##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

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

For the quarterly period ended March 29, 2003

OR

o 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

DELHAIZE AMERICA, INC.

(Exact name of registrant as specified in its charter)


|                                |  |                    
|------------------------------- |  | -------------------
|NORTH CAROLINA                  |  | 56-0660192         
|                                |  |                    
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

P.O. Box 1330, 2110 Executive Drive, Salisbury, NC 28145-1330

(Address of principal executive office)(Zip Code)


(704) 633-8250

(Registrants telephone number, including area code)


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 o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act):

|      |  |     
|----- |  | ----
|Yes o |  | No x

Outstanding shares of common stock of the Registrant as of May 12, 2003.

Class A Common Stock  91,050,642,127

Class B Common Stock   75,287,145

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
For the Quarter Ended March 29, 2003

INDEX

|                              |                                                                                               |                                                                                                             |      |      |     | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ---- | ---- | --- | 
|PART I. FINANCIAL INFORMATION |                                                                                               |                                                                                                             | PAGE
|                             
|                              | Item 1. Financial Statements                                                                  |                                                                                                             |      |      |    
|                             
|                              |                                                                                               | Condensed Consolidated Statements of Income (Loss)
for the 13 weeks ended March 29, 2003 and
March 30, 2002 |      |      | 3   | 
|                             
|                              |                                                                                               | Condensed Consolidated Balance Sheets as of
March 29, 2003 and December 28, 2002                            |      |      | 4   | 
|                             
|                              |                                                                                               | Condensed Consolidated Statements of Cash Flows
for the 13 weeks ended March 29, 2003 and March 30, 2002    |      |      | 5   | 
|                             
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                        |      |      | 6-9 | 
|                             
|                              | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                                                                             |      | 9-16 |    
|                             
|                              | Item 3. Quantitative and Qualitative Disclosures About
Market Risk                            |                                                                                                             |      | 16   |    
|                             
|                              | Item 4. Controls and Procedures                                                               |                                                                                                             |      | 16   |    
|                             
|PART II. OTHER INFORMATION    |                                                                                               |                                                                                                             |      |     
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                             |      | 17   |    
|                             
|Signature                     |                                                                                               |                                                                                                             | 18   |     
|                             
|Certification                 |                                                                                               |                                                                                                             | 19   |     
|                             
|Certification                 |                                                                                               |                                                                                                             | 20   |     
|                             
|Exhibit Index                 |                                                                                               |                                                                                                             | 21   |     

2



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##### 



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
For the 13 weeks ended March 29, 2003 and March 30, 2002
(Dollars in thousands)

|                                                                   |  |                |           |                |  |   |           |  
|------------------------------------------------------------------ |  | -------------- | --------- | -------------- |  | - | --------- | -
|                                                                   |  | 13 Weeks       |           | 13 Weeks      
|                                                                   |  | Ended          |           | Ended         
|                                                                   |  | March 29, 2003 |           | March 30, 2002
|                                                                   |  |                |           |               
|Net sales and other revenues                                       |  | $              | 3,681,128 |                |  | $ | 3,705,988 |  
|Cost of goods sold                                                 |  |                | 2,712,990 |                |  |   | 2,747,676 |  
|Selling and administrative expenses                                |  |                | 753,092   |                |  |   | 768,429   |  
|                                                                   |  |                |           |                |  |   |           |  
|Operating income                                                   |  |                | 215,046   |                |  |   | 189,883   |  
|Interest expense                                                   |  |                | 79,686    |                |  |   | 87,326    |  
|                                                                   |  |                |           |                |  |   |           |  
|Income from continuing operations and
before income taxes          |  |                | 135,360   |                |  |   | 102,557   |  
|Provision for income taxes                                         |  |                | 50,075    |                |  |   | 41,002    |  
|                                                                   |  |                |           |                |  |   |           |  
|Income before loss from discontinued operations,
net of tax        |  |                | 85,285    |                |  |   | 61,555    |  
|Loss from discontinued operations, net of tax                      |  |                | 22,246    |                |  |   | 2,328     |  
|                                                                   |  |                |           |                |  |   |           |  
|Income before cumulative effect
of changes in accounting principle |  |                | 63,039    |                |  |   | 59,227    |  
|Cumulative effect of changes in accounting
principle, net of tax   |  |                | 10,946    |                |  |   | 284,097   |  
|                                                                   |  |                |           |                |  |   |           |  
|Net income (loss)                                                  |  | $              | 52,093    |                |  | $ | (224,870  | )
|                                                                   |  |                |           |                |  |   |           |  

See notes to the unaudited condensed consolidated financial statements.

3



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##### 



DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

|                                                         |                                            |  |                |           |                   |  |           |           | 
|-------------------------------------------------------- | ------------------------------------------ |  | -------------- | --------- | ----------------- |  | --------- | --------- | 
|                                                         |                                            |  | March 29, 2003 |           | December 28, 2002
|                                                         |                                            |  |                |           |                  
|                                                         |                                            |  | (Unaudited)    |           |                   |  |          
|ASSETS                                                   |                                            |  |                |           |                   |  |           |          
|Current assets:                                          |                                            |  |                |           |                   |  |           |          
|                                                         | Cash and cash equivalents                  |  | $              | 308,458   |                   |  | $         | 131,641   | 
|                                                         | Receivables,net                            |  |                | 117,084   |                   |  |           | 142,371   | 
|                                                         | Receivable from affiliate                  |  |                | 11,630    |                   |  |           | 14,483    | 
|                                                         | Inventories                                |  |                | 1,239,543 |                   |  |           | 1,340,847 | 
|                                                         | Income tax receivable                      |  |                |          |                   |  |           | 6,036     | 
|                                                         | Prepaid expenses                           |  |                | 79,690    |                   |  |           | 30,622    | 
|                                                         | Deferred tax assets                        |  |                | 23,474    |                   |  |           | 18,976    | 
|                                                         |                                            |  |                |           |                   |  |           |           | 
|                                                         | Total current assets                       |  |                | 1,779,879 |                   |  |           | 1,684,976 | 
|Property and equipment, net                              |                                            |  | 2,979,312      |           |                   |  | 3,041,465 |          
|Goodwill, net                                            |                                            |  | 2,907,309      |           |                   |  | 2,907,305 |          
|Other intangibles, net                                   |                                            |  | 785,516        |           |                   |  | 792,689   |          
|Reinsurance recoverable from affiliate                   |                                            |  | 123,561        |           |                   |  | 119,827   |          
|Other assets                                             |                                            |  | 95,235         |           |                   |  | 88,554    |          
|                                                         |                                            |  |                |           |                   |  |           |           | 
|                                                         | Total assets                               |  | $              | 8,670,812 |                   |  | $         | 8,634,816 | 
|                                                         |                                            |  |                |           |                   |  |           |           | 
|LIABILITIES AND SHAREHOLDERS EQUITY                     |                                            |  |                |           |                   |  |           |          
|Current liabilities:                                     |                                            |  |                |           |                   |  |           |          
|                                                         | Accounts payable                           |  | $              | 675,390   |                   |  | $         | 762,179   | 
|                                                         | Dividend payable                           |  |                | 114,636   |                   |  |           | 114,636   | 
|                                                         | Payable to affiliate                       |  |                |          |                   |  |           | 8,959     | 
|                                                         | Accrued expenses                           |  |                | 380,140   |                   |  |           | 314,851   | 
|                                                         | Capital lease obligations  current        |  |                | 33,254    |                   |  |           | 32,652    | 
|                                                         | Long term debt  current                   |  |                | 27,889    |                   |  |           | 28,294    | 
|                                                         | Other liabilities  current                |  |                | 52,738    |                   |  |           | 49,372    | 
|                                                         | Income taxes payable                       |  |                | 43,569    |                   |  |           |          | 
|                                                         |                                            |  |                |           |                   |  |           |           | 
|                                                         | Total current liabilities                  |  |                | 1,327,616 |                   |  |           | 1,310,943 | 
|Long-term debt                                           |                                            |  | 2,946,704      |           |                   |  | 2,951,072 |          
|Capital lease obligations                                |                                            |  | 677,724        |           |                   |  | 698,283   |          
|Deferred income taxes                                    |                                            |  | 335,020        |           |                   |  | 357,314   |          
|Other liabilities                                        |                                            |  | 284,954        |           |                   |  | 273,502   |          
|                                                         |                                            |  |                |           |                   |  |           |           | 
|                                                         | Total liabilities                          |  |                | 5,572,018 |                   |  |           | 5,591,114 | 
|                                                         |                                            |  |                |           |                   |  |           |           | 
|Shareholders equity:                                    |                                            |  |                |           |                   |  |           |          
|Class A non-voting common stock                          |                                            |  | 53,222         |           |                   |  | 53,222    |          
|Class B voting common stock                              |                                            |  | 37,645         |           |                   |  | 37,645    |          
|Accumulated other comprehensive loss, net of tax         |                                            |  | (69,349        | )         |                   |  | (71,130   | )        
|Additional paid-in capital, net
of unearned compensation |                                            |  | 2,468,634      |           |                   |  | 2,467,397 |          
|Retained earnings                                        |                                            |  | 608,642        |           |                   |  | 556,568   |          
|                                                         |                                            |  |                |           |                   |  |           |           | 
|                                                         | Total shareholders equity                 |  |                | 3,098,794 |                   |  |           | 3,043,702 | 
|                                                         |                                            |  |                |           |                   |  |           |           | 
|                                                         | Total liabilities and
shareholders equity |  | $              | 8,670,812 |                   |  | $         | 8,634,816 | 
|                                                         |                                            |  |                |           |                   |  |           |           | 

