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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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



For the quarterly period ended October 2, 2004



OR



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



For the transition period from  to



Commission File number 0-6080



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DELHAIZE AMERICA, INC.

(Exact name of registrant as specified in its charter)



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



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

(Address of principal executive office) (Zip Code)



(704) 633-8250

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    Yes  x    No ̈



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



Outstanding shares of common stock of the Registrant as of November 16, 2004.



Class A Common Stock  91,270,348,481

Class B Common Stock 
        75,468,935



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



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DELHAIZE AMERICA, INC.

INDEX TO FORM 10-Q

October 2, 2004



|                           |  |                                                                                                               |  |      
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | -----
|                           |  |                                                                                                               |  | Page 
|Forward Looking Statements |  | 3-4                                                                                                          
|                           |  |                                                                                                              
|PART I.                    |  | FINANCIAL INFORMATION                                                                                         |  |      
|                           |  |                                                                                                              
|Item 1.                    |  | Financial Statements (Unaudited)                                                                              |  |      
|                           |  |                                                                                                              
|                           |  | Condensed Consolidated Statements of Income for the 13 weeks ended October 2, 2004 and September 27, 2003     |  | 5    
|                           |  |                                                                                                              
|                           |  | Condensed Consolidated Statements of Income for the 39 weeks ended October 2, 2004 and September 27, 2003     |  | 6    
|                           |  |                                                                                                              
|                           |  | Condensed Consolidated Balance Sheets as of October 2, 2004 and January 3, 2004 (Audited)                     |  | 7    
|                           |  |                                                                                                              
|                           |  | Condensed Consolidated Statements of Cash Flows for the 39 weeks ended October 2, 2004 and September 27, 2003 |  | 8    
|                           |  |                                                                                                              
|                           |  | Notes to Condensed Consolidated Financial Statements                                                          |  | 9-18 
|                           |  |                                                                                                              
|Item 2.                    |  | Managements Discussion and Analysis of Financial Condition and Results of Operation                          |  | 18-29
|                           |  |                                                                                                              
|Item 3.                    |  | Quantitative and Qualitative Disclosures About Market Risk                                                    |  | 29   
|                           |  |                                                                                                              
|Item 4.                    |  | Controls and Procedures                                                                                       |  | 29   
|                           |  |                                                                                                              
|PART II.                   |  | OTHER INFORMATION                                                                                             |  |      
|                           |  |                                                                                                              
|Item 6.                    |  | Exhibits                                                                                                      |  | 29   
|                           | 
|Signature                  |  | 30                                                                                                           
|                           | 
|Exhibit Index              |  | 31                                                                                                           



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



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FORWARD-LOOKING STATEMENTS



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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PART I.FINANCIAL INFORMATION



Item 1.Financial Statements



DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

For the 13 weeks ended October 2,
2004 and September 27, 2003

(Dollars in thousands)



|                                                      |  |                              |           |                                  |   |          
|----------------------------------------------------- |  | ---------------------------- | --------- | -------------------------------- | - | ---------
|                                                      |  | 13 WeeksEndedOctober 2, 2004 |           | 13 Weeks EndedSeptember 27, 2003
|Net sales and other revenues                          |  | $                            | 3,990,336 |                                  | $ | 3,819,431
|Cost of goods sold                                    |  |                              | 2,946,710 |                                  |   | 2,871,076
|Selling and administrative expenses                   |  |                              | 818,854   |                                  |   | 763,151  
|                                                      |  |                              |           |                                  |   |          
|Operating income                                      |  |                              | 224,772   |                                  |   | 185,204  
|Interest expense                                      |  |                              | 79,125    |                                  |   | 78,003   
|                                                      |  |                              |           |                                  |   |          
|Income from continuing operations before income taxes |  |                              | 145,647   |                                  |   | 107,201  
|Provision for income taxes                            |  |                              | 57,455    |                                  |   | 39,901   
|                                                      |  |                              |           |                                  |   |          
|Income from continuing operations                     |  |                              | 88,192    |                                  |   | 67,300   
|Loss from discontinued operations, net of tax         |  |                              | 859       |                                  |   | 4,174    
|                                                      |  |                              |           |                                  |   |          
|Net income                                            |  | $                            | 87,333    |                                  | $ | 63,126   
|                                                      |  |                              |           |                                  |   |          



See notes to unaudited condensed
consolidated financial statements.



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DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

For the 39 weeks ended October 2,
2004 and September 27, 2003

(Dollars in thousands)



|                                                                  |  |                              |            |                                  |   |           
|----------------------------------------------------------------- |  | ---------------------------- | ---------- | -------------------------------- | - | ----------
|                                                                  |  | 39 WeeksEndedOctober 2, 2004 |            | 39 Weeks EndedSeptember 27, 2003
|Net sales and other revenues                                      |  | $                            | 11,841,112 |                                  | $ | 11,184,610
|Cost of goods sold                                                |  |                              | 8,776,317  |                                  |   | 8,424,776 
|Selling and administrative expenses                               |  |                              | 2,411,175  |                                  |   | 2,251,882 
|                                                                  |  |                              |            |                                  |   |           
|Operating income                                                  |  |                              | 653,620    |                                  |   | 507,952   
|Interest expense                                                  |  |                              | 239,254    |                                  |   | 236,025   
|                                                                  |  |                              |            |                                  |   |           
|Income from continuing operations before income taxes             |  |                              | 414,366    |                                  |   | 271,927   
|Provision for income taxes                                        |  |                              | 160,176    |                                  |   | 99,482    
|                                                                  |  |                              |            |                                  |   |           
|Income from continuing operations                                 |  |                              | 254,190    |                                  |   | 172,445   
|Loss from discontinued operations, net of tax                     |  |                              | 57,103     |                                  |   | 34,183    
|                                                                  |  |                              |            |                                  |   |           
|Income before cumulative effect of change in accounting principle |  |                              | 197,087    |                                  |   | 138,262   
|Cumulative effect of change in accounting principle, net of tax   |  |                              |           |                                  |   | 10,946    
|                                                                  |  |                              |            |                                  |   |           
|Net income                                                        |  | $                            | 197,087    |                                  | $ | 127,316   
|                                                                  |  |                              |            |                                  |   |           



See notes to unaudited condensed
consolidated financial statements.



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DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of October 2, 2004 and January 3, 2004

(Dollars in thousands)



|                                                         |  |                 |           |   |                 |   |           |  
|-------------------------------------------------------- |  | --------------- | --------- | - | --------------- | - | --------- | -
|                                                         |  | October 2, 2004 |           |   | January 3, 2004 |  
|                                                         |  | (Unaudited)     |           |   | (Audited)       |  
|ASSETS                                                   |  |                 |           |   |                 |   |           |  
|Current assets:                                          |  |                 |           |   |                 |   |           |  
|Cash and cash equivalents                                |  | $               | 725,084   |   |                 | $ | 313,629   |  
|Receivables, net                                         |  |                 | 101,489   |   |                 |   | 111,738   |  
|Receivable from affiliate                                |  |                 | 13,137    |   |                 |   | 14,708    |  
|Inventories                                              |  |                 | 1,153,191 |   |                 |   | 1,203,487 |  
|Prepaid expenses                                         |  |                 | 49,948    |   |                 |   | 40,586    |  
|Deferred tax assets                                      |  |                 |          |   |                 |   | 26,491    |  
|Other assets                                             |  |                 | 13,854    |   |                 |   | 9,936     |  
|                                                         |  |                 |           |   |                 |   |           |  
|Total current assets                                     |  |                 | 2,056,703 |   |                 |   | 1,720,575 |  
|                                                         |  |                
|Property and equipment, net                              |  |                 | 2,904,131 |   |                 |   | 2,980,455 |  
|Goodwill, net                                            |  |                 | 2,892,509 |   |                 |   | 2,895,541 |  
|Other intangibles, net                                   |  |                 | 743,572   |   |                 |   | 775,830   |  
|Reinsurance recoverable from affiliate                   |  |                 | 134,596   |   |                 |   | 129,869   |  
|Other assets                                             |  |                 | 171,761   |   |                 |   | 168,113   |  
|                                                         |  |                 |           |   |                 |   |           |  
|Total assets                                             |  | $               | 8,903,272 |   |                 | $ | 8,670,383 |  
|                                                         |  |                 |           |   |                 |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                     |  |                 |           |   |                 |   |           |  
|                                                         |  |                
|Current liabilities:                                     |  |                 |           |   |                 |   |           |  
|Accounts payable                                         |  | $               | 717,852   |   |                 | $ | 751,122   |  
|Payable to affiliate                                     |  |                 |          |   |                 |   | 2,118     |  
|Accrued expenses                                         |  |                 | 369,997   |   |                 |   | 294,481   |  
|Capital lease obligations - current                      |  |                 | 37,540    |   |                 |   | 35,686    |  
|Long term debt - current                                 |  |                 | 17,221    |   |                 |   | 13,036    |  
|Other liabilities - current                              |  |                 | 24,840    |   |                 |   | 26,627    |  
|Deferred income taxes                                    |  |                 | 8,134     |   |                 |   |          |  
|Income taxes payable                                     |  |                 | 6,545     |   |                 |   | 1,154     |  
|                                                         |  |                 |           |   |                 |   |           |  
|Total current liabilities                                |  |                 | 1,182,129 |   |                 |   | 1,124,224 |  
|                                                         |  |                
|Long-term debt                                           |  |                 | 2,920,554 |   |                 |   | 2,937,485 |  
|Capital lease obligations                                |  |                 | 672,050   |   |                 |   | 685,852   |  
|Deferred income taxes                                    |  |                 | 251,766   |   |                 |   | 270,685   |  
|Other liabilities                                        |  |                 | 339,650   |   |                 |   | 306,423   |  
|                                                         |  |                 |           |   |                 |   |           |  
|Total liabilities                                        |  |                 | 5,366,149 |   |                 |   | 5,324,669 |  
|                                                         |  |                 |           |   |                 |   |           |  
|Commitments and contingencies (Note 14)                  |  |                 |           |   |                 |   |           |  
|                                                         |  |                
|Shareholders equity:                                    |  |                 |           |   |                 |   |           |  
|                                                         |  |                
|Class A non-voting common stock                          |  |                 | 163,076   |   |                 |   | 163,076   |  
|Class B voting common stock                              |  |                 | 37,736    |   |                 |   | 37,736    |  
|Accumulated other comprehensive loss, net of tax         |  |                 | (59,015   | ) |                 |   | (62,901   | )
|Additional paid-in capital, net of unearned compensation |  |                 | 2,480,134 |   |                 |   | 2,474,412 |  
|Retained earnings                                        |  |                 | 915,192   |   |                 |   | 733,391   |  
|                                                         |  |                 |           |   |                 |   |           |  
|Total shareholders equity                               |  |                 | 3,537,123 |   |                 |   | 3,345,714 |  
|                                                         |  |                 |           |   |                 |   |           |  
|Total liabilities and shareholders equity               |  | $               | 8,903,272 |   |                 | $ | 8,670,383 |  
|                                                         |  |                 |           |   |                 |   |           |  



See notes to unaudited condensed
consolidated financial statements.



