34 Commitments and contingencies
Ahold
Annual Report 2011
Groupata glance
Performance
Governance
Notes to the consolidated financial statements continued
Investors
Capital investment commitments
As of January 12012, Ahold had outstanding capital investment commitments for property, plant and equipment and investment
property, and for intangible assets of approximately €133 million and €1 million, respectively (January 2, 2011: €116 million and €5 million,
respectively). Ahold's share in the capital investment commitments of its unconsolidated joint ventures ICA and JMR amounted to
€30 million as of January 12012 (January 2, 2011: €39 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 1, 2012, the Company's purchase commitments were approximately €2,424 million (January 2, 2011: €341 million).
The significant increase in 2011 is due to a single purchase commitment with a three-year term. The amount as of January 2, 2011,
includes a decrease of €253 million in order to correct the amount disclosed in Ahold's 2010 Annual Report. Not included in the 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:
million
January 1
2012
January 2,
2011
Lease guarantees
686
758
Lease guarantees backed by letters of credit
94
103
Corporate and buyback guarantees
49
48
Loan guarantees
6
7
Total
835
916
The amounts included in the table above are the maximum undiscounted amounts the Group could be forced to settle under the
arrangement for the full guaranteed amount, if that amount is claimed by the counterparty to the guarantee. As part of the divestment of
U.S. Foodservice in 2007, Ahold received an irrevocable standby letter of credit for $216 million (€167 million), which was reduced to
$112 million (€87 million) as of January 1, 2012. 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 1, 2012, was €7 million. These
reductions followed the decreases in the underlying guarantees given by Ahold.
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 2030. The amounts of the lease guarantees exclude cost of common area maintenance and real estate taxes; such
amounts may vary in time, per region, and per property. Of the €686 million in the undiscounted lease guarantees, €345 million relates
to the BI-LO Bruno's divestment and €259 million to the Tops divestment. On a discounted basis those lease guarantees amount to
€552 million and €592 million as of January 1, 2012, and January 2, 2011, respectively.
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 within results on divestments.
In connection with the filings, on December 18, 2009, certain Ahold affiliates entered into a Settlement and Term Loan Acquisition
Agreement (Settlement Agreement) with Lone Star Fund V, LLC (Lone Star Fund) and certain other Lone Star entities. Pursuant to the
Settlement Agreement, Ahold acquired $260 million (€190 million) of BI-LO's existing term loans during February 2010. Lone Star Fund
and certain other Lone Star entities (Lone Star) provided Ahold with funding of $130 million (€95 million) and security relating to the
repayment of the acquired term loans.