See notes to unaudited condensed consolidated financial statements.

4



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DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 13 weeks ended March 29, 2003 and March 30, 2002
(Dollars in thousands)

|                                                                                        |                                                                  |   |                |         |                |   |          |          |  
|--------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | - | -------------- | ------- | -------------- | - | -------- | -------- | -
|                                                                                        |                                                                  |   | 13 Weeks       |         | 13 Weeks      
|                                                                                        |                                                                  |   | March 29, 2003 |         | March 30, 2002
|                                                                                        |                                                                  |   |                |         |               
|CASH FLOWS FROM OPERATING ACTIVITIES                                                    |                                                                  |   |                |         |                |   |          |         
|Net income (loss)                                                                       |                                                                  | $ | 52,093         |         |                | $ | (224,870 | )       
|Adjustments to reconcile net income(loss)
to net cash provided by operating activities: |                                                                  |   |                |         |                |   |          |         
|                                                                                        | Cumulative effect of changes in accounting
principle, net of tax |   |                | 10,946  |                |   |          | 284,097  |  
|                                                                                        | Discontinued operations                                          |   |                | 27,507  |                |   |          |         |  
|                                                                                        | Streamline charges                                               |   |                | 2,346   |                |   |          |         |  
|                                                                                        | Depreciation and amortization                                    |   |                | 111,771 |                |   |          | 112,671  |  
|                                                                                        | Depreciation and amortization  discontinued operations          |   |                | 444     |                |   |          | 1,440    |  
|                                                                                        | Amortization of debt fees/costs                                  |   |                | 489     |                |   |          | 503      |  
|                                                                                        | Amortization of debt premium/(discount)                          |   |                | 283     |                |   |          | 295      |  
|                                                                                        | Amortization of deferred loss on derivative                      |   |                | 2,071   |                |   |          | 2,128    |  
|                                                                                        | Amortization and termination of restricted shares                |   |                | 1,237   |                |   |          | 2,673    |  
|                                                                                        | Accrued interest on interest rate swap                           |   |                | (4,201  | )              |   |          |         |  
|                                                                                        | Loss on disposals of property and
capital lease terminations     |   |                | 1,592   |                |   |          | 117      |  
|                                                                                        | Deferred income taxes (benefit) provision                        |   |                | (27,579 | )              |   |          | 1,006    |  
|                                                                                        | Other                                                            |   |                | 496     |                |   |          | 35       |  
|Changes in operating assets and liabilities which provided (used) cash:                 |                                                                  |   |                |         |                |   |          |         
|                                                                                        | Receivables                                                      |   |                | 25,287  |                |   |          | 49,857   |  
|                                                                                        | Net receivable from affiliate                                    |   |                | (6,106  | )              |   |          | 10,357   |  
|                                                                                        | Income tax receivable                                            |   |                | 6,036   |                |   |          | 8,429    |  
|                                                                                        | Inventories                                                      |   |                | 81,054  |                |   |          | 17,020   |  
|                                                                                        | Prepaid expenses                                                 |   |                | (49,068 | )              |   |          | (38,776  | )
|                                                                                        | Other assets                                                     |   |                | (1,544  | )              |   |          | 289      |  
|                                                                                        | Accounts payable                                                 |   |                | (83,664 | )              |   |          | 34,203   |  
|                                                                                        | Accrued expenses                                                 |   |                | 61,750  |                |   |          | 42,970   |  
|                                                                                        | Income taxes payable                                             |   |                | 49,747  |                |   |          | 20,966   |  
|                                                                                        | Other liabilities                                                |   |                | (14,842 | )              |   |          | (1,585   | )
|                                                                                        |                                                                  |   |                |         |                |   |          |         
|                                                                                        | Total adjustments                                                |   |                | 196,052 |                |   |          | 548,695  |  
|                                                                                        |                                                                  |   |                |         |                |   |          |         
|                                                                                        | Net cash provided by operating activities                        |   |                | 248,145 |                |   |          | 323,825  |  
|                                                                                        |                                                                  |   |                |         |                |   |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES                                                    |                                                                  |   |                |         |                |   |          |         
|                                                                                        | Capital expenditures                                             |   |                | (58,653 | )              |   |          | (92,435  | )
|                                                                                        | Proceeds from sale of property                                   |   |                | 1,617   |                |   |          | 4,001    |  
|                                                                                        | Other investment activity                                        |   |                | (2,235  | )              |   |          | (1,785   | )
|                                                                                        |                                                                  |   |                |         |                |   |          |         
|                                                                                        | Net cash used in investing activities                            |   |                | (59,271 | )              |   |          | (90,219  | )
|                                                                                        |                                                                  |   |                |         |                |   |          |         
|CASH FLOWS FROM FINANCING ACTIVITIES                                                    |                                                                  |   |                |         |                |   |          |         
|Net payments under short-term borrowings                                                |                                                                  |   |               |         |                |   | (140,000 | )       
|                                                                                        | Principal payments on long-term debt                             |   |                | (4,247  | )              |   |          | (4,130   | )
|                                                                                        | Principal payments under capital lease obligations               |   |                | (7,791  | )              |   |          | (7,153   | )
|                                                                                        | Warrants common stock purchases                                  |   |                | (19     | )              |   |          |         |  
|                                                                                        | Parent common stock repurchased                                  |   |                |        |                |   |          | (4,482   | )
|                                                                                        | Proceeds from stock options exercised                            |   |                |        |                |   |          | 1,636    |  
|                                                                                        |                                                                  |   |                |         |                |   |          |         
|                                                                                        | Net cash used in financing activities                            |   |                | (12,057 | )              |   |          | (154,129 | )
|                                                                                        |                                                                  |   |                |         |                |   |          |         
|Net increase in cash and cash equivalents                                               |                                                                  |   | 176,817        |         |                |   | 79,477   |         
|Cash and cash equivalents at beginning of year                                          |                                                                  |   | 131,641        |         |                |   | 137,206  |         
|                                                                                        |                                                                  |   |                |         |                |   |          |         
|Cash and cash equivalents at end of period                                              |                                                                  | $ | 308,458        |         |                | $ | 216,683  |         
|                                                                                        |                                                                  |   |                |         |                |   |          |         

See notes to unaudited condensed consolidated financial statements.

5



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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 December 28, 2002 for further
information.

The financial information presented herein has been prepared in accordance with
the Companys customary accounting practices and has not been audited. In the
opinion of management, the financial information includes all adjustments,
consisting of only normal recurring items, necessary for a fair presentation of
interim results.

