##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended
June 29, 2002

OR

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

For the transition period from ____________to____________

Commission File number 0-6080

DELHAIZE AMERICA, INC.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|NORTH CAROLINA                                                 |  | 56-0660192                          
|                                                               |  |                                     
|(State or other jurisdiction of
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)


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   þ     No   box

Outstanding shares of common stock of the
Registrant as of August 13, 2002.

Class A Common Stock  91,050,642,127
Class B Common Stock   75,287,145

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

1



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DELHAIZE AMERICA, INC.
INDEX TO FORM 10-Q
JUNE 29, 2002

|         |                       |  |  |               |                                                                                       |  |                                                                                                                                                                                                                                  |       |  |      | 
|-------- | --------------------- |  |  | ------------- | ------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- |  | ---- | 
|         |                       |  |  |               |                                                                                       |  |                                                                                                                                                                                                                                  |       |  | Page
|         |                       |  |  |               |                                                                                       |  |                                                                                                                                                                                                                                  |       | 
|PART I.  | FINANCIAL INFORMATION |  |  |               |                                                                                      
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|         |                       |  |  | Item 1.       | Financial Statements                                                                  |  |                                                                                                                                                                                                                                  |       | 
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|         |                       |  |  |               |                                                                                       |  | Condensed Consolidated Statements of Income
for the 13 weeks ended June 29, 2002 (successor), 9 weeks
from April 29, 2001 to June 30, 2001 (successor) and 4 weeks
from April 1, 2001 to April 28, 2001 (predecessor)            |       |  | 3    | 
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|         |                       |  |  |               |                                                                                       |  | Condensed Consolidated Statements of Income/(Loss)
for the 26 weeks ended June 29, 2002(successor), 9 weeks
from April 29, 2001 to June 30, 2001 (successor) and 17 weeks
from December 30, 2000 to April 28, 2001 (predecessor) |       |  | 4    | 
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|         |                       |  |  |               |                                                                                       |  | Condensed Consolidated Balance Sheets as of
June 29, 2002 and December 29, 2001                                                                                                                                                  |       |  | 5    | 
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|         |                       |  |  |               |                                                                                       |  | Condensed Consolidated Statements of Cash Flows
for the 26 weeks ended June 29, 2002 (successor), 9 weeks from
April 29, 2001 to June 30, 2001 (successor) and 17 weeks
from December 30, 2000 to April 28, 2001 (predecessor)   |       |  | 6    | 
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|         |                       |  |  |               |                                                                                       |  | Notes to Condensed Consolidated
Financial Statements                                                                                                                                                                             |       |  | 7-10 | 
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|         |                       |  |  | Item 2.       | Managements Discussion and Analysis of
Financial Condition and Results of Operations |  |                                                                                                                                                                                                                                  | 11-19 | 
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|         |                       |  |  | Item 3.       | Quantitative and Qualitative Disclosures About
Market Risk                            |  |                                                                                                                                                                                                                                  | 19    | 
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|PART II. | OTHER INFORMATION     |  |  |               |                                                                                      
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|         |                       |  |  | Item 1.       | Legal Proceedings                                                                     |  |                                                                                                                                                                                                                                  | 19    | 
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|         |                       |  |  | Item 5.       | Other Information                                                                     |  |                                                                                                                                                                                                                                  | 19    | 
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|         |                       |  |  | Item 6.       | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                                                                                                                                                  | 19    | 
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|         |                       |  |  | Signature     |                                                                                       |  | 20                                                                                                                                                                                                                               |      
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|         |                       |  |  | Exhibit Index |                                                                                       |  | 21                                                                                                                                                                                                                               |      

2



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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 June 29, 2002 and June 30, 2001
(Dollars in thousands)

|                                    |  |               |           |                  |  |                   |           |                 |  |   |           | 
|----------------------------------- |  | ------------- | --------- | ---------------- |  | ----------------- | --------- | --------------- |  | - | --------- | 
|                                    |  |               |           |                  |  | Successor Co.     |           | Predecessor Co.
|                                    |  | Successor Co. |           | 9 Week           |  | 4 Week           
|                                    |  | 13 Weeks      |           | Period from      |  | Period from      
|                                    |  | Ended         |           | April 29, 2001   |  | April 1, 2001    
|                                    |  | June 29, 2002 |           | to June 30, 2001 |  | to April 28, 2001
|                                    |  |               |           |                  |  |                  
|Net sales and other revenues        |  | $             | 3,753,362 |                  |  | $                 | 2,595,031 |                 |  | $ | 1,131,902 | 
|                                   
|                                   
|                                   
|                                   
|Cost of goods sold                  |  |               | 2,803,994 |                  |  |                   | 1,924,437 |                 |  |   | 853,967   | 
|                                   
|                                   
|                                   
|                                   
|Selling and administrative expenses |  |               | 767,561   |                  |  |                   | 536,562   |                 |  |   | 236,004   | 
|                                   
|                                   
|                                   
|                                   
|Merger expense                      |  |               |          |                  |  |                   | 13,721    |                 |  |   | 2,610     | 
|                                    |  |               |           |                  |  |                   |           |                 |  |   |           | 
|Operating income                    |  |               | 181,807   |                  |  |                   | 120,311   |                 |  |   | 39,321    | 
|                                   
|                                   
|                                   
|                                   
|Interest expense, net               |  |               | 82,649    |                  |  |                   | 63,636    |                 |  |   | 26,879    | 
|                                    |  |               |           |                  |  |                   |           |                 |  |   |           | 
|Income before income taxes          |  |               | 99,158    |                  |  |                   | 56,675    |                 |  |   | 12,442    | 
|                                   
|                                   
|                                   
|                                   
|Provision for income taxes          |  |               | 38,331    |                  |  |                   | 27,278    |                 |  |   | 6,097     | 
|                                    |  |               |           |                  |  |                   |           |                 |  |   |           | 
|Net income                          |  | $             | 60,827    |                  |  | $                 | 29,397    |                 |  | $ | 6,345     | 
|                                    |  |               |           |                  |  |                   |           |                 |  |   |           | 

See notes to condensed consolidated financial statements.

3



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##### 



DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(Unaudited)
For the 26 weeks ended June 29, 2002 and June 30, 2001
(Dollars in thousands)

|                                                                                   |  |               |           |                  |  |                   |           |                 |  |   |           | 
|---------------------------------------------------------------------------------- |  | ------------- | --------- | ---------------- |  | ----------------- | --------- | --------------- |  | - | --------- | 
|                                                                                   |  |               |           |                  |  | Successor Co.     |           | Predecessor Co.
|                                                                                   |  | Successor Co. |           | 9 Week           |  | 17 Week          
|                                                                                   |  | 26 Weeks      |           | Period from      |  | Period from      
|                                                                                   |  | Ended         |           | April 29, 2001   |  | December 30, 2000
|                                                                                   |  | June 29, 2002 |           | to June 30, 2001 |  | to April 28, 2001
|                                                                                   |  |               |           |                  |  |                  
|Net sales and other revenues                                                       |  | $             | 7,501,212 |                  |  | $                 | 2,595,031 |                 |  | $ | 4,734,816 | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Cost of goods sold                                                                 |  |               | 5,586,044 |                  |  |                   | 1,924,437 |                 |  |   | 3,556,170 | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Selling and administrative expenses                                                |  |               | 1,546,683 |                  |  |                   | 536,562   |                 |  |   | 980,543   | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Merger expense                                                                     |  |               |          |                  |  |                   | 13,721    |                 |  |   | 25,992    | 
|                                                                                   |  |               |           |                  |  |                   |           |                 |  |   |           | 
|Operating income                                                                   |  |               | 368,485   |                  |  |                   | 120,311   |                 |  |   | 172,111   | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Interest expense, net                                                              |  |               | 170,569   |                  |  |                   | 63,636    |                 |  |   | 108,362   | 
|                                                                                   |  |               |           |                  |  |                   |           |                 |  |   |           | 
|Income before income taxes                                                         |  |               | 197,916   |                  |  |                   | 56,675    |                 |  |   | 63,749    | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Provision for income taxes                                                         |  |               | 77,862    |                  |  |                   | 27,278    |                 |  |   | 29,551    | 
|                                                                                   |  |               |           |                  |  |                   |           |                 |  |   |           | 
|Income before cumulative effect of
a change in accounting principle                |  |               | 120,054   |                  |  |                   | 29,397    |                 |  |   | 34,198    | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Less cumulative effect of change in
accounting principle, net of tax 
(See Note 7) |  |               | 284,097   |                  |  |                   |          |                 |  |   |          | 
|                                                                                   |  |               |           |                  |  |                   |           |                 |  |   |           | 
|Net (loss) income                                                                  |  | $             | (164,043  | )                |  | $                 | 29,397    |                 |  | $ | 34,198    | 
|                                                                                   |  |               |           |                  |  |                   |           |                 |  |   |           | 

See notes to condensed consolidated financial statements.

