Creating trust and confidence: transparency, governance and leadership
Focusing on the business
GO Ahold ANNUAL REPORT 2002 7
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
As a result of the events surrounding the announcements on February 24, 2003 and subsequently, and the related
investigations, we have undergone significant changes in management both at our parent company and at several of our
subsidiaries. Our new and existing management and support staff have had to devote substantial amounts of time and
resources to addressing all of the accounting issues that were found through the numerous internal investigations and
internal and external audits and to complete the audit of our fiscal 2002 consolidated financial statements. Significant
amounts of time also have been spent with respect to the related governmental and regulatory investigations and legal
proceedings that are ongoing. As a result of the foregoing, our management and support staff's attention to our operations
and strategic planning has been diverted, which has negatively affected our business.
We have restricted our capital expenditures during fiscal 2003 in order to strengthen our free cash flow. Accordingly, we
have delayed or cancelled several of our planned initiatives that involve discretionary capital expenditures, such as store
remodeling. However, we expect to continue working on initiatives that will reduce our administrative costs, as well as
other initiatives, including the opening of new stores, that are critical for us to remain competitive in our markets.
Our objective is to fund these initiatives largely through cash generated by our operations. We are working with our vendors
to develop ways to lower the cost of products, through, among other initiatives, jointly developing improved ordering
systems and creating additional buying synergies.
We recognize that we must ensure that our company is never again confronted with a similar crisis of controls and
governance. To this end, we aim to implement the highest possible standards of compliance, disclosure and professional
conduct throughout the business. The fact that these very standards may not have been the highest priority in the past has
strengthened our resolve to renew these principles, build a committed culture across the entire enterprise and develop a
changed leadership style. Our company culture must be truly open and honest. Our behavior across all our professional,
business and stakeholder relationships must comply with the highest standards of transparency and integrity. This is not
negotiable.
In recent months, as a result of our many, continuing investigations, we have been severely restricted in the information
that we could disclose to the market and the public. We realize that this too may have caused misunderstanding. We have
done our best to present the facts as quickly and as openly as possible under the circumstances.
On October 2, we reached a major milestone with the delivery of our full year 2002 results. This provides us with the basis
on which to carry out our strategy and our future. While the numbers highlight Ahold's underlying strength, they also show
that it is absolutely vital to make changes throughout the entire company.
It has been necessary for us, in past months, to spend many hours with bankers, legal advisors and auditors. The most
positive impact of finalizing our audit and delivering our financial results is that it allows us to begin to move forward and
focus our attention back to the business.
There is no doubt that the audit performed in our company was thorough. With the confidence of knowing exactly where
we stand as a company, we are taking the next steps. Our priorities are to focus our portfolio, simplify our structure, drive
costs out of the business and restore the value of U.S. Foodservice. This will enable us to establish a new foundation for
increasing free cash generation and to create more value for our customers and our shareholders.