The financial statement presentation includes the impact of the Companys
closing of 42 under performing Food Lion and Kash n Karry stores during the
first quarter of 2003. In accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 144, a portion of the costs
associated with these stores, as well as related operating activity prior to
closing for these stores, was recorded as discontinued operations in the
Companys Condensed Consolidated Statement of Income (Loss) for all periods
presented.

2) Supplemental Disclosure of Cash Flow Information:

Selected cash payments and non-cash activities during the period were as
follows:

|                                                                                                                                        |                           |                |          |   |          |   |         |        | 
|--------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------- | -------- | - | -------- | - | ------- | ------ | 
|                                                                                                                                        |                           |                | 13 Weeks |   | 13 Weeks
|                                                                                                                                        |                           |                | Ended    |   | Ended   
|(Dollars in thousands)                                                                                                                  | March 29, 2003            | March 30, 2002
|                                                                                                                                        |                           |               
|Cash payments for income taxes                                                                                                          |                           | $              | 9,269    |   |          | $ | 9,326   |       
|Cash payments for interest, net of amounts
capitalized                                                                                  |                           |                | 20,217   |   |          |   | 25,310  |       
|Non-cash investing and financing activities:                                                                                            |                           |                |          |   |          |   |         |       
|Capitalized lease obligations incurred for store
properties and equipment                                                               |                           |                | 7,301    |   |          |   | 10,984  |       
|Change in reinsurance recoverable and other liabilities                                                                                 |                           |                | 3,734    |   |          |   | 67      |       
|Other                                                                                                                                   |                           |                | 447      |   |          |   |        |       
|Investment in WWRE                                                                                                                      |                           |                |         |   |          |   | 3,000   |       
|Delhaize Group Share Exchange  final adjustment to
purchase price allocation:                                                          |                           |                |          |   |          |   |         |       
|                                                                                                                                        | Property                  |                |          |  |          |   |         | 44,433 | 
|                                                                                                                                        | Deferred income taxes     |                |          |  |          |   |         | 43,752 | 
|                                                                                                                                        | Capital lease obligations |                |          |  |          |   |         | 4,475  | 
|                                                                                                                                        | Accrued expenses          |                |          |  |          |   |         | 5,156  | 
|Reclassification of deferred taxes to goodwill
related to intangible assets that did not meet the
separability criteria of SFAS No. 141 |                           |                |         |   |          |   | 117,895 |       

3) Inventories

Inventories are stated at the lower of cost or market. Inventories valued using
the last-in, first-out (LIFO) method comprised approximately 80% of inventories
on March 29, 2003 and March 30, 2002. Meat, produce and deli inventories are
valued on the first-in, first-out (FIFO) method. If the FIFO method was used
entirely, inventories would have been $32.0 million and $65.3 million greater
as of March 29, 2003 and March 30, 2002, respectively. Application of the LIFO
method resulted in no impact on cost of goods sold for the 13 weeks ended March
29, 2003 and a $0.6 million increase for the 13 weeks ended March 30, 2002.

4) Reclassification

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

5) Accounting for Stock Issued to Employees

The Company has a stock option plan that is described fully in Note 14 to the
Companys Annual Report on Form 10-K for the year ended December 28, 2002. The
Company accounts for this plan under the recognition and measurement principles
of 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 this plan have an exercise price equal to
the market value of the underlying common stock on the date of the grant. The
following table illustrates the effect on net income if the Company had applied
the fair value recognition provisions of 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.

6



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##### 



|                                                                                                              |  |                |        |                |  |   |          |  
|------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | -------------- |  | - | -------- | -
|                                                                                                              |  | 13 weeks       |        | 13 weeks      
|                                                                                                              |  | Ended          |        | Ended         
|(Dollars in thousands)                                                                                        |  | March 29, 2003 |        | March 30, 2002
|                                                                                                              |  |                |        |               
|Net(loss) earnings  as reported                                                                              |  | $              | 52,093 |                |  | $ | (224,870 | )
|Deduct: Total stock-based employee
compensation expense determined using
fair value based method (net of tax) |  |                | 2,444  |                |  |   | 1,778    |  
|                                                                                                              |  |                |        |               
|Net earnings (loss)-pro forma                                                                                 |  | $              | 49,649 |                |  | $ | (226,648 | )

The weighted average fair value at date of grant for options granted during the
first quarter of 2003 and 2002 was $5.36 and $10.99 per option, respectively.
The fair value of options at date of grant was estimated using the
Black-Scholes model using the following assumptions:

|                            |  |                |      |                |  |  |      | 
|--------------------------- |  | -------------- | ---- | -------------- |  |  | ---- | 
|                            |  | 13 weeks       |      | 13 weeks      
|                            |  | Ended          |      | Ended         
|                            |  | March 29, 2003 |      | March 30, 2002
|                            |  |                |      |               
|Expected dividend yield (%) |  |                | 2.6  |                |  |  | 2.6  | 
|Expected volatility (%)     |  |                | 41.0 |                |  |  | 38.8 | 
|Risk-free interest rate (%) |  |                | 3.2  |                |  |  | 4.6  | 
|Expected term (years)       |  |                | 5.2  |                |  |  | 5.2  | 

6) Derivative Financial Instruments

Prior to the offering of the bonds and debentures on April 19, 2001, the
Company entered into interest rate hedge agreements to hedge against potential
increases in interest rates. The notional amount of these hedge agreements was
$1.75 billion. These hedge agreements were structured to hedge against the risk
of increasing market interest rates based on U.S. treasury rates, with the
specified rates based on the expected maturities of the related securities.
These hedge agreements were settled in connection with the completion of the
offering of the bonds and debentures, resulting in a payment in the amount of
an unrealized loss of approximately $214 million. As a result of the adoption
of SFAS No.133, Derivative Instruments and Hedging Activities, at the
beginning of fiscal 2001, the unrealized loss was recorded in other
comprehensive income, net of deferred taxes, and is being amortized to interest
expense over the term of the associated debt securities. The Company amortized
approximately $1.3 million, net of tax of the other comprehensive loss
associated with these hedge agreements to interest expense during both the
first quarter ended March 29, 2003 and March 30, 2002. The 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 at March 29,
2003, and March 30, 2002, totaled approximately $48.2 million and $54.6
million, net of deferred taxes, respectively.

During the fourth quarter of 2001 and the third quarter of 2002, the Company
entered into interest rate swap agreements to manage the exposure to interest
rate movements by effectively converting a portion of the debt from fixed to
variable rates. Maturity dates of the Companys 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. The notional principal amounts of
interest rate swap arrangements at March 29, 2003 were $300 million maturing in
2006 and $200 million maturing in 2011. These agreements are accounted for as
fair value hedges. For the 13 weeks ended March 29, 2003, interest expense
decreased by $4.2 million 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. The fair value of the Companys
debt has been increased by $19.8 million at March 29, 2003 with these
agreements. The Company has also recorded a derivative asset in connection with
these agreements in the amount of $27.4 million recorded in other assets.

7) Goodwill and Other Intangible Assets

On December 30, 2001, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which required that we cease amortizing goodwill and other
intangible assets with indefinite lives, and begin 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.
Accordingly, during the first quarter of 2002, the Company performed its
transitional assessment for potential impairment at each of our three operating
banners, since each chain represents a separate operating segment as defined by
SFAS No. 131 and a separate reporting unit as defined by SFAS No. 142. In
performing its assessment, the carrying value of assets and liabilities was
determined for each reporting unit and compared to the fair value of each
reporting unit, which was obtained from independent appraisals. If the carrying
value of the reporting unit exceeded its fair value, an assessment of
impairment was then necessary.

7



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The Companys impairment assessment at its individual operating banners
resulted in a non-cash impairment charge totaling approximately $288 million
before taxes ($284 million net of taxes), which was recorded as a cumulative
effect of change in accounting principle in the first quarter 2002. This
impairment charge relates primarily to goodwill associated with the
Delhaize Group share exchange and with the Companys acquisitions of Kash n Karry and
Hannaford. The Florida market, where Kash n Karry is
concentrated, is one of the most competitive markets in the Southeast
region. In addition, this market
has experienced the impact of security concerns and economic pressures, which
continue to negatively impact temporary residence and tourism in the state. The
Hannaford banner carries a significant goodwill balance due to the initial
acquisition in 2000 and the assignment of goodwill to this banner related to
the Delhaize Group share exchange.

