(in millions of EUR) December 31,
2010 2009 2008
U.S. dollar 2 35 -
Euro 14 28 152
Total 16 63 152
The carrying amounts of short-term borrowings approximate their fair values.
u.s. entities
At December 31, 2010 Food Lion, LLC had a short term construction facility of USD 5 million (EUR 4 million) in place, with maturity June 5, 2011, of which USD 3 million (EUR 2 million) was outstanding.
In December 2009, Delhaize America, LLC entered into an unsecured revolving credit agreement (“The Credit Agreement”), which provides the entity with a three-year USD 500 million (EUR 374 million), unsecured, committed revolving credit facility, including a USD 100 million (EUR 75 mil- lion) sub-limit for the issuance of letters of credit, and a USD 35 million (EUR 26 million) sub-limit for swingline loans. The aggregate maximum principal amount available under the Credit Agreement may be increased to an aggregate amount not exceeding USD 650 million (EUR 486 million), subject to certain conditions. Funds are available under the Credit Agreement for general corporate purposes. This Credit Agreement will mature on December 1, 2012 and is a second amendment and restatement of the credit agreement entered into in 2005 and subsequently amended and restated in 2007. The credit facility is guaranteed by substantially all of Delhaize America’s subsidiaries.
Delhaize America, LLC had no outstanding borrowings under its credit agreement as of December 31, 2010, USD 50 million (EUR 35 million) as of December 31, 2009 and no outstanding borrowings as of December 31, 2008.
Under the credit facilities that were in place at the various reporting dates, Delhaize America, LLC had average daily borrowings of USD 2 mil- lion (EUR 2 million) during 2010, USD 3 million (EUR 2 million) during 2009 and USD 25 million (EUR 18 million) during 2008. No credit agreement amounts were used to fund letters of credit during 2010 and 2009 and approximately USD 1 million (EUR 1 million), of the 2005 Credit Agreement was used to fund letters of credit during 2008. In addition to the Credit Agreement, Delhaize America, LLC had approximately USD 20 million (EUR 15 million), USD 37 million (EUR 26 million) and USD 77 million (EUR 55 million) outstanding to fund letters of credit as of December 31, 2010, 2009 and 2008 respectively.
Further, Delhaize America, LLC has periodic short-term borrowings under uncommitted credit facilities that are available at the lenders’ discre- tion and these facilities amounted to USD 45 million (EUR 34 million) at December 31, 2010. As of December 31, 2010, 2009 and 2008, Delhaize America, LLC had no borrowings outstanding under such arrangements.
european and asian entities
At December 31, 2010, 2009 and 2008 the Group’s European and Asian entities together had credit facilities (committed and uncommitted) of EUR 490 million (of which EUR 325 million of committed credit facilities), EUR 542 million and EUR 621 million, respectively, under which Delhaize Group can borrow amounts for less than one year (“Short-term Bank Borrowings”) or more than one year (“Medium-term Bank Borrowings”). The Short-term Bank Borrowings and the Medium-term Bank Borrowings generally bear interest at the inter-bank offering rate at the borrowing date plus a pre-set margin, or based on market quotes from banks. In Europe and Asia, Delhaize Group had EUR 14 million in outstanding short-term bank borrowings at December 31, 2010 compared to EUR 28 million in outstanding short-term bank borrowings at December 31, 2009 and EUR 152 million borrowings outstanding at December 31, 2008, respectively, with an average interest rate of 4.83%, 3.83% and 4.37%, respectively. During 2010, the Group’s European and Asian average borrowings were EUR 41 million at a daily average interest rate of 4.56%.
In addition to the Short-term Bank Borrowings, the Group’s European and Asian entities together had approximately EUR 4 million outstanding to fund letters of guarantees as of December 31, 2010 (EUR 3 million at December 31, 2009 and 2008).
debt Covenants for short-term Borrowings
The three-year USD 500 million syndicated revolving credit facility and the EUR 325 million committed European bilateral credit facilities require maintenance of various financial and non-financial covenants. The agreements contain customary provisions related to events of default and affirmative and negative covenants applicable to Delhaize Group. The negative covenants contain restrictions in terms of negative pledge, liens, indebtedness of subsidiaries, sale of assets, merger and dividend, as well as minimum fixed charge coverage ratios, maximum leverage ratios and maximum equity variation ratios based on non-GAAP measures. None of the debt covenants restrict the abilities of subsidiaries of Delhaize Group to transfer funds to the parent.
At December 31, 2010, 2009 and 2008, Delhaize Group was in compliance with all covenants conditions for Short-term Bank Borrowings, and headroom on financial covenants at December 31, 2010, was above 25% for all ratios.
