Food Lion 2012 Annual Report Download - page 62

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fully operate in a manner consistent
with our standards, our image and
reputation could be harmed, which
could adversely affect our business
and operating results.
Risk Related to our Prices
and Our Suppliers
Significant disruptions in operations
of, or our relationships with, our
vendors and suppliers could mate-
rially impact our operations by dis-
rupting store-level product selection
or costs, resulting in reduced sales.
The products we sell are sourced
from a wide variety of domestic and
international suppliers. This sourc-
ing may be impacted by elements
outside of Delhaize Group’s control
and may include political and eco-
nomic instability in the countries in
which suppliers are located, their
financial instability and any other
condition that may result in them
not being able to continue to sup-
ply Delhaize Group. These factors
affecting our suppliers and access
to products may result in decreased
product selection and increased
out-of-stock conditions, as well as
higher product costs, which could
adversely affect our operations and
financial performance.
Financial Risks
Delhaize Group has identified the
exposure associated with the ability
to continuously fund its operations,
adverse interest rate and currency
movements, the credit quality of its
financial counterparties, fluctuations
in its share price within the frame-
work of its share-based compen-
sation plans, and the funding of its
pension plans as its principal finan-
cial risks.
In order to manage its identi-
fied and quantified market risks
Delhaize Group uses derivative
financial instruments - such as for-
eign exchange forward contracts,
interest rate swaps, currency swaps
and other derivative instruments -
and does not hold such positions for
speculative purposes.
Funding and Liquidity Risk
Funding and liquidity risk is the
risk that the Group will encoun-
ter difficulty in meeting payment
obligation
s when they come due.
Delhaize Group manages this
exposure by closely monitoring
its cash resources, consisting of a
combination of retained cash flows,
bank facilities, long-term debt capi-
tal markets and leases, essential
to fulfil its working capital, capital
expenditures and debt require-
ments.
Delhaize Group operates an inter-
national cash-pooling structure in
order to centralize cash on a daily
basis whenever possible. At year-
end 2012 the Group’s Cash and
Cash Equivalents amounted to
€932 million.
Delhaize Group also monitors the
amount of short-term funding, the
mix of short-term funding to total
debt and the availability of commit-
ted credit facilities in relation to the
level of outstanding short-term debt
(see Note 18.2 “Short-term Borrow-
ings” in the Financial Statements).
At year-end 2012, the Group had
committed and undrawn credit
lines totalling €725 million. These
credit lines consisted of a syndi-
cated multicurrency credit facility of
€600 million for the Company and
certain of its subsidiaries including
Delhaize America, LLC and €125
million of bilateral credit facilities
for European entities. In addition,
the Group had €30 million of com-
mitted credit facilities for Letters of
Credit and guarantees of which €11
million was used. At December 31,
2012, the maturities of the com-
mitted credit facilities were as fol-
lows: €77 million maturing in 2013,
€28 million maturing in 2014, €50
million maturing in 2015 and €600
million maturing in 2016.
Delhaize Group pro-actively moni-
tors the maturities of its outstanding
debt in order to reduce refinanc-
ing risk. As described in Note 18.1
”Long-term Debt,” the debt matur-
ing in 2014 has been largely refi-
nanced and no significant principal
payment of financial debt is due
until 2017. At December 31, 2012,
the maturities of the long-term debt
through 2017 were €156 million in
2013, €232 million in 2014, €1 mil-
lion in 2015, €7 million in 2016 and
€341 million in 2017 after the effect
of interest rate swaps and cross-
currency interest rate swaps. Del-
haize Group relies on a strong credit
rating to optimally refinance matur-
ing debt. Delhaize Group’s long-
term issuer ratings from Standard
& Poor’s and Moody’s are BBB-
(stable) and Baa3 (stable) invest-
ment grade ratings, respectively.
These credit ratings are supported
by cross-guarantee arrangements
among Delhaize Group and sub-
stantially all of Delhaize Group’s
U.S. subsidiaries, whereby the enti-
ties are guaranteeing each other’s
financial debt obligations.
As also described in Notes 18.1
”Long-term Debt” and 18.2 “Short-
term Borrowings”, the Group is
subject to certain financial and
non-financial covenants related to
RISK FACTORS