8) Comprehensive Income (Loss)

Comprehensive income (loss) includes net earnings and other comprehensive
earnings. Other comprehensive earnings include revenues, expenses, gains and
losses that have been 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 and unrealized security holding
gains. Comprehensive income (loss) was $53,875 and ($223,517) for the 13 weeks
ended March 29, 2003 and March 30,2002, respectively.

9) Recently Adopted Accounting Standards

In December 2002, SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure, was issued and amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for
voluntary change to the fair value based method of accounting for stock based
employee compensation. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reporting results.
Certain new disclosure provisions of SFAS No. 148 are required for fiscal years
ending after December 15, 2002. See Note 5 to the Companys Condensed
Consolidated Financial Statements for the first quarter of fiscal 2003.

In November 2002, the Financial Standards Board (FASB) issued FASB
Interpretation No. 45 (FIN 45) Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, which is an interpretation of FASB Statements No. 5, 57, and 107 and
rescission of FASB Interpretation No. 34. FIN 45 elaborates on the disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15, 2002. The adoption of
this standard did not have an impact on the Companys financial statements. See
Debt Guarantees below.

In September 2002, Emerging Issues Task Force (EITF) Issue No. 02-16,
Accounting by a Reseller for Cash Consideration Received, was proposed and a
consensus was reached in January 2003. The issue was revised and finalized in
March 2003. This issue addresses the appropriate accounting, by a retailer, for
cash consideration received from a vendor and directs that cash consideration
received from a vendor should be presumed to be a reduction of inventory unless
it is a reimbursement of specific costs incurred in advertising the vendors
products. Previously the Company recorded allowances as a reduction of cost of
sales when earned. This change will have a timing impact on certain allowances
that will now be an adjustment to inventory cost and recognized in cost of
sales when the product is sold.

Upon adoption of EITF Issue No. 02-16 in 2003, the Company recorded the
cumulative effect of a change in accounting principle of $10.9 million, net of
tax. This charge was recorded in the Companys Condensed Consolidated
Statement of Income (Loss) and reflects an adjustment of the Companys opening
inventory balance. As a result of the adoption of this standard, certain
allowances will be recorded as a reduction of inventory as appropriate.

In June 2002, SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, was issued by the FASB. SFAS No. 146 addresses
significant issues relating to the recognition, measurement and reporting of
costs associated with exit and disposal activities (including store closings).
SFAS No. 146 replaces previous accounting guidance, principally EITF Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). Issue No. 94-3 required that a liability for an exit cost be
recognized when the company committed to a specific plan; whereas, SFAS No. 146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. SFAS No. 146 is
effective for exit or disposal activities initiated after December 31, 2002.
See Note 11 to the Companys Condensed Consolidated Financial Statements for
the first quarter of fiscal 2003.

In June 2001, the FASB also issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs, and applies to the legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after
June 15, 2002. The effect of adopting this standard did not have a significant
effect on the Companys financial statements.

8



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Debt Guarantees

The wholly owned direct subsidiaries named below will fully and unconditionally
and jointly and severally guarantee the debt of Delhaize America.

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

10) Recently Issued Accounting Standards

In May 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.  The
Company is currently assessing the potential effect of SFAS No. 149 on its financial statements.

11) Discontinued Operations

During the first quarter of 2003, the Company closed 42 under performing Food
Lion and Kash n Karry stores. In accordance with the provisions of SFAS No.
144, a portion of the costs associated with these stores, as well as related
operating activity prior to closing for these stores, was recorded in
discontinued operations in the Companys Condensed Consolidated Statement of
Income (Loss).

For the 13 weeks ended March 29, 2003 and March 30, 2002, discontinued
operations generated sales and other revenues of $16.5 million and $42.3
million, respectively, with net operating losses after taxes of $3.8 million
and $2.3 million, respectively. During the first quarter of 2003 in accordance
with SFAS No. 146, 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. Additional discontinued expenses not reserved
totaled $0.7 million after taxes.

The following table shows the reserve balances as of March 29, 2003.

|                                     |  |                   |         |                  |  |       |        |   |  |   |         |  
|------------------------------------ |  | ----------------- | ------- | ---------------- |  | ----- | ------ | - |  | - | ------- | -
|(Dollars in thousands)               |  | Other liabilities |         | Accrued Expenses |  | Total
|                                     |  |                   |         |                  |  |      
|Initial reserve                      |  | $                 | (25,927 | )                |  | $     | (1,640 | ) |  | $ | (27,567 | )
|Utilizations                         |  |                   | 555     |                  |  |       | 836    |   |  |   | 1,391   |  
|Adjustments                          |  |                   |        |                  |  |       |       |   |  |   |         |  
|Reserve balance as of
March 29, 2003 |  | $                 | (25,372 | )                |  | $     | (804   | ) |  | $ | (26,176 | )

12) Streamlining

During the first quarter of 2003, Food Lion initiated additional cost saving
opportunities by streamlining and optimizing the functioning of its support and
management structure. These initiatives include a reduction in work force
affecting approximately 400 associates. As a result, the Company recorded a
pre-tax charge of $2.4 million, which was included in Selling and
Administrative Expenses, and represents related severance, benefits, and
outplacement service costs. The Company paid $0.6 million of the initial
reserve during the first quarter of 2003 and the outstanding $1.8 million is
included in the Companys Condensed Consolidated Balance Sheet in Accrued
Expenses.

Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations (13 weeks ended March 29, 2003 compared to the 13 weeks ended March
30, 2002)

The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and, consequently, do not include all the disclosures
normally required by generally accepted accounting principles or those normally
made in the Companys Annual Report on Form 10-K. Accordingly, the reader of
this Form 10-Q should refer to the Companys Annual Report on Form 10-K for the
year ended December 28, 2002 for further information. Reclassifications have
been made for all current and historical information presented herein from that
contained in the Companys prior annual reports to shareholders and SEC filings
on forms 10-Q, 10-K and 8-K.

Critical Accounting Policies

We have chosen accounting policies that we believe are appropriate to
accurately and fairly report our operating results and financial position and
we apply those accounting policies in a consistent manner. 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

9



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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. The
reader should refer to Note 1 to the consolidated financial statements in our
Annual Report on Form 10-K for the fiscal year ended December 28, 2002 for
further information regarding significant accounting policies.

Results of Operations

The following tables set forth the unaudited condensed consolidated statements
of income(loss) for the 13 weeks ended March 29, 2003 and for the 13 weeks
ended March 30, 2002 for informational purposes. The 2002 results have been
adjusted to classify the results of operations for the 42 stores closed during
the first quarter of 2003 as discontinued operations; their net sales and
other revenues, cost of goods sold, and selling and administrative expenses
have been reflected on a net basis in discontinued operations in our
condensed consolidated statement of income (loss).

|                                                                   |  |   |                |  |                |   |           |   | 
|------------------------------------------------------------------ |  | - | -------------- |  | -------------- | - | --------- | - | 
|                                                                   |  |   | 13 Weeks       |  | 13 Weeks      
|                                                                   |  |   | Ended          |  | Ended         
|                                                                   |  |   | March 29, 2003 |  | March 30, 2002
|                                                                   |  |   | (unaudited)    |  | (unaudited)   
|                                                                   |  |   |                |  |               
|Net sales and other revenues                                       |  | $ | 3,681,128      |  |                | $ | 3,705,988 |  
|Cost of goods sold                                                 |  |   | 2,712,990      |  |                |   | 2,747,676 |  
|Selling and administrative expenses                                |  |   | 753,092        |  |                |   | 768,429   |  
|                                                                   |  |   |                |  |                |   |           |   | 
|Operating income                                                   |  |   | 215,046        |  |                |   | 189,883   |  
|Interest expense                                                   |  |   | 79,686         |  |                |   | 87,326    |  
|                                                                   |  |   |                |  |                |   |           |   | 
|Income from continuing operations and before
income taxes          |  |   | 135,360        |  |                |   | 102,557   |  
|Provision for income taxes                                         |  |   | 50,075         |  |                |   | 41,002    |  
|                                                                   |  |   |                |  |                |   |           |   | 
|Income before loss from discontinued operations,
net of tax        |  |   | 85,285         |  |                |   | 61,555    |  
|Loss from discontinued operations, net of tax                      |  |   | 22,246         |  |                |   | 2,328     |  
|                                                                   |  |   |                |  |                |   |           |   | 
|Income before cumulative effect of changes in
accounting principle |  |   | 63,039         |  |                |   | 59,227    |  
|Cumulative effect of changes in accounting
principle, net of tax   |  |   | 10,946         |  |                |   | 284,097   |  
|                                                                   |  |   |                |  |                |   |           |   | 
|Net income (loss)                                                  |  | $ | 52,093         |  |                | $ | (224,870  | )
|                                                                   |  |   |                |  |                |   |           |   | 