4



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##### 



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

|                                                         |                                     |                                            |           |               |           |                   |           |           |           | 
|-------------------------------------------------------- | ----------------------------------- | ------------------------------------------ | --------- | ------------- | --------- | ----------------- | --------- | --------- | --------- | 
|                                                         |                                     |                                            |           | Successor Co. |           | Successor Co.    
|                                                         |                                     |                                            |           | June 29, 2002 |           | December 29, 2001
|                                                         |                                     |                                            |           |               |           |                  
|ASSETS                                                   |                                     |                                            |           |               |           |                   |           |          
|                                                        
|                                                        
|                                                        
|                                                        
|Current assets:                                          |                                     |                                            |           |               |           |                   |           |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Cash and cash equivalents           |                                            | $         | 301,853       |           |                   | $         | 137,206   |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Receivables                         |                                            |           | 131,531       |           |                   |           | 198,158   |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Receivable from affiliate           |                                            |           | 4,273         |           |                   |           | 14,718    |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Inventories                         |                                            |           | 1,270,086     |           |                   |           | 1,239,470 |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Income tax receivable               |                                            |           |              |           |                   |           | 8,429     |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Prepaid expenses                    |                                            |           | 55,401        |           |                   |           | 28,250    |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Deferred tax assets                 |                                            |           | 9,623         |           |                   |           | 6,169     |          
|                                                         |                                     |                                            |           |               |           |                   |           |          
|                                                         |                                     | Total current assets                       |           |               | 1,772,767 |                   |           |           | 1,632,400 | 
|                                                        
|                                                        
|                                                        
|                                                        
|Property and equipment, net                              |                                     |                                            | 2,963,793 |               |           |                   | 3,011,279 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Goodwill, net                                            |                                     |                                            | 2,905,463 |               |           |                   | 3,273,385 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Intangibles, net                                         |                                     |                                            | 835,680   |               |           |                   | 885,455   |          
|                                                        
|                                                        
|                                                        
|                                                        
|Reinsurance recoverable                                  |                                     |                                            | 105,430   |               |           |                   | 104,118   |          
|                                                        
|                                                        
|                                                        
|                                                        
|Other assets                                             |                                     |                                            | 70,222    |               |           |                   | 63,361    |          
|                                                         |                                     |                                            |           |               |           |                   |           |          
|                                                         |                                     | Total assets                               |           | $             | 8,653,355 |                   |           | $         | 8,969,998 | 
|                                                         |                                     |                                            |           |               |           |                   |           |          
|LIABILITIES AND SHAREHOLDERS EQUITY                     |                                     |                                            |           |               |           |                   |           |          
|                                                        
|                                                        
|                                                        
|                                                        
|Current liabilities:                                     |                                     |                                            |           |               |           |                   |           |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Short-term borrowings               |                                            | $         |              |           |                   | $         | 140,000   |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Accounts payable                    |                                            |           | 782,851       |           |                   |           | 693,729   |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Dividend payable                    |                                            |           | 86,802        |           |                   |           | 86,093    |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Accrued expenses                    |                                            |           | 345,387       |           |                   |           | 305,364   |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Capital lease obligations  current |                                            |           | 30,381        |           |                   |           | 38,118    |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Long term debt  current            |                                            |           | 18,014        |           |                   |           | 17,890    |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other liabilities  current         |                                            |           | 31,218        |           |                   |           | 32,534    |          
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Income taxes payable                |                                            |           | 23,673        |           |                   |           |          |          
|                                                         |                                     |                                            |           |               |           |                   |           |          
|                                                         |                                     | Total current liabilities                  |           |               | 1,318,326 |                   |           |           | 1,313,728 | 
|                                                        
|                                                        
|                                                        
|                                                        
|Long-term debt                                           |                                     |                                            | 3,056,766 |               |           |                   | 3,065,446 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Capital lease obligations                                |                                     |                                            | 694,130   |               |           |                   | 675,746   |          
|                                                        
|                                                        
|                                                        
|                                                        
|Deferred income taxes                                    |                                     |                                            | 302,445   |               |           |                   | 459,525   |          
|                                                        
|                                                        
|                                                        
|                                                        
|Other liabilities                                        |                                     |                                            | 251,213   |               |           |                   | 265,784   |          
|                                                         |                                     |                                            |           |               |           |                   |           |          
|                                                         |                                     | Total liabilities                          |           |               | 5,622,880 |                   |           |           | 5,780,229 | 
|                                                         |                                     |                                            |           |               |           |                   |           |          
|Shareholders equity:                                    |                                     |                                            |           |               |           |                   |           |          
|                                                        
|                                                        
|                                                        
|                                                        
|Class A non-voting common stock                          |                                     |                                            | 53,222    |               |           |                   | 53,149    |          
|                                                        
|                                                        
|                                                        
|                                                        
|Class B voting common stock                              |                                     |                                            | 37,645    |               |           |                   | 37,645    |          
|                                                        
|                                                        
|                                                        
|                                                        
|Accumulated other comprehensive loss, net of tax         |                                     |                                            | (62,172   | )             |           |                   | (64,471   | )        
|                                                        
|                                                        
|                                                        
|                                                        
|Additional paid-in capital, net
of unearned compensation |                                     |                                            | 2,460,887 |               |           |                   | 2,452,945 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Retained earnings                                        |                                     |                                            | 540,893   |               |           |                   | 710,501   |          
|                                                         |                                     |                                            |           |               |           |                   |           |          
|                                                         |                                     | Total shareholders equity                 |           |               | 3,030,475 |                   |           |           | 3,189,769 | 
|                                                         |                                     |                                            |           |               |           |                   |           |          
|                                                         |                                     | Total liabilities and
shareholders equity |           | $             | 8,653,355 |                   |           | $         | 8,969,998 | 
|                                                         |                                     |                                            |           |               |           |                   |           |          

See notes to condensed consolidated financial statements.

5



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##### 



DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 26 weeks ended June 29, 2002 and June 30, 2001
(Dollars in thousands)

|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |            |          |          |  
|---------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------------- | ------------------------------------- | -------- | ------------- | -------- | ---------------- | -------- | ----------------- | -------- | ------- | ---------- | -------- | -------- | -
|                                                                                         |                                                                    |                                           |                                       |          |               |          | Successor Co.    |          | Predecessor Co.  
|                                                                                         |                                                                    |                                           |                                       |          | Successor Co. |          | 9 Week           |          | 17 Week          
|                                                                                         |                                                                    |                                           |                                       |          | 26 Weeks      |          | Period from      |          | Period from      
|                                                                                         |                                                                    |                                           |                                       |          | Ended         |          | April 29, 2001   |          | December 30, 2000
|                                                                                         |                                                                    |                                           |                                       |          | June 26, 2002 |          | to June 30, 2001 |          | to April 28, 2001
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                     |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Net (loss)/ income                                                                       |                                                                    | $                                         | (164,043                              | )        |               | $        | 29,397           |          |                   | $        | 34,198  |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Adjustments to reconcile net income/(loss)
to net cash provided by operating activities: |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Cumulative effect of change in accounting
principle                |                                           |                                       | 284,097  |               |          |                  |         |                   |          |         |           |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Depreciation and amortization                                      |                                           |                                       | 229,595  |               |          |                  | 92,440   |                   |          |         | 162,259    |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Non-cash portion of merger expense                                 |                                           |                                       |         |               |          |                  |         |                   |          |         | 21,682     |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Non-cash portion of merger expense parent acquisition             |                                           |                                       |         |               |          |                  | 12,086   |                   |          |         |           |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Amortization of debt fees/costs                                    |                                           |                                       | 1,006    |               |          |                  | 348      |                   |          |         | 55         |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Non-cash portion of debt premium/discount                          |                                           |                                       | 583      |               |          |                  | 201      |                   |          |         | 430        |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Amortization of deferred loss on derivative                        |                                           |                                       | 4,255    |               |          |                  | 3,291    |                   |          |         | 523        |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Debt swap                                                          |                                           |                                       | (1,604   | )             |          |                  |         |                   |          |         |           |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Loss (gain)on disposals of property and
capital lease terminations |                                           |                                       | 867      |               |          |                  | (2,687   | )                 |          |         | 2,048      |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Store closing provisions/recovery                                  |                                           |                                       | (4,111   | )             |          |                  | 1,212    |                   |          |         | 2,288      |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Deferred income taxes                                              |                                           |                                       | 3,734    |               |          |                  | (930     | )                 |          |         | (24        | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Other                                                              |                                           |                                       | 5,680    |               |          |                  | 699      |                   |          |         | 1,273      |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Changes in operating assets and liabilities:                                             |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Receivables                                                        |                                           |                                       | 66,627   |               |          |                  | (16,201  | )                 |          |         | 45,523     |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Net receivable from affiliate                                      |                                           |                                       | 11,154   |               |          |                  |         |                   |          |         |           |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Reinsurance recoverable                                            |                                           |                                       | (1,312   | )             |          |                  |         |                   |          |         |           |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Income tax receivable                                              |                                           |                                       | 8,429    |               |          |                  | (8,966   | )                 |          |         | 70,130     |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Inventories                                                        |                                           |                                       | (30,616  | )             |          |                  | (15,635  | )                 |          |         | 53,504     |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Prepaid expenses                                                   |                                           |                                       | (27,151  | )             |          |                  | (1,641   | )                 |          |         | 3,519      |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Other assets                                                       |                                           |                                       | 327      |               |          |                  | 307      |                   |          |         | (1,243     | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Accounts payable                                                   |                                           |                                       | 89,122   |               |          |                  | 100,856  |                   |          |         | (62,844    | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Accrued expenses                                                   |                                           |                                       | 45,179   |               |          |                  | 73,703   |                   |          |         | (49,376    | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Income taxes payable                                               |                                           |                                       | 23,673   |               |          |                  |         |                   |          |         |           |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Other liabilities                                                  |                                           |                                       | (11,776  | )             |          |                  | (3,093   | )                 |          |         | (8,385     | )       
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                         |                                                                    | Total adjustments                         |                                       |          | 697,758       |          |                  |          | 235,990           |          |         |            | 241,362  |         
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                         |                                                                    | Net cash provided by operating activities |                                       |          | 533,715       |          |                  |          | 265,387           |          |         |            | 275,560  |         
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|CASH FLOWS FROM INVESTING ACTIVITIES                                                     |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Capital expenditures                                               |                                           |                                       | (202,916 | )             |          |                  | (68,338  | )                 |          |         | (122,577   | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Proceeds from disposal of property                                 |                                           |                                       | 7,769    |               |          |                  | 1,745    |                   |          |         | 4,230      |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Other investment activity                                          |                                           |                                       | (1,918   | )             |          |                  |         |                   |          |         | (816       | )       
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                         |                                                                    | Net cash used in investing activities     |                                       |          | (197,065      | )        |                  |          | (66,593           | )        |         |            | (119,163 | )       
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|CASH FLOWS FROM FINANCING ACTIVITIES                                                     |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Net payments under short-term borrowings                           |                                           |                                       | (140,000 | )             |          |                  | (174,000 | )                 |          |         | (2,495,000 | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Proceeds from issuance of long-term debt                           |                                           |                                       |         |               |          |                  |         |                   |          |         | 2,600,000  |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Principal payments on long-term debt                               |                                           |                                       | (11,740  | )             |          |                  | (3,924   | )                 |          |         | (7,317     | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Principal payments under capital lease obligations                 |                                           |                                       | (14,623  | )             |          |                  | (5,052   | )                 |          |         | (10,210    | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Direct financing costs                                             |                                           |                                       |         |               |          |                  |         |                   |          |         | (23,105    | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Dividends paid                                                     |                                           |                                       |         |               |          |                  |         |                   |          |         | (28,572    | )       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Parent common stock repurchased                                    |                                           |                                       | (9,601   | )             |          |                  | (9,463   | )                 |          |         |           |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Proceeds from issuance of Parent common stock
for options          |                                           |                                       | 3,961    |               |          |                  | 3,598    |                   |          |         | 2,031      |         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Cash used to settle derivative instruments                         |                                           |                                       |         |               |          |                  |         |                   |          |         | (214,071   | )       
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|                                                                                         |                                                                    |                                           | Net cash used in financing activities |          |               | (172,003 | )                |          |                   | (188,841 | )       |            |          | (176,244 | )
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|Net increase (decrease)in cash and cash
equivalents                                      |                                                                    |                                           | 164,647                               |          |               |          | 9,953            |          |                   |          | (19,847 | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Cash and cash equivalents at beginning
of period                                         |                                                                    |                                           | 137,206                               |          |               |          | 115,789          |          |                   |          | 135,636 |           
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           
|Cash and cash equivalents at end of period                                               |                                                                    | $                                         | 301,853                               |          |               | $        | 125,742          |          |                   | $        | 115,789 |           
|                                                                                         |                                                                    |                                           |                                       |          |               |          |                  |          |                   |          |         |           

See notes to condensed consolidated financial statements.

6



---



##### 



Notes to Condensed Consolidated Financial Statements (Unaudited)



|1) |  | Basis of Presentation:
|-- |  | ----------------------

On April 25, 2001, Delhaize America, Inc. (Delhaize America or the Company)
became a wholly-owned subsidiary of Etablissements Delhaize Frères et Cie Le
Lion (Groupe Delhaize) (Delhaize Group) as a result of the Delhaize Group
share exchange (see Note 5). This transaction was accounted for as a purchase,
and in connection with this treatment, a new entity has been deemed created for
financial reporting purposes. Accordingly, in these financial statements, the
periods prior to the date of the Delhaize Group share exchange relate to the
predecessor company and the periods subsequent to the date of the Delhaize
Group share exchange relate to the successor company and have been labeled
herein accordingly.

The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and, consequently, do not include all the disclosures
normally required by generally accepted accounting principles or those normally
made in the Annual Report on Form 10-K of Delhaize America, Inc. Accordingly,
the reader of this Form 10-Q should refer to the Companys Form 10-K for the
year ended December 29, 2001 for further information.

