Notes to the consolidated financial statements
34 Commitments and contingencies
Financials e www.ahold.com/reports2009
Capital investment commitments
As of January 3, 2010, Ahold had outstanding capital investment commitments for property, plant and equipment and investment
property of approximately €144 million (December 28, 2008: €146 million). There were no outstanding capital investment commitments
for intangible assets as of January 3, 2010 or December 28, 2008. Ahold's share in the capital investment commitments of its
unconsolidated joint ventures ICA and JMR amounted to €37 million as of January 3, 2010 (December 28, 2008: €57 million).
Purchase commitments
Ahold enters into purchase commitments with vendors in the ordinary course of business. Ahold has long-term purchase contracts
with some vendors for varying terms that require Ahold to buy services and predetermined volumes of goods and goods not-for-resale
at fixed prices. As of January 3, 2010, the Company's purchase commitments were approximately €769 million (December 28, 2008:
€906 million). Not included in these 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 the 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 balance sheet.
Contingent liabilities
Guarantees
Guarantees to third parties issued by Ahold can be summarized as follows:
January 3, December 28,
million 2010 2008
Lease guarantees
904
1,096
Corporate and buyback guarantees
47
44
Loan guarantees
8
13
Total
959
1,153
Ahold is contingently liable for leases that have been assigned to third parties in connection with facility closings and asset disposals.
Ahold could be required to assume the financial obligations under these leases if any of the assignees are unable to fulfill their lease
obligations. The lease guarantees are based on the nominal value of future minimum lease payments of the assigned leases, which extend
through 2026. On a discounted basis the lease guarantees are €668 million and €787 million as of January 3, 2010 and December 28,
2008, respectively. Of the €904 million of the undiscounted lease guarantees, €405 million relates to the BI-LO/Bruno's divestment and
€298 million to the Tops divestment. The weakness of the banking sector in particular and the economies in general in both the United
States and Europe has led to a heightened likelihood that the Company may be required to assume a material amount of these obligations.
On February 5, 2009 and March 23, 2009, Bruno's Supermarkets, LLC and BI-LO, LLC, respectively, filed for protection under Chapter 11
of the U.S. Bankruptcy Code (the filings). As a result of the filings, Ahold has made an assessment of its potential obligations under the
lease guarantees based upon the remaining initial term of each lease, an assessment of the possibility that Ahold would have to pay under
a guarantee and any potential remedies that Ahold may have to limit future lease payments. Consequently, in 2009 Ahold recognized
provisions of €109 million and related tax benefit offsets of €47 million. A net provision of €62 million was included within results
on divestments. The provisions are Ahold's best estimate of the discounted aggregate amount of the remaining lease obligations and
associated charges, which could result in liability for Ahold under the various lease guarantees. Ahold continues to closely monitor any
developments in the aforementioned process. As disclosed further in Note 35, in February 2010 Ahold acquired $260 million of BI-LO
term loans.
As part of the divestment of Ahold's Polish retail operations, Ahold received a guarantee from Carrefour for €152 million in June 2007.
The outstanding amount of this guarantee as of January 3, 2010 was €7 million. As part of the divestment of U.S. Foodservice in 2007,
Ahold received an irrevocable standby letter of credit for $216 million (€151 million), which was reduced to $150 million (€105 million)
as of January 3, 2010. These reductions followed the decreases in the underlying guarantees given by Ahold.
Ahold has provided corporate guarantees to certain suppliers of Ahold's franchisees or non-consolidated entities. Ahold would be required
to perform under the guarantee if the franchisee or non-consolidated entity failed to meet the financial obligations, as described in the
guarantee. Buyback guarantees relate to Ahold's commitment to repurchase stores or inventory from certain franchisees at predetermined
prices. The buyback guarantee reflects the maximum committed repurchase value under the guarantee. The last of the corporate and
buyback guarantees expire in 2017.
Loan guarantees relate to the principal amounts of certain loans payable by Ahold's franchisees, non-consolidated real estate development
entities and joint ventures. The term of most guarantees is equal to the term of the related loan, the last of which matures in 2016. Ahold's
maximum liability under the guarantees equals the total amount of the related loans plus, in most cases, reasonable costs of enforcement
of the guarantee.
Ahold Annual Report 2009 109