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

|                                                                   |  |  |                |  |                |  |        |   | 
|------------------------------------------------------------------ |  |  | -------------- |  | -------------- |  | ------ | - | 
|                                                                   |  |  | 13 Weeks       |  | 13 Weeks      
|                                                                   |  |  | Ended          |  | Ended         
|                                                                   |  |  | March 29, 2003 |  | March 30, 2002
|                                                                   |  |  | %              |  | %             
|                                                                   |  |  | (unaudited)    |  | (unaudited)   
|                                                                   |  |  |                |  |               
|Net sales and other revenues                                       |  |  | 100.00         |  |                |  | 100.00 |  
|Cost of goods sold                                                 |  |  | 73.70          |  |                |  | 74.14  |  
|Selling and administrative expenses                                |  |  | 20.46          |  |                |  | 20.73  |  
|                                                                   |  |  |                |  |                |  |        |   | 
|Operating income                                                   |  |  | 5.84           |  |                |  | 5.13   |  
|Interest expense                                                   |  |  | 2.16           |  |                |  | 2.36   |  
|                                                                   |  |  |                |  |                |  |        |   | 
|Income from continuing operations and before
income taxes          |  |  | 3.68           |  |                |  | 2.77   |  
|Provision for income taxes                                         |  |  | 1.36           |  |                |  | 1.11   |  
|                                                                   |  |  |                |  |                |  |        |   | 
|Income before loss from discontinued operations,
net of tax        |  |  | 2.32           |  |                |  | 1.66   |  
|Loss from discontinued operations, net of tax                      |  |  | 0.60           |  |                |  | 0.06   |  
|                                                                   |  |  |                |  |                |  |        |   | 
|Income before cumulative effect of changes
in accounting principle |  |  | 1.72           |  |                |  | 1.60   |  
|Cumulative effect of changes in accounting
principle, net of tax   |  |  | 0.30           |  |                |  | 7.67   |  
|                                                                   |  |  |                |  |                |  |        |   | 
|Net income (loss)                                                  |  |  | 1.42           |  |                |  | (6.07  | )
|                                                                   |  |  |                |  |                |  |        |   | 

Sales

We record revenues primarily from the sale of products in over 1,440 retail
stores. Net sales and other revenues were $3.7 billion for the quarter ended
March 29, 2003, resulting in a decrease of 0.67% over the corresponding period
of 2002. Comparable store sales decreased 2.2% during the first quarter of
2003 as compared to the first quarter of 2002. Sales performance during the
first quarter of 2003 has been negatively impacted by the timing of the Easter
holiday, which fell in the first quarter of 2002 versus the second quarter of
2003. Excluding the negative impact of the timing of Easter, comparable store
sales decreased 1.1%. Sales performance during 2003 has been negatively
impacted by soft economic conditions and heightened competitive activity in the
companys major operating areas. Most of our stores are located in the
Southeast region of the United States, which continues to experience corporate
layoffs, high unemployment, and generally depressed economic conditions.

10



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We continue to see an increase in competitive activity as a greater number of
retailers battle for the consumers dollars. During the first three months of
2003, we have experienced 18 competitive store openings in our operating area -
increasing the amount of grocery square footage available to consumers. Most
major supermarket retailers continued to engage in promotional activity
offering deep discounts on selected items. We maintained our commitment to a
combination of everyday low prices, planned promotional activity, and
consistent low price offerings through the first quarter
of 2003.

As of March 29, 2003, we operated 1,444 stores, which consisted of 1,188 stores
operating primarily under the Food Lion banner, 119 stores operating under the Hannaford
and Shop n Save banners and 137 stores operating under the Kash n Karry
banner. During the first quarter we opened three new stores all of which were
under our Food Lion banner. In addition, we remodeled six stores in the first
quarter including three Food Lion stores, two Kash n Karry stores and one
Hannaford store. During the quarter we closed 43 Food Lion stores, and one Kash n
Karry store, resulting in a net decrease of
41 stores.

Gross Profit

Gross profit as a percentage of sales was 26.30% for the 13 weeks ended March
29, 2003, compared to 25.86% for the same period last year. Despite lower than
expected sales volume, we continue to post solid gross profit performance as a
result of the continued implementation of zone pricing and improved private
label product penetration at the Food Lion banner and strong performance at the
Hannaford banner, partially as a result of synergy initiatives. During the first quarter of 2003, gross profit
was also positively impacted by cost reductions across the distribution operation at Food Lion.

No LIFO provision is required for the first quarter of 2003 compared to a
provision of $0.6 million for first quarter of 2002. During the first quarter
of 2003, inflation/deflation conditions appear to be relatively flat.

Selling and administrative expenses

Selling and administrative expenses (which include depreciation and
amortization) as a percentage of sales were 20.46% in first quarter of 2003
compared to 20.73% in the first quarter of 2002. Excluding depreciation and
amortization, selling and administrative expenses as a percentage of sales were
17.42% for the first quarter of 2003 compared to 17.69% for the corresponding
period of the prior year. The decrease in selling and administrative expenses
(excluding depreciation and amortization) for the first quarter compared to the
corresponding period of last year is primarily due to decreases in store labor
costs as a result of productivity and standard practice improvements, lower
retirement plan expense due to changes in the Food Lion and Kash n Karry
benefit plans along with a gain from an early lease termination on a closed
store. Additional decrease in selling and administrative expenses resulted from
Food Lion completing a majority of its corporate support streamline efforts
during the first quarter of 2003.

Depreciation and amortization expense during the first quarter of 2003 was
$111.8 million or 3.04% of sales compared to $112.7 million or 3.04% of sales
for the first quarter of the prior year. During the quarter ended March 30,
2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets,
effective December 31, 2001. As a result, we no longer amortize goodwill and
intangible assets with indefinite lives. Under SFAS No. 142 the Company is
required to annually assess goodwill and other intangible assets with
indefinite lives by comparing the book value of these assets to their current
fair value. The Companys transitional impairment analysis (required upon
adoption of the standard) resulted in an impairment charge totaling $288
million before tax ($284 million after tax) which was recorded in the first
quarter of 2002 as a change in accounting principle on the Companys Condensed
Consolidated Statement of Income (Loss).

Interest Expense

Interest expense during the first quarter of 2003 was $79.7 million or 2.16% of
sales compared to $87.3 million or 2.36% of sales for the first quarter of the
prior year. Interest expense was lower in the first quarter of 2003 compared
with the first quarter of 2002 primarily due to the interest reduction from
interest rate swap agreements and the repurchase of $68.975 million in
debentures and debt securities during the last half of 2002.

