, foresee, likely, will, should or other similar words or phrases.



Although we believe that these statements are based upon reasonable assumptions, we can give
no assurance that our goals will be achieved. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date this quarterly
report on Form 10-Q is filed with the Securities and Exchange Commission. We assume no obligation to update or revise them. Important factors that could cause our actual results to differ materially from our expectations include, without limitation:



| |  | The grocery retailing industry continues to experience fierce competition from other food retailers, supercenters, mass merchandisers, club or warehouse stores, drug stores and
restaurants. Our continued success is dependent upon our ability to compete in this industry, develop and implement retailing strategies and continue to reduce operating expenses. The competitive environment may cause us to reduce our prices in
order to gain or maintain share of sales, thus reducing margins. While we believe our opportunities for sustained, profitable growth are considerable, unanticipated actions of competitors could impact our sales and net income.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our future results could be adversely affected due to pricing and promotional activities of existing and new competitors, including non-traditional food retailers; our response
actions; the state of the economy, including inflationary or deflationary trends in certain commodities; recessionary times in the economy; and our ability to sustain the cost reductions that we have identified and implemented.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our ability to achieve our cost savings goals could be affected by, in addition to other factors described herein, our ability to achieve productivity improvements, shrink
reduction, efficiencies in our distribution centers, and other efficiencies created by our logistics projects.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Changes in the general business and economic conditions in our operating regions, including the rate of inflation, population growth, and employment and job growth in the markets in
which we operate may affect our ability to hire and train qualified employees to operate our stores. This would negatively affect earnings and sales growth. General economic changes may also affect the shopping habits of our customers, which could
affect sales and earnings.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Consolidation in the food industry is likely to continue and the effects on our business, favorable or unfavorable, cannot be foreseen.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| |  | Our ability to integrate any companies we acquire or have acquired and achieve operating improvements at those companies will affect our financial results.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Increases in the cost of inputs, such as utility costs or raw material costs and increased product costs, and increased labor and labor related (e.g., health and welfare and
pension) costs could negatively impact financial ratios.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Adverse weather conditions could increase the cost our suppliers charge for their products, decrease or increase the customer demand for certain products, interrupt operations at
affected stores, or interrupt operations of our suppliers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We are subject to labor relations issues, including union organizing activities, that could result in an increase in costs or lead to a strike, thus impairing operations and
decreasing sales. We are also subject to labor relations issues at entities involved in our supply chain, including both suppliers and those involved in transportation and shipping.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Changes in laws and regulations, including changes in accounting standards, taxation requirements, and environmental laws may have a material impact on our financial statements.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our future results could be adversely affected by issues affecting the food distribution and retail industry generally, such as food safety concerns, an increase in consumers eating
away from home and the manner in which vendors target their promotional dollars.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our comparable store sales growth could be affected by increases or decreases in private-label sales, the impact of our new store openings, as well as competitors openings.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | We have estimated our exposure to the claims and litigation arising in the normal course of business and believe we have made adequate provisions for them. Unexpected outcomes in
these matters could result in an adverse effect on our earnings.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Interest expense on variable rate borrowings will vary with changes in capital markets and the amount of debt that we have outstanding. However, the majority of our long-term notes
payable bear an effective fixed interest rate. On this debt, we bear the risk that the required payments will exceed those based on current market rates.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our capital expenditures could differ from our estimate if we are unsuccessful in acquiring suitable sites for new stores, if development costs vary from those budgeted, or if
significant projects are not completed in the time frame expected or on budget.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Depreciation and amortization expenses may vary from our estimates due to the timing of new store openings.
| | - | -----------------------------------------------------------------------------------------------------------



| |  | LIFO charges and credits will be affected by changes in the cost of inventory
| | - | -----------------------------------------------------------------------------



| |  | We are self-insured for workers compensation, general liability, vehicle accident and druggist claims. Maximum retention, including defense costs per occurrence, ranges from
(i) $0.5 million to $1.0 million per accident for workers compensation, (ii) $5.0 million per accident for automobile liability and (iii) $2.0 million per accident for general liability, with an additional $5.0 million retention in excess of
the primary $2.0 million general liability retention for druggist liability. We are insured for costs related to covered claims, including defense costs, in excess of these retentions. It is possible that the final resolution of some of these claims
may require us to make significant expenditures in excess of our existing reserves over an extended period of time and in a range of amounts that cannot be reasonably estimated. Pursuant to our self-insurance program, self-insured reserves related
to workers compensation, general liability and auto coverage are reinsured by Pride Reinsurance Company (Pride), an Irish reinsurance captive, owned by an affiliated company of Delhaize Group. Premiums are transferred annually to
Pride through Delhaize Insurance Co., a subsidiary of Delhaize America.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our access to capital markets on favorable terms and leasing costs could be negatively affected by the companys financial performance and by conditions of the financial and
credit markets.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other factors and assumptions not identified
above could also cause actual results to differ materially from those set forth in the forward-looking information. Accordingly, actual events and results may vary significantly from those included in or contemplated or implied by forward-looking
statements made by us or our representatives.



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PART I.FINANCIAL INFORMATION



Item 1.Financial Statements



DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

For the 13 weeks ended July 3,
2004 and June 28, 2003

(Dollars in thousands)



|                                                      |  |                            |           |                             |   |          
|----------------------------------------------------- |  | -------------------------- | --------- | --------------------------- | - | ---------
|                                                      |  | 13 WeeksEnded July 3, 2004 |           | 13 WeeksEnded June 28, 2003
|Net sales and other revenues                          |  | $                          | 3,999,188 |                             | $ | 3,743,232
|Cost of goods sold                                    |  |                            | 2,974,578 |                             |   | 2,809,322
|Selling and administrative expenses                   |  |                            | 804,376   |                             |   | 751,123  
|                                                      |  |                            |           |                             |   |          
|Operating income                                      |  |                            | 220,234   |                             |   | 182,787  
|Interest expense                                      |  |                            | 80,094    |                             |   | 78,731   
|                                                      |  |                            |           |                             |   |          
|Income from continuing operations before income taxes |  |                            | 140,140   |                             |   | 104,056  
|Provision for income taxes                            |  |                            | 51,752    |                             |   | 37,878   
|                                                      |  |                            |           |                             |   |          
|Income from continuing operations                     |  |                            | 88,388    |                             |   | 66,178   
|Loss from discontinued operations, net of tax         |  |                            | 2,232     |                             |   | 5,550    
|                                                      |  |                            |           |                             |   |          
|Net income                                            |  | $                          | 86,156    |                             | $ | 60,628   
|                                                      |  |                            |           |                             |   |          



See notes to unaudited condensed
consolidated financial statements.



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DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

For the 26 weeks ended July 3,
2004 and June 28, 2003

(Dollars in thousands)



|                                                                  |  |                            |           |                             |   |          
|----------------------------------------------------------------- |  | -------------------------- | --------- | --------------------------- | - | ---------
|                                                                  |  | 26 WeeksEnded July 3, 2004 |           | 26 WeeksEnded June 28, 2003
|Net sales and other revenues                                      |  | $                          | 7,856,810 |                             | $ | 7,371,629
|Cost of goods sold                                                |  |                            | 5,834,443 |                             |   | 5,558,807
|Selling and administrative expenses                               |  |                            | 1,593,924 |                             |   | 1,490,406
|                                                                  |  |                            |           |                             |   |          
|Operating income                                                  |  |                            | 428,443   |                             |   | 322,416  
|Interest expense                                                  |  |                            | 160,163   |                             |   | 158,059  
|                                                                  |  |                            |           |                             |   |          
|Income from continuing operations before income taxes             |  |                            | 268,280   |                             |   | 164,357  
|Provision for income taxes                                        |  |                            | 102,721   |                             |   | 59,580   
|                                                                  |  |                            |           |                             |   |          
|Income from continuing operations                                 |  |                            | 165,559   |                             |   | 104,777  
|Loss from discontinued operations, net of tax                     |  |                            | 55,805    |                             |   | 29,641   
|                                                                  |  |                            |           |                             |   |          
|Income before cumulative effect of change in accounting principle |  |                            | 109,754   |                             |   | 75,136   
|Cumulative effect of change in accounting principle, net of tax   |  |                            |          |                             |   | 10,946   
|                                                                  |  |                            |           |                             |   |          
|Net income                                                        |  | $                          | 109,754   |                             | $ | 64,190   
|                                                                  |  |                            |           |                             |   |          



See notes to unaudited condensed
consolidated financial statements.



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DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of July 3, 2004 and January 3, 2004

(Dollars in thousands)



|                                                         |  |              |           |   |                 |   |           |  
|-------------------------------------------------------- |  | ------------ | --------- | - | --------------- | - | --------- | -
|                                                         |  | July 3, 2004 |           |   | January 3, 2004 |  
|                                                         |  | (Unaudited)  |           |   | (Audited)       |  
|ASSETS                                                   |  |              |           |   |                 |   |           |  
|Current assets:                                          |  |              |           |   |                 |   |           |  
|Cash and cash equivalents                                |  | $            | 629,657   |   |                 | $ | 313,629   |  
|Receivables, net                                         |  |              | 113,292   |   |                 |   | 111,738   |  
|Receivable from affiliate                                |  |              | 14,817    |   |                 |   | 14,708    |  
|Inventories                                              |  |              | 1,144,722 |   |                 |   | 1,203,487 |  
|Prepaid expenses                                         |  |              | 72,881    |   |                 |   | 40,586    |  
|Deferred tax assets                                      |  |              |          |   |                 |   | 26,491    |  
|Other assets                                             |  |              | 13,841    |   |                 |   | 9,936     |  
|                                                         |  |              |           |   |                 |   |           |  
|Total current assets                                     |  |              | 1,989,210 |   |                 |   | 1,720,575 |  
|Property and equipment, net                              |  |              | 2,889,151 |   |                 |   | 2,980,455 |  
|Goodwill, net                                            |  |              | 2,893,431 |   |                 |   | 2,895,541 |  
|Other intangibles, net                                   |  |              | 752,820   |   |                 |   | 775,830   |  
|Reinsurance recoverable from affiliate                   |  |              | 132,486   |   |                 |   | 129,869   |  
|Other assets                                             |  |              | 151,484   |   |                 |   | 170,741   |  
|                                                         |  |              |           |   |                 |   |           |  
|Total assets                                             |  | $            | 8,808,582 |   |                 | $ | 8,673,011 |  
|                                                         |  |              |           |   |                 |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                     |  |              |           |   |                 |   |           |  
|Current liabilities:                                     |  |              |           |   |                 |   |           |  
|Accounts payable                                         |  | $            | 764,888   |   |                 | $ | 751,122   |  
|Payable to affiliate                                     |  |              |          |   |                 |   | 2,118     |  
|Accrued expenses                                         |  |              | 306,114   |   |                 |   | 296,927   |  
|Capital lease obligations  current                      |  |              | 36,637    |   |                 |   | 35,686    |  
|Long term debt  current                                 |  |              | 17,116    |   |                 |   | 13,036    |  
|Other liabilities - current                              |  |              | 70,949    |   |                 |   | 55,664    |  
|Deferred income taxes                                    |  |              | 1,007     |   |                 |   |          |  
|Income taxes payable                                     |  |              | 13,481    |   |                 |   | 1,154     |  
|                                                         |  |              |           |   |                 |   |           |  
|Total current liabilities                                |  |              | 1,210,192 |   |                 |   | 1,155,707 |  
|Long-term debt                                           |  |              | 2,922,115 |   |                 |   | 2,940,135 |  
|Capital lease obligations                                |  |              | 671,931   |   |                 |   | 685,852   |  
|Deferred income taxes                                    |  |              | 251,088   |   |                 |   | 270,685   |  
|Other liabilities                                        |  |              | 301,184   |   |                 |   | 274,918   |  
|                                                         |  |              |           |   |                 |   |           |  
|Total liabilities                                        |  |              | 5,356,510 |   |                 |   | 5,327,297 |  
|                                                         |  |              |           |   |                 |   |           |  
|Commitments and contingencies (Note 14)                  |  |              |           |   |                 |   |           |  
|Shareholders equity:                                    |  |              |           |   |                 |   |           |  
|Class A non-voting common stock                          |  |              | 163,076   |   |                 |   | 163,076   |  
|Class B voting common stock                              |  |              | 37,736    |   |                 |   | 37,736    |  
|Accumulated other comprehensive loss, net of tax         |  |              | (60,315   | ) |                 |   | (62,901   | )
|Additional paid-in capital, net of unearned compensation |  |              | 2,475,162 |   |                 |   | 2,474,412 |  
|Retained earnings                                        |  |              | 836,413   |   |                 |   | 733,391   |  
|                                                         |  |              |           |   |                 |   |           |  
|Total shareholders equity                               |  |              | 3,452,072 |   |                 |   | 3,345,714 |  
|                                                         |  |              |           |   |                 |   |           |  
|Total liabilities and shareholders equity               |  | $            | 8,808,582 |   |                 | $ | 8,673,011 |  
|                                                         |  |              |           |   |                 |   |           |  



See notes to unaudited condensed
consolidated financial statements.



