Food Lion 2009 Annual Report Download - page 125

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SUMMARY STATUTORY ACCOUNTS
OF DELHAIZE GROUP SA
HISTORICAL FINANCIAL OVERVIEW CERTIFICATION OF RESPONSIBLE
PERSONS
REPORT OF THE STATUTORY AUDITOR
SUPPLEMENTARY INFORMATION
20.1. Closed Store Provisions
As explained in Note 2.3, Delhaize Group records closed store provisions for present obligations in connection with store closing activities,
which consist primarily of provisions for onerous contracts and severance (“termination”) costs. The amounts recognized reflect management’s
best estimate of the expected expenditures required to settle the present obligation at balance sheet date and requires the application of
judgment and estimates that could be impacted by factors such as the discount rate applied, the ability to sub-lease, the creditworthiness of
the sub-leasee or the success when negotiating any early termination of lease agreements. Most of the factors are significantly dependent
on general economic conditions and the interrelated demand for commercial property. Consequently, the cash flows projected, and the risk
reflected in those, might change, if applied assumptions change.
Most obligations recognized relate to onerous lease contracts, predominately for stores located in the United States, with remaining lease
terms ranging from one to 19 years. The average remaining lease term for closed stores was 4.3 years at December 31, 2009. Minor amounts
(less than EUR 2 million), recognized in 2009 and 2008, relate to termination benefits (zero in 2007).
The following table reflects the activity related to closed store provisions:
(in millions of EUR) 2009 2008 2007
Closed store provision at January 1 51 51 84
Additions:
Store closings - lease obligations 10 6 4
Store closings - other exit costs 2 2 5
Update of estimates 5 1 -
Interest expense (unwinding of discount) 4 4 5
Utilization:
Lease payments made (14) (11) (14)
Lease terminations (1) (3) (6)
Payments made for other exit costs - (2) (3)
Transfer to other accounts (1) - (17)
Currency translation effect (2) 3 (7)
Closed store provision at December 31 54 51 51
During 2009, 2008 and 2007, Delhaize Group recorded additions to the closed store provision of EUR 12 million, EUR 8 million and EUR 9 million,
primarily related to 32, 19 and 26 store closings, respectively made in the ordinary course of business. In 2009, the updating of the assumptions
applied to discount future cash flows resulted in a charge of EUR 4 million included in “Other Operating Expenses” (see Note 28).
The following table presents a reconciliation of the number of closed stores included in the closed store provision:
Number of
Closed Stores
Balance at January 1, 2007 181
Store closings added 26
Stores sold/lease terminated (39)
Balance at December 31, 2007 168
Store closings added 19
Stores sold/lease terminated (38)
Balance at December 31, 2008 149
Store closings added 32
Stores sold/lease terminated (35)
Balance at December 31, 2009 146
Expenses relating to closed store provisions were recorded in the income statement as follows:
(in millions of EUR) Note 2009 2008 2007
Other operating expenses 28 17 9 8
Interest expense included in “Finance costs” 29.1 4 3 4
Results from discontinued operations 5.3 - 1 2
Total 21 13 14