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DELHAIZE AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the 39 weeks ended October 2,
2004 and September 27, 2003

(Dollars in thousands)



|                                                                                  |  |                               |          |   |                                  |   |          |  
|--------------------------------------------------------------------------------- |  | ----------------------------- | -------- | - | -------------------------------- | - | -------- | -
|                                                                                  |  | 39 Weeks EndedOctober 2, 2004 |          |   | 39 Weeks EndedSeptember 27, 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                               |          |   |                                  |   |          |  
|Net income                                                                        |  | $                             | 197,087  |   |                                  | $ | 127,316  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                               |          |   |                                  |   |          |  
|Cumulative effect of change in accounting principle, net of tax (Note 10)         |  |                               |         |   |                                  |   | 10,946   |  
|Change in accounting method (Note 10)                                             |  |                               |         |   |                                  |   | 87,308   |  
|Provision for loss on disposal of discontinued operations                         |  |                               | 72,842   |   |                                  |   | 27,844   |  
|Streamline charges                                                                |  |                               |         |   |                                  |   | 2,346    |  
|Depreciation and amortization                                                     |  |                               | 344,898  |   |                                  |   | 331,785  |  
|Depreciation and amortization - discontinued operations                           |  |                               | 951      |   |                                  |   | 5,045    |  
|Amortization of debt fees/costs                                                   |  |                               | 1,494    |   |                                  |   | 1,466    |  
|Amortization of debt premium                                                      |  |                               | 1,113    |   |                                  |   | 754      |  
|Amortization of deferred loss on derivative                                       |  |                               | 6,335    |   |                                  |   | 6,215    |  
|Amortization and termination of restricted shares                                 |  |                               | 5,302    |   |                                  |   | 4,014    |  
|Transfer from escrow to fund interest, net of accretion                           |  |                               | 2,189    |   |                                  |   |         |  
|Accrued interest on interest rate swap                                            |  |                               | (1,967   | ) |                                  |   | (3,929   | )
|Loss on disposals of property and capital lease terminations                      |  |                               | 3,723    |   |                                  |   | 623      |  
|Deferred income taxes provision (benefit)                                         |  |                               | 13,299   |   |                                  |   | (85,541  | )
|Other                                                                             |  |                               | 179      |   |                                  |   | 698      |  
|Changes in operating assets and liabilities which provided (used) cash:           |  |                               |          |   |                                  |   |          |  
|Receivables                                                                       |  |                               | 10,249   |   |                                  |   | 20,384   |  
|Net receivable from affiliate                                                     |  |                               | (547     | ) |                                  |   | (6,732   | )
|Income tax receivable                                                             |  |                               |         |   |                                  |   | 12,018   |  
|Inventories                                                                       |  |                               | 50,296   |   |                                  |   | 35,712   |  
|Prepaid expenses                                                                  |  |                               | (9,362   | ) |                                  |   | (12,494  | )
|Other assets                                                                      |  |                               | 6,477    |   |                                  |   | 4,623    |  
|Accounts payable                                                                  |  |                               | (32,821  | ) |                                  |   | (43,977  | )
|Accrued expenses                                                                  |  |                               | 73,575   |   |                                  |   | 82,639   |  
|Income taxes payable                                                              |  |                               | 8,202    |   |                                  |   |         |  
|Other liabilities                                                                 |  |                               | (26,745  | ) |                                  |   | (27,642  | )
|                                                                                  |  |                               |          |   |                                  |   |          |  
|Total adjustments                                                                 |  |                               | 529,682  |   |                                  |   | 454,105  |  
|                                                                                  |  |                               |          |   |                                  |   |          |  
|Net cash provided by operating activities                                         |  |                               | 726,769  |   |                                  |   | 581,421  |  
|                                                                                  |  |                               |          |   |                                  |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                               |          |   |                                  |   |          |  
|Capital expenditures                                                              |  |                               | (260,433 | ) |                                  |   | (263,702 | )
|Proceeds from sale of property                                                    |  |                               | 15,970   |   |                                  |   | 10,310   |  
|Other investment activity                                                         |  |                               | (27,577  | ) |                                  |   | (15,197  | )
|                                                                                  |  |                               |          |   |                                  |   |          |  
|Net cash used in investing activities                                             |  |                               | (272,040 | ) |                                  |   | (268,589 | )
|                                                                                  |  |                               |          |   |                                  |   |          |  
|                                                                                  |  |                              
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                               |          |   |                                  |   |          |  
|Principal payments on long-term debt                                              |  |                               | (9,869   | ) |                                  |   | (25,390  | )
|Principal payments under capital lease obligations                                |  |                               | (26,365  | ) |                                  |   | (23,681  | )
|Escrow funding for Senior Notes                                                   |  |                               |         |   |                                  |   | (86,592  | )
|Transfer from escrow to fund long-term debt                                       |  |                               | 7,827    |   |                                  |   |         |  
|Taxes paid on capital contribution                                                |  |                               |         |   |                                  |   | (4,692   | )
|Parent common stock repurchased                                                   |  |                               | (20,090  | ) |                                  |   | (2,306   | )
|Tax payment for restricted shares vested                                          |  |                               | (852     | ) |                                  |   |         |  
|Proceeds from stock options exercised                                             |  |                               | 6,075    |   |                                  |   | 600      |  
|                                                                                  |  |                               |          |   |                                  |   |          |  
|Net cash used in financing activities                                             |  |                               | (43,274  | ) |                                  |   | (142,061 | )
|                                                                                  |  |                               |          |   |                                  |   |          |  
|Net increase in cash and cash equivalents                                         |  |                               | 411,455  |   |                                  |   | 170,771  |  
|Cash and cash equivalents at beginning of year                                    |  |                               | 313,629  |   |                                  |   | 131,641  |  
|                                                                                  |  |                               |          |   |                                  |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                             | 725,084  |   |                                  | $ | 302,412  |  
|                                                                                  |  |                               |          |   |                                  |   |          |  



See notes to unaudited condensed
consolidated financial statements.



8



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##### Table of Contents

Notes to Unaudited Condensed Consolidated Financial Statements



1) Basis of Presentation:



The
accompanying condensed consolidated financial statements are presented in accordance with the requirements for Form 10-Q and, consequently, do not include all the disclosures normally required by generally accepted accounting principles or those
normally made in the Annual Report on Form 10-K of Delhaize America, Inc. (Delhaize America or the Company). Accordingly, the reader of this Form 10-Q should refer to the Companys Form 10-K for the year ended January 3,
2004 for further information. Reclassifications and restatements for discontinued operations have been made for all current and historical information presented herein from that contained in the Companys prior SEC filings on Forms 10-Q and
10-K.



The financial information presented herein has been prepared in
accordance with the Companys customary accounting practices. In the opinion of management, the financial information includes all adjustments, including normal recurring items, necessary for a fair presentation of interim results.



2) Supplemental Disclosure of Cash Flow Information:



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



|                                                                              |  |                              |         |                                  |   |        
|----------------------------------------------------------------------------- |  | ---------------------------- | ------- | -------------------------------- | - | -------
|(Dollars in thousands)                                                        |  | 39 WeeksEndedOctober 2, 2004 |         | 39 Weeks EndedSeptember 27, 2003
|Cash payments for income taxes                                                |  | $                            | 106,222 |                                  | $ | 154,356
|Cash payments for interest, net of amounts funded from escrow and capitalized |  |                              | 173,132 |                                  |   | 175,008
|Non-cash investing and financing activities:                                  |  |                              |         |                                  |   |        
|Capitalized lease obligations incurred for store properties and equipment     |  |                              | 27,495  |                                  |   | 21,247 
|Capitalized lease obligations terminated for store properties and equipment   |  |                              | 1,087   |                                  |   | 2,163  
|Dividend to Delhaize Group and Detla in stock                                 |  |                              |        |                                  |   | 109,945
|Change in reinsurance recoverable and other liabilities                       |  |                              | 4,727   |                                  |   | 9,116  
|Reduction of tax payable and goodwill for tax adjustment                      |  |                              | 2,811   |                                  |   |       



3) Inventories



Inventories are stated at the lower of cost or market. Inventories valued using the Last-in,
First-out (LIFO) method comprised approximately 79% and 78% of inventories on October 2, 2004 and January 3, 2004, respectively. Meat, produce and deli inventories are valued on the average cost method rather than the LIFO method. If the Company did
not report under the LIFO method, inventories would have been $38.7 million and $33.6 million greater as of October 2, 2004 and January 3, 2004, respectively. Application of the LIFO method resulted in increases in cost of goods sold of $5.1 and
$1.3 million for the 39 weeks ended October 2, 2004 and September 27, 2003, respectively. As stated in Note 10, the Company changed its application of the LIFO method of accounting for store inventories from the retail method to the average item
cost method effective December 29, 2002.



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



4) Supplier Allowances



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



9



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##### Table of Contents

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



EITF
Issue No. 03-10, Application of Issue No, 02-16 by Resellers to Sales Incentives Offered to Consumers by Manufacturers, does not have an impact on the Companys financial statements.



Total supplier allowances recognized for the 13 and 39 weeks ended October 2, 2004 and the
comparable periods are shown below:



|                                                |  |                             |        |                               |   |                             |  |                                |         |  |   |        
|----------------------------------------------- |  | --------------------------- | ------ | ----------------------------- | - | --------------------------- |  | ------------------------------ | ------- |  | - | -------
|(Dollars in thousands)                          |  | 13 weeks ended Oct. 2, 2004 |        | 13 weeks ended Sept. 27, 2003 |   | 39 weeks ended Oct. 2, 2004 |  | 39 weeks ended* Sept. 27, 2003
|Allowances related to the purchase of inventory |  | $                           | 24,918 |                               | $ | 30,516                      |  | $                              | 78,176  |  | $ | 103,688
|Other allowances                                |  |                             | 35,094 |                               |   | 32,813                      |  |                                | 102,212 |  |   | 88,485 
|                                                |  |                             |        |                               |   |                             |  |                                |         |  |   |        
|Total supplier allowances                       |  | $                           | 60,012 |                               | $ | 63,329                      |  | $                              | 180,388 |  | $ | 192,173

---

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



5) Reclassification



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



6) Accounting for Stock Issued to Employees



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



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



|                                                                                                              |  |                             |        |                               |   |                             |  |                               |         |  |   |        
|------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ----------------------------- | - | --------------------------- |  | ----------------------------- | ------- |  | - | -------
|                                                                                                              |  | 13 weeks ended Oct. 2, 2004 |        | 13 weeks ended Sept. 27, 2003 |   | 39 weeks ended Oct. 2, 2004 |  | 39 weeks ended Sept. 27, 2003
|Net earnings  as reported                                                                                    |  | $                           | 87,333 |                               | $ | 63,126                      |  | $                             | 197,087 |  | $ | 127,316
|Deduct: Total stock-based employee compensation expense determined using fair value based method (net of tax) |  |                             | 2,621  |                               |   | 2,973                       |  |                               | 9,282   |  |   | 8,158  
|                                                                                                              |  |                             |        |                               |   |                             |  |                               |         |  |   |        
|Net earningspro forma                                                                                        |  | $                           | 84,712 |                               | $ | 60,153                      |  | $                             | 187,805 |  | $ | 119,158



The weighted average fair value at
date of grant for options granted under the Delhaize Group Plan during the third quarter of 2004 and 2003 was $11.25 and $12.45 per option, respectively. The weighted average fair value at date of grant for options granted under the Delhaize Group
Plan for the 39 weeks ended October 2, 2004 and September 27, 2003 was $15.14 and $8.44 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model based on the following assumptions:



|                            |  |                 |  |                   
|--------------------------- |  | --------------- |  | ------------------
|                            |  | October 2, 2004 |  | September 27, 2003
|Expected dividend yield (%) |  | 2.6             |  | 3.6               
|Expected volatility (%)     |  | 41.0            |  | 42.3              
|Risk-free interest rate (%) |  | 3.9             |  | 2.4               
|Expected term (years)       |  | 5.0             |  | 5.2               