The financial information presented herein has been prepared in accordance with
the Companys customary accounting practices and has not been audited. In the
opinion of management, the financial information includes all adjustments
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:

|                                                                                                                            |  |               |         |                  |  |                   |         |                 |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ---------------- |  | ----------------- | ------- | --------------- |  | - | ------- | -
|                                                                                                                            |  |               |         |                  |  | Successor Co.     |         | Predecessor Co.
|                                                                                                                            |  | Successor Co. |         | 9 Week Period    |  | 17 Week
Period   
|                                                                                                                            |  | 26 Weeks      |         | From             |  | From             
|                                                                                                                            |  | Ended         |         | April 29, 2001   |  | December 30, 2000
|                                                                                                                            |  | June 29, 2002 |         | to June 30, 2001 |  | to April 28, 2001
|                                                                                                                            |  |               |         |                  |  |                  
|(Dollars in thousands)                                                                                                      |  |               |         |                  |  |                   |         |                 |  |   |         |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Cash payments (refunds) for income taxes                                                                                    |  | $             | 42,223  |                  |  | $                 | 36,825  |                 |  | $ | (40,206 | )
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Cash payments for interest, net of amounts
capitalized                                                                      |  |               | 166,648 |                  |  |                   | 23,498  |                 |  |   | 117,642 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Non-cash investing and financing activities:                                                                                |  |               |         |                  |  |                   |         |                 |  |   |         |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Capitalized lease obligations incurred for store
properties and equipment                                                   |  |               | 20,795  |                  |  |                   |        |                 |  |   | 21,128  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Capitalized lease obligations terminated for
store properties and equipment                                                 |  |               |        |                  |  |                   |        |                 |  |   | 5,560   |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Acquisition of Hannaford  adjustment to purchase
price allocation                                                          |  |               |        |                  |  |                   | 7,225   |                 |  |   | 3,893   |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Excess purchase price related to parent acquisition                                                                         |  |               |        |                  |  |                   | 913,969 |                 |  |   |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|LIFO fair value adjustment related to parent acquisition                                                                    |  |               |        |                  |  |                   | 78,027  |                 |  |   |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Investment in WWRE                                                                                                          |  |               | 3,000   |                  |  |                   |        |                 |  |   |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Delhaize Group Share Exchange  adjustment to
purchase price allocation:                                                    |  |               |         |                  |  |                   |         |                 |  |   |         |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Property                                                                                                                    |  |               | 44,433  |                  |  |                   |        |                 |  |   |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Deferred income taxes                                                                                                       |  |               | 43,752  |                  |  |                   |        |                 |  |   |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Capital lease obligations                                                                                                   |  |               | 4,475   |                  |  |                   |        |                 |  |   |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Accrued expenses                                                                                                            |  |               | 5,156   |                  |  |                   |        |                 |  |   |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Reclassification of deferred taxes related to
intangible assets that did not meet the
separability criteria of SFAS No. 141 |  |               | 117,895 |                  |  |                   |        |                 |  |   |        |  



|3) |  | Inventories
|-- |  | -----------

Inventories are stated at the lower of cost or market. Inventories valued using
the last-in, first-out (LIFO) method comprised approximately 79% and 81% of
inventories for June 29, 2002 and June 30, 2001, respectively. Meat, produce
and deli inventories are valued on the first-in, first-out (FIFO) method. If
the FIFO method was used entirely, inventories would have been $66.8 million
and $65.0 million greater as of June 29, 2002 and June 30, 2001, respectively.
In connection with the final accounting for the Delhaize Group share exchange
discussed in Note 5, the Company recorded an adjustment to the basis for the
LIFO inventories in the amount of $78.6 million at April 25, 2001. Application
of the LIFO method resulted in increases in the cost of goods sold of $2.0
million for the 26 weeks ended June 29, 2002 (successor company) and $0.8
million for the 17 weeks ended April 28, 2001 (predecessor company) and $.4
million for the nine weeks ended June 30, 2001 (successor company).



|4) |  | Reclassification
|-- |  | ----------------

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



|5) |  | Acquisition
|-- |  | -----------

DELHAIZE GROUP SHARE EXCHANGE

On April 25, 2001, the Company and Delhaize Group consummated a share exchange
whereby Delhaize Group exchanged each outstanding share of the Companys Class
A and Class B common stock not already directly or indirectly held by Delhaize
Group for 0.4 Delhaize Group American Depository Shares listed on The New York
Stock Exchange or, at the option of each of our shareholders, 0.4 Delhaize
Group ordinary shares listed on Euronext Brussels. The Company became a
wholly-owned subsidiary of Delhaize Group as a result of the Delhaize Group
share exchange. Prior to this time, Delhaize Group owned approximately 44.88%
of the Companys outstanding common stock. The Delhaize Group share exchange
was accounted for using the

7



---



##### 



purchase method of accounting. Effective as of the April 28, 2001 fiscal period
end, the Company recorded adjustments to reflect the historical basis of 44.88%
owned by Delhaize Group and the fair value of the purchased net assets as the
new accounting basis in the Companys financial statements.

As consideration, Delhaize Group issued approximately 40.2 million of its
ordinary shares having an aggregate value of approximately $1.9 billion for the
remaining 55.12% of the Companys stock not previously owned by Delhaize Group.
Additional direct costs incurred in connection with the acquisition, primarily
legal and other professional fees, in the amount of $26.4 million have been
included in the purchase price allocation. Additional goodwill related to prior
step acquisitions by Delhaize Group in the approximate amount of $198.1 million
has also been reflected in the accompanying financial statements of the
Successor Company.

During the first quarter of 2002, the Company finalized its purchase price
allocation. The net purchase price was allocated as follows:

|                                                   |  |   |            |  
|-------------------------------------------------- |  | - | ---------- | -
|(Dollars in thousands)                             |  |   |            |  
|Current assets                                     |  | $ | 943,206    |  
|                                                  
|                                                  
|                                                  
|                                                  
|Property and equipment                             |  |   | 1,707,637  |  
|                                                  
|                                                  
|                                                  
|                                                  
|Goodwill                                           |  |   | 1,835,906  |  
|                                                  
|                                                  
|                                                  
|                                                  
|Identified intangible and
other non-current assets |  |   | 1,007,982  |  
|                                                  
|                                                  
|                                                  
|                                                  
|Current liabilities                                |  |   | (792,178   | )
|                                                  
|                                                  
|                                                  
|                                                  
|Non-current liabilities                            |  |   | (2,597,469 | )
|                                                   |  |   |            |  
|Purchase price                                     |  | $ | 2,105,084  |  
|                                                   |  |   |            |  

The Companys accounting for the share exchange transaction resulted in an
allocation of the purchase price to the Companys assets and liabilities, which
are comprised of 44.88% of historical basis and 55.12% of new basis as of the
transaction date.

Significant fair value step adjustments to property and equipment were
primarily related to buildings and improvements of approximately $141.3 million
and capital equipment of approximately $9.7 million. Increases to identified
intangible and other non-current assets consisted primarily of economic lease
values of approximately $310.7 million, trademarks of approximately $242.5
million, assembled workforce of approximately $52.7 million, distribution
network of approximately $84.3 million partially offset by reductions in the
fair value of the prescription files of approximately $11.7 million and
reductions in the fair value of the pension asset of approximately $12.7
million. The primary changes in the values of non-current liabilities as a
result of the share exchange were fair value adjustments to decrease long-term
debt by approximately $4.5 million, increase capital lease obligations by
approximately $63.3 million, increase deferred income tax liabilities by
approximately $313.4 million and to reduce approximately $73.0 million of the
deferred loss on settlement of a hedge arrangement.



|6) |  | Derivative Financial Instruments
|-- |  | --------------------------------

On December 31, 2000, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, which requires that all derivative instruments be
recognized as assets or liabilities in the financial statements. The Company
entered into interest rate hedge agreements against potential increases in
interest rates prior to the offering of debt securities in April 2001, which
were used to refinance short-term borrowings entered into in connection with
the Companys acquisition of Hannaford Bros. Co. (Hannaford). The notional
amount of the hedge agreements totaled $1.75 billion. These hedge agreements
were structured to hedge against the risk of increasing market interest rates
based on U.S. treasury rates, with the specified rates based on the anticipated
maturities of the securities that were expected to be issued. The hedge
agreements were settled as planned in connection with the completion of the
private offering of debt securities resulting in a payment in the amount of the
unrealized loss of approximately $214 million in April 2001. Upon adoption of
SFAS No. 133 at the beginning of fiscal 2001, the unrealized loss associated
with these hedge agreements was recorded in other comprehensive income, net of
deferred taxes, and is being amortized to interest expense over the term of the
associated debt securities. The Company amortized approximately $2.6 million,
net of tax, of the other comprehensive loss associated with these hedge
agreements to interest expense during the period from December 30, 2001 to June
29, 2002. The unrealized loss was reduced as of the date of the Delhaize Group
share exchange (see Note 5). The unrealized loss remaining at June 29, 2002
totaled approximately $53.2 million, net of deferred taxes.

During the fourth quarter of 2001, the Company entered into interest rate swap
agreements to manage its exposure to interest rate movements by effectively
converting a portion of its debt from fixed to variable rates. Maturity dates
of interest rate swap arrangements match those of the underlying debt. These
agreements, which mature in 2006, 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 semiannual basis or quarterly
basis. The differential between fixed and variable rates to be paid or received
is accrued as interest rates change in accordance with the agreements and
recognized over the life of the agreements as an adjustment to interest
expense. Interest expense was reduced by $4.6 million during the second quarter
in connection with these agreements. The notional amounts of interest rate swap
arrangements were approximately $300 million at June 29, 2002. These agreements
are accounted for as fair value hedges. These agreements met the criteria for
using the short-cut method, which assumes 100% hedge effectiveness, as
prescribed by SFAS No. 133. The fair value of the Companys debt has been
increased by $2.6 million at June 29, 2002 in connection with these agreements.



|7) |  | Recently Adopted Accounting Standards
|-- |  | -------------------------------------

In June 2001, the Financial Accounting Standards Board, or FASB, issued SFAS,
No. 141, Business Combinations. SFAS No. 141 addresses financial accounting
and reporting for business combinations and

8



---



##### 



supersedes Accounting Principles Board, or APB, Opinion No. 16, Business
Combinations, and SFAS No. 38, Accounting for Pre-acquisition Contingencies
of Purchased Enterprises. All business combinations that come within the scope
of SFAS No. 141 are to be accounted for using the purchase method of
accounting. The provisions of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001 and all business combinations accounted for using
the purchase method of accounting for which the date of acquisition is July 1,
2001 or later. SFAS No. 141 also sets forth new criteria for separability and
in-separability of intangible assets. The application of SFAS No. 141 resulted
in the Companys identification of certain intangible assets such as assembled
work force and distribution network that did not meet the separability criteria
of SFAS No. 141, which were re-classified into goodwill.

On December 30, 2001, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which required that we cease amortizing goodwill and other
intangible assets with indefinite lives, and begin an annual assessment of
potential impairment of goodwill and other intangible assets by comparing the
book value of these assets to their current fair value.

The Company performed its assessment for potential impairment at each of our
three operating banners, since each chain represents a separate operating
segment as defined by SFAS No. 131 and a separate reporting unit as defined by
SFAS No. 142. In performing its assessment, the carrying value of assets and
liabilities was determined for each reporting unit and compared to the fair
value of each reporting unit, which was obtained from independent appraisals.
If the carrying value of the reporting unit exceeded its fair value, an
assessment of impairment was then necessary.