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DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the 26 weeks ended July 3,
2004 and June 28, 2003

(Dollars in thousands)



|                                                                                  |  |                             |          |   |                             |   |          |  
|--------------------------------------------------------------------------------- |  | --------------------------- | -------- | - | --------------------------- | - | -------- | -
|                                                                                  |  | 26 Weeks Ended July 3, 2004 |          |   | 26 Weeks EndedJune 28, 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                             |          |   |                             |   |          |  
|Net income                                                                        |  | $                           | 109,754  |   |                             | $ | 64,190   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |          |   |                             |   |          |  
|Cumulative effect of change in accounting principle, net of tax (Note 10)         |  |                             |         |   |                             |   | 10,946   |  
|Change in accounting method (Note 10)                                             |  |                             |         |   |                             |   | 87,308   |  
|Provision for loss on disposal of discontinued operations                         |  |                             | 72,842   |   |                             |   | 27,844   |  
|Streamline charges                                                                |  |                             |         |   |                             |   | 2,346    |  
|Depreciation and amortization                                                     |  |                             | 230,577  |   |                             |   | 220,186  |  
|Depreciation and amortization - discontinued operations                           |  |                             | 790      |   |                             |   | 3,397    |  
|Amortization of debt fees/costs                                                   |  |                             | 996      |   |                             |   | 977      |  
|Amortization of debt premium                                                      |  |                             | 622      |   |                             |   | 483      |  
|Amortization of deferred loss on derivative                                       |  |                             | 4,223    |   |                             |   | 4,145    |  
|Amortization and termination of restricted shares                                 |  |                             | 2,083    |   |                             |   | 2,556    |  
|Transfer from escrow to fund interest, net of accretion                           |  |                             | 1,543    |   |                             |   |         |  
|Accrued interest on interest rate swap                                            |  |                             | 814      |   |                             |   | (26      | )
|Loss on disposals of property and capital lease terminations                      |  |                             | 1,776    |   |                             |   | 1,991    |  
|Deferred income taxes provision (benefit)                                         |  |                             | 6,296    |   |                             |   | (71,824  | )
|Other                                                                             |  |                             | 204      |   |                             |   | 699      |  
|Changes in operating assets and liabilities which provided (used) cash:           |  |                             |          |   |                             |   |          |  
|Receivables                                                                       |  |                             | (1,554   | ) |                             |   | 10,807   |  
|Net receivable from affiliate                                                     |  |                             | (2,227   | ) |                             |   | (7,989   | )
|Income tax receivable                                                             |  |                             |         |   |                             |   | 6,036    |  
|Inventories                                                                       |  |                             | 58,765   |   |                             |   | 31,671   |  
|Prepaid expenses                                                                  |  |                             | (32,295  | ) |                             |   | (43,547  | )
|Other assets                                                                      |  |                             | 2,728    |   |                             |   | 3,724    |  
|Accounts payable                                                                  |  |                             | 13,766   |   |                             |   | (29,798  | )
|Accrued expenses                                                                  |  |                             | 7,246    |   |                             |   | 25,054   |  
|Income taxes payable                                                              |  |                             | 14,201   |   |                             |   | 22,893   |  
|Other liabilities                                                                 |  |                             | (14,524  | ) |                             |   | (21,520  | )
|                                                                                  |  |                             |          |   |                             |   |          |  
|Total adjustments                                                                 |  |                             | 368,872  |   |                             |   | 288,359  |  
|                                                                                  |  |                             |          |   |                             |   |          |  
|Net cash provided by operating activities                                         |  |                             | 478,626  |   |                             |   | 352,549  |  
|                                                                                  |  |                             |          |   |                             |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                             |          |   |                             |   |          |  
|Capital expenditures                                                              |  |                             | (143,116 | ) |                             |   | (141,911 | )
|Proceeds from sale of property                                                    |  |                             | 11,235   |   |                             |   | 4,771    |  
|Other investment activity                                                         |  |                             | (4,219   | ) |                             |   | (2,885   | )
|                                                                                  |  |                             |          |   |                             |   |          |  
|Net cash used in investing activities                                             |  |                             | (136,100 | ) |                             |   | (140,025 | )
|                                                                                  |  |                             |          |   |                             |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                             |          |   |                             |   |          |  
|Principal payments on long-term debt                                              |  |                             | (8,899   | ) |                             |   | (13,413  | )
|Principal payments under capital lease obligations                                |  |                             | (17,360  | ) |                             |   | (15,598  | )
|Transfer from escrow to fund long-term debt                                       |  |                             | 7,827    |   |                             |   |         |  
|Taxes paid on capital contribution                                                |  |                             |         |   |                             |   | (4,692   | )
|Parent common stock repurchased                                                   |  |                             | (9,090   | ) |                             |   | (649     | )
|Tax payment for restricted shares vested                                          |  |                             | (852     | ) |                             |   |         |  
|Proceeds from stock options exercised                                             |  |                             | 1,876    |   |                             |   | 248      |  
|                                                                                  |  |                             |          |   |                             |   |          |  
|Net cash used in financing activities                                             |  |                             | (26,498  | ) |                             |   | (34,104  | )
|                                                                                  |  |                             |          |   |                             |   |          |  
|Net increase in cash and cash equivalents                                         |  |                             | 316,028  |   |                             |   | 178,420  |  
|Cash and cash equivalents at beginning of year                                    |  |                             | 313,629  |   |                             |   | 131,641  |  
|                                                                                  |  |                             |          |   |                             |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                           | 629,657  |   |                             | $ | 310,061  |  
|                                                                                  |  |                             |          |   |                             |   |          |  



See notes to unaudited condensed
consolidated financial statements.



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##### Table of Contents

Notes to Unaudited Condensed Consolidated Financial Statements



1) Basis of Presentation:



The
accompanying condensed consolidated financial statements are presented in accordance with the requirements for 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 Delhaize America, Inc. (Delhaize America or the Company). Accordingly, the reader of this Form 10-Q should refer to the Companys Form 10-K for the year ended January 3,
2004 for further information. Reclassifications and restatements for discontinued operations have been made for all current and historical information presented herein from that contained in the Companys prior SEC filings on Forms 10-Q and
10-K.



The financial information presented herein has been prepared in
accordance with the Companys customary accounting practices. In the opinion of management, the financial information includes all adjustments, including normal recurring items, 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:

|                                                                             |  |                           |         |                            |   |        
|---------------------------------------------------------------------------- |  | ------------------------- | ------- | -------------------------- | - | -------
|(Dollars in thousands)                                                       |  | 26 WeeksEndedJuly 3, 2004 |         | 26 WeeksEndedJune 28, 2003
|Cash payments for income taxes                                               |  | $                         | 55,765  |                            | $ | 86,128 
|Cash payments for interest, net of amounts funded for escrow and capitalized |  |                           | 152,196 |                            |   | 152,406
|Non-cash investing and financing activities:                                 |  |                           |         |                            |   |        
|Capitalized lease obligations incurred for store properties and equipment    |  |                           | 16,865  |                            |   | 15,437 
|Capitalized lease obligations terminated for store properties and equipment  |  |                           | 485     |                            |   | 843    
|Dividend to Delhaize Group and Detla in stock                                |  |                           |        |                            |   | 109,945
|Change in reinsurance recoverable and other liabilities                      |  |                           | 2,617   |                            |   | 5,698  
|Reduction of tax payable and goodwill for tax adjustment                     |  |                           | 1,874   |                            |   |       



3) Inventories



Inventories are stated at the lower of cost or market. Inventories valued using the Last-in,
First-out (LIFO) method comprised approximately 79% and 78% of inventories on July 3, 2004 and January 3, 2004, respectively. Meat, produce and deli inventories are valued on the average cost method rather than the LIFO method. If the Company did
not report under the LIFO method, inventories would have been $37.3 million and $33.6 million greater as of July 3, 2004 and January 3, 2004, respectively. Application of the LIFO method resulted in increases in cost of goods sold of $ 3.7 and $0.7
million for the 26 weeks ended July 3, 2004 and June 28, 2003, respectively. As stated in Note 10, the Company changed its application of the LIFO method of accounting for store inventories from the retail method to the average item cost method
effective December 29, 2002.



In 2003, upon the adoption of Emerging Issues
Task Force (EITF) Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor, certain vendor allowances began to be recorded as a reduction of inventory. Previously, the Company
recorded vendor allowances as a reduction of cost of sales when earned. This change had a timing impact on certain vendor allowances that are now an adjustment to inventory cost and recognized in cost of sales when the product is sold.



4) Supplier Allowances



The Company receives allowances, credits and income from suppliers primarily for volume
incentives, new product introductions, in-store promotions and co-operative advertising. Volume incentives are based on contractual arrangements generally covering a period of one year or less and have been historically included in the cost of
inventory and recognized as earned in cost of sales when the product is sold. New product introduction allowances compensate the Company for costs incurred which are associated with product handling and have been historically deferred and recognized
as a reduction in cost of sales over the product introductory period. Non-refundable credits from suppliers for in-store promotions such as product displays require related activities by the Company. Similarly, co-operative advertising requires the
Company to conduct the related advertising. In-store promotions income and co-operative advertising income have historically been included in cost of sales and recognized when the Company performs the related activities.



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In 2003, upon the adoption of EITF Issue No. 02-16, in-store promotion and co-operative advertising income is now
recorded as a reduction in the cost of inventory and recognized in cost of sales when the product is sold unless the allowance represents the reimbursement of a specific, incremental, and identifiable cost incurred by the Company to sell the
vendors product. The Company has reviewed the promotional funding received from vendors and concluded that these arrangements are primarily for general advertising purposes and not the reimbursement of a specific, incremental, and identifiable
cost incurred by the Company.



Total supplier allowances recognized for the 13
and 26 weeks ended July 3, 2004 and the comparable periods are shown below:



|                                                |  |                             |        |                              |   |                             |  |                               |         |  |   |        
|----------------------------------------------- |  | --------------------------- | ------ | ---------------------------- | - | --------------------------- |  | ----------------------------- | ------- |  | - | -------
|(Dollars in thousands)                          |  | 13 weeks ended July 3, 2004 |        | 13 weeks ended June 28, 2003 |   | 26 weeks ended July 3, 2004 |  | 26 weeks ended June 28, 2003*
|Allowances related to the purchase of inventory |  | $                           | 28,248 |                              | $ | 37,705                      |  | $                             | 53,258  |  | $ | 73,172 
|Other allowances                                |  |                             | 29,821 |                              |   | 25,268                      |  |                               | 67,118  |  |   | 55,672 
|                                                |  |                             |        |                              |   |                             |  |                               |         |  |   |        
|Total supplier allowances                       |  | $                           | 58,069 |                              | $ | 62,973                      |  | $                             | 120,376 |  | $ | 128,844



|* | Excludes the cumulative effect of adopting EITF Issue No. 02-16 of $10.9 million, net of tax during the first quarter of 2003.
|- | ------------------------------------------------------------------------------------------------------------------------------



5) Reclassification



The Company, prior to filing its financial statements on Form 10-Q, publicly releases unaudited condensed consolidated financial statements
in connection with the quarterly earnings release of its parent company, Delhaize Group. Between the date of such release and the filing of the Companys Form 10-Q, reclassifications may be required. Since Delhaize Groups earnings release
dated August 5, 2004, which included unaudited condensed consolidated financial statements of the Company for the quarterly period ended July 3, 2004, a reclassification totaling $2.5 million was made to net cash provided by operating activities
from net cash used in financing activities.



Certain financial statement items
in the prior period have been reclassified to conform to the current periods presentation.



6) Accounting for Stock Issued to Employees



The Company participates in a stock option plan (the Delhaize Group Plan) of its parent, Delhaize Group, which is described fully in Note 14 to the Companys Annual Report on Form 10-K for the year ended January 3, 2004.
The Company accounts for the Delhaize Group Plan under the recognition and measurement principles of Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees, and Related Interpretations. No
stock-based employee compensation cost is reflected in net income, as all options granted under the Delhaize Group Plan have an exercise price equal to the market value of the underlying Delhaize Group American Depository Share stock on the date of
grant. Additionally, the Company still has options outstanding under a 1996 Food Lion Plan, 1988 and 1998 Hannaford Plans and a 2000 Delhaize America Plan; however, the Company can no longer grant options under these plans.



The following table illustrates the effect on net income if the Company had applied the fair
value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure, to stock-based employee compensation.



|                                                                                                              |  |                             |        |                              |   |                             |  |                              |         |  |   |       
|------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---------------------------- | - | --------------------------- |  | ---------------------------- | ------- |  | - | ------
|                                                                                                              |  | 13 weeks ended July 3, 2004 |        | 13 weeks ended June 28, 2003 |   | 26 weeks ended July 3, 2004 |  | 26 weeks ended June 28, 2003
|Net earnings  as reported                                                                                    |  | $                           | 86,156 |                              | $ | 60,628                      |  | $                            | 109,754 |  | $ | 64,190
|Deduct: Total stock-based employee compensation expense determined using fair value based method (net of tax) |  |                             | 2,527  |                              |   | 2,726                       |  |                              | 4,856   |  |   | 5,124 
|                                                                                                              |  |                             |        |                              |   |                             |  |                              |         |  |   |       
|Net earningspro forma                                                                                        |  | $                           | 83,629 |                              | $ | 57,902                      |  | $                            | 104,898 |  | $ | 59,066



The weighted average fair value at
date of grant for options granted under the Delhaize Group Plan during the second quarter of 2004 and 2003 was $15.15 and $8.45 per option, respectively. The weighted average fair value at date of grant for options granted under the Delhaize Group
Plan for the 26 weeks ended July 3, 2004 and June 28, 2003 was $15.15 and $8.44 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model based on the following assumptions:



|                            |  |              |  |              
|--------------------------- |  | ------------ |  | -------------
|                            |  | July 3, 2004 |  | June 28, 2003
|Expected dividend yield (%) |  | 2.6          |  | 3.6          
|Expected volatility (%)     |  | 41.0         |  | 42.3         
|Risk-free interest rate (%) |  | 3.9          |  | 2.4          
|Expected term (years)       |  | 5.0          |  | 5.2          



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7) Derivative Financial Instruments



During the fourth quarter of 2001 and the third quarter of 2002, the Company entered into interest rate swap agreements, effectively
converting a portion of the debt from fixed to variable rates. Maturity dates of interest rate swap arrangements match those of the underlying debt. These agreements involve the exchange of fixed rate payments for variable rate payments without the
exchange of the underlying principal amounts. Variable rates for the Companys agreements are based on six-month or three-month U.S. dollar LIBOR and are reset on a semiannual basis or a quarterly basis. The differential between fixed and
variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and recognized over the life of the agreements as an adjustment to interest expense. On December 30, 2003, the Company terminated $100
million of the 2011 interest rate swap arrangements. The notional principal amounts of interest rate swap arrangements at July 3, 2004 were $300 million maturing in 2006 and $100 million maturing in 2011. For the 13 weeks and 26 weeks ended July 3,
2004, interest expense was reduced by $3.1 million and $6.5 million. For the 13 and 26 weeks ended June 28, 2003, interest expense was reduced by $4.1 million and $8.3 million, respectively, in connection with these agreements. These agreements met
the criteria for using the short-cut method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133, Derivative Instruments and Hedging Activities. The Company has recorded a derivative asset in connection with these
agreements in the amount of $13.1 million and $19.5 million at July 3, 2004 and January 3, 2004, respectively, which is included in the Companys Condensed Consolidated Balance Sheet in Other Assets.



Prior to the offering of bonds and debentures in 2001, the Company entered into interest rate
agreements to hedge against potential increases in interest rates. These hedge agreements were settled in 2001 with the loss recorded in other comprehensive income (loss), net of taxes and amortized to interest expense over the term of the
associated debt securities. This unrealized loss was reduced as of the date of the Delhaize Group share exchange as a result of the application of purchase accounting. The remaining unrealized loss, net of taxes, at July 3, 2004, and January 3,
2004, totaled approximately $41.7 million and $44.3 million, respectively.