10



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##### Table of Contents

7) Derivative Financial Instruments



During the fourth quarter of 2001 and the third quarter of 2002, the Company entered into interest rate swap agreements, effectively
converting a portion of the debt from fixed to variable rates. Maturity dates of interest rate swap arrangements match those of the underlying debt. These agreements involve the exchange of fixed rate payments for variable rate payments without the
exchange of the underlying principal amounts. Variable rates for the Companys agreements are based on six-month or three-month U.S. dollar LIBOR and are reset on a semiannual basis or a quarterly basis. The differential between fixed and
variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and recognized over the life of the agreements as an adjustment to interest expense. On December 30, 2003, the Company terminated $100
million of the 2011 interest rate swap arrangements. The notional principal amounts of interest rate swap arrangements at October 2, 2004 were $300 million maturing in 2006 and $100 million maturing in 2011. For the 13 weeks and 39 weeks ended
October 2, 2004, interest expense was reduced by $2.6 million and $9.1 million, respectively. For the 13 and 39 weeks ended September 27, 2003, interest expense was reduced by $3.9 million and $12.2 million, respectively, in connection with these
agreements. These agreements met the criteria for using the short-cut method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133, Derivative Instruments and Hedging Activities. The Company has recorded a derivative
asset in connection with these agreements in the amount of $14.9 million and $16.9 million at October 2, 2004 and January 3, 2004, respectively, which is included in the Companys Condensed Consolidated Balance Sheet in Other Assets.



Prior to the offering of bonds and debentures in 2001, the Company entered
into interest rate agreements to hedge against potential increases in interest rates. These hedge agreements were settled in 2001 with the loss recorded in other comprehensive income (loss), net of taxes and amortized to interest expense over the
term of the associated debt securities. This unrealized loss was reduced as of the date of the Delhaize Group share exchange as a result of the application of purchase accounting. The remaining unrealized loss, net of taxes, at October 2, 2004, and
January 3, 2004, totaled approximately $40.4 million and $44.3 million, respectively.



8) Intangible Assets



Intangible assets are comprised of the
following:



|                              |  |                 |           |             |   |          
|----------------------------- |  | --------------- | --------- | ----------- | - | ---------
|(Dollars in thousands)        |  | October 2, 2004 |           | Fiscal 2003
|Goodwill                      |  | $               | 2,981,461 |             | $ | 2,984,492
|Trademarks                    |  |                 | 486,752   |             |   | 486,752  
|Favorable lease rights        |  |                 | 361,547   |             |   | 365,883  
|Prescription files            |  |                 | 18,626    |             |   | 18,693   
|Liquor license                |  |                 | 3,696     |             |   | 3,528    
|Other                         |  |                 | 23,816    |             |   | 23,462   
|                              |  |                 |           |             |   |          
|                              |  |                 | 3,875,898 |             |   | 3,882,810
|Less accumulated amortization |  |                 | 239,817   |             |   | 211,439  
|                              |  |                 |           |             |   |          
|                              |  | $               | 3,636,081 |             | $ | 3,671,371
|                              |  |                 |           |             |   |          



The following represents a summary of
changes in gross goodwill at October 2, 2004 and fiscal 2003.



|                                         |  |                 |           |   |             |   |           |  
|---------------------------------------- |  | --------------- | --------- | - | ----------- | - | --------- | -
|                                         |  | October 2, 2004 |           |   | Fiscal 2003 |  
|Balance at beginning of year             |  | $               | 2,984,492 |   |             | $ | 2,996,256 |  
|Additions (reductions)                   |  |                 | (220      | ) |             |   | 4,057     |  
|Reduction of goodwill for tax adjustment |  |                 | (2,811    | ) |             |   | (15,821   | )
|                                         |  |                 |           |   |             |   |           |  
|Balance at end of period                 |  | $               | 2,981,461 |   |             | $ | 2,984,492 |  
|                                         |  |                 |           |   |             |   |           |  



Amortization expense totaled $9.8
million and $9.5 million for the 13 weeks ended October 2, 2004 and September 27, 2003, respectively, and $30.1 million and $28.3 million for the 39 weeks ended October 2, 2004 and September 27, 2003, respectively.



The Companys policy requires that an annual impairment assessment for goodwill and
other indefinite lived intangible assets be conducted in the fourth quarter of each year or when events or circumstances indicate that impairment may have occurred in accordance with SFAS 142. The Company had no impairment loss for the 39 weeks
ended October 2, 2004 or fiscal 2003.



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



|                      |  |                      |       |                        |   |                     |  |                       |       |  |   |    
|--------------------- |  | -------------------- | ----- | ---------------------- | - | ------------------- |  | --------------------- | ----- |  | - | ---
|(Dollars in millions) |  | Oct. 2, 2004Goodwill |       | Oct. 2, 2004Trademarks |   | Fiscal 2003Goodwill |  | Fiscal 2003Trademarks
|Food Lion             |  | $                    | 1,139 |                        | $ | 249                 |  | $                     | 1,138 |  | $ | 249
|Hannaford             |  |                      | 1,750 |                        |   | 223                 |  |                       | 1,754 |  |   | 223
|Harveys               |  |                      | 4     |                        |   | 5                   |  |                       | 4     |  |   | 5  
|                      |  |                      |       |                        |   |                     |  |                       |       |  |   |    
|                      |  | $                    | 2,893 |                        | $ | 477                 |  | $                     | 2,896 |  | $ | 477
|                      |  |                      |       |                        |   |                     |  |                       |       |  |   |    



11



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##### Table of Contents

As of October 2, 2004 and January 3, 2004, the Companys intangible assets with finite lives consist of favorable
lease rights, liquor licenses, pharmacy files, and developed software. The components of its intangible assets with finite lives are as follows:



|                       |  |                      |     |                         |   |      |     |  |                      |     |                         |   |     |     |   |      |   |  |   |    
|---------------------- |  | -------------------- | --- | ----------------------- | - | ---- | --- |  | -------------------- | --- | ----------------------- | - | --- | --- | - | ---- | - |  | - | ---
|                       |  | October 2, 2004      |     | Fiscal 2003            
|(Dollars in millions)  |  | Gross Carrying Value |     | AccumulatedAmortization |   |      | Net |  | Gross Carrying Value |     | AccumulatedAmortization |   |     | Net
|Favorable lease rights |  | $                    | 361 |                         | $ | (127 | )   |  | $                    | 234 |                         | $ | 366 |     | $ | (102 | ) |  | $ | 264
|Other                  |  |                      | 46  |                         |   | (14  | )   |  |                      | 32  |                         |   | 46  |     |   | (11  | ) |  |   | 35 
|                       |  |                      |     |                         |   |      |     |  |                      |     |                         |   |     |     |   |      |   |  |   |    
|Total                  |  | $                    | 407 |                         | $ | (141 | )   |  | $                    | 266 |                         | $ | 412 |     | $ | (113 | ) |  | $ | 299
|                       |  |                      |     |                         |   |      |     |  |                      |     |                         |   |     |     |   |      |   |  |   |    



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



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



9) Comprehensive Income (Loss)



Comprehensive income (loss) includes net earnings and other comprehensive
earnings (losses). Other comprehensive earnings (losses) include items that are currently excluded from the Companys net income (loss) and recorded directly to shareholders equity. Included in other comprehensive income (loss) are
unrealized losses on hedges, minimum pension liability adjustments and unrealized security holding gains. Comprehensive income was $201.0 million and $131.9 million for the 39 weeks ended October 2, 2004 and September 27, 2003, respectively.



10) Accounting Changes



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



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



11) Discontinued Operations



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



The Company closed 38 underperforming stores during the 39 weeks ended October 2, 2004, as well as, 44 underperforming stores through fiscal 2003. In accordance with
the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, a portion of the costs associated with the closure of these stores, as well as related operating activity prior to closing for these stores,
was recorded in Loss from discontinued operations, net of tax in the Companys Condensed Consolidated Statement of Income.



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



|                             |  |                             |       |   |                               |   |        |                             |  |   |                               |   |  |   |         |  
|---------------------------- |  | --------------------------- | ----- | - | ----------------------------- | - | ------ | --------------------------- |  | - | ----------------------------- | - |  | - | ------- | -
|(Dollars in thousands)       |  | 13 weeks ended Oct. 2, 2004 |       |   | 13 weeks ended Sept. 27, 2003 |   |        | 39 weeks ended Oct. 2, 2004 |  |   | 39 weeks ended Sept. 27, 2003 |  
|Net sales and other revenues |  | $                           | 2,207 |   |                               | $ | 5,159  |                             |  | $ | 30,994                        |   |  | $ | 31,684  |  
|Net loss                     |  | $                           | (54   | ) |                               | $ | (2,846 | )                           |  | $ | (6,122                        | ) |  | $ | (13,023 | )



During the first quarter of 2004 in
accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, the Company recorded a $72.8 million loss to discontinued operations ($46.4 million after taxes). The loss included an initial reserve of
$53.5 million for rent, real estate taxes, common area maintenance expenses (other liabilities) and $1.9 million for severance and outplacement costs (accrued expenses). The remaining loss included property retirement (asset impairment) of $22.1
million and gains on capital lease retirements of $4.7 million. Additional discontinued operations expenses not reserved totaled $0.8 million and $4.6 million after taxes for the 13 and 39 weeks ended October 2, 2004, respectively.



12



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##### Table of Contents

In the first quarter of 2003, the Company recorded an initial reserve of $27.5 million to discontinued operations ($17.7
million after taxes) for rent, real estate taxes and common area maintenance expenses (other liabilities) and severance and outplacement costs (accrued expenses). The Company recorded property retirement (asset impairment) of $5.0 million, which was
substantially offset by gains on capital lease retirements of $5.0 million. During the second quarter of 2003, the Company recorded an initial reserve of $0.3 million to discontinued operations ($0.2 million after taxes) for rent, real estate taxes
and common area maintenance expenses (other liabilities) and for property retirement (asset impairment). Additional discontinued operations expenses not reserved totaled $1.3 million and $3.3 million after taxes for the 13 and 39 weeks ended
September 27, 2003, respectively.