The Companys impairment assessment at its individual operating banners
resulted in a non-cash impairment charge totaling approximately $288 million
before taxes ($284 million net of taxes), which was recorded as a change in
accounting principle in the first quarter 2002 condensed consolidated
statements of income/(loss). This impairment charge relates primarily to
goodwill associated with the Delhaize Group share exchange and with the
Companys acquisitions of Kash n Karry and Hannaford. Impairment at the Kash
n Karry banner is due to a combination of factors including post-acquisition
capital expenditures and operating performance. The Company has seen a
heightened level of competition in the Florida area, where Kash n Karry is
concentrated. The Hannaford banner carries a significant goodwill balance due
to the initial acquisition in 2000 and the allocation of goodwill to this
banner related to the share exchange. The Company has experienced changes in
economic conditions within the retail sector subsequent to these events.

As a result of the adoption of SFAS No. 142, amortization expense of
approximately $22 million and $44 million of goodwill and other indefinite life
assets was appropriately not reflected in the current quarter and for the 26
weeks ended June 29, 2002, respectively.

The following schedule reconciles the Income before cumulative effect of change
in accounting principle adjusted to exclude after-tax amortization expense in
the three months and six months ended June 30, 2001 prior to the adoption of
SFAS No.142:

|                                                                           |  |               |    |               |  |               |     |              |  |   |    |  |  |   |    | 
|-------------------------------------------------------------------------- |  | ------------- | -- | ------------- |  | ------------- | --- | ------------ |  | - | -- |  |  | - | -- | 
|(Dollars in millions)                                                      |  | 13 Weeks      |    | 26 Weeks      |  | 13 Weeks      |     | 26 Weeks    
|                                                                           |  | Ended         |    | Ended         |  | Ended         |     | Ended       
|                                                                           |  | June 29, 2002 |    | June 29, 2002 |  | June 30, 2001 |     | June 30,2001
|                                                                           |  |               |    |               |  |               |     |             
|Income Before Cumulative
Effect of Change in
Accounting Principle          |  | $             | 61 |               |  | $             | 120 |              |  | $ | 36 |  |  | $ | 64 | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Add: Goodwill Amortization                                                 |  |               |   |               |  |               |    |              |  | $ | 14 |  |  | $ | 27 | 
|                                                                           |  |               |    |               |  |               |     |              |  |   |    |  |  |   |    | 
|Adjusted Income Before
Cumulative Effect of
Change in Accounting
Principle |  | $             | 61 |               |  | $             | 120 |              |  | $ | 50 |  |  | $ | 91 | 
|                                                                           |  |               |    |               |  |               |     |              |  |   |    |  |  |   |    | 

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

|                      |  |               |       |            |  |   |     | 
|--------------------- |  | ------------- | ----- | ---------- |  | - | --- | 
|                      |  | June 29, 2002
|                      |  |              
|(Dollars in millions) |  | Goodwill      |       | Trademarks
|                      |  |               |       |           
|Food Lion             |  | $             | 1,144 |            |  | $ | 249 | 
|                     
|                     
|                     
|                     
|Hannaford             |  |               | 1,761 |            |  |   | 223 | 
|                     
|                     
|                     
|                     
|Kash n Karry         |  |               |      |            |  |   | 27  | 
|                      |  |               |       |            |  |   |     | 
|Total                 |  | $             | 2,905 |            |  | $ | 499 | 
|                      |  |               |       |            |  |   |     | 

As of June 29, 2002 and June 30, 2001, the Companys amortized intangible assets
consist of favorable leasehold improvements, liquor licenses, pharmacy files,
and developed software. The components of its amortized intangible assets are as
follows:

|                             |  |          |     |              |  |               |     |       |  |              |     |             |  |   |     |               |  |   |     |   |  |   |     | 
|---------------------------- |  | -------- | --- | ------------ |  | ------------- | --- | ----- |  | ------------ | --- | ----------- |  | - | --- | ------------- |  | - | --- | - |  | - | --- | 
|                             |  |          |     |              |  | June 29, 2002 |     |       |  |              |     |             |  |   |     | June 30, 2001 |  |   |     |  
|                             |  |          |     |              |  |               |     |       |  |              |     |             |  |   |     |               |  |   |     |  
|                             |  | Gross    |     |              |  |               |     |       |  |              |     | Gross       |  |   |     |               |  |   |     |  
|                             |  | Carrying |     | Accumulated  |  |               |     |       |  | Carrying     |     | Accumulated |  |   |     |              
|(Dollars in millions)        |  | Value    |     | Amortization |  | Net           |     | Value |  | Amortization |     | Net        
|                             |  |          |     |              |  |               |     |       |  |              |     |            
|Favorable Leasehold
Interest |  | $        | 360 |              |  | $             | (46 | )     |  | $            | 314 |             |  | $ | 440 |               |  | $ | (14 | ) |  | $ | 426 | 
|                            
|                            
|                            
|                            
|Other                        |  |          | 26  |              |  |               | (4  | )     |  |              | 22  |             |  |   | 37  |               |  |   | (2  | ) |  |   | 35  | 
|                             |  |          |     |              |  |               |     |       |  |              |     |             |  |   |     |               |  |   |     |   |  |   |     | 
|Total                        |  | $        | 386 |              |  | $             | (50 | )     |  | $            | 336 |             |  | $ | 477 |               |  | $ | (16 | ) |  | $ | 461 | 
|                             |  |          |     |              |  |               |     |       |  |              |     |             |  |   |     |               |  |   |     |   |  |   |     | 

9



---



##### 



Estimated amortization expense (for amortized intangibles) for the remainder of
2002 and the five succeeding fiscal years follows:

|                      |  |   |      | 
|--------------------- |  | - | ---- | 
|(Dollars in millions) |  |   |      | 
|2002(remainder)       |  | $ | 18.1 | 
|                     
|                     
|                     
|                     
|2003                  |  |   | 36.5 | 
|                     
|                     
|                     
|                     
|2004                  |  |   | 36.1 | 
|                     
|                     
|                     
|                     
|2005                  |  |   | 34.8 | 
|                     
|                     
|                     
|                     
|2006                  |  |   | 32.7 | 
|                     
|                     
|                     
|                     
|2007                  |  |   | 31.1 | 

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which is effective for financial statements
issued for years beginning after December 15, 2001. The objectives of SFAS No.
144 are to address significant issues relating to the implementation of SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and to develop a single accounting model, based on
the framework established in SFAS No. 121 for long-lived assets to be disposed
of by sale, whether previously held and used or newly acquired. SFAS No. 144
was effective as of the beginning of the current fiscal year. The effect of
adopting this standard did not have a significant effect on the Companys
financial statements.



|8) |  | Recently Issued Accounting Standards
|-- |  | ------------------------------------

In June 2001, the FASB also issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs, and applies to the legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or normal operation of a
long- lived asset, except for certain obligations of lessees. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company is currently assessing the potential effect of SFAS No.
143 on its financial statements.

On April 30, 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. SFAS No. 145 rescinds both SFAS No. 4 Reporting Gains and Losses
from Extinguishment of Debt and the amendment to SFAS No. 4, SFAS No. 64
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. SFAS No.
145 eliminates the requirement set forth in both SFAS No. 4 and SFAS No. 64
that gains and losses from the extinguishment of debt be aggregated and, if
material, classified as an extraordinary item, net of the related income tax
effect. However, an entity is not prohibited from classifying these types of
gains and losses as extraordinary items so long as they meet the criteria in
paragraph 20 of Accounting Principles Board Opinion No. 30, Reporting the
Results of OperationsReporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. In addition, SFAS No. 145 amends paragraph 14(a) of SFAS No. 13,
Accounting for Leases, to eliminate an inconsistency between the accounting
for sale-leaseback transactions and certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. Specifically,
SFAS No. 145 requires that a lease modification:



| |  |  | results in recognition of the gain or loss in the financial
statements;                                                                                                                                                                                                
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | is subject to FASB Statement No. 66, Accounting for Sales of Real
Estate, if the leased asset is real estate, including integral
equipment; and                                                                                                                      
|
| |  |  | is subject in its entirety to the sale-leaseback rules of SFAS No.
98, Accounting for Leases: Sale-Leaseback Transactions Involving Real
Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term,
and Initial Direct Costs of Direct Financing Leases.

Generally, SFAS No. 145 is effective for transactions occurring after May 15,
2002. We have not yet evaluated the effect of SFAS No. 145 on our financial
statements.

On July 29, 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 requires that a
liability for a cost that is associated with an exit or disposal activity be
recognized when the liability is incurred. It nullifies the guidance of the
Emerging Issues Task Force, or EITF, in EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). Under EITF
Issue No. 94-3, an entity recognized a liability for an exit cost on the date
that the entity committed itself to an exit plan. In SFAS No. 146, the FASB
acknowledged that an entitys commitment to a plan does not, by itself, create
a present obligation to other parties that meets the definition of a liability.
SFAS No. 146 also establishes that fair value is the objective for the initial
measurement of the liability. SFAS No. 146 will be effective for exit or
disposal activities that are initiated after December 31, 2002. We have not yet
evaluated the effect of SFAS No. 146 on our financial statements.

10



---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations (13 weeks and 26 weeks ended June 29, 2002 compared to the 13 and 26
weeks ended June 30, 2001).

The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and, consequently, do not include all the disclosures
normally required by generally accepted accounting principles or those normally
made in the Companys Annual Report on Form 10-K. Accordingly, the reader of
this Form 10-Q should refer to the Companys Form 10-K for the year ended
December 29, 2001 for further information. Reclassifications have been made
for all current and historical information presented herein from that contained
in the Companys prior annual reports to shareholders and SEC filings on forms
10-Q, 10-K and 8-K.

On April 25, 2001, Delhaize America, Inc. became a wholly-owned subsidiary of
Delhaize Group as a result of the Delhaize Group share exchange. This
transaction was accounted for as a purchase and in connection with this
treatment, a new entity has been deemed created for financial reporting
purposes. Accordingly, in the financial statements, the periods prior to the
date of the Delhaize Group share exchange relate to the predecessor company
and the periods subsequent to the date of the Delhaize Group share exchange
relate to the successor company and have been labeled accordingly. The
results of the predecessor company and the successor company have been combined
for the 13 and 26 weeks ended June 30, 2001, since separate results and
discussions of the predecessor company and the successor company are not
meaningful in comparison to the related periods of the current year.

CRITICAL ACCOUNTING POLICIES

We have chosen accounting policies that we believe are appropriate to
accurately and fairly report our operating results and financial position and
we apply those accounting policies in a consistent manner. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America requires that we make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. These estimates and assumptions are based on historical and
other factors believed to be reasonable under the circumstances. We evaluate
these estimates and assumptions on an ongoing basis and may retain outside
consultants, lawyers and actuaries to assist in our evaluation. The reader
should refer to Note 1 to the consolidated financial statements in our Annual
Report on Form 10-K for the Fiscal year ended December 29, 2001 for further
information regarding significant accounting policies.

