Notes to the
consolidated
financial statements
continued
34 Commitments and contingencies
Overview
Business review
Governance
Financials
Investors
Capital investment commitments
As of January I, 2017, Ahold Delhaize had outstanding capital investment commitments for property, plant and equipment and investment
property, and for intangible assets of approximately €264 million and €30 million, respectively (January 3, 2016: €228 million and €9 million,
respectively). Ahold Delhaize’s share in the capital investment commitments of its unconsolidated joint ventures JMR and Super Indo amounted
to €7 million as of January 1, 2017 (January 3, 2016: €5 million).
Purchase commitments
Ahold Delhaize enters into purchase commitments with vendors in the ordinary course of business. Ahold Delhaize has purchase contracts with
some vendors for varying terms that require Ahold Delhaize to buy services and predetermined volumes of goods and goods not-for-resale
at fixed prices. As of January 1, 2017, the Company’s purchase commitments were approximately €1,086 million (January 3, 2016: €821 million).
Not included in the purchase commitments are those purchase contracts for which Ahold Delhaize has received advance vendor allowances, such
as upfront 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.
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 Delhaize received an irrevocable standby letter of credit for $216 million (€163 million), which was reduced to $64 million (€60 million) as of
January 1, 2017 (2015: $73 million (€68 million)).
Ahold Delhaize is contingently liable for leases that have been assigned to third parties in connection with facility closings and asset disposals.
Ahold Delhaize 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 2040. The amounts of the lease guarantees exclude the cost of common area maintenance and real estate taxes; such amounts may
vary in time, per region, and per property. Of the €902 million in the undiscounted lease guarantees, €184 million relates to the BI-LO Bruno’s
divestment, €204 million to the Sweetbay, Harveys, and Reid’s divestment, €144 million to the Bottom Dollar Food divestment and €161 million to the
Tops divestment. On a discounted basis the lease guarantees amount to €786 million and €437 million as of January 1, 2017, and January 3, 2016,
respectively.
Contingent liabilities
Guarantees
Guarantees to third parties issued by Ahold Delhaize can be summarized as follows:
BI-LO Bruno’s divestment
On February 5, 2009, and March 23, 20 09, 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 Delhaize 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 Delhaize would have to pay under
a guarantee and any potential remedies that Ahold Delhaize may have to limit future lease payments. Consequently, in 2009, Ahold Delhaize
recognized provisions of €109 million and related tax benefit offsets of €47 million within results on divestments.
January 1,
2017
9Ö2
60
34
996
million
Lease guarantees
Lease guarantees backed by letters of credit
Corporate and buyback guarantees
Total
January 3,
2016
495
68
36
599
Ahold Delhaize Annual Report 2016 ^0^