The following table shows the reserve
balances for discontinued operations as of October 2, 2004:



|                                      |  |                  |         |   |                  |   |      |       |  |   |         |  
|------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ---- | ----- |  | - | ------- | -
|(Dollars in thousands)                |  | OtherLiabilities |         |   | Accrued Expenses |   |      | Total | 
|Reserve balance as of July 3, 2004    |  | $                | (69,801 | ) |                  | $ | (327 | )     |  | $ | (70,128 | )
|Additions                             |  |                  |        |   |                  |   |     |       |  |   |        |  
|Utilizations                          |  |                  | 7,088   |   |                  |   | 327  |       |  |   | 7,415   |  
|                                      |  |                  |         |   |                  |   |      |       |  |   |         |  
|Reserve balance as of October 2, 2004 |  | $                | (62,713 | ) |                  | $ |     |       |  | $ | (62,713 | )
|                                      |  |                  |         |   |                  |   |      |       |  |   |         |  



12) Store Closings



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



|                             |  |                        |   |  |        |   |  |       |  
|---------------------------- |  | ---------------------- | - |  | ------ | - |  | ----- | -
|                             |  | DiscontinuedOperations |   |  | Closed |   |  | Total |  
|As of July 3, 2004           |  | 65                     |   |  | 158    |   |  | 223   |  
|Store closings added         |  | 3                      |   |  |       |   |  | 3     |  
|Stores sold/lease terminated |  | (7                     | ) |  | (5     | ) |  | (12   | )
|                             |  |                        |   |  |        |   |  |       |  
|As of October 2, 2004        |  | 61                     |   |  | 153    |   |  | 214   |  



The following table reflects closed
store liabilities as of October 2, 2004 and activity during the quarter, including additions to closed store liabilities charged to operations or discontinued operations and adjustments to liabilities based on changes in facts and circumstances and
payments made.



|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|----------------------------------------- |  | ---------------- | ---- | - | --------------- | - | ----- | -------------- |  | - | ----- | -
|                                          |  | Qtr 32004Disc Op |      |   | Qtr 32004Closed |   |       | Qtr 32004Total | 
|Balance at July 3, 2004                   |  | $                | 69.8 |   |                 | $ | 103.5 |                |  | $ | 173.3 |  
|Additions:                                |  |                  |      |   |                 |   |       |                |  |   |       |  
|Store closings  lease obligations        |  |                  | 0.1  |   |                 |   | 0.0   |                |  |   | 0.1   |  
|Store closing  other exit costs          |  |                  | 0.0  |   |                 |   | 0.0   |                |  |   | 0.0   |  
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|Total additions                           |  |                  | 0.1  |   |                 |   | 0.0   |                |  |   | 0.1   |  
|Adjustments:                              |  |                  |      |   |                 |   |       |                |  |   |       |  
|Adjustments to estimates-lease obligation |  |                  | (4.1 | ) |                 |   | (2.2  | )              |  |   | (6.3  | )
|Adjustments to estimates-other exit costs |  |                  | (0.7 | ) |                 |   | (0.0  | )              |  |   | (0.7  | )
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|Total adjustments                         |  |                  | (4.8 | ) |                 |   | (2.2  | )              |  |   | (7.0  | )
|Reductions:                               |  |                  |      |   |                 |   |       |                |  |   |       |  
|Lease payments made                       |  |                  | (1.7 | ) |                 |   | (3.1  | )              |  |   | (4.8  | )
|Payments for other exit costs             |  |                  | (0.7 | ) |                 |   | (0.5  | )              |  |   | (1.2  | )
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|Total reductions                          |  |                  | (2.4 | ) |                 |   | (3.6  | )              |  |   | (6.0  | )
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  
|Balance at October 2, 2004                |  | $                | 62.7 |   |                 | $ | 97.7  |                |  | $ | 160.4 |  
|                                          |  |                  |      |   |                 |   |       |                |  |   |       |  



The October 2, 2004 balance of
approximately $160.4 million consisted of lease liabilities and other exit cost liabilities of $132.6 million and $27.8 million, respectively, and includes lease liabilities of $54.9 million and other exit costs of $7.8 million associated with
discontinued operations. During the quarter, the Company closed three underperforming Food Lion stores.



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



13



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##### Table of Contents

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



13) Guarantor Subsidiaries



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



Delhaize America, Inc.

Consolidated Statements of Income

For the 39 Weeks ended October 2, 2004



|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |           
|----------------------------------------------------- |  | --------------- | -------- | - | ---------------------- | - | ------------ |  | - | ------------ | - |  | - | ----------
|(Dollars in thousands)                                |  | Parent (Issuer) |          |   | Guarantor Subsidiaries |   | Eliminations |  |   | Consolidated
|Net sales and other revenues                          |  | $               |         |   |                        | $ | 11,841,112   |  | $ |             |   |  | $ | 11,841,112
|Cost of goods sold                                    |  |                 |         |   |                        |   | 8,776,317    |  |   |             |   |  |   | 8,776,317 
|Selling and administrative expenses                   |  |                 | 27,312   |   |                        |   | 2,383,863    |  |   |             |   |  |   | 2,411,175 
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |           
|Operating (loss) income                               |  |                 | (27,312  | ) |                        |   | 680,932      |  |   |             |   |  |   | 653,620   
|Interest expense                                      |  |                 | 168,675  |   |                        |   | 70,579       |  |   |             |   |  |   | 239,254   
|Equity in earnings of subsidiaries                    |  |                 | (318,600 | ) |                        |   |             |  |   | 318,600      |   |  |   |          
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |           
|Income from continuing operations before income taxes |  |                 | 122,613  |   |                        |   | 610,353      |  |   | (318,600     | ) |  |   | 414,366   
|(Benefit) provision for income taxes                  |  |                 | (74,474  | ) |                        |   | 234,650      |  |   |             |   |  |   | 160,176   
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |           
|Income before loss from discontinued operations       |  |                 | 197,087  |   |                        |   | 375,703      |  |   | (318,600     | ) |  |   | 254,190   
|Loss from discontinued operations, net of tax         |  |                 |         |   |                        |   | 57,103       |  |   |             |   |  |   | 57,103    
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |           
|Net income                                            |  | $               | 197,087  |   |                        | $ | 318,600      |  | $ | (318,600     | ) |  | $ | 197,087   
|                                                      |  |                 |          |   |                        |   |              |  |   |              |   |  |   |           



Delhaize America, Inc.

Consolidated Statements of Income

For the 39 Weeks ended September 27, 2003



|                                                                   |  |                |          |   |                        |   |              |  |   |              |   |  |   |           
|------------------------------------------------------------------ |  | -------------- | -------- | - | ---------------------- | - | ------------ |  | - | ------------ | - |  | - | ----------
|(Dollars in thousands)                                             |  | Parent(Issuer) |          |   | Guarantor Subsidiaries |   | Eliminations |  |   | Consolidated
|Net sales and other revenues                                       |  | $              |         |   |                        | $ | 11,184,610   |  | $ |             |   |  | $ | 11,184,610
|Cost of goods sold                                                 |  |                |         |   |                        |   | 8,424,776    |  |   |             |   |  |   | 8,424,776 
|Selling and administrative expenses                                |  |                | 18,922   |   |                        |   | 2,232,960    |  |   |             |   |  |   | 2,251,882 
|                                                                   |  |                |          |   |                        |   |              |  |   |              |   |  |   |           
|Operating (loss) income                                            |  |                | (18,922  | ) |                        |   | 526,874      |  |   |             |   |  |   | 507,952   
|Interest expense                                                   |  |                | 165,207  |   |                        |   | 70,818       |  |   |             |   |  |   | 236,025   
|Equity in earnings of subsidiaries                                 |  |                | (241,500 | ) |                        |   |             |  |   | 241,500      |   |  |   |          
|                                                                   |  |                |          |   |                        |   |              |  |   |              |   |  |   |           
|Income from continuing operations before income taxes              |  |                | 57,371   |   |                        |   | 456,056      |  |   | (241,500     | ) |  |   | 271,927   
|(Benefit) provision for income taxes                               |  |                | (69,945  | ) |                        |   | 169,427      |  |   |             |   |  |   | 99,482    
|                                                                   |  |                |          |   |                        |   |              |  |   |              |   |  |   |           
|Income before loss from discontinued operations                    |  |                | 127,316  |   |                        |   | 286,629      |  |   | (241,500     | ) |  |   | 172,445   
|Loss from discontinued operations, net of tax                      |  |                |         |   |                        |   | 34,183       |  |   |             |   |  |   | 34,183    
|                                                                   |  |                |          |   |                        |   |              |  |   |              |   |  |   |           
|Income before cumulative effect of changes in accounting principle |  |                | 127,316  |   |                        |   | 252,446      |  |   | (241,500     | ) |  |   | 138,262   
|Cumulative effect of changes in accounting principle, net of tax   |  |                |         |   |                        |   | 10,946       |  |   |             |   |  |   | 10,946    
|                                                                   |  |                |          |   |                        |   |              |  |   |              |   |  |   |           
|Net income                                                         |  | $              | 127,316  |   |                        | $ | 241,500      |  | $ | (241,500     | ) |  | $ | 127,316   
|                                                                   |  |                |          |   |                        |   |              |  |   |              |   |  |   |           



14



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##### Table of Contents

Delhaize America, Inc.

Consolidated Balance Sheets

As of October 2, 2004



|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|------------------------------------------ |  | --------------- | --------- | ---------------------- | - | ------------ |  | - | ------------ | - |  | - | ---------
|(Dollars in thousands)                     |  | Parent (Issuer) |           | Guarantor Subsidiaries |   | Eliminations |  |   | Consolidated
|Assets                                     |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Current assets:                            |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Cash and cash equivalents                  |  | $               | 604,644   |                        | $ | 120,440      |  | $ |             |   |  | $ | 725,084  
|Receivables, net                           |  |                 | 302       |                        |   | 101,452      |  |   | (265         | ) |  |   | 101,489  
|Receivable from affiliate                  |  |                 | 10,884    |                        |   | 49,496       |  |   | (47,243      | ) |  |   | 13,137   
|Income tax receivable                      |  |                 |          |                        |   | 3,588        |  |   | (3,588       | ) |  |   |         
|Inventories                                |  |                 |          |                        |   | 1,153,191    |  |   |             |   |  |   | 1,153,191
|Prepaid expenses                           |  |                 | 566       |                        |   | 49,382       |  |   |             |   |  |   | 49,948   
|Other assets                               |  |                 |          |                        |   | 13,854       |  |   |             |   |  |   | 13,854   
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total current assets                       |  |                 | 616,396   |                        |   | 1,491,403    |  |   | (51,096      | ) |  |   | 2,056,703
|                                           |  |                 |           |                       
|Property and equipment, net                |  |                 | 7,252     |                        |   | 2,986,879    |  |   |             |   |  |   | 2,904,131
|Goodwill, net                              |  |                 |          |                        |   | 2,892,509    |  |   |             |   |  |   | 2,892,509
|Other intangibles, net                     |  |                 |          |                        |   | 743,572      |  |   |             |   |  |   | 743,572  
|Reinsurance recoverable from affiliate     |  |                 |          |                        |   | 134,596      |  |   |             |   |  |   | 134,596  
|Deferred tax asset                         |  |                 | 65,970    |                        |   |             |  |   | (65,970      | ) |  |   |         
|Other assets                               |  |                 | 103,679   |                        |   | 68,082       |  |   |             |   |  |   | 171,761  
|Investment in and advances to subsidiaries |  |                 | 5,743,418 |                        |   |             |  |   | (5,743,418   | ) |  |   |         
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total assets                               |  | $               | 6,536,715 |                        | $ | 8,227,041    |  | $ | (5,860,484   | ) |  | $ | 8,903,272
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Liabilities and Shareholders Equity       |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|                                           |  |                 |           |                       
|Current liabilities:                       |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Accounts payable                           |  | $               | 44        |                        | $ | 717,808      |  | $ |             |   |  | $ | 717,852  
|Payable to affiliate                       |  |                 | 36,132    |                        |   | 11,111       |  |   | (47,243      | ) |  |   |         
|Accrued expenses                           |  |                 | 113,436   |                        |   | 256,561      |  |   |             |   |  |   | 369,997  
|Capital lease obligations  current        |  |                 |          |                        |   | 37,540       |  |   |             |   |  |   | 37,540   
|Long-term debt  current                   |  |                 |          |                        |   | 17,486       |  |   | (265         | ) |  |   | 17,221   
|Other liabilities  current                |  |                 |          |                        |   | 24,840       |  |   |             |   |  |   | 24,840   
|Deferred income taxes                      |  |                 |          |                        |   | 8,134        |  |   |             |   |  |   | 8,134    
|Income taxes payable                       |  |                 | 10,133    |                        |   |             |  |   | (3,588       | ) |  |   | 6,545    
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total current liabilities                  |  |                 | 159,745   |                        |   | 1,073,480    |  |   | (51,096      | ) |  |   | 1,182,129
|                                           |  |                 |           |                       
|Long-term debt                             |  |                 | 2,839,242 |                        |   | 81,312       |  |   |             |   |  |   | 2,920,554
|Capital lease obligations                  |  |                 |          |                        |   | 672,050      |  |   |             |   |  |   | 672,050  
|Deferred income taxes                      |  |                 |          |                        |   | 317,736      |  |   | (65,970      | ) |  |   | 251,766  
|Other liabilities                          |  |                 | 605       |                        |   | 339,045      |  |   |             |   |  |   | 339,650  
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total liabilities                          |  |                 | 2,999,592 |                        |   | 2,483,623    |  |   | (117,066     | ) |  |   | 5,366,149
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Commitments and contingencies (Note 14)    |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|                                           |  |                 |           |                       
|Total shareholders equity                 |  |                 | 3,537,123 |                        |   | 5,743,418    |  |   | (5,743,418   | ) |  |   | 3,537,123
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total liabilities and shareholders equity |  | $               | 6,536,715 |                        | $ | 8,227,041    |  | $ | (5,860,484   | ) |  | $ | 8,903,272
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          



15



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##### Table of Contents

Delhaize America, Inc.