RESULTS OF OPERATIONS

The following tables set forth the unaudited condensed consolidated statements
of income/(loss) for the 13 and 26 weeks ended June 29, 2002 and for the 13 and
26 weeks ended June 30, 2001 (predecessor and successor companies combined) for
informational purposes.

|                                    |            |   |               |        |               |   |           |        | 
|----------------------------------- | ---------- | - | ------------- | ------ | ------------- | - | --------- | ------ | 
|                                    |            |   | 13 Weeks      |        | 13 Weeks     
|                                    |            |   | Ended         |        | Ended        
|                                    |            |   | June 29, 2002 |        | June 30, 2001
|                                    |            |   |               |        |              
|Net sales and other revenues        |            | $ | 3,753,362     |        |               | $ | 3,726,933 |       
|                                   
|                                   
|                                   
|                                   
|Cost of goods sold                  |            |   | 2,803,994     |        |               |   | 2,778,404 |       
|                                   
|                                   
|                                   
|                                   
|Selling and administrative expenses |            |   | 767,561       |        |               |   | 772,566   |       
|                                   
|                                   
|                                   
|                                   
|Merger expense                      |            |   |              |        |               |   | 16,331    |       
|                                    |            |   |               |        |               |   |           |       
|Operating income                    |            |   | 181,807       |        |               |   | 159,632   |       
|                                   
|                                   
|                                   
|                                   
|Interest expense, net               |            |   | 82,649        |        |               |   | 90,515    |       
|                                    |            |   |               |        |               |   |           |       
|Income before income taxes          |            |   | 99,158        |        |               |   | 69,117    |       
|                                   
|                                   
|                                   
|                                   
|Provision for income taxes          |            |   | 38,331        |        |               |   | 33,375    |       
|                                    |            |   |               |        |               |   |           |       
|                                    | Net income |   | $             | 60,827 |               |   | $         | 35,742 | 
|                                    |            |   |               |        |               |   |           |       

|                                                                     |  |               |           |               |  |   |           | 
|-------------------------------------------------------------------- |  | ------------- | --------- | ------------- |  | - | --------- | 
|                                                                     |  | 26 Weeks      |           | 26 Weeks     
|                                                                     |  | Ended         |           | Ended        
|                                                                     |  | June 29, 2002 |           | June 30, 2001
|                                                                     |  |               |           |              
|Net sales and other revenues                                         |  | $             | 7,501,212 |               |  | $ | 7,329,847 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cost of goods sold                                                   |  |               | 5,586,044 |               |  |   | 5,480,607 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Selling and administrative expenses                                  |  |               | 1,546,683 |               |  |   | 1,517,105 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Merger expense                                                       |  |               |          |               |  |   | 39,713    | 
|                                                                     |  |               |           |               |  |   |           | 
|Operating income                                                     |  |               | 368,485   |               |  |   | 292,422   | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Interest expense, net                                                |  |               | 170,569   |               |  |   | 171,998   | 
|                                                                     |  |               |           |               |  |   |           | 
|Income before income taxes                                           |  |               | 197,916   |               |  |   | 120,424   | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Provision for income taxes                                           |  |               | 77,862    |               |  |   | 56,829    | 
|                                                                     |  |               |           |               |  |   |           | 
|Income before cumulative effect of
a change in accounting principle  |  |               | 120,054   |               |  |   | 63,595    | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Less Cumulative effect of change in
accounting principle, net of tax |  |               | 284,097   |               |  |   |          | 
|                                                                     |  |               |           |               |  |   |           | 
|Net (loss) / income                                                  |  | $             | (164,043  | )             |  | $ | 63,595    | 
|                                                                     |  |               |           |               |  |   |           | 

11



---



##### 



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

|                                    |            |  |               |      |               |  |        |      | 
|----------------------------------- | ---------- |  | ------------- | ---- | ------------- |  | ------ | ---- | 
|                                    |            |  | 13 Weeks      |      | 13 Weeks     
|                                    |            |  | Ended         |      | Ended        
|                                    |            |  | June 29, 2002 |      | June 30, 2001
|                                    |            |  | %             |      | %            
|                                    |            |  |               |      |              
|Net sales and other revenues        |            |  | 100.00        |      |               |  | 100.00 |     
|                                   
|                                   
|                                   
|                                   
|Cost of goods sold                  |            |  | 74.71         |      |               |  | 74.55  |     
|                                   
|                                   
|                                   
|                                   
|Selling and administrative expenses |            |  | 20.45         |      |               |  | 20.73  |     
|                                   
|                                   
|                                   
|                                   
|Merger expense                      |            |  | 0.00          |      |               |  | 0.44   |     
|                                    |            |  |               |      |               |  |        |     
|Operating income                    |            |  | 4.84          |      |               |  | 4.28   |     
|                                   
|                                   
|                                   
|                                   
|Interest expense, net               |            |  | 2.20          |      |               |  | 2.43   |     
|                                    |            |  |               |      |               |  |        |     
|Income before income taxes          |            |  | 2.64          |      |               |  | 1.85   |     
|                                   
|                                   
|                                   
|                                   
|Provision for income taxes          |            |  | 1.02          |      |               |  | 0.89   |     
|                                    |            |  |               |      |               |  |        |     
|                                    | Net income |  |               | 1.62 |               |  |        | 0.96 | 
|                                    |            |  |               |      |               |  |        |     

|                                                                     |  |               |        |               |  |  |        | 
|-------------------------------------------------------------------- |  | ------------- | ------ | ------------- |  |  | ------ | 
|                                                                     |  | 26 Weeks      |        | 26 Weeks     
|                                                                     |  | Ended         |        | Ended        
|                                                                     |  | June 29, 2002 |        | June 30, 2001
|                                                                     |  | %             |        | %            
|                                                                     |  |               |        |              
|Net sales and other revenues                                         |  |               | 100.00 |               |  |  | 100.00 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cost of goods sold                                                   |  |               | 74.47  |               |  |  | 74.77  | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Selling and administrative expenses                                  |  |               | 20.62  |               |  |  | 20.70  | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Merger expense                                                       |  |               | 0.00   |               |  |  | 0.54   | 
|                                                                     |  |               |        |               |  |  |        | 
|Operating income                                                     |  |               | 4.91   |               |  |  | 3.99   | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Interest expense, net                                                |  |               | 2.27   |               |  |  | 2.35   | 
|                                                                     |  |               |        |               |  |  |        | 
|Income before income taxes                                           |  |               | 2.64   |               |  |  | 1.64   | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Provision for income taxes                                           |  |               | 1.04   |               |  |  | 0.77   | 
|                                                                     |  |               |        |               |  |  |        | 
|Income before cumulative effect of
a change in accounting principle  |  |               | 1.60   |               |  |  | 0.87   | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Less Cumulative effect of change in
accounting principle, net of tax |  |               | 3.79   |               |  |  | 0.00   | 
|                                                                     |  |               |        |               |  |  |        | 
|Net (loss) / income                                                  |  |               | (2.19  | )             |  |  | 0.87   | 
|                                                                     |  |               |        |               |  |  |        | 

Sales

We record revenues primarily from the sales of products in over 1,450 retail
stores. Net sales and other revenues for the second quarter 2002 and for the 26
weeks ended June 29, 2002 were $3.8 billion and $7.5 billion, respectively,
resulting in increases of 0.7% and 2.3% over the corresponding periods of 2001.
Comparable store sales decreased 1.2% during the second quarter and
increased 0.1% for the 26 weeks ended June 29, 2002. Sales performance during
the second quarter 2002 was negatively impacted by the timing of the Easter
holiday, which fell in the first quarter this year versus the second quarter
last year. Excluding the negative impact of Easter in the second
quarter of 2002,
comparable store sales decreased 0.3%. Sales performance during 2002 has been
negatively impacted by soft economic conditions in the companys major
operating areas. Most of our stores are located in the Southeast region of the
United States, a region that until recently reported lower than national levels
of unemployment. Currently, the Southeast region is experiencing unemployment
levels that are consistent with the national average of 6.0%.

In addition, we continue to see an increase in competitive activity as all
retailers battle for the shrinking consumer dollar. During the first six
months of 2002, we have experienced 38 net competitive openings in our
operating area  increasing the amount of grocery square footage available to
consumers. Most major supermarket retailers have engaged in unplanned
promotional activity that offers deep discounts and value on selected items for
short periods of time. We have elected to maintain our commitment to
consistent low price leadership and planned promotional activity, avoiding high
cost initiatives that provide only short-term sales lifts. A constant and
growing customer base at all of our banners confirms this commitment. In the
short-term, customers may take advantage of special offerings on selected items
by other retailers, however they are still shopping in our stores, recognizing
the total basket value every day.

As of June 29, 2002, we operated 1,472 stores, which consisted of 1,220 stores
operating under the Food Lion banner, 115 stores operating under the Hannaford
and Shop n Save banners and 137 stores operating under the Kash n Karry
banner. During the second quarter we opened thirteen new stores, all of which
were Food Lion stores. In addition, we also remodeled 35 stores in the second
quarter, of which 32 were Food Lion stores and three were Kash n Karry stores.
During the quarter we relocated three Food Lion stores and closed one Food
Lion and one Kash n Karry store.

Gross profit during the second quarter of 2002 and for the 26 weeks ended June
29, 2002 was 25.29% of sales and 25.53% of sales, respectively, compared to
25.45% and 25.23% for the same periods of 2001.

12



---



##### 



Gross profit is in line with the prior year, emphasizing the commitment to low
price leadership and value noted above. Despite lower than expected sales
volume we continue to post strong gross profit performance as a result of
improved product mix, the implementation of zone pricing and improved private
label program execution. Gross profit was negatively impacted during the
quarter by an increase in product shrink resulting from lower than expected
sales volumes. The change in basis of accounting related to the Delhaize Group
share exchange discussed above (see Financial Note 5) had no material impact on
the reported gross profits.

We have provided for a $1.4 million and $2.0 million LIFO provision during the
second quarter of 2002 and for the 26 weeks ended June 29, 2002, respectively,
compared with a LIFO provision of $0.6 million and $1.2 million for the same
periods last year.

Selling and administrative expenses during the second quarter of 2002 were
$767.6 million (including $115.5 in depreciation and amortization) or 20.45% of
sales compared to $773.0 million (including $131.2 in depreciation and
amortization) or 20.73% of sales for the second quarter of the prior year. For
the 26 weeks ended June 29, 2002, selling and administrative expenses were
$1,547.0 million (including $229.6 in depreciation and amortization) or 20.62%
of sales compared to $1,517.0 million (including $254.7 in depreciation and
amortization) or 20.70% of sales for the corresponding period in the prior
year. Excluding depreciation and amortization, selling and administrative
expenses as a percentage of sales were 17.37% for the second quarter, 2002 and
17.56% for the 26 weeks ended June 29, 2002 compared to 17.21% and 17.22% for
the corresponding periods of the prior year. Excluding depreciation and
amortization, the increase in selling and administrative expenses in the second
quarter compared to last year is attributable primarily to increased store
labor costs to support improved customer service at all banners. We
believe that we continue
to demonstrate rigor in cost control, even in an environment of soft sales,
constantly adjusting as appropriate to sales fluctuations, and managing related
variable costs. During the quarter selling and administrative expenses included
a credit related to the reversal of a previously established store closing
reserve. During 2000 we closed a store previously operated by the Hannaford
banner as part of the merger related divestitures. At that time, we established
the required store closing reserves. The Company recently made the decision to
re-open the store under the Food Lion banner, and appropriately reversed these
store closing reserves. The change in basis of accounting related to the
Delhaize Group share exchange discussed above (see Financial Note 5) primarily
impacted depreciation/amortization expense and interest expense (as discussed
below). Selling and administrative expenses excluding depreciation and
amortization were not materially impacted and are therefore comparable year
over year.