Store Closings

The following table shows the number of stores closed and planned to be closed
at the end of the first quarter of 2003, along with the number of stores
committed for closure during the year, the number of stores actually closed,
the number of closed stores acquired and the number of stores sold or for which
the lease was terminated.

|                             |  |              |    |        |  |          |     |         |  |  |    |   |  |  |     |  
|---------------------------- |  | ------------ | -- | ------ |  | -------- | --- | ------- |  |  | -- | - |  |  | --- | -
|                             |  | Discontinued |    |        |  |          |     | Planned |  |  |    |  
|                             |  | Operations   |    | Closed |  | Closings |     | Total  
|                             |  |              |    |        |  |          |     |        
|As of December 28, 2002      |  |              |    |        |  |          | 172 |         |  |  | 5  |   |  |  | 177 |  
|Store closings added         |  |              | 42 |        |  |          |     |         |  |  | 1  |   |  |  | 43  |  
|Stores acquired and closed   |  |              |    |        |  |          | 5   |         |  |  |    |   |  |  | 5   |  
|Planned closings completed   |  |              |    |        |  |          | 2   |         |  |  | (2 | ) |  |  |     |  
|Stores sold/lease terminated |  |              |    |        |  |          | (7  | )       |  |  |    |   |  |  | (7  | )
|                             |  |              |    |        |  |          |     |         |  |  |    |   |  |  |     |  
|As of March 29, 2003         |  |              | 42 |        |  |          | 172 |         |  |  | 4  |   |  |  | 218 |  

11



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The following table reflects closed store liabilities as of March 29, 2003 and
activity during the quarter, including additions to closed store liabilities
charged to operations and adjustments to liabilities based on changes in facts
and circumstances and payments made.

|                             |                                           |                  |  |  |  |                    |      |                   |      |                  |       |      |      |   |       |      |      |  
|---------------------------- | ----------------------------------------- | ---------------- |  |  |  | ------------------ | ---- | ----------------- | ---- | ---------------- | ----- | ---- | ---- | - | ----- | ---- | ---- | -
|                             |                                           |                  |  |  |  | Qtr 1 2003 Disc Op |      | Qtr 1 2003 Closed |      | Qtr 1 2003 Total
|                             |                                           |                  |  |  |  |                    |      |                   |      |                 
|Balance at December 28, 2002 |                                           |                  |  |  |  | $                  | 0.0  |                   |      | $                | 146.6 |      |      | $ | 146.6 |     
|Additions:                   |                                           |                  |  |  |  |                    |      |                   |      |                  |       |      |      |   |       |     
|                             | Store closings  lease obligations        |                  |  |  |  |                    |      | 22.8              |      |                  |       | 0.2  |      |   |       | 23.0 |     
|                             | Store closing-other exit costs            |                  |  |  |  |                    |      | 3.2               |      |                  |       | 0.0  |      |   |       | 3.2  |     
|                             | Adjustments to estimates-lease obligation |                  |  |  |  |                    |      | 0.6               |      |                  |       | (5.3 | )    |   |       | (4.7 | )   
|                             | Adjustments to estimates-other exit costs |                  |  |  |  |                    |      | (0.1              | )    |                  |       | (1.4 | )    |   |       | (1.5 | )   
|                             |                                           | Total additions  |  |  |  |                    |      |                   | 26.5 |                  |       |      | (6.5 | ) |       |      | 20.0 |  
|Reductions:                  |                                           |                  |  |  |  |                    |      |                   |      |                  |       |      |      |   |       |     
|                             | Lease payments made                       |                  |  |  |  |                    |      | (1.0              | )    |                  |       | (3.7 | )    |   |       | (4.7 | )   
|                             | Payments for other exit costs             |                  |  |  |  |                    |      | (0.1              | )    |                  |       | (0.9 | )    |   |       | (1.0 | )   
|                             |                                           | Total reductions |  |  |  |                    |      |                   | (1.1 | )                |       |      | (4.6 | ) |       |      | (5.7 | )
|Balance at March 29, 2003    |                                           |                  |  |  |  | $                  | 25.4 |                   |      | $                | 135.5 |      |      | $ | 160.9 |     

The March 29, 2003 balance of approximately $160.9 million consisted of lease
liabilities and other exit cost liabilities of $129.0 million and $31.9
million, respectively. During the quarter, the Company completed the closure of
42 under performing Food Lion and Kash n Karry stores. The March 29, 2003
balance includes lease liabilities of $22.4 million and other exit costs of
$3.0 million associated with these 42 stores.

We 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 20 years. Adjustments
to closed store liabilities and other exit costs primarily relate to changes in
subtenants and actual exit costs 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 to income in the period that such settlement is determined. We use 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.

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 our 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.

Asset Impairment Charge

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, 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 cash flows. If impairment is
identified for retail stores, we compare the asset groups estimated fair
market 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.

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, our
policy requires that an impairment assessment of Goodwill and Other Intangible
Assets with indefinite lives be performed at least annually. We will be
conducting this assessment in the fourth quarter of each year unless facts and
circumstances require an assessment at an earlier date.

Liquidity and Capital Resources

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

At March 29, 2003, we had cash and cash equivalents of $308.5 million. We have
historically generated positive cash flow from operations. Cash provided by
operating activities totaled $248.1 million for the 13 weeks ended March 29,
2003, compared with $323.8 million for the corresponding period last year. Cash
provided by operating activities for the 13 weeks ended March 29, 2003 was
primarily due to income of

12



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$63.0 million before cumulative effect of changes in
accounting principle, a decrease in inventory of $81.1 million, increases in accrued
expenses of $61.8 million, and an
increase in income tax payable of $49.7 million. The decrease in cash provided
by operating activities from the corresponding period last year was primarily
due to the decrease in accounts payable, and the decrease in accounts receivable
offset by a decrease in inventory.

Cash flows used in investing activities decreased to $59.3 million for the 13
weeks ended March 29, 2003, compared with $90.2 million for the corresponding
period last year primarily due to a decrease in capital expenditures of $58.7
million for the 13 weeks ended March 29, 2003 compared with $92.4 million for
the corresponding period in 2002. For the 13 weeks ended March 29, 2003, we
have opened three new stores and completed the renovation of six existing
stores compared to eight openings and 29 renovations completed for the
corresponding period of last year.

In fiscal 2003, we plan to incur approximately $450 million of capital
expenditures, including approximately $120 million to renovate existing stores,
approximately $160 million for new store construction and approximately $170
million for information technology, logistics and distribution spending. We
plan to finance capital expenditures during fiscal 2003 through funds generated
from operations and existing bank facilities and through use of leases when
necessary.

Cash flows used in financing activities for the quarter ended March 29, 2003
were $12.1 million compared to $154.1 million for the same period last year.
The decrease in cash used in financing activities was primarily the result of
short-term borrowings repaid in 2002.

Debt

We maintain a revolving credit facility with a syndicate of commercial banks
providing $350.0 million in committed lines of credit. In December 2002, the
credit facility was amended and the line of credit was reduced from $500.0
million to $350.0 million. 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 these
covenants in order to have access to the credit facility. As of March 29, 2003,
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 March 29, 2003 and have had no borrowings during 2003. There
were no borrowings outstanding at March 30, 2002. This facility is utilized to
provide short-term capital to meet liquidity needs as necessary.

At March 29, 2003, we had outstanding notes of $600 million at 7.375% due 2006,
$149.5 million at 7.55% due 2007, $1.1 billion in notes at 8.125% due 2011,
$121.3 million at 8.05% due 2027 and $855 million in debentures at 9.00% due
2031. We also had medium-term notes of $15.8 million due from 2003 to 2006 at
interest rates of 8.53% to 8.73% and outstanding other notes of $78.8 million
due from 2004 to 2016 at interest rates of 6.31% to 14.15%. The Company had
mortgage notes payable of $32.9 million due from 2003 to 2016 at interest rates
of 7.5% to 10.2% at March 29, 2003.

On December 12, 2001, the Company was granted a term loan facility by Delhaize
The Lion Coordination Center S.A., a Belgian company wholly-owned by Delhaize
Group, in the amount of $38 million intended for general corporate and working
capital requirements. On September 19, 2002, the Company repaid the $38 million
loan plus accrued interest totaling $1.1 million.

We enter into significant leasing obligations related to our store properties.
Capital lease obligations outstanding at March 29, 2003 were $711.0 million
compared with $722.2 million at March 30, 2002. These leases generally have
original terms of up to 20 years.

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

Informal Credit Arrangements

|                                                       |  |           |      |           |  |  |  |  |   |  |      |  
|------------------------------------------------------ |  | --------- | ---- | --------- |  |  |  |  | - |  | ---- | -
|                                                       |  | March 29, |      | March 30,
|(Dollars in millions)                                  |  | 2003      |      | 2002     
|                                                       |  |           |      |          
|Outstanding borrowings
at the end of the first quarter |  | $         |     |           |  |  |  |  | $ |  |     |  
|Average borrowings                                     |  |           | 1.3  |           |  |  |  |  |   |  | 6.2  |  
|Maximum amount outstanding                             |  |           | 37.0 |           |  |  |  |  |   |  | 80.0 |  
|Daily weighted average interest rate                   |  |           | 2.81 | %         |  |  |  |  |   |  | 2.84 | %

Market Risk

We are 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. We maintain certain variable-rate debt to take
advantage of lower relative interest rates currently available. We have not
entered into any of our financial instruments for trading purposes.