Consolidated Balance Sheets

As of January 3, 2004



|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|------------------------------------------ |  | --------------- | --------- | ---------------------- | - | ------------ |  | - | ------------ | - |  | - | ---------
|(Dollars in thousands)                     |  | Parent (Issuer) |           | Guarantor Subsidiaries |   | Eliminations |  |   | Consolidated
|Assets                                     |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Current assets:                            |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Cash and cash equivalents                  |  | $               | 147,090   |                        | $ | 166,539      |  | $ |             |   |  | $ | 313,629  
|Receivables, net                           |  |                 | 1,327     |                        |   | 110,676      |  |   | (265         | ) |  |   | 111,738  
|Receivable from affiliate                  |  |                 | 12,086    |                        |   | 72,138       |  |   | (69,516      | ) |  |   | 14,708   
|Income tax receivable                      |  |                 | 11,895    |                        |   |             |  |   | (11,895      | ) |  |   |         
|Inventories                                |  |                 |          |                        |   | 1,203,487    |  |   |             |   |  |   | 1,203,487
|Prepaid expenses                           |  |                 | 2,409     |                        |   | 38,177       |  |   |             |   |  |   | 40,586   
|Deferred tax assets                        |  |                 | 68,378    |                        |   | 26,491       |  |   | (68,378      | ) |  |   | 26,491   
|Other assets                               |  |                 |          |                        |   | 9,936        |  |   |             |   |  |   | 9,936    
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total current assets                       |  |                 | 243,185   |                        |   | 1,627,444    |  |   | (150,054     | ) |  |   | 1,720,575
|                                           |  |                 |           |                       
|Property and equipment, net                |  |                 | 7,222     |                        |   | 2,973,233    |  |   |             |   |  |   | 2,980,455
|Goodwill, net                              |  |                 |          |                        |   | 2,895,541    |  |   |             |   |  |   | 2,895,541
|Other intangibles, net                     |  |                 |          |                        |   | 775,830      |  |   |             |   |  |   | 775,830  
|Reinsurance recoverable from affiliate     |  |                 |          |                        |   | 129,869      |  |   |             |   |  |   | 129,869  
|Other assets                               |  |                 | 85,890    |                        |   | 82,223       |  |   |             |   |  |   | 168,113  
|Investment in and advances to subsidiaries |  |                 | 5,964,277 |                        |   |             |  |   | (5,964,277   | ) |  |   |         
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total assets                               |  | $               | 6,300,574 |                        | $ | 8,484,140    |  | $ | (6,114,331   | ) |  | $ | 8,670,383
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Liabilities and Shareholders Equity       |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|                                           |  |                 |           |                       
|Current liabilities:                       |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Accounts payable                           |  | $               | 663       |                        | $ | 750,459      |  | $ |             |   |  | $ | 751,122  
|Payable to affiliate                       |  |                 | 57,638    |                        |   | 13,996       |  |   | (69,516      | ) |  |   | 2,118    
|Accrued expenses                           |  |                 | 53,414    |                        |   | 241,067      |  |   |             |   |  |   | 294,481  
|Capital lease obligations  current        |  |                 |          |                        |   | 35,686       |  |   |             |   |  |   | 35,686   
|Long-term debt  current                   |  |                 |          |                        |   | 13,301       |  |   | (265         | ) |  |   | 13,036   
|Other liabilities  current                |  |                 |          |                        |   | 26,627       |  |   |             |   |  |   | 26,627   
|Income taxes payable                       |  |                 |          |                        |   | 13,049       |  |   | (11,895      | ) |  |   | 1,154    
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total current liabilities                  |  |                 | 111,715   |                        |   | 1,094,185    |  |   | (81,676      | ) |  |   | 1,124,224
|                                           |  |                 |           |                       
|Long-term debt                             |  |                 | 2,842,832 |                        |   | 94,653       |  |   |             |   |  |   | 2,937,485
|Capital lease obligations                  |  |                 |          |                        |   | 685,852      |  |   |             |   |  |   | 685,852  
|Deferred income taxes                      |  |                 |          |                        |   | 339,063      |  |   | (68,378      | ) |  |   | 270,685  
|Other liabilities                          |  |                 | 313       |                        |   | 306,110      |  |   |             |   |  |   | 306,423  
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total liabilities                          |  |                 | 2,954,860 |                        |   | 2,519,863    |  |   | (150,054     | ) |  |   | 5,324,669
|                                           |  |                 |           |                       
|Commitments and contingencies (Note 14)    |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|                                           |  |                 |           |                       
|Total shareholders equity                 |  |                 | 3,345,714 |                        |   | 5,964,277    |  |   | (5,964,277   | ) |  |   | 3,345,714
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          
|Total liabilities and shareholdersequity  |  | $               | 6,300,574 |                        | $ | 8,484,140    |  | $ | (6,114,331   | ) |  | $ | 8,670,383
|                                           |  |                 |           |                        |   |              |  |   |              |   |  |   |          



16



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##### Table of Contents

Delhaize America, Inc.

Consolidated Statements of Cash Flows

For the 39 Weeks ended October 2, 2004



|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|---------------------------------------------------- |  | --------------- | -------- | - | ---------------------- | - | -------- | ------------ |  | - | -------- | -
|(Dollars in thousands)                               |  | Parent (Issuer) |          |   | Guarantor Subsidiaries |   |          | Consolidated | 
|Net cash (used in) provided by operating activities  |  | $               | (115,048 | ) |                        | $ | 841,817  |              |  | $ | 726,769  |  
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Cash flows from investing activities                 |  |                 |          |   |                        |   |          |              |  |   |          |  
|Capital expenditures                                 |  |                 | (689     | ) |                        |   | (259,744 | )            |  |   | (260,433 | )
|Proceeds from sale of property                       |  |                 |         |   |                        |   | 15,970   |              |  |   | 15,970   |  
|Other investment activity                            |  |                 | (27,238  | ) |                        |   | (339     | )            |  |   | (27,577  | )
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Net cash used in investing activities                |  |                 | (27,927  | ) |                        |   | (244,113 | )            |  |   | (272,040 | )
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Cash flows from financing activities                 |  |                 |          |   |                        |   |          |              |  |   |          |  
|Principal payments on long-term debt                 |  |                 |         |   |                        |   | (9,869   | )            |  |   | (9,869   | )
|Principal payments under capital lease obligations   |  |                 |         |   |                        |   | (26,365  | )            |  |   | (26,365  | )
|Transfer from escrow to fund long-term debt          |  |                 |         |   |                        |   | 7,827    |              |  |   | 7,827    |  
|Net change in advances to subsidiaries               |  |                 | 615,396  |   |                        |   | (615,396 | )            |  |   |         |  
|Parent common stock repurchased                      |  |                 | (20,090  | ) |                        |   |         |              |  |   | (20,090  | )
|Tax payment for restricted shares vested             |  |                 | (852     | ) |                        |   |         |              |  |   | (852     | )
|Proceeds from stock options exercised                |  |                 | 6,075    |   |                        |   |         |              |  |   | 6,075    |  
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Net cash provided by (used in) financing activities  |  |                 | 600,529  |   |                        |   | (643,803 | )            |  |   | (43,274  | )
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Net increase (decrease) in cash and cash equivalents |  |                 | 457,554  |   |                        |   | (46,099  | )            |  |   | 411,455  |  
|Cash and cash equivalents at beginning of year       |  |                 | 147,090  |   |                        |   | 166,539  |              |  |   | 313,629  |  
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  
|Cash and cash equivalents at end of period           |  | $               | 604,644  |   |                        | $ | 120,440  |              |  | $ | 725,084  |  
|                                                     |  |                 |          |   |                        |   |          |              |  |   |          |  



Delhaize America, Inc.

Consolidated Statements of Cash Flows

For the 39 Weeks ended September 27,
2003



|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|--------------------------------------------------- |  | --------------- | ------- | - | ---------------------- | - | -------- | ------------ |  | - | -------- | -
|(Dollars in thousands)                              |  | Parent (Issuer) |         |   | Guarantor Subsidiaries |   |          | Consolidated | 
|Net cash provided by operating activities           |  | $               | (93,366 | ) |                        | $ | 674,787  |              |  | $ | 581,421  |  
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Cash flows from investing activities                |  |                 |         |   |                        |   |          |              |  |   |          |  
|Capital expenditures                                |  |                 | (11     | ) |                        |   | (263,691 | )            |  |   | (263,702 | )
|Proceeds from sale of property                      |  |                 |        |   |                        |   | 10,310   |              |  |   | 10,310   |  
|Other investment activity                           |  |                 | (16,791 | ) |                        |   | 1,594    |              |  |   | (15,197  | )
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Net cash used in investing activities               |  |                 | (16,802 | ) |                        |   | (251,787 | )            |  |   | (268,589 | )
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Cash flows from financing activities                |  |                 |         |   |                        |   |          |              |  |   |          |  
|Principal payments on long-term debt                |  |                 | (10,600 | ) |                        |   | (14,790  | )            |  |   | (25,390  | )
|Principal payments under capital lease obligations  |  |                 |        |   |                        |   | (23,681  | )            |  |   | (23,681  | )
|Escrow funding for Senior Notes                     |  |                 |        |   |                        |   | (86,592  | )            |  |   | (86,592  | )
|Taxes paid on capital contribution                  |  |                 | (4,692  | ) |                        |   |         |              |  |   | (4,692   | )
|Net change in advances to subsidiaries              |  |                 | 381,921 |   |                        |   | (381,921 | )            |  |   |         |  
|Parent common stock repurchased                     |  |                 | (2,306  | ) |                        |   |         |              |  |   | (2,306   | )
|Proceeds from stock options exercised               |  |                 | 600     |   |                        |   |         |              |  |   | 600      |  
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Net cash provided by (used in) financing activities |  |                 | 364,923 |   |                        |   | (506,984 | )            |  |   | (142,061 | )
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Net increase in cash and cash equivalents           |  |                 | 254,755 |   |                        |   | (83,984  | )            |  |   | 170,771  |  
|Cash and cash equivalents at beginning of year      |  |                 | 12,000  |   |                        |   | 119,641  |              |  |   | 131,641  |  
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  
|Cash and cash equivalents at end of period          |  | $               | 266,755 |   |                        | $ | 35,657   |              |  | $ | 302,412  |  
|                                                    |  |                 |         |   |                        |   |          |              |  |   |          |  



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



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



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



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



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



14) Commitments and Contingencies



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



Item 2.Managements Discussion and Analysis of Financial Condition and Result of Operations (13 weeks and 39 weeks ended October 2, 2004 compared to the 13 and 39 weeks ended September 27, 2003)



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



Executive Summary



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



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



During the third quarter of fiscal 2004, Delhaize America posted increased sales, improving gross margins, and continued operating cost reductions, as compared to third
quarter of 2003.