Depreciation and amortization expense during the second quarter of 2002 was
$115.5 million or 3.08% of sales compared to $131.2 million or 3.52% of sales
for the second quarter of the prior year. For the 26 weeks ended June 29,
2002, depreciation and amortization expense was $229.6 million or 3.06% of
sales compared to $254.7 million or 3.47% of sales for the corresponding period
in the prior year. During the quarter ended March 30, 2002, we adopted SFAS
No. 142, Goodwill and Other Intangible Assets, effective December 30, 2001.
As a result, we no longer amortize goodwill and intangible assets with
indefinite lives. Under SFAS No. 142 the Company is required to annually assess
goodwill and other intangible assets with indefinite lives by comparing the
book value of these assets to their current fair value. The Companys
transitional impairment analysis (required upon adoption of the standard)
resulted in an impairment charge totaling $288 million before tax ($284 million
after tax) which was recorded in the first quarter of 2002 as a change in
accounting principle on the Companys Statement of Income/Loss (See
Financial Note 7). Depreciation and amortization was further impacted by the
revaluation performed in conjunction with the Delhaize Group share exchange
(see Financial Note 5). Excluding the impact of the discontinuance of goodwill
and indefinite lived intangibles amortization and the effects of additional
depreciation and amortization resulting from the valuation process,
depreciation and amortization would have been approximately 3.26% of sales (or
approximately $122 million) during the second quarter of 2002 and 3.25% (or
$243.7 million) for the 26 weeks ended June 29, 2002.

Interest expense during the second quarter of 2002 was $82.6 million or 2.20%
of sales compared to $90.5 million or 2.43% of sales for the second quarter of
the prior year. For the 26 weeks ended June 29, 2002, interest expense was
$170.6 million or 2.27% of sales compared to $172.0 million or 2.35% of sales
for the corresponding period in the prior year. Interest expense was lower
this year primarily due to lower short-term borrowings and the interest
reduction as a result of the interest rate swap agreements (See Financial Note
6). Interest expense was further impacted by the purchase price allocation
performed in conjunction with the Delhaize Group share exchange (see Financial
Note 5). Excluding the impact of the share exchange interest expense would have
been approximately 2.41% of sales (or approximately $90.4 million) during the
second quarter of 2002 and 2.41% (or $180.7 million) for the 26 weeks ended
June 29, 2002.

Store Closings

The following table summarizes the number of stores closed and planned to be
closed as of June 29, 2002.

|                             |  |        |     |          |  |         |    |   |  |  |     |  
|---------------------------- |  | ------ | --- | -------- |  | ------- | -- | - |  |  | --- | -
|                             |  |        |     |          |  | Planned |    |   |  | 
|                             |  | Closed |     | Closings |  | Total  
|                             |  |        |     |          |  |        
|As of March 30, 2002         |  |        | 181 |          |  |         | 8  |   |  |  | 189 |  
|                            
|                            
|                            
|                            
|Store Closings added         |  |        |    |          |  |         | 3  |   |  |  | 3   |  
|                            
|                            
|                            
|                            
|Planned closings completed   |  |        | 7   |          |  |         | (7 | ) |  |  |    |  
|                            
|                            
|                            
|                            
|Stores sold/lease terminated |  |        | (7  | )        |  |         |   |   |  |  | (7  | )
|                             |  |        |     |          |  |         |    |   |  |  |     |  
|As of June 29, 2002          |  |        | 181 |          |  |         | 4  |   |  |  | 185 |  
|                             |  |        |     |          |  |         |    |   |  |  |     |  

The following table reflects closed store liabilities as of June 29, 2002, and
activity during the quarter, including additions to closed store liabilities
charged to and adjustments to liabilities based on changes in facts and
circumstances and payments made.

13



---



##### 



|                                   |  |          |       |  
|---------------------------------- |  | -------- | ----- | -
|                                   |  | June 29,
|(Dollars in millions)              |  | 2002    
|                                   |  |         
|Balance at beginning of quarter    |  | $        | 161.2 |  
|                                  
|                                  
|                                  
|                                  
|Additions charged to earnings:     |  |          |       |  
|                                  
|                                  
|                                  
|                                  
|Store
Closings  lease obligations |  |          | 1.6   |  
|                                  
|                                  
|                                  
|                                  
|Store
Closings  other exit cost   |  |          | 0.4   |  
|                                  
|                                  
|                                  
|                                  
|Adjustment to Prior Year  lease   |  |          | (9.8  | )
|                                  
|                                  
|                                  
|                                  
|Adjustment to Prior Year  other   |  |          | (2.2  | )
|                                   |  |          |       |  
|Total charged to earnings          |  |          | (10.0 | )
|                                  
|                                  
|                                  
|                                  
|Reductions:                        |  |          |       |  
|                                  
|                                  
|                                  
|                                  
|Lease payments                     |  |          | (4.0  | )
|                                  
|                                  
|                                  
|                                  
|Payments for other exit costs      |  |          | (0.6  | )
|                                   |  |          |       |  
|Total reductions                   |  |          | (4.6  | )
|                                   |  |          |       |  
|Balance at end of quarter          |  | $        | 146.6 |  
|                                   |  |          |       |  

The June 29, 2002 balance of approximately $146.6 million consisted of lease
liabilities and exit cost liabilities of $126.0 million and $20.6 million,
respectively. The Company recognized income of approximately $6.6 million in
the second quarter related to a closed store location owned by Hannaford. The
decision was made during the quarter to re-open this store as a Food Lion store
(see discussion in selling and administrative expenses).

We provided for closed store liabilities in the quarter ended June 29, 2002 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 fees, insurance
and utility costs to be incurred after the store closes. Store closings are
generally completed within one year after the decision to close. The closed
store liabilities are usually paid over the lease terms associated with the
closed stores having remaining terms ranging from one to 20 years. Adjustments
to closed store liabilities and other exit costs primarily relate to changes in
actual exit costs from original estimates. Adjustments are made for changes in
estimates in the period in which the change becomes known. Any excess store
closing liability remaining upon settlement of the obligation is reversed to
income in the period that such settlement is determined. We use a discount rate
based on the current treasury note rates to calculate the present value of the
remaining rent payments on closed stores.

The revenues and operating results for stores closed are not material to our
revenues and operating results for the quarter or year to date. Future cash
obligations for closed store liabilities are related principally to the
remaining non-cancelable lease payments less sublease payments to be received.

Asset Impairment Charge

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 long-lived
assets, including amortizable intangible assets, for potential impairment based
on projected undiscounted cash flows. If impairment is identified for
long-lived assets other than real property, we compare the assets future
discounted cash flows 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 efforts to dispose
of similar assets and current economic conditions. Impairment of real property
is recognized for the excess of carrying value over estimated fair market
value.

Goodwill and other intangible assets are tested annually for potential
impairment by comparing the book value of these assets to their current fair
market value.

Liquidity and Capital Resources

We fund our operations and expenditures from cash generated from our operations
and borrowings.
At June 29, 2002, we had cash and cash equivalents of $301.9 million.
Historically we have generated positive cash flow from operations. Cash
provided by operating activities totaled $533.7 million for the 26 weeks ended
June 29, 2002, compared with $540.9 million for the corresponding period last
year. The decrease was primarily due to an increase in inventories, a
smaller decrease
in income tax receivable than experienced in the prior year and an increase in prepaid expenses resulting from the
prepayment of self-insurance expense. These decreases to cash flow from
operating activities were offset by increases in accounts payable, accrued
expenses and a decrease in accounts receivable.

Cash used in investing activities increased to $197.1 million for the 26 weeks
ended June 29, 2002, compared with $185.8 million for the corresponding period
last year primarily due to capital expenditures of $204.2 million for the 26
weeks ended June 29, 2002, compared to $190.9 million for the corresponding
period in 2001. For the 26 weeks ended June 29, 2002, we have opened 21 new
stores and completed the renovation of 64 existing stores.

With our fiscal 2002 growth plan, we anticipate a net increase in store square footage
of approximately 3.0%. This plan is subject to change and review as conditions
warrant. Capital expenditures currently estimated for fiscal 2002 are $510
million.

14



---



##### 



Capital expenditures for fiscal 2002 will be financed through funds
generated from operations and existing bank credit facilities, if necessary.

Cash used in financing activities for the quarter ended June 30, 2002
were $172.0 million compared to $365.1 million for the same period last year.
The decrease in cash used in financing activities was primarily the result of a
cash settlement on April 19, 2001 for the hedge contracts related to the $2.6
billion bond offering used as long-term financing for the Hannaford
acquisition. In addition, last year the Company made a dividend payment during
the second quarter while this year, the Company will make a dividend payment in
third quarter.

Adjusted EBITDA was $596.0 million for the 26 weeks ended June 29, 2002,
compared to $591.5 million for the 26 weeks ended June 30, 2001. Management and
industry analysts generally consider adjusted EBITDA to be a measurement of the
financial performance of the Company that provides a relevant basis for
comparison among companies. Adjusted EBITDA is not a measurement of financial
performance under U.S. GAAP and should not be considered as a substitute for
net income as a measure of performance, or for cash flow as a measure of
liquidity. Investors should note that our calculation of adjusted EBITDA might
differ from similarly titled measures for other companies. The following table
sets forth, for the periods indicated, a calculation of our adjusted EBITDA:

|                                                             |                                                         |               |                |               |   |   |       |       | 
|------------------------------------------------------------ | ------------------------------------------------------- | ------------- | -------------- | ------------- | - | - | ----- | ----- | 
|                                                             |                                                         |               | 26 Weeks Ended
|                                                             |                                                         |               |               
|(Dollars in millions)                                        |                                                         | June 29, 2002 |                | June 30, 2001
|                                                             |                                                         |               |                |              
|Net (loss)/income                                            |                                                         | $             | (164.0         | )             |   | $ | 63.6  |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Add
Cumulative effect of change in
accounting principle |               |                | 284.1         |   |   |       |      | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | LIFO expense                                            |               |                | 2.0           |   |   |       | 1.2   | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Depreciation                                            |               |                | 210.6         |   |   |       | 202.0 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Amortization of intangible assets                       |               |                | 19.0          |   |   |       | 52.7  | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Store closing provision/recoveries                      |               |                | (4.1          | ) |   |       | 3.5   | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Merger expense                                          |               |                | 0.0           |   |   |       | 39.7  | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Interest expense, net                                   |               |                | 170.6         |   |   |       | 172.0 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Income taxes                                            |               |                | 77.8          |   |   |       | 56.8  | 
|                                                             |                                                         |               |                |               |   |   |       |      
|Adjusted EBITDA                                              |                                                         | $             | 596.0          |               |   | $ | 591.5 |      
|                                                             |                                                         |               |                |               |   |   |       |      
|Adjusted EBITDA as a percent of
net sales and other revenues |                                                         |               | 8.0            | %             |   |   | 8.1   | %    

Debt

We maintain a revolving credit facility with a syndicate of commercial banks
providing $500.0 million in committed lines of credit, which expires in July
2005. As of June 29, 2002, there were no outstanding borrowings under this
arrangement. During the quarter ended June 29, 2002, we made no borrowings
under this credit facility. There were borrowings of $25.0 million outstanding
at June 30, 2001. This facility is utilized to provide short-term capital to
meet our liquidity needs as necessary.

At March 31, 2001, we had $2.4 billion in outstanding borrowings at 8.19% under
a $2.5 billion 364-day term loan facility that expired in July 2001. The
borrowings under this facility were used to initially fund the cash portion of
the purchase price of the Hannaford acquisition in fiscal 2000. On April 19,
2001, we completed a private offering of $600 million of 7.375%
notes due
2006, $1.1 billion of 8.125% notes due 2011 and
$900 million in 9.000% debentures
due 2031, which we refer to in this report as the old securities. The
Company used the proceeds of this offering to repay in full the $2.4 billion
outstanding under the term loan facility. On November 16, 2001, we offered to
exchange the old securities for exchange securities that are identical in all
material respects to the old securities except that such exchange securities
are registered under the Securities Act, are not subject to the transfer
restrictions applicable to the old securities and are not subject to any
covenants regarding exchange or registration rights. The exchange offer expired
on December 17, 2001. $2,542,142,000 of old securities were tendered for
exchange securities. $57,858,000 in old securities remain outstanding.