CONSOLIDATED BALANCE SHEET CONSOLIDATED INCOME
STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF CHANGES IN EqUITY CONSOLIDATED STATEMENT OF CASH FLOwS notes to the finanCial statements
18.3. leases
As explained in Note 2.3, the classification of a lease agreement depends on the allocation of risk and rewards incidental to the ownership of the leased item. When assessing the classification of a lease agreement, certain estimates and assumptions need to be made and applied, which include, but are not limited to, the determination of the expected lease term and minimum lease payments, the assessment of the likeli- hood of exercising options and estimation of the fair value of the lease property.
delhaize group as lessee - finance and operating lease commitments
As detailed in Note 8, Delhaize Group operates a significant number of its stores under finance and operating lease arrangements. Various properties leased are (partially or fully) subleased to third parties, where the Group is therefore acting as a lessor (see further below). Lease terms (including reasonably certain renewal options) generally range from 1 to 40 years with renewal options ranging from 3 to 36 years. The schedule below provides the future minimum lease payments, which have not been reduced by expected minimum sublease income of EUR 50 million, due over the term of non-cancellable subleases, as of December 31, 2010:
(in millions of EUR) 2011 2012 2013 2014 2015 Thereafter Total
Finance leases
Future minimum lease payments 134 122 118 113 110 937 1 534
Less amount representing interest (77) (75) (69) (63) (58) (451) (793)
Present value of minimum lease payments 57 47 49 50 52 486 741
Of which related to closed store lease
obligations 3 3 3 2 3 15 29
Operating leases
Future minimum lease payments
(for non-cancellable leases) 269 233 207 182 157 831 1 879
Of which related to closed store lease
obligations 13 11 10 8 7 23 72
The average effective interest rate for finance leases was 12.0%, 11.8% and 11.9% at December 31, 2010, 2009 and 2008, respectively. The fair value of the Group’s finance lease obligations using an average market rate of 5.1% at December 31, 2010 was EUR 994 million (2009: 6.1%,
EUR 887 million; 2008: 8.3%, EUR 817 million).
The Group’s obligation under finance leases is secured by the lessors’ title to the leased assets.
Rent payments, including scheduled rent increases, are recognized on a straight-line basis over the minimum lease term. Total rent expense under operating leases was EUR 295 million, EUR 270 million and EUR 245 million in 2010, 2009 and 2008, respectively, being included pre- dominately in “Selling, general and administrative expenses.” Certain lease agreements also include contingent rent requirements which are generally based on store sales and were insignificant in 2010, 2009 and 2008.
Sublease payments received and recognized into income for 2010, 2009 and 2008 were EUR 22 million, EUR 22 million and EUR 19 million, respectively.
Delhaize Group signed lease agreements for additional store facilities under construction at December 31, 2010. The corresponding lease terms as well as the renewal options generally range from 15 to 25 years. Total future minimum lease payments for these agreements relating to stores under construction were approximately EUR 208 million.
Provisions for EUR 44 million, EUR 53 million and EUR 51 million at December 31, 2010, 2009 and 2008, respectively, representing the discounted value of remaining lease payments, net of expected sublease income, for closed stores, were included in “Closed Store Provisions” (see Note 20.1). The discount rate is based on the incremental borrowing rate for debt with similar terms to the lease at the time of the store closing.
delhaize group as lessor - finance and operating expected lease income
As noted above, occasionally, Delhaize Group acts as a lessor for certain owned or leased property, mainly in connection with closed stores that have been sub-leased to other parties, retail units in Delhaize Group shopping centers or within a Delhaize Group store. Currently the Group did not enter into any lease arrangements with independent third party lessees that would qualify as finance leases. Rental income is included in “Other Operating Income” in the income statement.
The undiscounted expected future minimum lease payments to be received under non-cancellable operating leases as at December 31, 2010 can be summarized as follows:
(in millions of EUR) 2011 2012 2013 2014 2015 Thereafter Total
Future minimum lease payments to be received 38 33 26 13 3 15 128
of which related to sub-lease agreements 16 13 8 3 2 8 50
The total amount of EUR 128 million represents expected future lease income to be recognized as such in the income statement and excludes expected future sub-lease payments to receive in relation to stores being part of the “Closed Store Provision” (see Note 20.1).
PERSONS AUDITOR OF DELHAIZE GROUP SA STATEMENT OF COMPREHENSIVE INCOME OF CHANGES IN EqUITY OF CASH FLOwS statements
18.4 net debt
Net debt is defined as the non-current financial liabilities, plus current financial liabilities and derivative financial liabilities, minus derivative financial assets, investments in securities, and cash and cash equivalents.
(in millions of EUR) December 31
Note 2010 2009 2008
Non-current financial debt 18.1, 18.3 2 650 2 547 2 409
Current financial liabilities 18.1, 18.2, 18.3 113 149 522
Derivative liabilities 19 16 40 -
Derivative assets 19 (66) (96) (58)
Investments in securities - non-current 11 (125) (126) (123)
Investments in securities - current 11 (43) (12) (28)
Cash and cash equivalents 15 (758) (439) (320)
Net debt 1 787 2 063 2 402
Net debt to equity ratio 35.3% 46.8% 57.3%
The following table summarizes the movement of net debt during 2010:
(in millions of EUR) Note
Net debt at January 1, 2010 2 063
Free cash flow (665)
Exercise of stock options and warrants (32)
Purchase of treasury shares 26
Purchase of non-controlling interests 47
Dividends paid 17 162
Net debt after cash movements 1 601
Non-cash movements 122
Currency translation effect on assets and liabilities 64
Net debt at December 31, 2010 1 787
Free cash flow is defined as cash flow before financing activities, investments in debt securities and sale and maturity of debt securities and can be summarized as follows:
(in millions of EUR) 2010
Net cash provided by operating activities 1 317
Net cash used in investing activities (665)
Investment in debt securities (net) 13
Free cash flow 665