Third Quarter Highlights:



| |  | Market Renewal. Following the launch of Food Lions market renewal in Raleigh in fiscal 2003, a second renewal program was launched in Charlotte, North Carolina in early
October of 2004. Market renewal represents a change in Food Lions historical approach to remodeling activity. In the past, annual capital spending for remodel activity was dedicated to stores based on age and our related remodel calendar.
Through market renewal, remodel spending is focused on markets that generate significant sales (Key Markets) to maximize consumer recognition and reaction. Market renewal was developed to make our stores more appealing and customer
focused, particularly in the produce and meat departments. As an integral part of this project, Food Lion also brings a sharper focus on assortment development, marketing, merchandising and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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training associates. These successful focused programs have led Food Lion to identify the Greensboro,
North Carolina market for a third relaunch of a complete market scheduled for mid 2005. Greensboro is one of the most important markets in sales for Food Lion.



| |  | Inventory Management. During the third quarter of fiscal 2004, we successfully completed the transition in all Food Lion stores to an inventory management system originally
developed at Hannaford and modified to address the specific needs of Food Lion. This system will improve margin analysis, shrink control and inventory management, through full visibility to item-level detail data. The roll out of the same system in
our Kash n Karry stores was completed during the second quarter of 2004.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Hurricanes. September 2004 was a record-breaker for the number of storms hitting the Southeastern United States - Hurricanes Charley, Frances, Jeanne and Ivan, and Tropical
Storm Gaston. Our operating banners in the Southeastern United States  Food Lion, Kash n Karry and Harveys incurred $10.7 million during the third quarter in product loss, preparation and other costs. We showed tremendous teamwork and
planning in both preparing for and responding to these storms. A cross-functional team associated with these storms located generators, deployed personnel, dispatched temperature-controlled trucks, ordered product, and provided store maintenance
assistance to ensure the safety of our customers, associates and products. We worked diligently, balancing serving our customers in the busy days prior to the storms arrivals with preparing the stores for the potential impact due to wind, rain
and power loss. With this advance preparation, stores were able to re-open quickly after the storms passed. As a consequence, the sales impact of the hurricanes was almost neutral. In some communities, store associates distributed free water and ice
to our customers.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Growth of Harveys. In October of 2003, we expanded our business by acquiring Harveys, a chain of 43 supermarkets primarily in South Georgia. This chain is strengthening our
position in a Georgia market where we did not have a strong presence, giving us opportunities to focus on local consumers needs in this market to grow the Harveys business. As part of this strategy, 12 Food Lion stores were converted to
Harveys stores during the first nine months of fiscal 2004, with one additional store to be converted during the fourth quarter of 2004. Building on this success, we have decided to convert 12 additional Food Lion stores in fiscal 2005 to the
Harveys banner.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Fourth Quarter Outlook



During the fourth quarter of 2004, Delhaize America plans to continue its focus on Key
Markets to build on accelerating sales momentum. As part of this strategy, Kash n Karry will be rebranded over the coming three years to the new banner name Sweetbay Supermarket. As part of this effort, we closed 34 underperforming
Kash n Karry stores primarily in the Orlando area and on the east coast of Florida in the first quarter of 2004. These closings allow us to focus our efforts in the remaining stores in our core area on the west coast of Florida, including the
Tampa/St. Petersburg market where we have a solid market position and consumer perceptions are strong. We plan to build on this position by delivering on meat and produce quality, variety and value for consumers in ways that differentiate us from
our competitors. The first Sweetbay Supermarket opened in early November in St. Petersburg. Five more stores  all conversions  are expected to open in December 2004 in the Fort Myers/Naples market. In addition, three new and one
converted unit are scheduled to open during the first quarter of 2005 in the same market. At our Food Lion banner in the short term, we will continue to focus on excellence in execution, in-stock conditions, cleanliness, freshness, increased
convenience and customer service. In the medium term, we will focus on market renewal (see above) in Key Markets. At Hannaford, the Festival Strategy will evolve in response to shifting customer needs, as this strategy is founded on the principle of
listening to consumers and anticipating their needs.



Recent Developments



On November 10, 2004, Food Lion, LLC announced it had reached an
agreement to acquire ten Winn-Dixie stores in North Carolina and Virginia. These stores will reinforce the store network of Food Lion in its existing trade area.



On September 24, 2004, Hannaford Bros. Co. announced it had entered into a definitive agreement to acquire Victory Super Markets, Inc.,
which includes 19 Victory Super Markets, 17 in central and southeastern Massachusetts and two in southern New Hampshire, for $175 million. Delhaize America expects that Hannaford will complete the acquisition before the end of the year. The Victory
stores will be integrated in the Hannaford store network and converted to Hannafords banner. The acquisition of Victory Super Markets provides an optimal opportunity for Hannaford to meet its objective of expanding in Massachusetts and filling
in its existing trade area. This acquisition also fits the Companys strategy to reinforce our presence in existing or contiguous markets through



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organic growth and fill-in acquisitions with strong synergies. There are strong synergies between Victory and Hannaford in commercial positioning. With an
average surface of 44,000 square feet, the Victory Super Markets are well-merchandised stores that focus on fresh foods and great customer service. They feature fruit and vegetables, meat, seafood, deli, bakery, grocery, health and beauty, frozen
food, dairy and floral departments, as well as food courts. The chain currently operates six flagship stores called Market Square at Victory.



On August 4, 2004, the Board of Directors of Delhaize Americas parent company, Delhaize Group, decided to divest its loss-making Thai operation, Food Lion Thailand
Ltd, (Food Lion Thailand). Delhaize America owns, through its wholly-owned subsidiary Food Lion Thailand, Inc., a 51% interest in Food Lion Thailand and Delhaize The Lion Nederland BV, a Dutch subsidiary of Delhaize Group,
owns the remaining 49% interest in Food Lion Thailand. Delhaize America accounts for its Food Lion Thailand investment under the equity method, and its shares of Food Lion Thailands operating loss for the 39 weeks ended October 2, 2004 and
fiscal 2003 were not material to the Companys consolidated results of operation. As a result of the decision to divest, Delhaize America recorded a charge of $1.8 million in the third quarter of 2004. Delhaize Group sold 21 of its 26 Food Lion
Thailand stores in the third quarter of fiscal 2004 to Central Food Retail Company of Thailand and closed the remaining stores in August.



Critical Accounting Policies



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



Results of Operation



The following tables set forth the unaudited condensed consolidated statements of income for the 13 and the 39 weeks ended October 2, 2004 and for the 13 and 39 weeks ended September 27, 2003 for informational
purposes. The 2003 results have been adjusted to classify the results of operation for the 38 stores closed during the 39 weeks ended October 2, 2004 as discontinued operations. The net sales and other revenues, cost of goods sold, and
selling and administrative expenses are reflected on a net basis in discontinued operations in our condensed consolidated statement of income.



|                                                                   |  |                               |            |                                   |   |           
|------------------------------------------------------------------ |  | ----------------------------- | ---------- | --------------------------------- | - | ----------
|(Dollars in thousands)                                             |  | 13 WeeksEndedOctober 2, 2004  |            | 13 Weeks EndedSeptember 27, 2003 
|                                                                   |  | (unaudited)                   |            | (unaudited)                      
|Net sales and other revenues                                       |  | $                             | 3,990,336  |                                   | $ | 3,819,431 
|Cost of goods sold                                                 |  |                               | 2,946,710  |                                   |   | 2,871,076 
|Selling and administrative expenses                                |  |                               | 818,854    |                                   |   | 763,151   
|                                                                   |  |                               |            |                                   |   |           
|Operating income                                                   |  |                               | 224,772    |                                   |   | 185,204   
|Interest expense                                                   |  |                               | 79,125     |                                   |   | 78,003    
|                                                                   |  |                               |            |                                   |   |           
|Income from continuing operations before income taxes              |  |                               | 145,647    |                                   |   | 107,201   
|Provision for income taxes                                         |  |                               | 57,455     |                                   |   | 39,901    
|                                                                   |  |                               |            |                                   |   |           
|Income from continuing operations                                  |  |                               | 88,192     |                                   |   | 67,300    
|Loss from discontinued operations, net of tax                      |  |                               | 859        |                                   |   | 4,174     
|                                                                   |  |                               |            |                                   |   |           
|Net income                                                         |  | $                             | 87,333     |                                   | $ | 63,126    
|                                                                   |  |                               |            |                                   |   |           
|                                                                   |  |                              
|(Dollars in thousands)                                             |  | 39 WeeksEnded October 2, 2004 |            | 39 Weeks Ended September 27, 2003
|                                                                   |  | (unaudited)                   |            | (unaudited)                      
|Net sales and other revenues                                       |  | $                             | 11,841,112 |                                   | $ | 11,184,610
|Cost of goods sold                                                 |  |                               | 8,776,317  |                                   |   | 8,424,776 
|Selling and administrative expenses                                |  |                               | 2,411,175  |                                   |   | 2,251,882 
|                                                                   |  |                               |            |                                   |   |           
|Operating income                                                   |  |                               | 653,620    |                                   |   | 507,952   
|Interest expense                                                   |  |                               | 239,254    |                                   |   | 236,025   
|                                                                   |  |                               |            |                                   |   |           
|Income from continuing operations before income taxes              |  |                               | 414,366    |                                   |   | 271,927   
|Provision for income taxes                                         |  |                               | 160,176    |                                   |   | 99,482    
|                                                                   |  |                               |            |                                   |   |           
|Income from continuing operations                                  |  |                               | 254,190    |                                   |   | 172,445   
|Loss from discontinued operations, net of tax                      |  |                               | 57,103     |                                   |   | 34,183    
|                                                                   |  |                               |            |                                   |   |           
|Income before cumulative effect of changes in accounting principle |  |                               | 197,087    |                                   |   | 138,262   
|Cumulative effect of change in accounting principle, net of tax    |  |                               |           |                                   |   | 10,946    
|                                                                   |  |                               |            |                                   |   |           
|Net income                                                         |  | $                             | 197,087    |                                   | $ | 127,316   
|                                                                   |  |                               |            |                                   |   |           



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



|                                                      |  |                                 |  |                                  
|----------------------------------------------------- |  | ------------------------------- |  | ---------------------------------
|                                                      |  | 13 Weeks EndedOctober 2, 2004 % |  | 13 Weeks EndedSeptember 27, 2003%
|                                                      |  | (unaudited)                     |  | (unaudited)                      
|Net sales and other revenues                          |  | 100.00                          |  | 100.00                           
|Cost of goods sold                                    |  | 73.85                           |  | 75.17                            
|Selling and administrative expenses                   |  | 20.52                           |  | 19.98                            
|                                                      |  |                                 |  |                                  
|Operating income                                      |  | 5.63                            |  | 4.85                             
|Interest expense                                      |  | 1.98                            |  | 2.04                             
|                                                      |  |                                 |  |                                  
|Income from continuing operations before income taxes |  | 3.65                            |  | 2.81                             
|Provision for income taxes                            |  | 1.44                            |  | 1.05                             
|                                                      |  |                                 |  |                                  
|Income from continuing operations                     |  | 2.21                            |  | 1.76                             
|Loss from discontinued operations, net of tax         |  | 0.02                            |  | 0.11                             
|                                                      |  |                                 |  |                                  
|Net income                                            |  | 2.19                            |  | 1.65                             
|                                                      |  |                                 |  |                                  



Note:



Cost of goods sold and selling and administrative expenses for the 13 weeks ended October
2, 2004 includes $5.4 million (0.14% of sales) and $5.3 million (0.13% of sales), respectively, in costs associated with the five named storms in the third quarter of fiscal 2004.