At June 29, 2002, we had outstanding medium-term notes of $16.9 million due
from 2002 to 2006 at interest rates of 8.53% to 8.73% and outstanding other
notes of $85.1 million due from 2002 to 2016 at interest rates of 6.16% to
14.15%. We also had long-term debt securities outstanding of $293.7 million, of
which $149.5 million matures in 2007, at an interest rate of 7.55% and $144.2
million, which matures in 2027 at an interest rate of 8.05%. The Company had
mortgage notes payable of $38.5 million due from 2003 to 2016 at interest rates
of 7.5% to 10.2% at June 29, 2002.

On December 12, 2001, the Company was granted a term loan facility by Delhaize
The Lion Coordination Center S.A., a Belgian company wholly-owned by Delhaize
Group, in the amount of $38 million intended for general corporate and working
capital requirements. Until the notes maturity on December 12, 2006, the
Company will pay interest at a rate equal to the US LIBOR for the relevant
interest period plus 1.25% per annum. This loan is recorded in long-term debt
in the Companys consolidated balance sheet.

As mentioned above, during the fourth quarter of 2001, the Company entered into
interest rate swap agreements to manage its exposure to interest rate movements
by effectively converting a portion of its debt from fixed to variable rates.
Maturity dates of interest rate swap arrangements match those of the underlying
debt. These agreements, which mature in 2006, 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 semiannual basis or quarterly
basis. The differential between fixed and variable rates to be paid or received
is accrued as interest rates change in accordance with the agreements and
recognized over the life of the agreements as an adjustment to interest
expense. Interest expense was reduced by $4.6 million during the second quarter
in connection with these agreements. The notional amounts of interest rate swap
arrangements were approximately $300 million at June 29, 2002. These agreements
are accounted for as

15



---



##### 



fair value hedges. These agreements are accounted for using the short-cut
method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133.
The fair value of the Companys debt has been increased by $2.6 million at June
29, 2002 in connection with these agreements.

We enter into significant leasing obligations related to our store properties.
Capital lease obligations outstanding at June 29, 2002 were $724.5 million
compared with $631.4 million at June 30, 2001. These leases generally have
terms of up to 20 years.

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

Informal Credit Arrangements

|                                                        |  |              |      |              |  |   |      |  
|------------------------------------------------------- |  | ------------ | ---- | ------------ |  | - | ---- | -
|(Dollars in millions)                                   |  | June 29,2002 |      | June 30,2001
|                                                        |  |              |      |             
|Outstanding borrowings
at the end of the second quarter |  | $            |     |              |  | $ | 46.0 |  
|                                                       
|                                                       
|                                                       
|                                                       
|Average borrowings                                      |  | $            | 3.6  |              |  | $ | 34.8 |  
|                                                       
|                                                       
|                                                       
|                                                       
|Maximum amount outstanding                              |  | $            | 80.0 |              |  | $ | 95.0 |  
|                                                       
|                                                       
|                                                       
|                                                       
|Daily weighted average interest rate                    |  |              | 2.84 | %            |  |   | 6.10 | %

Market Risk

We are exposed to changes in interest rates primarily as a result of our
long-term debt requirements. Our interest rate risk management objectives are
to limit the effect of interest rate changes on earnings and cash flows and to
lower overall borrowing costs. We maintain certain variable-rate debt to take
advantage of lower relative interest rates currently available. We have not
entered into any of our financial instruments for trading purposes.

As mentioned above during the fourth quarter of 2001, the Company entered into
interest rate swap agreements to manage its exposure to interest rate movements
by 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, which mature in 2006, 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 semiannual basis or quarterly
basis. The differential between fixed and variable rates to be paid or received
is accrued as interest rates change in accordance with the agreements and
recognized over the life of the agreements as an adjustment to interest
expense. Interest expense was reduced by $4.6 million during the second quarter
in connection with such agreements. The notional amounts of interest rate swap
arrangements were approximately $300 million at June 29, 2002. These agreements
are accounted for as fair value hedges. These agreements are accounted for
using the short-cut method, which assumes 100% hedge effectiveness, as
prescribed by SFAS No. 133. The fair value of the Companys debt has been
increased $2.6 million at June 29, 2002 in connection with these agreements.

Prior to the offering of the old securities discussed in Debt above, we
entered into interest rate hedge agreements to hedge against potential
increases in interest rates. The notional amount of these hedge agreements was
$1.75 billion. These hedge agreements were structured to hedge against the risk
of increasing market interest rates based on U.S. treasury rates, with the
specified rates based on the expected maturities of the related securities.
These hedge agreements were settled in connection with the completion of the
offering of the old securities, resulting in a payment in the amount of an
unrealized loss of approximately $214 million. As a result of the adoption of
SFAS No. 133 at the beginning of fiscal 2001, the unrealized loss was recorded
in Other Comprehensive Loss, net of taxes and is being amortized to interest
expense over the term of the associated debt securities. The unrealized loss
was reduced as of the date of the Delhaize Group share exchange as a result of
the application of purchase accounting. The remaining unrealized loss at the
end of second quarter 2002 was approximately $53.2 million, net of taxes.

The table set forth below provides the expected principal payments (net of
related discounts or premiums) and related interest rates of our long-term debt
by fiscal year of maturity as of December 29, 2001.

|                           |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  |   |       |   |  |   |         |   |  |      |         | 
|-------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ---- | ---------- |  | ----- | ---- | - |  | - | ----- | - |  | - | ------- | - |  | ---- | ------- | 
|                           |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  |   |       |   |  |   |         |   |  | Fair
|(Dollars in millions)      |  | 2002 |       | 2003 |  | 2004 |       | 2005 |  | 2006 |      | Thereafter |  | Value
|                           |  |      |       |      |  |      |       |      |  |      |      |            |  |      
|Notes, due 2006            |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  | $ | 600.0 |   |  |   |         |   |  | $    | 635.3   | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  |   | 7.38  | % |  |   |         |   |  |      |         | 
|                          
|                          
|                          
|                          
|Notes, due 2011            |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  |   |       |   |  | $ | 1,100.0 |   |  | $    | 1,201.3 | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  |   |       |   |  |   | 8.13    | % |  |      |         | 
|                          
|                          
|                          
|                          
|Debentures, due 2031       |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  |   |       |   |  | $ | 900.0   |   |  | $    | 1,059.5 | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  |   |       |   |  |   | 9.00    | % |  |      |         | 
|                          
|                          
|                          
|                          
|Medium term notes          |  | $    | 1.1   |      |  | $    | 10.7  |      |  |      |      |            |  |       |      |   |  | $ | 5.2   |   |  |   |         |   |  | $    | 17.8    | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 8.58  | %    |  |      | 8.63  | %    |  |      |      |            |  |       |      |   |  |   | 8.71  | % |  |   |         |   |  |      |         | 
|                          
|                          
|                          
|                          
|Debt securities (discount) |  | $    | (0.3  | )    |  | $    | (0.3  | )    |  | $    | (0.3 | )          |  | $     | (0.3 | ) |  | $ | (0.3  | ) |  | $ | 295.0   |   |  | $    | 316.1   | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 7.89  | %    |  |      | 7.89  | %    |  |      | 7.89 | %          |  |       | 7.89 | % |  |   | 7.89  | % |  |   | 7.80    | % |  |      |         | 
|                          
|                          
|                          
|                          
|Note to Parent Co.         |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  | $ | 38.0  |   |  |   |         |   |  | $    | 38.0    | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      |       |      |  |      |       |      |  |      |      |            |  |       |      |   |  |   | 3.69  | % |  |   |         |   |  |      |         | 
|                          
|                          
|                          
|                          
|Mortgage payables          |  | $    | 6.0   |      |  | $    | 6.2   |      |  | $    | 5.4  |            |  | $     | 3.0  |   |  | $ | 3.2   |   |  | $ | 16.0    |   |  | $    | 42.5    | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 9.60  | %    |  |      | 9.65  | %    |  |      | 9.64 | %          |  |       | 9.10 | % |  |   | 9.09  | % |  |   | 8.80    | % |  |      |         | 
|                          
|                          
|                          
|                          
|Other notes                |  | $    | 9.5   |      |  | $    | 10.0  |      |  | $    | 7.9  |            |  | $     | 11.3 |   |  | $ | 11.4  |   |  | $ | 41.4    |   |  | $    | 97.8    | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 6.88  | %    |  |      | 6.85  | %    |  |      | 6.91 | %          |  |       | 6.59 | % |  |   | 7.00  | % |  |   | 7.16    | % |  |      |         | 
|                          
|                          
|                          
|                          
|Other note Payable         |  | $    | 1.6   |      |  | $    | 1.9   |      |  |      |      |            |  |       |      |   |  |   |       |   |  |   |         |   |  | $    | 3.5     | 
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 11.25 | %    |  |      | 11.25 | %    |  |      |      |            |  |       |      |   |  |   |       |   |  |   |         |   |  |      |         | 

16



---



##### 



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

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as
of December 29, 2001. Note that the $140 million in Lines of Credit was paid
down subsequent to December 29, 2001:

|                                      |  |       |         |      |  |      |       |      |  |      |       |      |  |            |       |  |  |  |       |  |  |  |       |  |  |  |         | 
|------------------------------------- |  | ----- | ------- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---------- | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ------- | 
|                                      |  | Total |         | 2002 |  | 2003 |       | 2004 |  | 2005 |       | 2006 |  | Thereafter
|                                      |  |       |         |      |  |      |       |      |  |      |       |      |  |           
|(Dollars in millions)
Lines of credit |  | $     | 140.0   |      |  |      |       |      |  |      |       |      |  |            |       |  |  |  | 140.0 |  |  |  |       |  |  |  |         | 
|                                     
|                                     
|                                     
|                                     
|Long-term debt                        |  |       | 3,083.3 |      |  |      | 17.9  |      |  |      | 28.5  |      |  |            | 13.0  |  |  |  | 14.0  |  |  |  | 657.5 |  |  |  | 2,352.4 | 
|                                     
|                                     
|                                     
|                                     
|Capital lease payments                |  |       | 1,500.2 |      |  |      | 111.8 |      |  |      | 111.6 |      |  |            | 110.8 |  |  |  | 109.9 |  |  |  | 109.3 |  |  |  | 946.8   | 
|                                     
|                                     
|                                     
|                                     
|Operating lease payments              |  |       | 2,881.8 |      |  |      | 234.6 |      |  |      | 230.9 |      |  |            | 225.7 |  |  |  | 220.5 |  |  |  | 213.2 |  |  |  | 1,756.9 | 

Recently Adopted Accounting Standards

In June 2001, the Financial Accounting Standards Board, or FASB, issued SFAS,
No. 141, Business Combinations. SFAS No. 141 addresses financial accounting
and reporting for business combinations and supersedes Accounting Principles
Board, or APB, Opinion No. 16, Business Combinations, and SFAS No. 38,
Accounting for Pre-acquisition Contingencies of Purchased Enterprises. All
business combinations that come within the scope of SFAS No. 141 are to be
accounted for using the purchase method of accounting. The provisions of SFAS
No. 141 apply to all business combinations initiated after June 30, 2001 and
all business combinations accounted for using the purchase method of accounting
for which the date of acquisition is July 1, 2001 or later. SFAS No. 141 also
sets forth new criteria for separability and in separability of intangible
assets. The application of SFAS No. 141 resulted in the Companys
identification of certain intangible assets such as assembled work force and
distribution network that did not meet the separability criteria of SFAS No.
141, which were re-classified into goodwill.