8) Intangible Assets



Intangible assets are comprised of the
following:



|                              |  |                             |           |             |   |          
|----------------------------- |  | --------------------------- | --------- | ----------- | - | ---------
|(Dollars in thousands)        |  | 26 weeks ended July 3, 2004 |           | Fiscal 2003
|Goodwill                      |  | $                           | 2,982,383 |             | $ | 2,984,492
|Trademarks                    |  |                             | 486,752   |             |   | 486,752  
|Favorable lease rights        |  |                             | 361,547   |             |   | 365,883  
|Prescription files            |  |                             | 18,626    |             |   | 18,693   
|Liquor license                |  |                             | 3,508     |             |   | 3,528    
|Other                         |  |                             | 23,672    |             |   | 23,462   
|                              |  |                             |           |             |   |          
|                              |  |                             | 3,876,488 |             |   | 3,882,810
|Less accumulated amortization |  |                             | 230,237   |             |   | 211,439  
|                              |  |                             |           |             |   |          
|                              |  | $                           | 3,646,251 |             | $ | 3,671,371
|                              |  |                             |           |             |   |          



The following represents a summary of
changes in gross goodwill at 26 weeks ended July 3, 2004 and fiscal 2003.



|                                         |  |                             |           |   |             |   |           |  
|---------------------------------------- |  | --------------------------- | --------- | - | ----------- | - | --------- | -
|                                         |  | 26 weeks ended July 3, 2004 |           |   | Fiscal 2003 |  
|Balance at beginning of year             |  | $                           | 2,984,492 |   |             | $ | 2,996,256 |  
|Additions (reductions)                   |  |                             | (235      | ) |             |   | 4,057     |  
|Reduction of goodwill for tax adjustment |  |                             | (1,874    | ) |             |   | (15,821   | )
|                                         |  |                             |           |   |             |   |           |  
|Balance at end of period                 |  | $                           | 2,982,383 |   |             | $ | 2,984,492 |  
|                                         |  |                             |           |   |             |   |           |  



Amortization expense totaled $10.1
million and $9.4 million for the 13 weeks ended July 3, 2004 and June 28, 2003, respectively and $20.3 million and $18.8 million for the 26 weeks ended July 3, 2004 and June 28, 2003.



The Companys policy requires that an annual impairment assessment be conducted in the fourth quarter of each year or when events or
circumstances indicate that an impairment may have occurred in accordance with SFAS 142. The Company had no impairment loss for the 26 weeks ended July 3, 2004 or 2003.



The carrying amount of goodwill and trademarks at each of the Companys reporting units follows:



|                      |  |                      |       |                        |   |                     |  |                       |       |  |   |    
|--------------------- |  | -------------------- | ----- | ---------------------- | - | ------------------- |  | --------------------- | ----- |  | - | ---
|(Dollars in millions) |  | July 3, 2004Goodwill |       | July 3, 2004Trademarks |   | Fiscal 2003Goodwill |  | Fiscal 2003Trademarks
|Food Lion             |  | $                    | 1,140 |                        | $ | 249                 |  | $                     | 1,138 |  | $ | 249
|Hannaford             |  |                      | 1,749 |                        |   | 223                 |  |                       | 1,754 |  |   | 223
|Harveys               |  |                      | 4     |                        |   | 5                   |  |                       | 4     |  |   | 5  
|                      |  |                      |       |                        |   |                     |  |                       |       |  |   |    
|                      |  | $                    | 2,893 |                        | $ | 477                 |  | $                     | 2,896 |  | $ | 477
|                      |  |                      |       |                        |   |                     |  |                       |       |  |   |    



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As of July 3, 2004 and January 3, 2004, the Companys intangible assets with finite lives consist of favorable lease
rights, liquor licenses, pharmacy files, and developed software. The components of its intangible assets with finite lives are as follows:



|                       |  |                      |     |                         |   |      |     |  |                      |     |                         |   |     |     |   |      |   |  |   |    
|---------------------- |  | -------------------- | --- | ----------------------- | - | ---- | --- |  | -------------------- | --- | ----------------------- | - | --- | --- | - | ---- | - |  | - | ---
|                       |  | July 3, 2004         |     | Fiscal 2003            
|(Dollars in millions)  |  | Gross Carrying Value |     | AccumulatedAmortization |   |      | Net |  | Gross Carrying Value |     | AccumulatedAmortization |   |     | Net
|Favorable lease rights |  | $                    | 361 |                         | $ | (118 | )   |  | $                    | 243 |                         | $ | 366 |     | $ | (102 | ) |  | $ | 264
|Other                  |  |                      | 46  |                         |   | (13  | )   |  |                      | 33  |                         |   | 46  |     |   | (11  | ) |  |   | 35 
|                       |  |                      |     |                         |   |      |     |  |                      |     |                         |   |     |     |   |      |   |  |   |    
|Total                  |  | $                    | 407 |                         | $ | (131 | )   |  | $                    | 276 |                         | $ | 412 |     | $ | (113 | ) |  | $ | 299
|                       |  |                      |     |                         |   |      |     |  |                      |     |                         |   |     |     |   |      |   |  |   |    



Estimated amortization expense for
intangible assets with finite lives for the five succeeding fiscal years follows:



|                      |  |   |     
|--------------------- |  | - | ----
|(Dollars in millions) |  |  
|2004                  |  | $ | 37.6
|2005                  |  |   | 35.1
|2006                  |  |   | 32.9
|2007                  |  |   | 29.0
|2008                  |  |   | 23.9



9) Comprehensive Income (Loss)



Comprehensive income (loss) includes net earnings and other comprehensive
earnings (losses). Other comprehensive earnings (losses) include items that are currently excluded from the Companys net income (loss) and recorded directly to shareholders equity. Included in other comprehensive income (loss) are
unrealized losses on hedges, minimum pension liability adjustments and unrealized security holding gains. Comprehensive income was $112.3 million and $67.5 million for the 26 weeks ended July 3, 2004 and June 28, 2003, respectively.



10) Accounting Changes



In the second quarter of 2003, the Company changed its application of the LIFO method of accounting for store inventories from the retail
method to the average item cost method. The effect of the change on the December 28, 2002 inventory valuation resulted in a decrease in inventory of $87.3 million at the beginning of fiscal year 2003. The change was made to more accurately reflect
inventory value by eliminating the estimation inherent in the retail method. The cumulative effect of this change on periods prior to December 28, 2002 cannot be determined and accordingly, the effect of this change has been included as a component
of cost of sales in the condensed consolidated statement of income for the 13 weeks ended March 29, 2003.



In addition, the Company adopted EITF Issue No. 02-16 during first quarter of 2003 and recorded the cumulative effect of a change in accounting principle of $10.9 million, net of tax during the first quarter.



11) Store Closings



The following table shows the number of stores closed at the end of the second quarter of
2004:



|                             |  |                        |   |  |        |   |  |                  |   |  |       |  
|---------------------------- |  | ---------------------- | - |  | ------ | - |  | ---------------- | - |  | ----- | -
|                             |  | DiscontinuedOperations |   |  | Closed |   |  | Planned Closings |   |  | Total |  
|As of April 3, 2004          |  | 70                     |   |  | 163    |   |  | 2                |   |  | 235   |  
|Store closings added         |  |                       |   |  | 5      |   |  | (2               | ) |  | 3     |  
|Stores sold/lease terminated |  | (5                     | ) |  | (10    | ) |  |                 |   |  | (15   | )
|                             |  |                        |   |  |        |   |  |                  |   |  |       |  
|As of July 3, 2004           |  | 65                     |   |  | 158    |   |  |                 |   |  | 223   |  



The following table reflects closed
store liabilities as of July 3, 2004 and activity during the quarter, including additions to closed store liabilities charged to operations or discontinued operations and adjustments to liabilities based on changes in facts and circumstances and
payments made.



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|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|----------------------------------------- |  | ---------------- | ---- | - | --------------- | - | ----- | -------------- |  | - | ----- | -
|                                          |  | Qtr 22004Disc Op |      |   | Qtr 22004Closed |   |       | Qtr 22004Total | 
|Balance at April 3, 2004                  |  | $                | 75.2 |   |                 | $ | 111.6 |                |  | $ | 186.8 |  
|Additions:                                |  |                  |      |   |                 |   |       |                |  |   |       |  
|Store closings  lease obligations        |  |                  | 0.0  |   |                 |   | 0.2   |                |  |   | 0.2   |  
|Store closing  other exit costs          |  |                  | 0.1  |   |                 |   | 0.0   |                |  |   | 0.1   |  
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|Total additions                           |  |                  | 0.1  |   |                 |   | 0.2   |                |  |   | 0.3   |  
|Adjustments:                              |  |                  |      |   |                 |   |       |                |  |   |       |  
|Adjustments to estimates-lease obligation |  |                  | (2.9 | ) |                 |   | (4.2  | )              |  |   | (7.1  | )
|Adjustments to estimates-other exit costs |  |                  | 0.3  |   |                 |   | (0.4  | )              |  |   | (0.1  | )
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|Total adjustments                         |  |                  | (2.6 | ) |                 |   | (4.6  | )              |  |   | (7.2  | )
|Reductions:                               |  |                  |      |   |                 |   |       |                |  |   |       |  
|Lease payments made                       |  |                  | (2.0 | ) |                 |   | (3.1  | )              |  |   | (5.1  | )
|Payments for other exit costs             |  |                  | (0.9 | ) |                 |   | (0.6  | )              |  |   | (1.5  | )
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|Total reductions                          |  |                  | (2.9 | ) |                 |   | (3.7  | )              |  |   | (6.6  | )
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|Balance at July 3, 2004                   |  | $                | 69.8 |   |                 | $ | 103.5 |                |  | $ | 173.3 |  
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  



The July 3, 2004 balance of
approximately $173.3 million consisted of lease liabilities and other exit cost liabilities of $143.7 million and $29.6 million, respectively and includes lease liabilities of $60.6 million and other exit costs of $9.2 million associated with
discontinued operations. During the quarter, the Company completed the closure of three Food Lion stores, acquired one store which will remain closed, and re-instated one store whose lease had previously ended.



The Company provided for closed store liabilities in the quarter to reflect the estimated
post-closing lease liabilities and other exit costs associated with the related store closing commitments. These other exit costs include estimated real estate taxes, common area maintenance, and insurance costs to be incurred after the store closes
(all of which are contractually required payments under the lease agreements) over the remaining lease term. Store closings are generally completed within one year after the decision to close. The closed store liabilities are usually paid over the
lease terms associated with the closed stores having remaining terms ranging from one to 19 years. Adjustments to closed store liabilities and other exit costs primarily relate to changes in subtenants and actual exit costs differing from original
estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Any excess store closing liability remaining upon settlement of the obligation is reversed in the period that such settlement is determined.
The Company uses a discount rate based on the current treasury note rates adjusted for the Companys current credit spread to calculate the present value of the remaining rent payments on closed stores.



The revenues and operating results for stores closed and not relocated, with the exception of
stores that have been classified as discontinued operations, are not material to the Companys revenues and operating results for the quarter. Future cash obligations for closed store liabilities are tied principally to the remaining
non-cancelable lease payments less sublease payments to be received.



12)
Discontinued Operations



The Company classifies operations as discontinued
if the operations and cash flows have been eliminated from ongoing operations, there is no significant continuing involvement and a re-location within the vicinity has not occurred.



The Company closed 35 underperforming stores during the 26 weeks ended July 3, 2004, as well as, 44 underperforming stores through fiscal
2003. In accordance with the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, a portion of the costs associated with the closure of these stores, as well as related operating activity prior to
closing for these stores, was recorded in Loss from discontinued operations, net of tax in the Companys Consolidated Statement of Income.



Operating activity prior to closing for the discontinued stores is shown below:



|                             |  |                             |      |   |                              |   |        |                             |  |   |                              |   |  |   |         |  
|---------------------------- |  | --------------------------- | ---- | - | ---------------------------- | - | ------ | --------------------------- |  | - | ---------------------------- | - |  | - | ------- | -
|(Dollars in thousands)       |  | 13 weeks ended July 3, 2004 |      |   | 13 weeks ended June 28, 2003 |   |        | 26 weeks ended July 3, 2004 |  |   | 26 weeks ended June 28, 2003 |  
|Net sales and other revenues |  | $                           |     |   |                              | $ | 51,948 |                             |  | $ | 22,754                       |   |  | $ | 122,023 |  
|Net loss                     |  | $                           | (367 | ) |                              | $ | (4,139 | )                           |  | $ | (5,784                       | ) |  | $ | (9,810  | )



During the first quarter of 2004 in
accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, the Company recorded a $72.8 million loss to discontinued operations ($46.4 million after taxes). The loss included an initial reserve of
$53.5 million for rent, real estate taxes, common area maintenance expenses (other liabilities) and $1.9 million for severance and outplacement costs (accrued expenses). The remaining loss included property retirement (asset impairment) of $22.1
million and gains on capital lease retirements of $4.7 million. Additional discontinued operations expenses not reserved totaled $1.9 million and $3.6 million after taxes for the 13 and 26 weeks ended July 3, 2004.



In the first quarter of 2003, the Company recorded an initial reserve of $27.5 million to
discontinued operations ($17.7 million after taxes) for rent, real estate taxes and common area maintenance expenses (other liabilities) and severance and outplacement costs (accrued expenses). The Company recorded property retirement (asset
impairment) of $5.0 million, which was substantially offset by gains on capital lease retirements of $5.0 million. During the second quarter of 2003, the Company recorded an initial reserve of $0.3



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million to discontinued operations ($0.2 million after taxes) for rent, real estate taxes and common area maintenance expenses (other liabilities) and for
property retirement (asset impairment). Additional discontinued operations expenses not reserved totaled $1.2 million and $1.9 million after taxes for the 13 and 26 weeks ended June 28, 2003.