Cost of goods sold and selling and administrative expenses for the 13 weeks ended September 27, 2003 includes $14.7 million (0.38% of
sales) and $1.4 million (0.04% of sales), respectively, in costs associated with Hurricane Isabel.



|                                                                   |  |                               |  |                                  
|------------------------------------------------------------------ |  | ----------------------------- |  | ---------------------------------
|                                                                   |  | 39 WeeksEndedOctober 2, 2004% |  | 39 Weeks EndedSeptember 27, 2003%
|                                                                   |  | (unaudited)                   |  | (unaudited)                      
|Net sales and other revenues                                       |  | 100.00                        |  | 100.00                           
|Cost of goods sold                                                 |  | 74.12                         |  | 75.32                            
|Selling and administrative expenses                                |  | 20.36                         |  | 20.13                            
|                                                                   |  |                               |  |                                  
|Operating income                                                   |  | 5.52                          |  | 4.55                             
|Interest expense                                                   |  | 2.02                          |  | 2.11                             
|                                                                   |  |                               |  |                                  
|Income from continuing operations before income taxes              |  | 3.50                          |  | 2.44                             
|Provision for income taxes                                         |  | 1.35                          |  | 0.89                             
|                                                                   |  |                               |  |                                  
|Income from continuing operations                                  |  | 2.15                          |  | 1.55                             
|Loss from discontinued operations, net of tax                      |  | 0.49                          |  | 0.31                             
|                                                                   |  |                               |  |                                  
|Income before cumulative effect of changes in accounting principle |  | 1.66                          |  | 1.24                             
|Cumulative effect of change in accounting principle, net of tax    |  | 0.00                          |  | 0.10                             
|                                                                   |  |                               |  |                                  
|Net income                                                         |  | 1.66                          |  | 1.14                             
|                                                                   |  |                               |  |                                  



Note:



Cost of goods sold includes a December 29, 2002 adoption charge of $87.3 million (0.78%
of sales) in the 39 weeks ended September 27, 2003 related to the conversion in inventory accounting from the retail method to average item cost method at the Food Lion and Kash n Karry banners. The cumulative effect of change in accounting
principle is discussed in Note 10 to the unaudited condensed consolidated financial statements.



23



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Sales



We record revenues primarily from the sale of products in our retail stores. Net sales and other revenues for the 13 and 39 weeks ended October 2, 2004 were $4.0 billion
and $11.8 billion, respectively, resulting in increases of 4.5% and 5.9% over the corresponding periods of 2003. Included in these increases are additional sales of the 43 Harveys stores acquired during the fourth quarter of fiscal 2003,
contributing 2.5% to the sales increase both for the quarter and the 39 weeks ended October 2, 2004, continuing positive comparable store sales and new store sales. Comparable store sales increased 1.7% during the third quarter of 2004 and 1.9% for
the 39 weeks ended October 2, 2004. Third quarter sales of 2004 have been positively impacted by a continued focus on operational excellence at Food Lion, continued strength of Hannafords Festival strategy and improving sales trends at our
Kash n Karry stores.



We continue to see a competitive market as
retailers battle for the consumers dollars. During the first nine months of 2004, we experienced 84 net competitive store openings in our operating area - increasing the amount of grocery square footage available to consumers. In addition,
most competitors continued to invest heavily in promotional spending in the form of aggressive advertised pricing, buy one and get one or two free offers, double and triple couponing and other aggressive pricing strategies.



As of October 2, 2004, we operated 1,494 stores, which consisted of 1,214 stores operating
primarily under the Food Lion banner, 123 stores operating under the Hannaford banner, 103 stores operating under the Kash n Karry banner and 54 stores under the Harveys banner. During the third quarter of 2004, we opened 11 new stores; five
under the Food Lion banner and six under the Harveys banner (conversion from Food Lion to Harveys). In addition, we closed nine Food Lion stores (six of which converted to Harveys from Food Lion) and closed one Harveys store, resulting in a net
increase of one store. We remodeled 50 stores in the third quarter of 2004; 49 stores for the Food Lion banner and one for the Hannaford banner. Retail store square footage totaled 54.9 million square feet at October 2, 2004, resulting in a 2.0%
increase over third quarter of 2003.



Gross Profit



Gross profit as a percentage of sales was 26.15% and 24.83% for the 13 weeks ended October
2, 2004, and the corresponding period in 2003, respectively. Gross profit as a percentage of sales was 25.88% and 24.68% for the 39 weeks ended October 2, 2004, and the corresponding period in 2003, respectively. Year to date gross margin
comparisons with last year are positively impacted by the Companys store inventory accounting change last year from the retail method to the average item cost method. The effect of the change on the December 28, 2002 inventory valuation
resulted in a decrease in inventory of $87.3 million at the beginning of fiscal 2003 with a corresponding increase to cost of goods sold (0.78% of sales) for the 39 weeks ended September 27, 2003.



Gross profit as a percentage of sales increased in the third quarter of 2004 compared with
the third quarter of 2003 primarily due to lower inventory shrink at Food Lion and continued focus on optimizing margin to drive sustainable, profitable sales at all four operating companies. We have now successfully completed the transition of all
of our Food Lion and Kash n Karry stores to a new inventory and margin management system, which was first developed at Hannaford and modified to address the specific needs of Food Lion and Kash n Karry. This system has enabled us to
improve our current margin analysis, shrink control and inventory management through full visibility to item-level detail data.



For the 39 weeks ended October 2, 2004, excluding the impact of the store inventory accounting change, gross profit as a percentage of sales increased in 2004, primarily
as a result of lower inventory shrink at Food Lion this year compared with the prior year.



Also gross profit comparisons for the third quarter were negatively affected by the impact of hurricanes in both 2004 and 2003, which resulted in product losses and other costs of $5.4 million this year compared to
$14.7 million last year. Product losses were lower this year due to the Companys advanced preparation efforts.



We recorded a $1.4 million LIFO provision in the third quarter of 2004 and $5.1 million in the 39 weeks ended October 2, 2004, compared with a LIFO provision of $0.6
million in the third quarter of 2003 and $1.3 million in the 39 weeks ended September 27, 2003.



Selling and Administrative Expenses



|                                            |  |                                |  |                                   |  |                               |  |                                  
|------------------------------------------- |  | ------------------------------ |  | --------------------------------- |  | ----------------------------- |  | ---------------------------------
|                                            |  | 13 Weeks ended October 2, 2004 |  | 13 Weeks ended September 27, 2003 |  | 39 Weeks endedOctober 2, 2004 |  | 39 Weeks ended September 27, 2003
|(Percent of net sales and other revenues)   |  |                                |  |                                   |  |                               |  |                                  
|Selling and administrative expenses SGA   |  | 20.52                          |  | 19.98                             |  | 20.36                         |  | 20.13                            
|SGA excluding depreciation and amortization |  | 17.65                          |  | 17.05                             |  | 17.45                         |  | 17.17                            



24



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##### Table of Contents

SGA for the third quarter of 2004 includes $5.3 million in preparation and other costs incurred for the recent hurricanes
experienced by the Company compared with $1.4 million incurred last year in third quarter for Hurricane Isabel. Additional increases in SGA as compared to last year are due to the SGA expenses for the 43 Harveys stores acquired in fiscal 2003,
expenses incurred for the Raleigh and Charlotte market renewal projects and $1.8 million charge recorded for the divesture of its Thai operation, Food Lion Thailand.



|                                        |  |                                |       |                                   |   |                               |  |                                   |       |  |   |      
|--------------------------------------- |  | ------------------------------ | ----- | --------------------------------- | - | ----------------------------- |  | --------------------------------- | ----- |  | - | -----
|(Dollars in millions)                   |  | 13 Weeks ended October 2, 2004 |       | 13 Weeks ended September 27, 2003 |   | 39 Weeks endedOctober 2, 2004 |  | 39 Weeks ended September 27, 2003
|Depreciation and amortization expense   |  | $                              | 114.4 |                                   | $ | 111.8                         |  | $                                 | 344.9 |  | $ | 331.8
|Percent of net sales and other revenues |  |                                | 2.87  |                                   |   | 2.93                          |  |                                   | 2.91  |  |   | 2.96 



The increase in depreciation and
amortization for the 13 weeks and 39 weeks ended October 2, 2004 compared to the corresponding periods last year is primarily due to the acquisition of the 43 Harveys stores acquired in fiscal 2003, software purchases and upgrades for the transition
of its Food Lion and Kash n Karry banners to a new inventory system, and equipment purchases for new stores and renovations since the third quarter of last year. The decrease as a percent of sales is due to our strong sales performance for the
quarter and year to date.



Interest Expense



|                                        |  |                                |      |                                   |   |                               |  |                                   |       |  |   |      
|--------------------------------------- |  | ------------------------------ | ---- | --------------------------------- | - | ----------------------------- |  | --------------------------------- | ----- |  | - | -----
|(Dollars in millions)                   |  | 13 Weeks ended October 2, 2004 |      | 13 Weeks ended September 27, 2003 |   | 39 Weeks endedOctober 2, 2004 |  | 39 Weeks ended September 27, 2003
|Interest expense                        |  | $                              | 79.1 |                                   | $ | 78.0                          |  | $                                 | 239.3 |  | $ | 236.0
|Percent of net sales and other revenues |  |                                | 1.98 |                                   |   | 2.04                          |  |                                   | 2.02  |  |   | 2.11 



Interest expense increased for the 13
and 39 weeks ended October 2, 2004 as compared to the corresponding periods last year primarily due to a decrease in the benefit from our interest rate swap agreements and increased interest expense from additional store capital leases offset
partially by increased investment income due to higher cash balances.



LIFO



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



Our LIFO reserve increased to $1.4 million for the third quarter of 2004 as compared to $0.6 million for the same period last year. For the 39 weeks ended October 2, 2004, our LIFO reserve increased to $5.1 million as compared to $1.3
million for the same period last year.



Discontinued Operations



The Company closed 38 underperforming stores during the 39 weeks ended
October 2, 2004. In accordance with the provisions of SFAS No. 144, a portion of the costs associated with the closure of these stores, as well as related operating activity prior to closing for these stores, was recorded in Loss from
discontinued operations, net of tax in the Companys Condensed Consolidated Statement of Income.



