Financial statements - Notes to the consolidated financial statements
Note 35
Purchase commitments
Guarantees
Legal proceedings
Ahold enters into purchase commitments with vendors in the ordinary course of business. The Company has long-term
purchase contracts with some vendors for varying terms that require the Company to buy services and predetermined volumes
of goods and goods not-for-resale at fixed prices. As of January 1, 2006, the Company's purchase commitments were
approximately EUR 2,931, which are not recorded on the consolidated balance sheets (January 2, 2005: EUR 2,268).
Not included in the above purchase commitments are those purchase contracts for which Ahold has received advance vendor
allowances, such as up-front signing payments in consideration of its purchase commitments. These contracts generally may
be terminated without satisfying the purchase commitments upon repayment of the unearned portions of the advance vendor
allowances. The unearned portion of these advance vendor allowances is recorded as a liability on the consolidated balance
sheets.
Guarantees to third parties issued by Ahold, primarily covering liabilities and commitments of its subsidiaries, can be
summarized as follows:
January 1, 1
January 2,
2006 1
2005
Lease guarantees
709
111
Loan guarantees
71
40
Corporate guarantees
30
76
Buy back guarantees
21
43
Total
831
270
Ahold is contingently liable for leases that have been assigned to various third parties in connection with facility closings
and asset dispositions. Ahold could be required to assume these leases if any of the assignees is unable to fulfill their lease
obligations. Due to the wide distribution of the assignments among third parties and various remedies available to Ahold,
management believes the likelihood that it will be required to assume a material amount of these obligations is remote. Of the
EUR 709 of lease guarantees, EUR 507 is related to the BI-LO/Bruno's divestment. For information about legal proceedings in
connection with certain leases of Bradlees Stores, Inc. that Ahold has guaranteed, see "Stop Shop Bradlees Lease Litigation
with Vornado" below in this Note 35.
Ahold also had loan guarantees relating to the principal amounts of certain loans payable by Ahold's franchisees, other
subsidiaries (which relate to real estate development) and joint ventures. These guarantees have been issued by Ahold to
facilitate loan agreements between consolidated Ahold subsidiaries and third-party financiers or for general corporate purposes.
The term of most guarantees is equal to the term of the related loan. Ahold's maximum liability under the guarantees equals
the total amount of the related loans recorded on the consolidated balance sheets plus, in most cases, reasonable costs of
enforcement of the guarantee.
Ahold's corporate guarantees have been provided to suppliers as assurance that an Ahold subsidiary's or franchisee's financial
obligation, as detailed in the underlying contract, will be met. Ahold would be required to perform under the guarantee if the
subsidiary or franchisee failed to meet the financial obligations under the contract, as described in the guarantee.
Ahold and certain of its subsidiaries are involved in a number of legal proceedings, which include litigation as a result of
divestments, tax, employment and other litigation. The legal proceedings discussed below, whether pending, threatened or
unasserted, if decided adversely to or settled by the Company, may result in liability material to the Company's financial
condition or results of operations. The Company may enter into discussions regarding settlement of these and other
proceedings, and may enter into settlement agreements, if it believes settlement is in the best interests of the Company's
shareholders. In accordance with IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" the Company has
recognized provisions with respect to these proceedings, where appropriate, which are reflected in the Company's consolidated
balance sheets.
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