The following table shows the reserve balances for discontinued operations as of July 3,
2004:



|                                    |  |                  |         |   |                  |   |      |       |  |   |         |  
|----------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ---- | ----- |  | - | ------- | -
|(Dollars in thousands)              |  | Otherliabilities |         |   | Accrued expenses |   |      | Total | 
|Reserve balance as of April 3, 2004 |  | $                | (75,159 | ) |                  | $ | (110 | )     |  | $ | (75,269 | )
|Additions                           |  |                  |        |   |                  |   | (217 | )     |  |   | (217    | )
|Utilizations                        |  |                  | 5,358   |   |                  |   |     |       |  |   | 5,358   |  
|                                    |  |                  |         |   |                  |   |      |       |  |   |         |  
|Reserve balance as of July 3, 2004  |  | $                | (69,801 | ) |                  | $ | (327 | )     |  | $ | (70,128 | )
|                                    |  |                  |         |   |                  |   |      |       |  |   |         |  



13) Guarantor Subsidiaries



Delhaize America, Inc. has issued 7.375% notes due 2006, 7.55% notes due
2007, 8.125% notes due 2011, 8.05% notes due 2027 and 9.000% debentures due 2031. Substantially all of Delhaize Americas subsidiaries (the Guarantor Subsidiaries) have fully and unconditionally, jointly and severally guaranteed
this debt. The Guarantor Subsidiaries and non-guarantor subsidiaries are wholly-owned subsidiaries of the Company. The non-guaranteeing subsidiaries represent less than 3% on an individual and aggregate basis of consolidated assets, pretax earnings,
cash flow, and equity. Therefore, the non-guarantor subsidiaries information is not separately presented in the tables below, but rather is included in the column labeled Guarantor Subsidiaries. Condensed consolidated financial
information for the Company and its Guarantor Subsidiaries is as follow:



Delhaize America, Inc.

Consolidated Statements of Income (Loss)

For the 26 Weeks ended July 3, 2004



|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|----------------------------------------------------- |  | --------------- | -------- | - | ---------------------- | - | ------------ |  | - | ------------ | - |  | - | ---------
|(Dollars in thousands)                                |  | Parent (Issuer) |          |   | Guarantor Subsidiaries |   | Eliminations |  |   | Consolidated
|Net sales and other revenues                          |  | $               |         |   |                        | $ | 7,856,810    |  | $ |             |   |  | $ | 7,856,810
|Cost of goods sold                                    |  |                 |         |   |                        |   | 5,834,443    |  |   |             |   |  |   | 5,834,443
|Selling and administrative expenses                   |  |                 | 18,799   |   |                        |   | 1,575,125    |  |   |             |   |  |   | 1,593,924
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Operating (loss) income                               |  |                 | (18,799  | ) |                        |   | 447,242      |  |   |             |   |  |   | 428,443  
|Interest expense                                      |  |                 | 113,069  |   |                        |   | 47,094       |  |   |             |   |  |   | 160,163  
|Equity in earnings of subsidiaries                    |  |                 | (191,512 | ) |                        |   |             |  |   | 191,512      |   |  |   |         
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Income from continuing operations before income taxes |  |                 | 59,644   |   |                        |   | 400,148      |  |   | (191,512     | ) |  |   | 268,280  
|(Benefit) provision for income taxes                  |  |                 | (50,110  | ) |                        |   | 152,831      |  |   |             |   |  |   | 102,721  
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Income before loss from discontinued operations       |  |                 | 109,754  |   |                        |   | 247,317      |  |   | (191,512     | ) |  |   | 165,559  
|Loss from discontinued operations, net of tax         |  |                 |         |   |                        |   | 55,805       |  |   |             |   |  |   | 55,805   
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Net income                                            |  | $               | 109,754  |   |                        | $ | 191,512      |  | $ | (191,512     | ) |  | $ | 109,754  
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          



Delhaize America, Inc.

Consolidated Statements of Income (Loss)

For the 26 Weeks ended June 28, 2003



|                                                                   |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|------------------------------------------------------------------ |  | --------------- | -------- | - | ---------------------- | - | ------------ |  | - | ------------ | - |  | - | ---------
|(Dollars in thousands)                                             |  | Parent (Issuer) |          |   | Guarantor Subsidiaries |   | Eliminations |  |   | Consolidated
|Net sales and other revenues                                       |  | $               |         |   |                        | $ | 7,371,629    |  | $ |             |   |  | $ | 7,371,629
|Cost of goods sold                                                 |  |                 |         |   |                        |   | 5,558,807    |  |   |             |   |  |   | 5,558,807
|Selling and administrative expenses                                |  |                 | 12,313   |   |                        |   | 1,478,093    |  |   |             |   |  |   | 1,490,406
|                                                                   |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Operating (loss) income                                            |  |                 | (12,313  | ) |                        |   | 334,729      |  |   |             |   |  |   | 322,416  
|Interest expense                                                   |  |                 | 110,277  |   |                        |   | 47,782       |  |   |             |   |  |   | 158,059  
|Equity in earnings of subsidiaries                                 |  |                 | (140,220 | ) |                        |   |             |  |   | 140,220      |   |  |   |         
|                                                                   |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Income from continuing operations before income taxes              |  |                 | 17,630   |   |                        |   | 286,947      |  |   | (140,220     | ) |  |   | 164,357  
|(Benefit) provision for income taxes                               |  |                 | (46,560  | ) |                        |   | 106,140      |  |   |             |   |  |   | 59,580   
|                                                                   |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Income before loss from discontinued operations                    |  |                 | 64,190   |   |                        |   | 180,807      |  |   | (140,220     | ) |  |   | 104,777  
|Loss from discontinued operations, net of tax                      |  |                 |         |   |                        |   | 29,641       |  |   |             |   |  |   | 29,641   
|                                                                   |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Income before cumulative effect of changes in accounting principle |  |                 | 64,190   |   |                        |   | 151,166      |  |   | (140,220     | ) |  |   | 75,136   
|Cumulative effect of changes in accounting principle, net of tax   |  |                 |         |   |                        |   | 10,946       |  |   |             |   |  |   | 10,946   
|                                                                   |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          
|Net income                                                         |  | $               | 64,190   |   |                        | $ | 140,220      |  | $ | (140,220     | ) |  | $ | 64,190   
|                                                                   |  |                 |          |   |                        |   |              |  |   |              |   |  |   |          



14



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##### Table of Contents

Delhaize America, Inc.

Consolidated Balance Sheets

As of July 3, 2004



|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|------------------------------------------ |  | --------------- | --------- | ---------------------- | - | ------------ |  | - | ------------ | - |  | - | ---------
|(Dollars in thousands)                     |  | Parent (Issuer) |           | Guarantor Subsidiaries |   | Eliminations |  |   | Consolidated
|Assets                                     |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Current assets:                            |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Cash and cash equivalents                  |  | $               | 471,245   |                        | $ | 158,412      |  | $ |             |   |  | $ | 629,657  
|Receivables, net                           |  |                 | 265       |                        |   | 113,292      |  |   | (265         | ) |  |   | 113,292  
|Receivable from affiliate                  |  |                 | 11,704    |                        |   | 51,647       |  |   | (48,534      | ) |  |   | 14,817   
|Income tax receivable                      |  |                 |          |                        |   | 1,767        |  |   | (1,767       | ) |  |   |         
|Inventories                                |  |                 |          |                        |   | 1,144,722    |  |   |             |   |  |   | 1,144,722
|Prepaid expenses                           |  |                 | 953       |                        |   | 71,928       |  |   |             |   |  |   | 72,881   
|Other assets                               |  |                 |          |                        |   | 13,841       |  |   |             |   |  |   | 13,841   
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total current assets                       |  |                 | 484,167   |                        |   | 1,555,609    |  |   | (50,566      | ) |  |   | 1,989,210
|                                           |  |                 |           |                       
|Property and equipment, net                |  |                 | 6,804     |                        |   | 2,882,347    |  |   |             |   |  |   | 2,889,151
|Goodwill, net                              |  |                 |          |                        |   | 2,893,431    |  |   |             |   |  |   | 2,893,431
|Other intangibles, net                     |  |                 |          |                        |   | 752,820      |  |   |             |   |  |   | 752,820  
|Reinsurance recoverable from affiliate     |  |                 |          |                        |   | 132,486      |  |   |             |   |  |   | 132,486  
|Deferred tax asset                         |  |                 | 66,773    |                        |   |             |  |   | (66,773      | ) |  |   |         
|Other assets                               |  |                 | 82,965    |                        |   | 68,519       |  |   |             |   |  |   | 151,484  
|Investment in and advances to subsidiaries |  |                 | 5,754,614 |                        |   |             |  |   | (5,754,614   | ) |  |   |         
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total assets                               |  | $               | 6,395,323 |                        | $ | 8,285,212    |  | $ | (5,871,953   | ) |  | $ | 8,808,582
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Liabilities and Shareholders Equity       |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|                                           |  |                 |           |                       
|Current liabilities:                       |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Accounts payable                           |  | $               | 325       |                        | $ | 764,563      |  | $ |             |   |  | $ | 764,888  
|Payable to affiliate                       |  |                 | 35,119    |                        |   | 13,415       |  |   | (48,534      | ) |  |   |         
|Accrued expenses                           |  |                 | 52,102    |                        |   | 254,012      |  |   |             |   |  |   | 306,114  
|Capital lease obligations  current        |  |                 |          |                        |   | 36,637       |  |   |             |   |  |   | 36,637   
|Long-term debt  current                   |  |                 |          |                        |   | 17,381       |  |   | (265         | ) |  |   | 17,116   
|Other liabilities  current                |  |                 |          |                        |   | 70,949       |  |   |             |   |  |   | 70,949   
|Deferred income taxes                      |  |                 |          |                        |   | 1,007        |  |   |             |   |  |   | 1,007    
|Income taxes payable                       |  |                 | 15,248    |                        |   |             |  |   | (1,767       | ) |  |   | 13,481   
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total current liabilities                  |  |                 | 102,794   |                        |   | 1,157,964    |  |   | (50,566      | ) |  |   | 1,210,192
|                                           |  |                 |           |                       
|Long-term debt                             |  |                 | 2,839,952 |                        |   | 82,163       |  |   |             |   |  |   | 2,922,115
|Capital lease obligations                  |  |                 |          |                        |   | 671,931      |  |   |             |   |  |   | 671,931  
|Deferred income taxes                      |  |                 |          |                        |   | 317,861      |  |   | (66,773      | ) |  |   | 251,088  
|Other liabilities                          |  |                 | 505       |                        |   | 300,679      |  |   |             |   |  |   | 301,184  
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total liabilities                          |  |                 | 2,943,251 |                        |   | 2,530,598    |  |   | (117,339     | ) |  |   | 5,356,510
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Commitments and contingencies (Note 14)    |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|                                           |  |                 |           |                       
|Total shareholders equity                 |  |                 | 3,452,072 |                        |   | 5,754,614    |  |   | (5,754,614   | ) |  |   | 3,452,072
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total liabilities and shareholdersequity  |  | $               | 6,395,323 |                        | $ | 8,285,512    |  | $ | (5,871,953   | ) |  | $ | 8,808,582
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          



15



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##### Table of Contents

Delhaize America, Inc.

Consolidated Balance Sheets

As of January 3, 2004



|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|------------------------------------------ |  | --------------- | --------- | ---------------------- | - | ------------ |  | - | ------------ | - |  | - | ---------
|(Dollars in thousands)                     |  | Parent (Issuer) |           | Guarantor Subsidiaries |   | Eliminations |  |   | Consolidated
|Assets                                     |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Current assets:                            |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Cash and cash equivalents                  |  | $               | 147,090   |                        | $ | 166,539      |  | $ |             |   |  | $ | 313,629  
|Receivables, net                           |  |                 | 1,327     |                        |   | 110,676      |  |   | (265         | ) |  |   | 111,738  
|Receivable from affiliate                  |  |                 | 12,086    |                        |   | 72,138       |  |   | (69,516      | ) |  |   | 14,708   
|Income tax receivable                      |  |                 | 11,895    |                        |   |             |  |   | (11,895      | ) |  |   |         
|Inventories                                |  |                 |          |                        |   | 1,203,487    |  |   |             |   |  |   | 1,203,487
|Prepaid expenses                           |  |                 | 2,409     |                        |   | 38,177       |  |   |             |   |  |   | 40,586   
|Deferred tax assets                        |  |                 | 68,378    |                        |   | 26,491       |  |   | (68,378      | ) |  |   | 26,491   
|Other assets                               |  |                 |          |                        |   | 9,936        |  |   |             |   |  |   | 9,936    
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total current assets                       |  |                 | 243,185   |                        |   | 1,627,444    |  |   | (150,054     | ) |  |   | 1,720,575
|                                           |  |                 |           |                       
|Property and equipment, net                |  |                 | 7,222     |                        |   | 2,973,233    |  |   |             |   |  |   | 2,980,455
|Goodwill, net                              |  |                 |          |                        |   | 2,895,541    |  |   |             |   |  |   | 2,895,541
|Other intangibles, net                     |  |                 |          |                        |   | 775,830      |  |   |             |   |  |   | 775,830  
|Reinsurance recoverable from affiliate     |  |                 |          |                        |   | 129,869      |  |   |             |   |  |   | 129,869  
|                                           |  |                 |           |                       
|Other assets                               |  |                 | 88,540    |                        |   | 82,201       |  |   |             |   |  |   | 170,741  
|Investment in and advances to subsidiaries |  |                 | 5,964,277 |                        |   |             |  |   | (5,964,277   | ) |  |   |         
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total assets                               |  | $               | 6,303,224 |                        | $ | 8,484,118    |  | $ | (6,114,331   | ) |  | $ | 8,673,011
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Liabilities and Shareholders Equity       |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|                                           |  |                 |           |                       
|Current liabilities:                       |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Accounts payable                           |  | $               | 663       |                        | $ | 750,459      |  | $ |             |   |  | $ | 751,122  
|Payable to affiliate                       |  |                 | 57,638    |                        |   | 13,996       |  |   | (69,516      | ) |  |   | 2,118    
|Accrued expenses                           |  |                 | 53,414    |                        |   | 243,513      |  |   |             |   |  |   | 296,927  
|Capital lease obligations  current        |  |                 |          |                        |   | 35,686       |  |   |             |   |  |   | 35,686   
|Long-term debt  current                   |  |                 |          |                        |   | 13,301       |  |   | (265         | ) |  |   | 13,036   
|Other liabilities  current                |  |                 |          |                        |   | 55,664       |  |   |             |   |  |   | 55,664   
|Income taxes payable                       |  |                 |          |                        |   | 13,049       |  |   | (11,895      | ) |  |   | 1,154    
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total current liabilities                  |  |                 | 111,715   |                        |   | 1,125,668    |  |   | (81,676      | ) |  |   | 1,155,707
|Long-term debt                             |  |                 | 2,845,482 |                        |   | 94,653       |  |   |             |   |  |   | 2,940,135
|Capital lease obligations                  |  |                 |          |                        |   | 685,852      |  |   |             |   |  |   | 685,852  
|Deferred income taxes                      |  |                 |          |                        |   | 339,063      |  |   | (68,378      | ) |  |   | 270,685  
|Other liabilities                          |  |                 | 313       |                        |   | 274,605      |  |   |             |   |  |   | 274,918  
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total liabilities                          |  |                 | 2,957,510 |                        |   | 2,519,841    |  |   | (150,054     | ) |  |   | 5,327,297
|                                           |  |                 |           |                       
|Commitments and contingencies (Note 14)    |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|                                           |  |                 |           |                       
|Total shareholders equity                 |  |                 | 3,345,714 |                        |   | 5,964,277    |  |   | (5,964,277   | ) |  |   | 3,345,714
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total liabilities and shareholders equity |  | $               | 6,303,224 |                        | $ | 8,484,118    |  | $ | (6,114,331   | ) |  | $ | 8,673,011
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          



16



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##### Table of Contents

Delhaize America, Inc.