During the fourth quarter of 2001 and the third quarter of 2002, we entered
into interest rate swap agreements to manage the exposure to interest rate
movements by effectively converting a portion of our debt from fixed to
variable rates. Maturity dates of the Companys interest rate swap arrangements
match those of the underlying debt. These agreements involve the exchange of
fixed rate payments for

13



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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 semiannual basis 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
recognized over the life of the agreements as an adjustment to interest
expense. The notional amounts of interest rate swap arrangements at March 29,
2003 were $300 million maturing in 2006 and $200 million maturing in 2011.
These agreements are accounted for as fair value hedges. For the 13 weeks ended
March 29, 2003, interest expense was decreased $4.2 million 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.
The fair value of our debt has been increased by $19.8 million at March 29,
2003 in connection with these agreements. We have also recorded a derivative
asset in connection with these agreements in the amount of $27.4 million
recorded in other assets.

Prior to the offering of the original debt securities discussed under the
heading Debt above, we entered into interest rate hedge agreements to hedge
against potential increases in interest rates. The notional amount of these
hedge agreements was $1.75 billion. These hedge agreements were structured to
hedge against the risk of increasing market interest rates based on U.S.
treasury rates, with the specified rates based on the expected maturities of
the related securities. These hedge agreements were settled in connection with
the completion of the offering of the original debt securities, resulting in a
payment in the amount of an unrealized loss of approximately $214 million. As a
result of the adoption of SFAS No. 133 at the beginning of fiscal 2001, the
unrealized loss was recorded in other comprehensive loss, net of taxes and is
being amortized to interest expense over the term of the associated debt
securities. The 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 at the end of first quarter 2003 was approximately
$48.2 million, net of taxes.

The table set forth below provides the expected principal payments (net of
related discounts or premiums) and related interest rates of our long-term debt
by fiscal year of maturity as of December 28, 2002.

|                           |  |      |       |      |  |      |      |      |  |      |      |            |  |            |       |   |  |   |       |   |  |   |         |   |  |   |         | 
|-------------------------- |  | ---- | ----- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | ---------- |  | ---------- | ----- | - |  | - | ----- | - |  | - | ------- | - |  | - | ------- | 
|(Dollars in millions)      |  | 2003 |       | 2004 |  | 2005 |      | 2006 |  | 2007 |      | Thereafter |  | Fair Value
|                           |  |      |       |      |  |      |      |      |  |      |      |            |  |           
|Notes, due 2006            |  |      |       |      |  |      |      |      |  |      |      |            |  | $          | 600.0 |   |  |   |       |   |  |   |         |   |  | $ | 582.1   | 
|Average interest rate      |  |      |       |      |  |      |      |      |  |      |      |            |  |            | 7.38  | % |  |   |       |   |  |   |         |   |  |   |         | 
|Notes, due 2011            |  |      |       |      |  |      |      |      |  |      |      |            |  |            |       |   |  |   |       |   |  | $ | 1,100.0 |   |  | $ | 1,056.1 | 
|Average interest rate      |  |      |       |      |  |      |      |      |  |      |      |            |  |            |       |   |  |   |       |   |  |   | 8.13    | % |  |   |         | 
|Debentures, due 2031       |  |      |       |      |  |      |      |      |  |      |      |            |  |            |       |   |  |   |       |   |  | $ | 855.0   |   |  | $ | 769.6   | 
|Average interest rate      |  |      |       |      |  |      |      |      |  |      |      |            |  |            |       |   |  |   |       |   |  |   | 9.00    | % |  |   |         | 
|Medium term notes          |  | $    | 10.7  |      |  |      |      |      |  |      |      |            |  | $          | 5.1   |   |  |   |       |   |  |   |         |   |  | $ | 15.7    | 
|Average interest rate      |  |      | 8.63  | %    |  |      |      |      |  |      |      |            |  |            | 8.71  | % |  |   |       |   |  |   |         |   |  |   |         | 
|Debt securities (discount) |  | $    | (0.3  | )    |  | $    | (0.3 | )    |  | $    | (0.3 | )          |  | $          | (0.3  | ) |  | $ | 149.8 |   |  | $ | 122.2   |   |  | $ | 244.5   | 
|Average interest rate      |  |      | 7.88  | %    |  |      | 7.88 | %    |  |      | 7.88 | %          |  |            | 7.88  | % |  |   | 7.55  | % |  |   | 8.05    | % |  |   |         | 
|Mortgage payables          |  | $    | 6.2   |      |  | $    | 5.4  |      |  | $    | 3.1  |            |  | $          | 3.4   |   |  | $ | 3.4   |   |  | $ | 12.1    |   |  | $ | 33.5    | 
|Average interest rate      |  |      | 9.64  | %    |  |      | 9.64 | %    |  |      | 9.10 | %          |  |            | 9.09  | % |  |   | 9.00  | % |  |   | 8.74    | % |  |   |         | 
|Other notes                |  | $    | 9.8   |      |  | $    | 7.9  |      |  | $    | 11.3 |            |  | $          | 11.4  |   |  | $ | 11.7  |   |  | $ | 29.6    |   |  | $ | 82.4    | 
|Average interest rate      |  |      | 6.86  | %    |  |      | 6.91 | %    |  |      | 6.99 | %          |  |            | 7.00  | % |  |   | 7.01  | % |  |   | 7.21    | % |  |   |         | 
|Other note payable         |  | $    | 1.9   |      |  |      |      |      |  |      |      |            |  |            |       |   |  |   |       |   |  |   |         |   |  | $ | 1.9     | 
|Average interest rate      |  |      | 11.25 | %    |  |      |      |      |  |      |      |            |  |            |       |   |  |   |       |   |  |   |         |   |  |   |         | 
|Interest rate swap         |  |      |       |      |  |      |      |      |  |      |      |            |  | $          | 18.5  |   |  |   |       |   |  | $ | 2.1     |   |  | $ | 20.6    | 

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

The following table summarizes our contractual obligations and commitments as
of December 28, 2002:

|                          |  |       |         |      |  |      |       |      |  |      |       |      |  |            |       |  |  |  |       |  |  |  |       |  |  |  |         | 
|------------------------- |  | ----- | ------- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---------- | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ------- | 
|(Dollars in millions)     |  | Total |         | 2003 |  | 2004 |       | 2005 |  | 2006 |       | 2007 |  | Thereafter
|                          |  |       |         |      |  |      |       |      |  |      |       |      |  |           
|Long-term debt            |  | $     | 2,979.4 |      |  |      | 28.3  |      |  |      | 13.0  |      |  |            | 14.1  |  |  |  | 638.1 |  |  |  | 164.9 |  |  |  | 2,121.0 | 
|Capital lease obligations |  |       | 1,514.1 |      |  |      | 117.9 |      |  |      | 117.6 |      |  |            | 116.2 |  |  |  | 115.5 |  |  |  | 114.4 |  |  |  | 932.5   | 
|Operating leases          |  |       | 2,763.7 |      |  |      | 237.2 |      |  |      | 231.7 |      |  |            | 226.5 |  |  |  | 219.5 |  |  |  | 210.2 |  |  |  | 1,638.6 | 

Recently Adopted Accounting Standards

In December 2002, SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure, was issued and amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for
voluntary change to the fair value based method of accounting for stock based
employee compensation. In addition, this Statement amends the disclosure
requirements of SFAS

14



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No. 123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reporting results. Certain new disclosure
provisions of SFAS No. 148 are required for fiscal years ending after December
15, 2002. See Note 5 to the Companys Condensed Consolidated Financial
Statements for the first quarter of fiscal 2003.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45)
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, which is an interpretation of
FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No.
34. FIN 45 elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required
to recognize, at the inception of a guarantee, a liability for the fair value
of the obligation undertaken in issuing the guarantee. The disclosure
requirements are effective for financial statements of interim or annual
periods ending after December 15, 2002. The adoption of this standard did not
have an impact on the Companys financial statements. See Debt Guarantees
below.