On December 30, 2001, we adopted Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible Assets, which required that we
cease amortizing goodwill and other intangible assets with indefinite lives,
and begin an annual assessment of potential impairment of goodwill and other
intangible assets by comparing the book value of these assets to their current
fair value.

The Company performed its assessment for potential impairment at each of our
three operating banners, since each chain represents a separate operating
segment as defined by SFAS 131 and a separate reporting unit as defined by SFAS
142. In performing its assessment, the carrying value of assets and liabilities
was determined for each reporting unit and compared to the fair value of each
reporting unit, which was obtained from independent appraisals. If the carrying
value of the reporting unit exceeded its fair value, an assessment of
impairment was then necessary.

The Companys impairment assessment at its individual operating banners
resulted in a non-cash impairment charge totaling approximately $288 million
before taxes ($284 million net of taxes), which was recorded as a change in
accounting principle in the first quarter 2002 condensed consolidated
statements of income/(loss). This impairment charge relates primarily to
goodwill associated with the Delhaize Group share exchange and with the
Companys acquisitions of Kash n Karry and Hannaford. Impairment at the Kash
n Karry banner is due to a combination of factors including post-acquisition
capital expenditures and operating performance. The Company has seen a
heightened level of competition in the Florida area, where Kash n Karry is
concentrated. The Hannaford banner carries a significant goodwill balance due
to the initial acquisition in 2000 and the allocation of goodwill to this
banner related to the share exchange. The Company has experienced changes in
the economic conditions subsequent to these events.

As a result of the adoption of SFAS 142, amortization expense of approximately
$22 and $44 million of goodwill and other indefinite life assets was
appropriately not reflected in the second quarter and for the 26 weeks ended
June 29, 2002, respectively.

The following schedule reconciles the Income before cumulative effect of change
in accounting principle adjusted to exclude after-tax amortization expense in
the three months and six months ended June 30, 2001 prior to the adoption of
SFAS 142:

|                                                                           |  |               |    |               |  |               |     |               |  |   |    |  |  |   |    | 
|-------------------------------------------------------------------------- |  | ------------- | -- | ------------- |  | ------------- | --- | ------------- |  | - | -- |  |  | - | -- | 
|                                                                           |  | 13 Weeks      |    | 26 Weeks      |  | 13 Weeks      |     | 26 Weeks     
|                                                                           |  | Ended         |    | Ended         |  | Ended         |     | Ended        
|(Dollars in millions)                                                      |  | June 29, 2002 |    | June 29, 2002 |  | June 30, 2001 |     | June 30, 2001
|                                                                           |  |               |    |               |  |               |     |              
|Income Before Cumulative
Effect of Change in
Accounting Principle          |  | $             | 61 |               |  | $             | 120 |               |  | $ | 36 |  |  | $ | 64 | 
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Add: Goodwill Amortization                                                 |  |               |   |               |  |               |    |               |  | $ | 14 |  |  | $ | 27 | 
|                                                                           |  |               |    |               |  |               |     |               |  |   |    |  |  |   |    | 
|Adjusted Income Before
Cumulative Effect of
Change in Accounting
Principle |  | $             | 61 |               |  | $             | 120 |               |  | $ | 50 |  |  | $ | 91 | 
|                                                                           |  |               |    |               |  |               |     |               |  |   |    |  |  |   |    | 

17



---



##### 



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

|                      |  |               |       |            |  |   |     | 
|--------------------- |  | ------------- | ----- | ---------- |  | - | --- | 
|                      |  | June 29, 2002
|                      |  |              
|(Dollars in millions) |  | Goodwill      |       | Trademarks
|                      |  |               |       |           
|Food Lion             |  | $             | 1,144 |            |  | $ | 249 | 
|                     
|                     
|                     
|                     
|Hannaford             |  |               | 1,761 |            |  |   | 223 | 
|                     
|                     
|                     
|                     
|Kash n Karry         |  |               |      |            |  |   | 27  | 
|                      |  |               |       |            |  |   |     | 
|Total                 |  | $             | 2,905 |            |  | $ | 499 | 
|                      |  |               |       |            |  |   |     | 

As of June 29, 2002 and June 30, 2001, the Companys amortized intangible
assets consist of favorable leasehold improvements, liquor licenses, pharmacy
files, and developed software. The components of its amortized intangible
assets are as follows:

|                             |  |          |     |              |  |               |     |       |  |              |     |             |  |   |     |               |  |   |     |   |  |   |     | 
|---------------------------- |  | -------- | --- | ------------ |  | ------------- | --- | ----- |  | ------------ | --- | ----------- |  | - | --- | ------------- |  | - | --- | - |  | - | --- | 
|                             |  |          |     |              |  | June 29, 2002 |     |       |  |              |     |             |  |   |     | June 30, 2001 |  |   |     |  
|                             |  | Gross    |     |              |  |               |     |       |  |              |     | Gross       |  |   |     |               |  |   |     |  
|                             |  | Carrying |     | Accumulated  |  |               |     |       |  | Carrying     |     | Accumulated |  |   |     |              
|(Dollars in millions)        |  | Value    |     | Amortization |  | Net           |     | Value |  | Amortization |     | Net        
|                             |  |          |     |              |  |               |     |       |  |              |     |            
|Favorable Leasehold
Interest |  | $        | 360 |              |  | $             | (46 | )     |  | $            | 314 |             |  | $ | 440 |               |  | $ | (14 | ) |  | $ | 426 | 
|                            
|                            
|                            
|                            
|Other                        |  |          | 26  |              |  |               | (4  | )     |  |              | 22  |             |  |   | 37  |               |  |   | (2  | ) |  |   | 35  | 
|                             |  |          |     |              |  |               |     |       |  |              |     |             |  |   |     |               |  |   |     |   |  |   |     | 
|Total                        |  | $        | 386 |              |  | $             | (50 | )     |  | $            | 336 |             |  | $ | 477 |               |  | $ | (16 | ) |  | $ | 461 | 
|                             |  |          |     |              |  |               |     |       |  |              |     |             |  |   |     |               |  |   |     |   |  |   |     | 

Estimated amortization expense (for amortized intangibles) for the remainder of
2002 and the five succeeding fiscal years follows:

|                      |  |   |      | 
|--------------------- |  | - | ---- | 
|(Dollars in millions) |  |   |      | 
|2002(remainder)       |  | $ | 18.1 | 
|                     
|                     
|                     
|                     
|2003                  |  |   | 36.5 | 
|                     
|                     
|                     
|                     
|2004                  |  |   | 36.1 | 
|                     
|                     
|                     
|                     
|2005                  |  |   | 34.8 | 
|                     
|                     
|                     
|                     
|2006                  |  |   | 32.7 | 
|                     
|                     
|                     
|                     
|2007                  |  |   | 31.1 | 

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which is effective for financial statements
issued for years beginning after December 15, 2001. The objective of SFAS 144
is to address significant issues relating to the implementation of SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and to develop a single accounting model, based on
the framework established in SFAS No. 121 for long-lived assets to be disposed
of by sale, whether previously held and used or newly acquired. SFAS No. 144
was effective as of the beginning of the current fiscal year. The effect of
adopting this standard did not have a significant effect on the Companys
financial statements.

Recently Issued Accounting Standards

In June 2001, the FASB also issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs, and applies to the legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or normal operation of a
long- lived asset, except for certain obligations of lessees. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company is currently assessing the potential effect of SFAS No.
143 on its financial statements.

On April 30, 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. SFAS No. 145 rescinds both SFAS No. 4 Reporting Gains and Losses
from Extinguishment of Debt and the amendment to SFAS No. 4, SFAS No. 64
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. SFAS No.
145 eliminates the requirement set forth in both SFAS No. 4 and SFAS No. 64
that gains and losses from the extinguishment of debt be aggregated and, if
material, classified as an extraordinary item, net of the related income tax
effect. However, an entity is not prohibited from classifying these types of
gains and losses as extraordinary items so long as they meet the criteria in
paragraph 20 of Accounting Principles Board Opinion No. 30, Reporting the
Results of OperationsReporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. In addition, SFAS No. 145 amends paragraph 14(a) of SFAS No. 13,
Accounting for Leases, to eliminate an inconsistency between the accounting
for sale-leaseback transactions and certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. Specifically,
SFAS No. 145 requires that a lease modification:



| |  |  | results in recognition of the gain or loss in the financial
statements;                                                                                                                                                                                                
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | is subject to FASB Statement No. 66, Accounting for Sales of Real
Estate, if the leased asset is real estate, including integral
equipment; and                                                                                                                      
|
| |  |  | is subject in its entirety to the sale-leaseback rules of SFAS No.
98, Accounting for Leases: Sale-Leaseback Transactions Involving Real
Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term,
and Initial Direct Costs of Direct Financing Leases.

Generally, SFAS No. 145 is effective for transactions occurring after May 15,
2002. We have not yet evaluated the effect of SFAS No. 145 on our financial
statements.

On July 29, 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 requires that a
liability for a cost that is associated with an exit or disposal activity be
recognized when the liability is incurred. It nullifies the guidance of the
Emerging Issues Task Force, or EITF, in EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). Under EITF
Issue No. 94-3, an entity recognized a liability for an exit cost on the date
that the entity committed itself to an exit plan. In SFAS No. 146, the FASB
acknowledged that an entitys commitment to a plan does not, by itself, create
a present obligation to other parties that meets the definition of a liability.
SFAS No. 146 also establishes that fair value is the objective for the initial
measurement of the liability. SFAS No. 146 will be effective for exit or
disposal activities that are initiated after December 31, 2002. We have not yet
evaluated the effect of SFAS No. 146 on our financial statements.

Other

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

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

18



---



##### 



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

Item 3. Quantitative and Qualitative
Disclosures About Market Risk

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

PART II   OTHER INFORMATION

Item 1.   Legal
Proceedings

None.

Item 5.   Other
Information

None.

Item 6.   Exhibits and
Reports on Form 8-K

(a).      Exhibits



| |  | 4.1   Delhaize America, Inc. 2000 Stock Incentive Plan, as amended and
restated effective May 23, 2002    
| |  | ----------------------------------------------------------------------------------------------------------
|
| |  | 4.2   Delhaize America, Inc. 2002 Restricted Stock Unit Plan                                              
|
| |  | 99.1   Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 
|
| |  | 99.2   Certification of Chief Accounting Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002

(b).      Reports on Form 8-K

The Company filed a report on Form 8-K on March 21, 2002 and Amendment No. 1 to
such report on April 5, 2002 in connection with the Companys dismissal of
PricewaterhouseCoopers LLP as the Companys independent accountant and the
selection of Deloitte & Touche LLP as the Companys new independent accountant.

19



---



##### 



SIGNATURE

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.

|                      |  |                        |  |                                                                                                                      
|--------------------- |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------
|                      |  | DELHAIZE AMERICA, INC.
|                     
|DATE: August 13, 2002 |  | BY:                    |  | /s/ Carol M. HerndonCarol M. Herndon
Executive Vice President of
Accounting and Analysis and
Chief Accounting Officer

20



---



##### 



Exhibit Index

|        |  |                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                        
|        |  |                                                                                                    
|4.1     |  | Delhaize America, Inc. 2000 Stock Incentive Plan, as amended and restated effective May 23, 2002   
|       
|       
|       
|       
|4.2     |  | Delhaize America, Inc. 2002 Restricted Stock Unit Plan                                             
|       
|       
|       
|       
|99.1    |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
|       
|       
|       
|       
|99.2    |  | Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

21