Consolidated Statements of Cash Flows

For the 26 Weeks ended July 3, 2004



|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|---------------------------------------------------- |  | --------------- | -------- | - | ---------------------- | - | -------- | ------------ |  | - | -------- | -
|(Dollars in thousands)                               |  | Parent (Issuer) |          |   | Guarantor Subsidiaries |   |          | Consolidated | 
|Net cash (used in) provided by operating activities  |  | $               | (119,282 | ) |                        | $ | 597,908  |              |  | $ | 478,626  |  
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Cash flows from investing activities                 |  |                 |          |   |                        |   |          |              |  |   |          |  
|Capital expenditures                                 |  |                 | (21      | ) |                        |   | (143,095 | )            |  |   | (143,116 | )
|Proceeds from sale of property                       |  |                 |         |   |                        |   | 11,235   |              |  |   | 11,235   |  
|Other investment activity                            |  |                 | (4,498   | ) |                        |   | 279      |              |  |   | (4,219   | )
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Net cash used in investing activities                |  |                 | (4,519   | ) |                        |   | (131,581 | )            |  |   | (136,100 | )
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Cash flows from financing activities                 |  |                 |          |   |                        |   |          |              |  |   |          |  
|Principal payments on long-term debt                 |  |                 |         |   |                        |   | (8,899   | )            |  |   | (8,899   | )
|Principal payments under capital lease obligations   |  |                 |         |   |                        |   | (17,360  | )            |  |   | (17,360  | )
|Transfer from escrow to fund long-term debt          |  |                 |         |   |                        |   | 7,827    |              |  |   | 7,827    |  
|Net change in advances to subsidiaries               |  |                 | 456,022  |   |                        |   | (456,022 | )            |  |   |         |  
|Parent common stock repurchased                      |  |                 | (9,090   | ) |                        |   |         |              |  |   | (9,090   | )
|Tax payment for restricted shares vested             |  |                 | (852     | ) |                        |   |         |              |  |   | (852     | )
|Proceeds from stock options exercised                |  |                 | 1,876    |   |                        |   |         |              |  |   | 1,876    |  
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Net cash provided by (used in) financing activities  |  |                 | 447,956  |   |                        |   | (474,454 | )            |  |   | (26,498  | )
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Net increase (decrease) in cash and cash equivalents |  |                 | 324,155  |   |                        |   | (8,127   | )            |  |   | 316,028  |  
|Cash and cash equivalents at beginning of year       |  |                 | 147,090  |   |                        |   | 166,539  |              |  |   | 313,629  |  
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Cash and cash equivalents at end of period           |  | $               | 471,245  |   |                        | $ | 158,412  |              |  | $ | 629,657  |  
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  



Delhaize America, Inc.

Consolidated Statements of Cash Flows

For the 26 Weeks ended June 28, 2003



|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|--------------------------------------------------- |  | --------------- | ------- | - | ---------------------- | - | -------- | ------------ |  | - | -------- | -
|(Dollars in thousands)                              |  | Parent (Issuer) |         |   | Guarantor Subsidiaries |   |          | Consolidated | 
|Net cash provided by operating activities           |  | $               | (91,550 | ) |                        | $ | 444,099  |              |  | $ | 352,549  |  
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Cash flows from investing activities                |  |                 |         |   |                        |   |          |              |  |   |          |  
|Capital expenditures                                |  |                 | (11     | ) |                        |   | (141,900 | )            |  |   | (141,911 | )
|Proceeds from sale of property                      |  |                 |        |   |                        |   | 4,771    |              |  |   | 4,771    |  
|Other investment activity                           |  |                 | (3,979  | ) |                        |   | 1,094    |              |  |   | (2,885   | )
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Net cash used in investing activities               |  |                 | (3,990  | ) |                        |   | (136,035 | )            |  |   | (140,025 | )
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Cash flows from financing activities                |  |                 |         |   |                        |   |          |              |  |   |          |  
|Principal payments on long-term debt                |  |                 |        |   |                        |   | (13,413  | )            |  |   | (13,413  | )
|Principal payments under capital lease obligations  |  |                 |        |   |                        |   | (15,598  | )            |  |   | (15,598  | )
|Taxes paid on capital contribution                  |  |                 | (4,692  | ) |                        |   |         |              |  |   | (4,692   | )
|Net change in advances to subsidiaries              |  |                 | 267,257 |   |                        |   | (267,257 | )            |  |   |         |  
|Parent common stock repurchased                     |  |                 | (649    | ) |                        |   |         |              |  |   | (649     | )
|Proceeds from stock options exercised               |  |                 | 248     |   |                        |   |         |              |  |   | 248      |  
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Net cash provided by (used in) financing activities |  |                 | 262,164 |   |                        |   | (296,268 | )            |  |   | (34,104  | )
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Net increase in cash and cash equivalents           |  |                 | 166,624 |   |                        |   | 11,796   |              |  |   | 178,420  |  
|Cash and cash equivalents at beginning of year      |  |                 | 12,000  |   |                        |   | 119,641  |              |  |   | 131,641  |  
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Cash and cash equivalents at end of period          |  | $               | 178,624 |   |                        | $ | 131,437  |              |  | $ | 310,061  |  
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  



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The wholly-owned direct subsidiaries named below fully and unconditionally and jointly and severally guarantee Delhaize
Americas 7.375% notes due 2006, 7.550% notes due 2007, 8.125% notes due 2011, 8.05% notes due 2027 and 9.000% debentures due 2031.



Food Lion, LLC is a North Carolina limited liability company that operates substantially all of the Companys Food Lion stores. Food Lions
executive offices are located at 2110 Executive Drive, Salisbury, North Carolina 28145-1330.



Hannaford Bros. Co. is a Maine corporation that operates substantially all of the Companys Hannafords stores. Hannafords executive offices are located at 145 Pleasant Hill Road, Scarborough, Maine
04074.



Kash n Karry Food Stores, Inc. is a Delaware
corporation that operates all the Companys Kash n Karry stores. Kash n Karry executive offices are located at 3801 Sugar Palm Drive, Tampa, Florida 33619.



J.H. Harvey Co., LLC is a Georgia limited liability company that operates all of the Companys Harveys stores. Harveys
executive offices are located at 727 S. Davis St., Nashville, Georgia 31639.



14) Commitments and Contingencies



The Company is involved in
various claims and lawsuits arising out of the normal conduct of its business. Although the ultimate outcome of these legal proceedings cannot be predicted with certainty, the Companys management believes that the resulting liability, if any,
would not have a material effect upon the Companys consolidated results of operation, financial position or liquidity.



Item 2.Managements Discussion and Analysis of Financial Condition and Result of Operations (13 weeks and 26 weeks ended July 3, 2004 compared to the 13 and 26 weeks ended June 28, 2003)



The following information should be read in conjunction with the
unaudited condensed consolidated financial statements and notes thereto in this Quarterly Report and the audited financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operation contained in our Form
10-K for the year ended January 3, 2004.



Executive Summary



Delhaize America, a wholly-owned subsidiary of Delhaize Group, engages in one line of
business, the operation of retail food supermarkets in the eastern United States. Delhaize America is a holding company having four subsidiary operating companies that do business primarily under the banners Food Lion, Hannaford, Kash n Karry
and Harveys. Our stores sell a wide variety of groceries, produce, meats, dairy products, seafood, frozen food, deli-bakery and non-food items such as health and beauty care, prescriptions, and other household and personal products. We offer
nationally and regionally advertised brand name merchandise as well as products manufactured and packaged for us under the private labels of Food Lion, Hannaford, Kash n Karry and Harveys.



Our business is highly competitive and characterized by low profit margins. We
compete with national, regional and local supermarket chains, supercenters, discount food stores, single unit stores, convenience stores, warehouse clubs, drug stores and restaurants. We continue to develop and evaluate new retailing strategies at
each of our banners in the eastern United States to respond to local consumers needs and maintain and increase our market share.



During the second quarter of fiscal 2004, Delhaize America posted increased sales, improving gross margins, and continued cost and expense reduction.



Second Quarter Highlights:



| |  | Sales. Sales increased 6.8%. Comparable store sales increased 1.4%. Cost inflation has accelerated in the first half of 2004. We are very attentive to our competitive price
position, but we have generally been able to pass through increased costs in this quarter while maintaining competitiveness and positive market share momentum.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Food Lion Focus. During second quarter of 2004, Food Lion continued to focus on excellence in execution, in-stock conditions, cleanliness, freshness, increased convenience
and customer service. Food Lion continued to experience accelerated sales momentum in the first half of fiscal 2004 as compared to the first half of fiscal 2003.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Market Renewal. Following the launch of Food Lions market renewal in Raleigh in fiscal 2003, a second renewal program is underway in Charlotte, North Carolina. Market
renewal represents a change in Food Lions historical approach to remodeling activity. In the past, annual capital spending for remodel activity was dedicated to stores based on age and our related remodel calendar. Through market renewal,
remodel spending is focused on key markets to maximize consumer recognition and reaction. Market renewal was developed to make our stores, particularly the produce and meat departments, more appealing and customer focused. As an integral part of
this project, Food Lion also brings a sharper focus on assortment development, marketing, merchandising and training associates.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | Bloom, A Food Lion Market. Food Lion plans to open five pilot stores in 2004, one of which opened in the second quarter of 2004, to test a new store concept, format and brand
name. The pilot stores will be named Bloom, A Food Lion Market, a new brand under the Food Lion banner. These stores will focus on driving convenience to a level of distinction and are designed to provide a simple, uncomplicated and
hassle-free shopping experience. As its Thought for Food tagline suggests, Bloom will appeal to customers with a focus on shopping solutions, value-adding services, home meal replacement, easy-to-shop store lay-out and technology
features that expedite the shopping experience to bring full meaning to the broad term convenience. The pilot stores are the result of the work of a cross-functional team from around the Group that developed this new store concept based
on comprehensive consumer research.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Festival Strategy. At Hannaford, the Festival Strategy supported strong sales performance throughout the first half of fiscal 2004. The Festival Strategy is designed to
create a sustainable advantage against all competitive impacts including traditional and non-traditional competitors.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Growth of Harveys. In October of 2003, we expanded our business by acquiring Harveys, a chain of 43 supermarkets primarily in South Georgia. This chain is strengthening our
position in a Georgia market where we currently do not have a strong presence, giving us opportunities to focus on local consumers needs in this market to grow the Harveys business. As part of this strategy, six Food Lion stores were converted
to Harveys stores during the first half of fiscal 2004, while seven additional stores will be converted during the second half of 2004.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Inventory Management. During the first half of fiscal 2004, we continued to transition our Food Lion inventory system to an existing Hannaford system, which was adapted to
accomodate Food Lion specific needs. The system will improve margin analysis, shrink control and inventory management at Food Lion, through full visibility to item-level data. At the end of second quarter of 2004, the new inventory system and
processes had been implemented in over 1,000 Food Lion stores and will be implemented in all of our stores by the end of the third quarter of 2004. The roll out of the same system in our Kash n Karry stores was completed during the second
quarter of 2004.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Cost Reduction and Continuous Improvement. In addition to our sales growth, we continued our focus in the first half of fiscal 2004 on cost reduction and continuous
improvement efforts, particularly at our Food Lion banner, to drive further efficiencies in our processes and systems. We plan to continue cost savings and continuous improvement initiatives to maintain and reinforce the price leadership of Food
Lion among supermarket operators in the Southeast, re-position our Kash n Karry banner and continue the strong performance of Hannaford.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During the second half of 2004, Delhaize America plans to continue its focus on core markets to build on accelerating sales momentum. As part of this strategy, Kash
n Karry, which had strong comparable sales in the last half of 2003 and the first half of fiscal 2004, will be rebranded over the coming three years to the new banner name Sweetbay Supermarket. As part of this effort, we closed 34
underperforming Kash n Karry stores primarily in the Orlando area and on the east coast of Florida in the first quarter of 2004. These closings allow us to focus our efforts in the remaining stores in our core area on the west coast of
Florida, including the Tampa/St. Petersburg market where we have a solid market position and consumer perceptions are strong. We plan to build on this position by delivering on meat and produce quality, variety and value for consumers in ways that
differentiate us from our competitors. At our Food Lion banner in the short term, we will continue to focus on excellence in execution, in-stock conditions, cleanliness, freshness, increased convenience and customer service. In the medium term, we
will focus on market renewal (see above) in key markets. At Hannaford, the Festival Strategy will evolve in response to shifting customer needs, as this strategy is founded on the principle of listening to consumers and anticipating their needs.



Recent Developments



The Board of Directors of Delhaize Americas parent company, Delhaize Group, decided,
on August 4, 2004, to divest its loss-making Thai operation, Food Lion Thailand. Delhaize America owns a 51% interest in Food Lion Thailand and Delhaize The Lion Nederland BV, a Dutch subsidiary of Delhaize Group, owns the remaining 49%
interest in Food Lion Thailand. Delhaize America accounts for its Food Lion Thailand investment under the equity method, and its share of Food Lion Thailands operating loss for the 26 weeks ended July 3, 2004 and fiscal 2003 was not material
to the Companys consolidated results of operation. Delhaize Group is in an advanced stage of negotiations on the possible sale of a significant number of Food Lion Thailand stores. Any store not sold will be closed. As a result of the decision
to divest, Delhaize America expects to record a charge of approximately $3.0 million in the third quarter of 2004.



