00 Ahold ANNUAL REPORT 2002 41
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
business, which business' general and administrative expenses, as a percentage of net sales, was lower than that of our
retail trade business.
- Fiscal 2001
Our operating expenses increased by EUR 2.2 billion, or 27.2%, in fiscal 2001 compared to fiscal 2000 primarily as a
result of the full-year consolidation of USF and PYA/Monarch. Operating expenses in fiscal 2001 included restructuring
charges of EUR 141 million, in particular related to the restructuring at USF in connection with the acquisition of Alliant.
As a percentage of net sales, our operating expenses were 18.6% in fiscal 2001 compared to 19.4% in fiscal 2000
because of lower operating expenses as a percentage of net sales at USF and PYA/Monarch. The increase in our operating
expenses was partially offset by leveraging of economies of scale at newly acquired companies, the elimination of
redundant processes, particularly within our U.S. food service segment, and a decrease of expenses resulting from the
creation of shared service organizations in our retail trade operations. Our selling expenses increased in fiscal 2001 to
EUR 8.1 billion from EUR 6.5 billion in fiscal 2000 due to acquisitions and the related increase in net sales and inflation.
Selling expenses, however, decreased as a percentage of net sales as a result of our acquisition of USF, which business'
selling expenses, as a percentage of net sales, is lower than our retail trade business. Our general and administrative
expenses increased in fiscal 2001 to EUR 1.8 billion from EUR 1.4 billion in fiscal 2000 due to acquisitions and the
related increase in net sales, as well as inflation. As a percentage of net sales, our general and administrative expenses
remained constant. Goodwill and intangible asset amortization increased in fiscal 2001 to EUR 256 million from
EUR 50 million in fiscal 2000 as a result of the full-year inclusion of goodwill amortization relating to Superdiplo and
PYA/Monarch, which were acquired in December 2000.
Operating income
- Fiscal 2002
Our operating income was EUR 239 million in fiscal 2002 compared to EUR 1.9 billion in fiscal 2001, a decrease of
EUR 1.7 billion, or 87.5%. This significant decrease was largely the result of increased operating expenses caused primarily
by the impairment and amortization charges and the exceptional loss discussed above. Operating income in fiscal 2002
included a EUR 12 million gain relating to excess reserve reversals at USF, and in fiscal 2001 included a EUR 111
million loss relating to a restructuring charge at USF in connection with the acquisition of Alliant. Our operating income,
as a percentage of net sales, was 0.4% in fiscal 2002 compared to 3.5% in fiscal 2001. Operating income in fiscal 2002
also was negatively affected by currency exchange rate differences, particularly as a result of the lower exchange rate of
the US dollar to the Euro.
Our operating income before impairment and amortization of goodwill and exceptional loss, which is a non-GAAP financial
measure, in fiscal 2002 amounted to EUR 2.1 billion, an increase of 4.0% compared to fiscal 2001. Excluding the
impact of currency exchange rates, operating income before impairment and amortization of goodwill and exceptional loss
would have increased by EUR 168.7 million, or 8.6%, to EUR 2.1 billion in fiscal 2002 compared to fiscal 2001. The
exceptional loss refers to the exceptional loss on related party default guarantee of EUR 372 million in fiscal 2002 as a
result of the default by VRH on debt that we had guaranteed. We believe providing operating income before impairment
and amortization of goodwill and exceptional loss is relevant and useful information to our shareholders as it provides a
more meaningful comparison of our underlying operating performance in fiscal 2002 to that in fiscal 2001, excluding
certain items, including goodwill amortization, goodwill impairment and exceptional loss on related party default
guarantee. It is also a measure used by our management to assess the effectiveness of our operating strategies and to
evaluate our operating performance trends in different periods. The exceptional loss was unusual and is unlikely to recur.
Operating income before impairment and amortization of goodwill and exceptional loss, as we have defined it, may not be
comparable to similarly titled measures reported by other companies. It should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in accordance with Dutch GAAP.