In September 2002, Emerging Issues Task Force (EITF) Issue No. 02-16,
Accounting by a Reseller for Cash Consideration Received, was proposed and a
consensus was reached in January 2003. The issue was revised and finalized in
March 2003. This issue addresses the appropriate accounting, by a retailer, for
cash consideration received from a vendor and directs that cash consideration
received from a vendor should be presumed to be a reduction of inventory unless
it is a reimbursement of specific costs incurred in advertising the vendors
products. Previously the Company recorded allowances as a reduction of cost of
sales when earned. This change will have a timing impact on certain allowances
that will now be an adjustment to inventory cost and recognized in cost of
sales when the product is sold.

Upon adoption of EITF Issue No. 02-16 in 2003, the Company recorded the
cumulative effect of a change in accounting principle of $10.9 million, net of
tax. This charge was recorded in the Companys Condensed Consolidated
Statement of Income (Loss) and reflects an adjustment of the Companys opening
inventory balance. As a result of the adoption of this standard, certain
allowances will be recorded as a reduction of inventory as appropriate.

In June 2002, SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, was issued by the FASB. SFAS No. 146 addresses
significant issues relating to the recognition, measurement and reporting of
costs associated with exit and disposal activities (including store closings).
SFAS No. 146 replaces previous accounting guidance, principally EITF Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). Issue No. 94-3 required that a liability for an exit cost be
recognized when the company committed to a specific plan; whereas, SFAS No.146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. SFAS No. 146 is
effective for exit or disposal activities initiated after December 31, 2002.
See Note 11 to the Companys Condensed Consolidated Financial Statements for
the first quarter of fiscal 2003.

In June 2001, the FASB also issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs, and applies to the legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The effect of adopting this standard did not have a significant
effect on the Companys financial statements.

Debt Guarantees

The wholly owned direct subsidiaries named below will fully and unconditionally
and jointly and severally guarantee the debt of Delhaize America.

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

Recently Issued Accounting Standards

In May 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments
and Hedging Activities, which amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other contracts (collectively referred
to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities.  The Company is currently assessing the potential effect of
SFAS No. 149 on its financial statements.

Discontinued Operations

During the first quarter of 2003, the Company closed 42 under performing Food
Lion and Kash n Karry stores. In accordance with the provisions of SFAS No.
144, a portion of these costs associated with these stores, as well as related
operating activity prior to closing, was recorded in discontinued operations
in the Companys Condensed Consolidated Statement of Income (Loss).

For the 13 weeks ended March 29, 2003 and March 30, 2002, discontinued
operations generated sales and other revenues of $16.5 million and $42.3
million, respectively, with net operating losses after taxes of $3.8 million
and $2.3 million, respectively. During the first quarter of 2003 in accordance
with SFAS No. 146, 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

15



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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. Additional discontinued expenses
not reserved totaled $0.7 million after taxes.

The following table shows the reserve balances as of March 29, 2003.

|                                     |  |                   |         |                  |  |       |        |   |  |   |         |   | 
|------------------------------------ |  | ----------------- | ------- | ---------------- |  | ----- | ------ | - |  | - | ------- | - | 
|(Dollars in thousands)               |  | Other liabilities |         | Accrued Expenses |  | Total |       
|                                     |  |                   |         |                  |  |       |       
|Initial reserve                      |  | $                 | (25,927 | )                |  | $     | (1,640 | ) |  | $ | (27,567 | ) | 
|Utilizations                         |  |                   | 555     |                  |  |       | 836    |   |  |   | 1,391   |   | 
|Adjustments                          |  |                   |        |                  |  |       |       |   |  |   |         |   | 
|Reserve balance as of
March 29, 2003 |  | $                 | (25,372 | )                |  | $     | (804   | ) |  | $ | (26,176 | ) | 

Streamlining

During the first quarter of 2003, Food Lion initiated additional cost saving
opportunities by streamlining and optimizing the functioning of its support and
management structure. These initiatives include a reduction in work force
affecting approximately 400 associates. As a result, the Company recorded a
pre-tax charge of $2.4 million, which was included in Selling and
Administrative Expenses, and represents related severance, benefits, and
outplacement service costs. The Company paid $0.6 million of the initial
reserve during the first quarter of 2003 and the outstanding $1.8 million is
included in the Companys Condensed Consolidated Balance Sheet in Accrued
Expenses.

Effective Income Tax Rate

The provision for income taxes reflects managements best estimate
of the annual effective tax rate. The effective income tax rate decreased from 40% for the 13 weeks ended March 30, 2002 to 38% for the 13
weeks ended March 29, 2003.  The decrease was primarily due to updated estimates of federal and
state taxes which were lower than amounts previously estimated.

Other

All statements in this report, other than statements of historical facts, which
address activities, events or developments that the Company expects or
anticipates will or may occur in the future, including such things as expansion
and growth of the Companys business, future capital expenditures and the
Companys business strategy, are forward-looking statements within the
meaning of the Securities Litigation Reform Act. In reviewing such information,
it should be kept in mind that actual results may differ materially from those
projected or suggested in such forward-looking statements. This forward-looking
information is based on various factors and was derived utilizing numerous
assumptions. Many of these factors have previously been identified in filings
or statements made by or on behalf of the Company, including filings with the
Securities and Exchange Commission of Forms 10-Q, 10-K and 8-K.

Important assumptions and other important factors that could cause actual
results to differ materially from those set forth in the forward-looking
statements include: changes in the general economy or in the Companys primary
markets, changes in consumer spending, competitive factors, the nature and
extent of continued consolidation in the industry, changes in the rate of
inflation and interest costs on borrowed funds, changes in state or federal
legislation or regulation, changes in the availability and cost of labor,
adverse determinations with respect to litigation or other claims, inability to
develop new stores or complete remodels as rapidly as planned, the ability to
integrate and achieve operating improvements at Hannaford as well as other
companies Delhaize America, Inc. acquires, and stability of product costs 
supply or quality control problems with the Companys vendors detailed from
time-to-time in the Companys filings with the Securities and Exchange
Commission.

The Company does not undertake to update forward-looking information contained
herein or elsewhere to reflect actual results, changes in assumptions or
changes in other factors affecting such forward-looking information.

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

Based on their evaluation, as of a date within 90 days of the filing date of
this Form 10-Q, our Chief Executive Officer and Chief Accounting Officer have
concluded that our disclosure controls and procedures (as defined in Rule
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended)
are effective. There have been no significant changes in internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

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PART II OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------

|        |  |                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                        
|        |  |                                                                                                    
|99.1    |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 
|99.2    |  | Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002



|(b) |  | Reports on Form 8-K
|--- |  | -------------------

The Company filed a report on Form 8-K on January 7, 2003, in connection with
the amendment of its existing revolving credit facility.

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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: May 13, 2003 |  | BY: /s/ Carol M. Herndon
      Carol M. Herndon
      Executive Vice President of
      Accounting and Analysis and
      Chief Accounting Officer

18



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CERTIFICATION

I, Pierre-Olivier Beckers, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Delhaize America,
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                                                                          |  | 
|------------------------------------------------------------------------- |  | 
|Date: May 13, 2003                                                        |  | 
|                                                                         
|                                                                          |  | 
|                                                                         
|/s/ Pierre-Olivier Beckers
Pierre-Olivier Beckers
Chief Executive Officer |  | 

19



---



##### 



CERTIFICATION

I, Carol M. Herndon, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Delhaize America,
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                                                               |  | 
|-------------------------------------------------------------- |  | 
|Date: May 13, 2003                                             |  | 
|                                                              
|                                                               |  | 
|                                                              
|/s/ Carol M. Herndon
Carol M. Herndon
Chief Accounting Officer |  | 

20



---



##### 



Exhibit Index

|        |  |                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                        
|        |  |                                                                                                    
|99.1    |  | Certification of Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 
|99.2    |  | Certification of Chief Accounting Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002

21