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On May 12, 2004, our company, the Bank of New York, as Trustee (the Trustee) and Food Lion, LLC, Hannaford
Bros. Co., Kash n Karry Food Stores, Inc., FL Food Lion, Inc., Risk Management Services, Inc., Hannbro Company, Martins Foods Of South Burlington, Inc., Shop n Save-Mass., Inc., Hannaford Procurement Corp., Boney Wilson & Sons,
Inc., J.H. Harvey Co., LLC and Hannaford Licensing Corp., each a direct or indirect wholly-owned subsidiary of our company (collectively, the Subsidiary Guarantors), executed a Second Supplemental to the Indenture, dated as of August 25,
1991, between our company and the Trustee, as amended by the First Supplemental Indenture, dated as of April 21, 1997, between our company and the Trustee. Under the terms of the Second Supplemental Indenture, each of the Subsidiary Guarantors fully
and unconditionally and jointly and severally guaranteed our $150,000,000 in original aggregate principal amount of 7.55% Notes due 2007 and $150,000,000 in original aggregate principal amount of 8.05% Notes due 2027.



On March 15, 2004, the Company reached an agreement with The United Food & Commercial
Workers International Union (the UFCW) providing that the UFCW will end its corporate campaign against the Company. The agreement additionally resolves all outstanding disputes between the UFCW and the Company, including all
litigation.



Critical Accounting Policies



We have chosen accounting policies we believe are appropriate to accurately and fairly
report our operating results and financial position and we apply these accounting policies in a consistent manner. The significant accounting policies are summarized in Note 1 to our Annual Report on Form 10-K for the year ended January 3, 2004.



The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical and
other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis and may retain outside consultants, lawyers and actuaries to assist in our evaluation. We believe the following
accounting policies are the most critical because they involve the most significant judgments and estimates used in preparation of our consolidated financial statements.



Asset impairment - We periodically evaluate the period of depreciation or amortization for long-lived assets to determine
whether current circumstances warrant revised estimates of useful lives. We monitor the carrying value of our retail stores, our lowest level asset group for which identifiable cash flows are independent of other groups of assets and liabilities,
for potential impairment based on projected undiscounted future cash flows. If impairment is identified for retail stores, we compare the asset groups estimated fair value to its current carrying value and record provisions for impairment as
appropriate. With respect to owned property and equipment associated with closed stores, the value of the property and equipment is adjusted to reflect recoverable values based on our previous experience in disposing of similar assets and current
economic conditions.



Impairment losses are significantly impacted by estimates
of future operating cash flows and estimates of fair value. We estimate future cash flows based on the experience and knowledge of the markets in which our stores are located. These estimates are adjusted for variable factors such as inflation and
general economic conditions. We estimate fair value based on our experience and knowledge of the real estate markets where the store is located and also include an independent third-party appraiser in certain situations.



Goodwill and other intangible assets  We conduct an annual assessment of
potential impairment of goodwill and other indefinite lived intangible assets by comparing the book value of these assets to their current fair value. Fair value is estimated based on discounted cash flow projections provided by reporting unit
management. When the carrying value of the reporting unit exceeds its fair value, a provision for impairment is recorded. We conduct an annual impairment assessment in the fourth quarter of each year or when events or circumstances indicate that an
impairment may have occurred in accordance with SFAS 142.



The evaluation of
goodwill and intangibles with indefinite useful lives for impairment requires management to use significant judgments and estimates including, but not limited to, projected future revenue, cash flows and discount rates. We believe that, based on
current conditions, material goodwill and intangible impairments are not likely to occur. However, a change in assumptions or market conditions could result in a change in estimated future cash flows and the likelihood of material impairment.



Inventories- Inventories are stated at the lower of cost or
market. Meat, produce and deli-bakery inventories are valued on the average cost method rather than the LIFO method. We evaluate inventory shrinkage throughout the year based on actual physical counts in our stores and distribution centers and
record adjustments based on the results of these counts to provide for the estimated shrinkage as of the balance sheet date.



Supplier Allowances- We receive allowances, credits and income from suppliers primarily for volume incentives, new product introductions, in-store
promotions and co-operative advertising. Volume incentives are based on contractual arrangements generally covering a period of one year or less and have been historically included in the cost of inventory and recognized as earned in cost of sales
when the product is sold. New product introduction allowances compensate us for costs incurred associated with product



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handling and have been historically deferred and recognized as a reduction in cost of sales over the product introductory period. Non-refundable credits from
suppliers for in-store promotions such as product displays require related activities by us. Similarly, co-operative advertising requires us to conduct the related advertising. In-store promotions income and co-operative advertising income have
historically been included in cost of sales and recognized when we perform the related activities.



In 2003, upon the adoption of EITF Issue No. 02-16, in-store promotion and co-operative advertising income is now recorded as a reduction in the cost of inventory and recognized in cost of sales when the product is
sold unless the allowance represents the reimbursement of a specific, incremental, and identifiable cost incurred by us to sell the vendors product. We have reviewed the promotional funding received from vendors and concluded that these
arrangements are primarily for general advertising purposes and not the reimbursement of a specific, incremental, and identifiable cost incurred by us.



Upon adoption of EITF Issue No. 02-16 in 2003, we recorded the cumulative effect of a change in accounting principle of $10.9 million, net of tax, during the first
quarter of 2003. This charge was recorded as a decrease in net income in our consolidated statement of income and reflects an adjustment, which decreased our opening inventory balance. The adoption effectively transfers a portion of the benefit
associated with supplier allowances from cost of sales to inventory until the related product is sold.



Estimating some rebates received from third party vendors requires us to make assumptions and judgments regarding specific purchase or sales levels and estimate related inventory turns. We constantly review the
relevant significant assumptions and estimates and make adjustments as necessary. Although we believe the assumptions and estimates used are reasonable, significant changes in these arrangements or purchase volumes could have a material effect on
future cost of sales.



Self-insurance - We are self-insured for
workers compensation, general liability, vehicle accident and druggist claims. The self-insurance liability is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Maximum retention, including
defense costs per occurrence, ranges from (i) $0.5 million to $1.0 million per accident for workers compensation, (ii) $5.0 million per accident for automobile liability and (iii) $2.0 million per accident for general liability, with an
additional $5.0 million retention in excess of the primary $2.0 million general liability retention for druggist liability. We are insured for costs related to covered claims, including defense costs, in excess of these retentions. The significant
assumptions used in the development of the actuarial estimates are grounded upon our historical claims data, including the average monthly claims and the average lag time between incurrence and payment.



We implemented a captive insurance program in fiscal 2001 pursuant to which the self-insured
reserves related to workers compensation, general liability and auto coverage were reinsured by Pride Reinsurance Company (Pride), an Irish reinsurance captive, owned by an affiliated company of Delhaize Group. The purpose for
implementing the captive insurance program is to provide Delhaize Group continuing flexibility in its risk management program while providing certain excess loss protection through anticipated reinsurance contracts with Pride. Premiums are
transferred annually to Pride through Delhaize Insurance Co., a subsidiary of Delhaize America.



The actuarial estimates are subject to a high degree of uncertainty from various sources, including changes in claim reporting patterns, claim settlement patterns, judicial decisions, legislation, and economic
conditions. Although we believe that the actuarial estimates are reasonable, significant differences related to the items noted above could materially affect our self-insurance obligations and the level of future premiums to Pride.



Store closing reserves- We provide for closed store liabilities relating to
the estimated post-closing lease liabilities and related other exit costs associated with store closing commitments. The closed store liabilities are usually paid over the lease terms associated with the closed stores having remaining terms ranging
from one to 20 years. We estimate the lease liabilities net of sublease income, using a discount rate based on the current treasury note rates adjusted for our current credit spread to calculate the present value of the remaining rent payments on
closed stores. Other exit costs include estimated real estate taxes, common area maintenance, and insurance costs to be incurred after the store closes (all of which are contractually required payments under the lease agreements) over the remaining
lease term. Store closings are generally completed within one year after the decision to close. Adjustments to closed store liabilities and other exit costs primarily relate to changes in subtenants and actual exit costs differing from original
estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Any excess store closing liability remaining upon settlement of the obligation is reversed in the period that such settlement is determined.



Inventory write-downs, if any, in connection with store closings, are
classified in cost of sales. Costs to transfer inventory and equipment from closed stores are expensed as incurred. When severance costs are incurred in connection with store closings, a liability for the termination benefits is recognized and
measured at its fair value at the communication date. Store closing liabilities are reviewed quarterly to ensure that any accrued amounts appropriately reflect the outstanding commitments and that any additional costs are accrued or amounts that are
no longer needed for their originally intended purpose are reversed.



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Calculating the estimated losses requires significant judgments and estimates that could be impacted by factors such as
the extent of interested buyers, the ability to obtain subleases, the creditworthiness of sublessees, and our success at negotiating early termination agreements with lessors. These factors are significantly dependent on general economic conditions
and resultant demand for commercial property.



Results of Operation



The following tables set forth the unaudited condensed consolidated
statements of income for the 13 and the 26 weeks ended July 3, 2004 and for the 13 and 26 weeks ended June 28, 2003 for informational purposes. The 2003 results have been adjusted to classify the results of operation for the 35 stores closed during
the 26 weeks ended July 3, 2004 as discontinued operations. The net sales and other revenues, cost of goods sold, and selling and administrative expenses are reflected on a net basis in discontinued operations in our
condensed consolidated statement of income.



|                                                      |  |                            |           |                             |   |          
|----------------------------------------------------- |  | -------------------------- | --------- | --------------------------- | - | ---------
|                                                      |  | 13 WeeksEnded July 3, 2004 |           | 13 WeeksEnded June 28, 2003
|                                                      |  | (unaudited)                |           | (unaudited)                
|Net sales and other revenues                          |  | $                          | 3,999,188 |                             | $ | 3,743,232
|Cost of goods sold                                    |  |                            | 2,974,578 |                             |   | 2,809,322
|Selling and administrative expenses                   |  |                            | 804,376   |                             |   | 751,123  
|                                                      |  |                            |           |                             |   |          
|Operating income                                      |  |                            | 220,234   |                             |   | 182,787  
|Interest expense                                      |  |                            | 80,094    |                             |   | 78,731   
|                                                      |  |                            |           |                             |   |          
|Income from continuing operations before income taxes |  |                            | 140,140   |                             |   | 104,056  
|Provision for income taxes                            |  |                            | 51,752    |                             |   | 37,878   
|                                                      |  |                            |           |                             |   |          
|Income from continuing operations                     |  |                            | 88,388    |                             |   | 66,178   
|Loss from discontinued operations, net of tax         |  |                            | 2,232     |                             |   | 5,550    
|                                                      |  |                            |           |                             |   |          
|Net income                                            |  | $                          | 86,156    |                             | $ | 60,628   
|                                                      |  |                            |           |                             |   |          

|                                                                   |  |                            |           |                             |   |          
|------------------------------------------------------------------ |  | -------------------------- | --------- | --------------------------- | - | ---------
|                                                                   |  | 26 WeeksEnded July 3, 2004 |           | 26 WeeksEnded June 28, 2003
|                                                                   |  | (unaudited)                |           | (unaudited)                
|Net sales and other revenues                                       |  | $                          | 7,856,810 |                             | $ | 7,371,629
|Cost of goods sold                                                 |  |                            | 5,834,443 |                             |   | 5,558,807
|Selling and administrative expenses                                |  |                            | 1,593,924 |                             |   | 1,490,406
|                                                                   |  |                            |           |                             |   |          
|Operating income                                                   |  |                            | 428,443   |                             |   | 322,416  
|Interest expense                                                   |  |                            | 160,163   |                             |   | 158,059  
|                                                                   |  |                            |           |                             |   |          
|Income from continuing operations before income taxes              |  |                            | 268,280   |                             |   | 164,357  
|Provision for income taxes                                         |  |                            | 102,721   |                             |   | 59,580   
|                                                                   |  |                            |           |                             |   |          
|Income from continuing operations                                  |  |                            | 165,559   |                             |   | 104,777  
|Loss from discontinued operations, net of tax                      |  |                            | 55,805    |                             |   | 29,641   
|                                                                   |  |                            |           |                             |   |          
|Income before cumulative effect of changes in accounting principle |  |                            | 109,754   |                             |   | 75,136   
|Cumulative effect of change in accounting principle, net of tax    |  |                            |          |                             |   | 10,946   
|                                                                   |  |                            |           |                             |   |          
|Net income                                                         |  | $                          | 109,754   |                             | $ | 64,190   
|                                                                   |  |                            |           |                             |   |          



The following tables set forth, for
the periods indicated, the percentage at which the listed amounts bear to net sales and other revenues:



|                                                      |  |                             |  |                            
|----------------------------------------------------- |  | --------------------------- |  | ---------------------------
|                                                      |  | 13 WeeksEnded July 3, 2004% |  | 13 WeeksEndedJune 28, 2003%
|                                                      |  | (unaudited)                 |  | (unaudited)                
|Net sales and other revenues                          |  | 100.00                      |  | 100.00                     
|Cost of goods sold                                    |  | 74.38                       |  | 75.05                      
|Selling and administrative expenses                   |  | 20.11                       |  | 20.07                      
|                                                      |  |                             |  |                            
|Operating income                                      |  | 5.51                        |  | 4.88                       
|Interest expense                                      |  | 2.01                        |  | 2.10                       
|                                                      |  |                             |  |                            
|Income from continuing operations before income taxes |  | 3.50                        |  | 2.78                       
|Provision for income taxes                            |  | 1.29                        |  | 1.01                       
|                                                      |  |                             |  |                            
|Income from continuing operations                     |  | 2.21                        |  | 1.77                       
|Loss from discontinued operations, net of tax         |  | 0.06                        |  | 0.15                       
|                                                      |  |                             |  |                            
|Net income                                            |  | 2.15                        |  | 1.62                       
|                                                      |  |                             |  |                            



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|                                                                   |  |                              |  |                             
|------------------------------------------------------------------ |  | ---------------------------- |  | ----------------------------
|                                                                   |  | 26 WeeksEnded July 3, 2004 % |  | 26 WeeksEnded June 28, 2003%
|                                                                   |  | (unaudited)                  |  | (unaudited)                 
|Net sales and other revenues                                       |  | 100.00                       |  | 100.00                      
|Cost of goods sold                                                 |  | 74.26                        |  | 75.41                       
|Selling and administrative expenses                                |  | 20.29                        |  | 20.22                       
|                                                                   |  |                              |  |                             
|Operating income                                                   |  | 5.45                         |  | 4.37                        
|Interest expense                                                   |  | 2.04                         |  | 2.14                        
|                                                                   |  |                              |  |                             
|Income from continuing operations before income taxes              |  | 3.41                         |  | 2.23                        
|Provision for income taxes                                         |  | 1.30                         |  | 0.81                        
|                                                                   |  |                              |  |                             
|Income from continuing operations                                  |  | 2.11                         |  | 1.42                        
|Loss from discontinued operations, net of tax                      |  | 0.71                         |  | 0.40                        
|                                                                   |  |                              |  |                             
|Income before cumulative effect of changes in accounting principle |  | 1.40                         |  | 1.02                        
|Cumulative effect of change in accounting principle, net of tax    |  | 0.00                         |  | 0.15                        
|                                                                   |  |                              |  |                             
|Net income                                                         |  | 1.40                         |  | 0.87                        
|                                                                   |  |                              |  |                             



Note: Cost of goods sold includes a
December 29, 2002 adoption charge of $87.3 million (1.18% of sales) in the 26 weeks ended June 28, 2003 related to the conversion in inventory accounting from the retail method to average item cost method at the Food Lion and Kash n Karry
banners. The cumulative effect of change in accounting principle is discussed in Note 10 to the unaudited condensed consolidated financial statements.