Income Taxes



|                           |  |                                |      |   |                                  |   |      |                                |  |   |                                  |   |  |   |      |  
|-------------------------- |  | ------------------------------ | ---- | - | -------------------------------- | - | ---- | ------------------------------ |  | - | -------------------------------- | - |  | - | ---- | -
|(Dollars in millions)      |  | 13 Weeks Ended October 2, 2004 |      |   | 13 Weeks EndedSeptember 27, 2003 |   |      | 39 Weeks Ended October 2, 2004 |  |   | 39 Weeks EndedSeptember 27, 2003 |  
|Provision for income taxes |  | $                              | 57.5 |   |                                  | $ | 39.9 |                                |  | $ | 160.2                            |   |  | $ | 99.5 |  
|Effective tax rate         |  |                                | 39.4 | % |                                  |   | 37.2 | %                              |  |   | 38.7                             | % |  |   | 36.6 | %



The tax provision for the 39 weeks
ended October 2, 2004 includes approximately $3.4 million (net of tax) in interest income related to an IRS audit refund (discussed below). The Companys tax rate from continuing operations would have been 39.5% for the 39 weeks ended October
2, 2004 excluding this interest refund which was recorded during the second quarter. Notwithstanding the refund, our effective tax rate increased in the third quarter of 2004 and year to date of 2004 from the respective periods of the prior year due
to the following reasons. First, the rate was lower in 2003 because of the relative effect of ongoing tax saving initiatives over a lower level of Income from continuing operations before income taxes. Income from continuing operations
before income taxes was lower in 2003 primarily due to the inventory accounting charge discussed in Note 10. Second, the 2004 rate is higher due to increased tax provisions related to state audit activity, which has not yet reached a final
resolution.



25



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##### Table of Contents

The Internal Revenue Service has completed its audit for tax years 1999 though 2001 resulting in a refund of
approximately $30 million (plus approximately $5.6 million in interest) associated with the timing of certain tax deductions. Except for the interest recorded in the tax provision, this refund results in no impact to our Condensed Consolidated
Statement of Income for the period ended October 2, 2004.



Liquidity and
Capital Resources



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



At October 2,
2004, we had cash and cash equivalents of $725.1 million compared with $302.4 million at September 27, 2003. We have historically generated positive cash flow from operations. Cash provided by operating activities totaled $726.8 million for the 39
weeks ended October 2, 2004, compared with $581.4 million for the corresponding period last year. The increase in cash provided by operating activities over the comparable period is primarily due to lower tax payments, $106.2 million for the 39
weeks ended October 2, 2004 compared with $154.4 million for the 39 weeks ended September 27, 2003. The lower tax payments in fiscal 2004 are primarily the result of an overpayment on the prior year tax return. Also contributing to the increase in
cash from operations were changes in inventories and accounts payable.



Cash
flows used in investing activities increased to $272.0 million for the 39 weeks ended October 2, 2004, compared with $268.6 million for the corresponding period last year primarily due to an increase of $12.9 million in cash used for workers
compensation collateral requirements offset partially by increased proceeds from property sales in 2004. For the 39 weeks ended October 2, 2004, proceeds were received from the sale-leaseback of a Food Lion store, the sale of three Kash n
Karry stores and the sale of land.



Capital expenditures were $260.4 million
for the 39 weeks ended October 2, 2004 compared to $263.7 million for the prior year period. For the 39 weeks ended October 2, 2004, we have opened 33 new stores and 57 renovations compared with 18 new stores and 85 renovations for the corresponding
period of last year.



In fiscal 2004, we plan to incur approximately $425
million of capital expenditures compared to the previous projection of $450 million. In addition, the Company will fund the planned acquisition of Victory Super Markets for $175 million, which is expected to close before the end of the year. We plan
to finance capital expenditures during fiscal 2004 through funds generated from operations and existing bank facilities and through the use of leases when necessary.



Cash flows used in financing activities for the 39 weeks ended October 2, 2004 were $42.0 million compared to $142.1 million for the same
period last year. The decrease in net cash used in financing activities was primarily due to the maturity of securities held in escrow to fund the defeasance of certain senior notes at the Hannaford banner (see discussion below in debt) and a
decrease in long-term debt payments. Offsetting this decrease were additional parent common stock repurchases in 2004 and taxes paid on capital contribution in 2003.



Debt



We maintain a revolving credit facility with a syndicate of commercial banks providing $350.0 million in committed lines of credit. The credit facility is secured by
certain inventory of the Delhaize America operating subsidiaries. The $350.0 million facility expires in July 2005 and contains affirmative and negative covenants. Negative covenants include a minimum fixed charge coverage ratio, a maximum leverage
ratio, and an asset coverage ratio. We must be in compliance with all covenants in order to have access to the credit facility. As of October 2, 2004, we were in compliance with all covenants contained in the credit facility. A deteriorating
economic or operating environment can subject us to a risk of non-compliance with the covenants. We had no outstanding borrowings under this facility as of October 2, 2004, and had no borrowings during 2004 and fiscal 2003. This facility is utilized
to provide short-term capital to meet liquidity needs as necessary.



At October
2, 2004, the Company had the following longterm debt:



|                                                          |  |   |           |    
|--------------------------------------------------------- |  | - | --------- | ---
|(Dollars in thousands)                                    |  |   |           |    
|                                                          | 
|Notes, 7.375%, due 2006                                   |  | $ | 607,889   | (a)
|Notes, 7.55%, due 2007                                    |  |   | 149,732   | (a)
|Notes, 8.125%, due 2011                                   |  |   | 1,099,687 | (a)
|Notes, 8.05%, due 2027                                    |  |   | 121,602   | (a)
|Debentures, 9.00%, due 2031                               |  |   | 855,000   |    
|Medium-term notes, 8.67% to 8.73%, due 2006               |  |   | 5,069     | (a)
|Other notes, 6.31% to 14.15%, due Nov. 2004 to 2016       |  |   | 62,077    | (a)
|Mortgage payables, 7.55% to 10.20%, due Oct. 2004 to 2016 |  |   | 26,554    | (a)
|Financing obligation, 7.25%, due 2004 to 2018             |  |   | 10,165    |    
|                                                          |  |   |           |    
|                                                          |  |   | 2,937,775 |    
|Less current portion                                      |  |   | 17,221    |    
|                                                          |  |   |           |    
|                                                          |  | $ | 2,920,554 |    
|                                                          |  |   |           |    

---

|(a) | Net of associated discount and premium
|--- | --------------------------------------



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##### Table of Contents

In October 2003, our Hannaford banner invoked the defeasance provisions of its outstanding 8.54% Senior Notes due 2004,
6.31% Senior Notes due 2008, 6.50% Senior Notes due 2008, 7.41% Senior Notes due 2009, 6.58% Senior Notes due 2011, and 7.06% Senior Notes due 2016 (collectively, the Notes) and placed sufficient funds in an escrow account to satisfy the
remaining principal and interest payments due on the Notes. As a result of this defeasance, Hannaford is no longer subject to the negative covenants contained in the agreements governing these notes. As of October 2, 2004, $66.0 million in aggregate
principal amount of these notes was outstanding. Cash committed to fund the escrow and not available for general corporate purposes is considered restricted. At October 2, 2004, restricted funds of $13.9 million and $60.4 million are recorded in
Current Other Assets and Non-current Other Assets, respectively.



We enter into
significant leasing obligations related to our store properties. Capital lease obligations outstanding at October 2, 2004 were $709.6 million compared with $706.9 million at September 27, 2003. These leases generally have terms of up to 25 years. We
also had significant operating lease commitments at the end of fiscal 2003.



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



|                                     |  |                 |     |   |                    |   |      |  
|------------------------------------ |  | --------------- | --- | - | ------------------ | - | ---- | -
|(Dollars in millions)                |  | October 2, 2004 |     |   | September 27, 2003 |  
|Outstanding borrowings at period end |  | $               | 0   |   |                    | $ | 0    |  
|Average borrowings                   |  |                 | 0.0 |   |                    |   | 0.4  |  
|Maximum amount outstanding           |  |                 | 0.0 |   |                    |   | 37.0 |  
|Daily weighted average interest rate |  |                 | 0   | % |                    |   | 2.81 | %



Market Risk



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



During the fourth quarter of 2001 and the third quarter of 2002, we entered into interest rate swap agreements, effectively converting a portion of our debt from fixed to variable rates. Maturity dates of interest
rate swap arrangements match those of the underlying debt. These agreements involve the exchange of fixed rate payments for variable rate payments without the exchange of the underlying principal amounts. Variable rates for our agreements are based
on six-month or three-month U.S. dollar LIBOR and are reset on a semi-annual or quarterly basis. The differential between fixed and variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and is
recognized over the life of the agreements as an adjustment to interest expense. On December 30, 2003, we terminated $100 million of the 2011 interest rate swap arrangements. The notional principal amounts of interest rate swap arrangements as of
October 2, 2004 were $300 million maturing in 2006 and $100 million maturing in 2011. These agreements met the criteria for using the short-cut method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133. We have recorded a
derivative asset in connection with these agreements in the amount of $14.9 million and $16.9 million at October 2, 2004 and January 3, 2004, respectively, recorded in our Consolidated Balance Sheets in Other Assets.



Prior to the offering of bonds and debentures in 2001, the Company entered into interest rate
agreements to hedge against potential increases in interest rates. These hedge agreements were settled in 2001 with the loss recorded in other comprehensive income (loss), net of taxes and amortized to interest expense over the term of the
associated debt securities. This unrealized loss was reduced as of the date of the Delhaize Group share exchange as a result of the application of purchase accounting. The remaining unrealized loss, net of taxes, at October 2, 2004, and January 3,
2004, totaled approximately $40.4 million and $44.3 million, respectively.



27



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##### Table of Contents

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



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

---

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

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

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



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



Contractual Obligations and Commitments



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



Insurance



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



28



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##### Table of Contents

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



In the fourth quarter of 2003, we
renegotiated our property insurance lowering our self-insured retention per occurrence to $5.0 million for named storms and $2.5 million for all other losses. Prior to the renewal, the amount of the deductible for each named storm occurrence as
insured was calculated as five percent of the total insured value at all locations where physical loss or damage occurred. We incurred property loss of $10.7 million for the hurricanes during the 13 weeks ended October 2, 2004. In fiscal 2003, we
incurred property loss of $16.9 million (which includes a $14.3 million loss of inventory) related to Hurricane Isabel.



Item 3.Quantitative and Qualitative Disclosures About Market Risk



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



Item 4.Controls and Procedures



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



PART II OTHER INFORMATION



Item 6.Exhibits



|        |  |                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                        
|31(a)   |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)                              
|        | 
|31(b)   |  | Certification of Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)                             
|        | 
|32      |  | Certifications of Chief Executive Officer and Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)



29



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##### Table of Contents

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: November 16, 2004 |  | BY:                    |  | /s/    Carol M. Herndon    
|                        |  |                        |  | Carol M. Herndon           
|                        |  |                        |  | Executive Vice President of
|                        |  |                        |  | Accounting and Analysis and
|                        |  |                        |  | Chief Accounting Officer   



30



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##### Table of Contents

Exhibit Index



|        |  |                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                        
|31(a)   |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)                              
|        | 
|31(b)   |  | Certification of Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241)                             
|        | 
|32      |  | Certifications of Chief Executive Officer and Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)



31