Outlook for fiscal 2003
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Simplification of the Organization
Our objective is to integrate, streamline and standardize our operations by implementing common processes throughout
our businesses, with the aim of reducing the complexity and improving the efficiency and effectiveness of our operations.
We intend to organize the administrative and controls functions, information technology and management of our
businesses around regional marketplaces with similar characteristics, which we call “arenas.”
Financial Management
Our businesses are now focused on generating free cash flow through working capital management and scrutinizing capital
expenditures. In addition to our divestment program, we are also currently assessing other alternatives in order to
strengthen our balance sheet and to reduce our debt. We are also taking steps to address the significant internal control
weaknesses that have been identified throughout Ahold. For more detailed information, please see “Restatements,
Adjustments and Remedial Actions” in this section.
The following discussion provides an overview of our outlook for fiscal 2003 for our consolidated results of operations and
for certain of our segments and operating areas. Because we have operations in a number of countries throughout the
world, a substantial portion of our results of operations are denominated in foreign currencies, primarily the US dollar. As
a result, we are subject to foreign currency exchange risk due to exchange rate movements, which affect our transaction
costs and the translation of the results of our foreign subsidiaries. Our expectations set forth below as to net sales and
operating income exclude any impact of currency exchange rates. As discussed below, currency exchange rates could
significantly affect our results of operations for fiscal 2003.
Consolidated results of operations: fiscal 2003
In fiscal 2003, we expect that our consolidated net sales compared to fiscal 2002 will be negatively affected by the
weakened global economy and strong competition in the markets that we serve, as well as the diversion of our management
as a result of the events surrounding the announcement on February 24, 2003, and the related investigations. In addition,
our fiscal 2003 net sales will be negatively affected by our completed and future divestments.
As discussed in more detail below, we expect that operating expenses, excluding the impact of currency exchange rates,
will be significantly higher in fiscal 2003 than our operating expenses in fiscal 2002 (excluding the impact of the
impairment of goodwill charges taken in fiscal 2002 and the exceptional loss in fiscal 2002) and that, as a result, we will
experience an adverse impact on our consolidated operating income in fiscal 2003. In addition, as discussed in more
detail below, we expect that net financial expenses, excluding the impact of currency exchange rates, will increase above
fiscal 2002 levels. We anticipate that these increases in expenses will adversely affect net income.
As a result of the events surrounding the announcement on February 24, 2003, 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 forensic investigations and internal and external
audits and to complete the audit of our fiscal 2002 financial position. 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.
As noted above, 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.
Operating expenses: fiscal 2003
We expect that our operating expenses for fiscal 2003, excluding the impact of currency exchange rates, will be significantly
higher than our operating expenses in fiscal 2002 (excluding the impact of goodwill impairment charges taken in fiscal
2002 and the exceptional loss in fiscal 2002). We have incurred in fiscal 2003, and will continue to incur, significant