Sales



We record revenues primarily from the sale of products in our retail stores. Net sales and other revenues for the 13 and 26 weeks ended July 3, 2004 were $4.0 billion and $7.9 billion, respectively, resulting in
increases of 6.8% and 6.6% over the corresponding periods of 2003. Included in these increases, 2.4% both for the quarter and the 26 weeks resulted from the acquisition of the 43 Harveys stores during the fourth quarter of fiscal 2003. Comparable
store sales increased 1.4% during the second quarter of 2004 and 1.9% for the 26 weeks ended July 3, 2004. Second quarter sales of 2004 have been positively impacted by a continued focus on operational excellence at Food Lion, continued strength of
Hannafords Festival strategy, and improving sales trends at our Kash n Karry stores.



We continue to see a competitive market as a great number of retailers battle for the consumers dollars. During the first six months of 2004, we experienced 54 net competitive store openings in our operating
areaincreasing the amount of grocery square footage available to consumers. In addition, many competitors continued to invest heavily in promotional spending in the form of aggressive advertised pricing, buy one and get one or two free offers,
double and triple couponing and other aggressive pricing strategies.



As of
July 3, 2004, we operated 1,493 stores, which consisted of 1,218 stores operating primarily under the Food Lion banner, 123 stores operating under the Hannaford banner, 103 stores operating under the Kash n Karry banner and 49 stores under the
Harveys banner. During the second quarter of 2004, we opened 13 new stores; 11 under the Food Lion banner, one under the Hannaford banner and one under the Harveys banner (conversion from Food Lion to Harveys). In addition, we closed four Food Lion
stores (one of which converted to Harveys from Food Lion), resulting in a net increase of nine stores. We remodeled seven stores in the second quarter of 2004; six stores for the Food Lion banner and one for the Hannaford banner. Retail store square
footage totaled 54.8 million square feet at July 3, 2004, resulting in a 2.4% increase over second quarter of 2003.



Gross Profit



Gross profit as a percentage of sales was 25.62% and 24.95% for the 13 weeks ended July 3, 2004, and the corresponding period in 2003. Gross profit as a percentage of sales was 25.74% and 24.59% for the 26 weeks ended
July 3, 2004, and the corresponding period in 2003. Gross margin comparisons with last year are positively impacted by the Companys store inventory accounting change last year from the retail method to the average item cost method. The effect
of the change on the December 28, 2002 inventory valuation resulted in a decrease in inventory of $87.3 million at the beginning of fiscal 2003 with a corresponding increase to cost of goods sold (1.18% of sales) for the 26 weeks ended June 28,
2003.



Gross profit as a percentage of sales increased in the second quarter of
2004 compared with the second quarter of 2003 primarily due to lower inventory shrink at Food Lion, a better sales mix throughout all banners and continued focus on optimizing margin to drive sustainable, profitable sales at all four operating
companies. As of the end of second quarter 2004, more than 1,000 Food Lion stores



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##### Table of Contents

and all Kash n Karry stores have successfully transitioned to a new inventory and margin management system, which
was first developed at Hannaford and modified to address the specific needs of the Companys other operating banners. This system has enabled us to improve our current margin analysis, shrink control and inventory management through full
visibility to item-level detail data. Implementation in all Food Lion stores will be final by the end of the third quarter.



For the 26 weeks ended July 3, 2004, excluding the impact of the store inventory accounting change, gross profit as a percentage of sales declined slightly in 2004,
primarily as a result of the continued planned price initiatives at our Food Lion banner that started in second quarter of 2003. Higher than prior year inventory shrink at Food Lion also contributed to the first quarter 2004 gross profit decline.



We provided for a $2.3 million LIFO provision in the second quarter of 2004
and $3.7 million in the 26 weeks ended July 3, 2004, compared with a LIFO provision of $0.7 million for both of the corresponding periods last year.



Selling and Administrative Expenses



|                                            |  |                               |  |                                |  |                              |  |                               
|------------------------------------------- |  | ----------------------------- |  | ------------------------------ |  | ---------------------------- |  | ------------------------------
|(Percent of net sales and otherrevenues)    |  | % 13 Weeks ended July 3, 2004 |  | % 13 Weeks ended June 28, 2003 |  | % 26 Weeks endedJuly 3, 2004 |  | % 26 Weeks ended June 28, 2003
|Selling and administrative expenses SGA   |  | 20.11                         |  | 20.07                          |  | 20.29                        |  | 20.22                         
|SGA excluding depreciation and amortization |  | 17.25                         |  | 17.13                          |  | 17.35                        |  | 17.23                         





SGA for the second quarter of 2004 includes additional operating costs related to the launch of Sweetbay Supermarkets and expenses for the 43 Harveys stores acquired in
fiscal 2003. These increases in SGA were reduced by Food Lions continued focus on cost improvement.



|                                        |  |                             |       |                              |   |                            |  |                              |       |  |   |      
|--------------------------------------- |  | --------------------------- | ----- | ---------------------------- | - | -------------------------- |  | ---------------------------- | ----- |  | - | -----
|(Dollars in millions)                   |  | 13 Weeks ended July 3, 2004 |       | 13 Weeks ended June 28, 2003 |   | 26 Weeks endedJuly 3, 2004 |  | 26 Weeks ended June 28, 2003
|Depreciation and amortization expense   |  | $                           | 114.4 |                              | $ | 109.9                      |  | $                            | 230.6 |  | $ | 220.2
|Percent of net sales and other revenues |  |                             | 2.86  |                              |   | 2.94                       |  |                              | 2.93  |  |   | 2.99 



The increase in depreciation and
amortization for the 13 weeks and 26 weeks ended July 13, 2004 compared to the corresponding periods last year is primarily due to the acquisition of the 43 Harveys stores acquired in fiscal 2003, software purchases and upgrades for the transition
of its Food Lion and Kash n Karry banners to a new inventory system, and equipment purchases for new stores and renovations since the second quarter of last year. The decrease as a percent of sales is due to our strong sales performance for
the quarter and year to date.



Interest Expense



|                                        |  |                             |      |                              |   |                            |  |                              |       |  |   |      
|--------------------------------------- |  | --------------------------- | ---- | ---------------------------- | - | -------------------------- |  | ---------------------------- | ----- |  | - | -----
|(Dollars in millions)                   |  | 13 Weeks ended July 3, 2004 |      | 13 Weeks ended June 28, 2003 |   | 26 Weeks endedJuly 3, 2004 |  | 26 Weeks ended June 28, 2003
|Interest expense                        |  | $                           | 80.1 |                              | $ | 78.7                       |  | $                            | 160.2 |  | $ | 158.1
|Percent of net sales and other revenues |  |                             | 2.01 |                              |   | 2.10                       |  |                              | 2.04  |  |   | 2.14 



Interest expense increased for the 13
and 26 weeks ended July 3, 2004 as compared to last year primarily due to a decrease in the benefit from our interest rate swap agreements and increased interest expense from additional store capital leases offset partially by increased investment
income due to higher cash balances.



24



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##### Table of Contents

LIFO



Our inventories are stated at the lower of cost or market, and we value approximately 79% of our inventory using the Last-in, First-out (LIFO) method.



Our LIFO reserve increased $2.4 million for the second quarter of 2004 as compared to $0.7
million for the same period last year.



Discontinued Operations



The Company closed 35 underperforming stores during the 26 weeks ended
July 3, 2004. In accordance with the provisions of SFAS No. 144, a portion of the costs associated with the closure of these stores, as well as related operating activity prior to closing for these stores, was recorded in Loss from
discontinued operations, net of tax in the Companys Consolidated Statement of Income.



Income Taxes



|                           |  |                             |      |   |                             |   |      |                             |  |   |                             |   |  |   |      |  
|-------------------------- |  | --------------------------- | ---- | - | --------------------------- | - | ---- | --------------------------- |  | - | --------------------------- | - |  | - | ---- | -
|(Dollars in millions)      |  | 13 Weeks Ended July 3, 2004 |      |   | 13 Weeks EndedJune 28, 2003 |   |      | 26 Weeks Ended July 3, 2004 |  |   | 26 Weeks EndedJune 28, 2003 |  
|Provision for income taxes |  | $                           | 51.8 |   |                             | $ | 37.9 |                             |  | $ | 102.7                       |   |  | $ | 59.6 |  
|Effective tax rate         |  |                             | 36.9 | % |                             |   | 36.4 | %                           |  |   | 38.3                        | % |  |   | 36.3 | %



The tax provision for the period ended
July 3, 2004 includes approximately $3.4 million (net of tax) in interest income related to an IRS audit refund (discussed below). The Companys tax rate from continuing operations would have been 39.3% and 39.5% for the second quarter of 2004
and year to date of 2004, respectively, excluding this interest refund. Notwithstanding the refund, our effective tax rate increased in the second quarter of 2004 and year to date of 2004 from the respective periods of the prior year due to the
following reasons. First, the rate was lower in 2003 because of the relative effect of ongoing tax saving initiatives over a lower level of Income from continuing operations before income taxes. Income from continuing operations before
income taxes was lower in 2003 primarily due to the inventory accounting charge discussed in Note 10. Second, the 2004 rate is higher due to increased tax provisions related to state audit activity which has not yet reached a final resolution.



The Internal Revenue Service has completed its audit for tax years 1999 though
2001. This audit resulted in a proposed refund of approximately $30 million (plus approximately $5.6 million in interest) associated with the timing of certain tax deductions. Except for the interest recorded in the tax provision, this refund
results in no impact to our Condensed Consolidated Statement of Income for the period ended July 3, 2004. We recently received a letter stating the congressional Joint Committee on Taxation has completed its consideration of such refund and has
taken no exception to the conclusions reached by the Internal Revenue Service (IRS).



Liquidity and Capital Resources



We have funded our operations
and acquisitions from cash internally generated from our operations and borrowings.



At July 3, 2004, we had cash and cash equivalents of $629.7 million compared with $310.1 million at June 28, 2003. We have historically generated positive cash flow from operations. Cash provided by operating activities totaled $478.6
million for the 26 weeks ended July 3, 2004, compared with $352.5 million for the corresponding period last year. The increase in cash provided by operating activities over the comparable period is primarily due to lower tax payments, $55.8 million
for the 26 weeks ended July 3, 2004 compared with $86.1 million for the 26 weeks ended June 28, 2003. Also contributing to the increase in cash from operations were changes in inventories and accounts payable.



Cash flows used in investing activities decreased to $136.1 million for the 26 weeks ended
July 3, 2004, compared with $140.0 million for the corresponding period last year primarily due to an increase in proceeds from property sales in 2004. For the 26 weeks ended July 3, 2004, proceeds were received from the sale leaseback of a Food
Lion store, the sale of three Kash n Karry stores and the sale of land.



Capital expenditures were $143.1 million for the 26 weeks ended July 3, 2004 compared to $141.9 million for the prior year period. For the 26 weeks ended July 3, 2004, we have opened 22 new stores and seven renovations compared with ten new
stores and 17 renovations for the corresponding period of last year.



In fiscal
2004, we plan to incur approximately $450 million of capital expenditures. We plan to finance capital expenditures during fiscal 2004 through funds generated from operations and existing bank facilities and through the use of leases when necessary.



Cash flows used in financing activities for the 26 weeks ended July 3, 2004
were $26.5 million compared to $34.1 million for the same period last year. The decrease in net cash used in financing activities was primarily due to the maturity of securities held in escrow to fund the defeasance of certain senior notes at the
Hannaford banner (see discussion below in debt). Offsetting this decrease were additional parent common stock repurchases in 2004 and taxes paid on capital contribution in 2003.



25



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##### Table of Contents

Debt



We maintain a revolving credit facility with a syndicate of commercial banks providing $350.0 million in committed lines of credit. The credit facility is secured by
certain inventory of the Delhaize America operating subsidiaries. The $350.0 million facility expires in July 2005 and contains affirmative and negative covenants. Negative covenants include a minimum fixed charge coverage ratio, a maximum leverage
ratio, and an asset coverage ratio. We must be in compliance with all covenants in order to have access to the credit facility. As of July 3, 2004, we were in compliance with all covenants contained in the credit facility. A deteriorating economic
or operating environment can subject us to a risk of non-compliance with the covenants. We had no outstanding borrowings under this facility as of July 3, 2004, and had no borrowings during 2004 and 2003. This facility is utilized to provide
short-term capital to meet liquidity needs as necessary.



At July 3, 2004, the
Company had the following longterm debt:



|                                                          |  |   |           |    
|--------------------------------------------------------- |  | - | --------- | ---
|(Dollars in thousands)                                    |  |   |          
|                                                          | 
|Notes, 7.375%, due 2006                                   |  | $ | 608,180   | (a)
|Notes, 7.55%, due 2007                                    |  |   | 149,706   | (a)
|Notes, 8.125%, due 2011                                   |  |   | 1,100,171 | (a)
|Notes, 8.05%, due 2027                                    |  |   | 121,553   | (a)
|Debentures, 9.00%, due 2031                               |  |   | 855,000   |    
|Medium-term notes, 8.67% to 8.73%, due 2006               |  |   | 5,077     | (a)
|Other notes, 6.31% to 14.15%, due Nov. 2004 to 2016       |  |   | 64,548    | (a)
|Mortgage payables, 7.55% to 10.20%, due Oct. 2004 to 2016 |  |   | 24,760    | (a)
|Financing obligation, 7.25%, due 2004 to 2018             |  |   | 10,236    |    
|                                                          |  |   |           |    
|                                                          |  |   | 2,939,231 |    
|Less current portion                                      |  |   | 17,116    |    
|                                                          |  |   |           |    
|                                                          |  | $ | 2,922,115 |    
|                                                          |  |   |           |    



(a) Net of associated discount and
premium



In October 2003, our Hannaford banner invoked the defeasance
provisions of its outstanding, 8.54% Senior Notes due 2004, 6.31% Senior Notes due 2008, 6.50% Senior Notes due 2008, 7.41% Senior Notes due 2009, 6.58% Senior Notes due 2011, and 7.06% Senior Notes due 2016 (collectively, the Notes) and
placed sufficient funds in an escrow account to satisfy the remaining principal and interest payments due on the Notes. As a result of this defeasance, Hannaford is no longer subject to the negative covenants contained in the agreements governing
these notes. As of July 3, 2004, $66.0 million in aggregate principal amount of these notes was outstanding. Cash committed to fund the escrow and not available for general corporate purposes is considered restricted. At July 3, 2004, restricted
funds of $13.8 million and $61.1 million are recorded in Current Other Assets and Non-current Other Assets, respectively.



We enter into significant leasing obligations related to our store properties. Capital lease obligations outstanding at July 3, 2004 were $708.6 million compared with
$710.5 million at June 28, 2003. These leases generally have terms of up to 25 years. We also had significant operating lease commitments at the end of fiscal 2003.



As set forth in the table below, we also have periodic short-term borrowings under informal credit arrangements that are available to us at
the lenders discretion.



|                                     |  |              |     |   |               |   |      |  
|------------------------------------ |  | ------------ | --- | - | ------------- | - | ---- | -
|(Dollars in millions)                |  | July 3, 2004 |     |   | June 28, 2003 |  
|Outstanding borrowings at period end |  | $            | 0   |   |               | $ | 0    |  
|Average borrowings                   |  |              | 0.0 |   |               |   | 0.7  |  
|Maximum amount outstanding           |  |              | 0.0 |   |               |   | 37.0 |  
|Daily weighted average interest rate |  |              | 0   | % |               |   | 2.81 | %



Market Risk



Our company is exposed to changes in interest rates primarily as a result of our long-term
debt requirements. Our interest rate risk management objectives are to limit the effect of interest rate changes on earnings and cash flows and to lower overall borrowing costs. The mix of fixed-rate debt and floating-rate debt is managed within
policy guidelines. We have not entered into any financial instruments for trading purposes.



During the fourth quarter of 2001 and the third quarter of 2002, we entered into interest rate swap agreements, effectively converting a portion of our debt from fixed to variable rates. Maturity dates of interest
rate swap arrangements match those of the underlying debt. These agreements involve the exchange of fixed rate payments for variable rate payments without the exchange of the underlying principal amounts. Variable rates for our agreements are based
on six-month or three-month U.S. dollar LIBOR and are reset on a semi-annual or quarterly basis. The differential between fixed and variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and is
recognized over the life of the agreements as an adjustment to interest expense. On December 30, 2003, we terminated $100 million of the 2011 interest rate swap arrangements. The notional principal amounts of interest rate swap arrangements as of
July 3, 2004 were $300 million maturing in 2006 and $100 million maturing in 2011. These agreements met the criteria for using the short-cut method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133. We have recorded a derivative
asset in connection with these agreements in the amount of $13.1 million and $19.5 million at July 3, 2004 and January 3, 2004, respectively, recorded in our Consolidated Balance Sheets in Other Assets.



26



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##### Table of Contents

Prior to the offering of bonds and debentures in 2001, the Company entered into interest rate agreements to hedge against
potential increases in interest rates. These hedge agreements were settled in 2001 with the loss recorded in other comprehensive income (loss), net of taxes and amortized to interest expense over the term of the associated debt securities. This
unrealized loss was reduced as of the date of the Delhaize Group share exchange as a result of the application of purchase accounting. The remaining unrealized loss, net of taxes, at July 3, 2004, and January 3, 2004, totaled approximately $41.7
million and $44.3 million, respectively.



The table set forth below provides
the expected principal payments and related interest rates of our long-term debt by fiscal year of maturity as of January 3, 2004.



|                          |  |      |      |   |      |   |      |      |  |   |       |     |  |      |       |   |            |   |      |   |  |           |         |     |  |  |  |   |        
|------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ----- | --- |  | ---- | ----- | - | ---------- | - | ---- | - |  | --------- | ------- | --- |  |  |  | - | -------
|(Dollars in millions)     |  | 2004 |      |   | 2005 |   |      | 2006 |  |   | 2007  |     |  | 2008 |       |   | Thereafter |   |      |   |  | FairValue
|Notes, due 2006           |  |      |      |   |      |   |      |      |  | $ | 600.0 | (a) |  |      |       |   |            |   |      |   |  |           |         |     |  |  |  | $ | 648.0  
|Average interest rate     |  |      |      |   |      |   |      |      |  |   | 7.38  | %   |  |      |       |   |            |   |      |   |  |           |         |     |  |  |  |   |        
|                          |  |      |      |   |      |   |      |     
|Notes, due 2011           |  |      |      |   |      |   |      |      |  |   |       |     |  |      |       |   |            |   |      |   |  | $         | 1,100.0 | (b) |  |  |  | $ | 1,250.4
|Average interest rate     |  |      |      |   |      |   |      |      |  |   |       |     |  |      |       |   |            |   |      |   |  |           | 8.13    | %   |  |  |  |   |        
|                          |  |      |      |   |      |   |      |     
|Debentures, due 2031      |  |      |      |   |      |   |      |      |  |   |       |     |  |      |       |   |            |   |      |   |  | $         | 855.0   |     |  |  |  | $ | 1,026.6
|Average interest rate     |  |      |      |   |      |   |      |      |  |   |       |     |  |      |       |   |            |   |      |   |  |           | 9.00    | %   |  |  |  |   |        
|                          |  |      |      |   |      |   |      |     
|Medium term notes         |  |      |      |   |      |   |      |      |  | $ | 5.0   |     |  |      |       |   |            |   |      |   |  |           |         |     |  |  |  | $ | 5.5    
|Average interest rate     |  |      |      |   |      |   |      |      |  |   | 8.71  | %   |  |      |       |   |            |   |      |   |  |           |         |     |  |  |  |   |        
|                          |  |      |      |   |      |   |      |     
|Debt securities, due 2007 |  |      |      |   |      |   |      |      |  |   |       |     |  | $    | 150.0 |   |            |   |      |   |  |           |         |     |  |  |  | $ | 164.7  
|Average interest rate     |  |      |      |   |      |   |      |      |  |   |       |     |  |      | 7.55  | % |            |   |      |   |  |           |         |     |  |  |  |   |        
|                          |  |      |      |   |      |   |      |     
|Debt securities, due 2027 |  |      |      |   |      |   |      |      |  |   |       |     |  |      |       |   |            |   |      |   |  | $         | 126.0   |     |  |  |  | $ | 139.9  
|Average interest rate     |  |      |      |   |      |   |      |      |  |   |       |     |  |      |       |   |            |   |      |   |  |           | 8.05    | %   |  |  |  |   |        
|                          |  |      |      |   |      |   |      |     
|Mortgage payables         |  | $    | 5.0  |   |      | $ | 2.6  |      |  | $ | 2.9   |     |  | $    | 3.2   |   |            | $ | 2.8  |   |  | $         | 9.3     |     |  |  |  | $ | 28.1   
|Average interest rate     |  |      | 9.56 | % |      |   | 8.85 | %    |  |   | 8.85  | %   |  |      | 8.86  | % |            |   | 8.92 | % |  |           | 8.67    | %   |  |  |  |   |        
|                          |  |      |      |   |      |   |      |     
|Other notes               |  | $    | 8.8  |   |      | $ | 12.1 |      |  | $ | 12.2  |     |  | $    | 12.2  |   |            | $ | 12.2 |   |  | $         | 18.8    | (c) |  |  |  | $ | 80.4   
|Average interest rate     |  |      | 6.82 | % |      |   | 6.93 | %    |  |   | 6.95  | %   |  |      | 6.98  | % |            |   | 6.98 | % |  |           | 7.32    | %   |  |  |  |   |        
|                          |  |      |      |   |      |   |      |     
|Financing obligation      |  | $    | 0.5  |   |      | $ | (2.5 | )    |  | $ | 0.4   |     |  | $    | 0.5   |   |            | $ | 0.5  |   |  |           | 11.0    |     |  |  |  | $ | 10.4   
|Average interest rate     |  |      | 7.25 | % |      |   | 7.25 | %    |  |   | 7.25  | %   |  |      | 7.25  | % |            |   | 7.25 | % |  |           | 7.25    | %   |  |  |  |   |        

---

|(a) | $300.0 million notional amount was swapped for a variable interest rate based on a six-month or three-month U.S. dollar LIBOR reset on a semi-annual or quarterly basis. The carrying
value of these notes was increased by $13.0 million at January 3, 2004, to reflect the fair value of the interest rate swap.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | $100.0 million notional amount was swapped for a variable interest rate based on a six-month or three-month U.S. dollar LIBOR reset on a semi-annual or quarterly basis. The carrying
value of these notes was increased by $1.0 million at January 3, 2004, to reflect the fair value of the interest rate swap.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | See Note 7 to our Annual Report on Form 10-K for the year ended January 3, 2004, for Hannaford defeasance discussion.
|--- | ---------------------------------------------------------------------------------------------------------------------



We do not trade in foreign markets or in commodities, nor do we have significant
concentrations of credit risk. Accordingly, we do not believe that foreign exchange risk, commodity risk or credit risk pose a significant threat to our company.



Contractual Obligations and Commitments



We assume various financial obligations and commitments in the normal course of our operations and financing activities. Financial obligations are considered to represent
known future cash payments that we are required to make under existing contractual arrangements, such as debt and lease agreements. A table representing the scheduled maturities of our contractual obligations as of January 3, 2004 was included under
the heading Contractual Obligations and Commitments on page 23 of the Companys 2003 Annual Report on Form 10-K filed with the SEC on April 2, 2004. There were no significant changes from the table referenced above.



Insurance



We are self-insured for workers compensation, general liability, vehicle accident and druggist claims. The self-insurance liability is



27



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##### Table of Contents

determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Maximum retention, including defense costs per
occurrence, ranges from (i) $0.5 million to $1.0 million per accident for workers compensation, (ii) $5.0 million per accident for automobile liability and (iii) $2.0 million per accident for general liability, with an additional $5.0 million
retention in excess of the primary $2.0 million general liability retention for druggist liability. We are insured for costs related to covered claims, including defense costs, in excess of these retentions. It is possible that the final resolution
of some of these claims may require us to make significant expenditures in excess of our existing reserves over an extended period of time and in a range of amounts that cannot be reasonably estimated.



We implemented a captive insurance program in fiscal 2001 pursuant to which the self-insured
reserves related to workers compensation, general liability and auto coverage were reinsured by Pride, an Irish reinsurance captive, owned by an affiliated company of Delhaize Group. The purpose for implementing the captive insurance program
is to provide Delhaize Group continuing flexibility in its risk management program while providing certain excess loss protection through anticipated reinsurance contracts with Pride. Premiums are transferred annually to Pride through Delhaize
Insurance Co., a subsidiary of Delhaize America, Inc.



In the fourth quarter of
2003, we renegotiated our property insurance lowering our self-insured retention per occurrence to $5.0 million for named storms and $2.5 million for all other losses. Prior to the renewal, the amount of the deductible for each named storm
occurrence as insured was calculated as five percent of the total insured value at all locations where physical loss or damage occurred. In fiscal 2003, we incurred property loss of $16.9 million (which includes a $14.3 million loss of inventory)
related to Hurricane Isabel.



Item 3.Quantitative and Qualitative Disclosures About Market Risk



The information set forth under the heading Market Risk under Item 2 of this Form 10-Q is hereby incorporated herein by reference.



Item 4.Controls and Procedures



Our management, with the participation of our Chief Executive Officer and Chief Accounting Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Accounting Officer have concluded that, as
of such date, our disclosure controls and procedures are effective. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by
this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II OTHER INFORMATION



Item 6.Exhibits and Reports on Form 8-K



(a). Exhibits



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4       |  | Second Supplemental Indenture, dated as of May 12, 2004, by and among Delhaize America, Inc., Food Lion, LLC, Hannaford Bros. Co, Kash n Karry Food Stores, Inc., FL Food Lion, Inc.,
Risk Management Services, Inc., Hannbro Company, Martins Foods of South Burlington, Inc., Shopn Save-Mass, Inc., Hannaford Procurement Corp., Boney Wilson & Sons, Inc., J.H. Harvey Co., LLC, Hannaford Licensing Corp. and The Bank of
New York, as Trustee (incorporated by reference to Exhibit 4(b) of the Companys Quarterly Report on Form 10-Q dated May 18, 2004) (SEC File No. 0-6080)
|        | 
|31(a)   |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 
|31(b)   |  | Certification of Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 
|32      |  | Certifications of Chief Executive Officer and Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)                                                                                                                                                                                                                                                                                                                                                                                                                                       



(b). Reports on Form 8-K



None.



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SIGNATURE



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.



|                      |  |                        |  |                                                                                 
|--------------------- |  | ---------------------- |  | --------------------------------------------------------------------------------
|                      |  | DELHAIZE AMERICA, INC.
|                      |  |                       
|DATE: August 17, 2004 |  | BY:                    |  | /s/ Carol M. Herndon                                                            
|                      |  |                        |  | Carol M. Herndon                                                                
|                      |  |                        |  | Executive Vice President of Accounting and Analysis and Chief Accounting Officer



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Exhibit Index



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 
|4       |  | Second Supplemental Indenture, dated as of May 12, 2004, by and among Delhaize America, Inc., Food Lion, LLC, Hannaford Bros. Co, Kash n Karry Food Stores, Inc., FL Food Lion, Inc.,
Risk Management Services, Inc., Hannbro Company, Martins Foods of South Burlington, Inc., Shopn Save-Mass, Inc., Hannaford Procurement Corp., Boney Wilson & Sons, Inc., J.H. Harvey Co., LLC, Hannaford Licensing Corp. and The Bank of
New York, as Trustee (incorporated by reference to Exhibit 4(b) of the Companys Quarterly Report on Form 10-Q dated May 18, 2004) (SEC File No. 0-6080)
|        | 
|31(a)   |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 
|31(b)   |  | Certification of Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 
|32      |  | Certifications of Chief Executive Officer and Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)                                                                                                                                                                                                                                                                                                                                                                                                                                       



30