00 Ahold ANNUAL REPORT 2002 65
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
of lower margin chain sales, compared to higher margin street sales, is greater than that of its competitors. Chain sales are
typically sales to larger, multi-unit restaurant, healthcare and catering companies. Street sales are sales to smaller,
independent, owner-operated restaurants. During fiscal 2002, as a result of the full-year consolidation of Alliant, which
had a higher proportion of its net sales consisting of chain sales, the proportion of USF's sales that are street sales
declined from the fiscal 2001 level of 53.7% to 52.1% of total fiscal 2002 net sales. This caused a decline in USF's
gross profit margin in fiscal 2002 compared to fiscal 2001. For a discussion of USF's plans to address these issues,
please see "Outlook for Fiscal 2003 - Food Service in the United States: Fiscal 2003" in this section.
Operating income at USF increased by EUR 108 million, or 207.7%, to EUR 160 million in fiscal 2002 compared to
fiscal 2001 as a result of the acquisitions referred to above. Fiscal 2001 operating income included a gain relating to the
reversal of excess reserves in the amount of EUR 28 million. In fiscal 2001, a EUR 111 million restructuring charge was
incurred at USF in connection with the Alliant acquisition. As a percentage of net sales, operating income was 0.9% in
fiscal 2002 compared to 0.4% in fiscal 2001. Operating expenses increased in fiscal 2002 compared to fiscal 2001,
reflecting the full-year consolidation of Alliant. Operating costs also were higher in fiscal 2002 as a result of the
realignment of customer servicing in the southeastern United States among existing USF and newly acquired Alliant
divisions which resulted in higher sales commissions and higher transportation costs.
- Fiscal 2001
Net sales at USF increased by EUR 6.7 billion, or 103.9%, to EUR 13.6 billion in fiscal 2001, compared to fiscal 2000.
Currency exchange rates did not have a significant effect on net sales in fiscal 2001 compared to fiscal 2000. The
increase in net sales was due to the acquisition of PYA/Monarch, which was consolidated beginning in December 2000,
and, to a lesser extent, Mutual and Parkway, which were acquired in fiscal 2001. The increase also reflects the full-year of
net sales for USF in fiscal 2001 compared to a partial year in fiscal 2000, as a result of our April 2000 acquisition of
USF. The increase in net sales was partly offset by a decline in tourism and business travel following the September 11,
2001 terrorist attack, which in particular affected USF's sales to hospitality customers, along with sales in specific
geographical areas that rely on the tourism industry, including Las Vegas, Washington D.C. and Florida.
Street sales in fiscal 2001 represented approximately 54% of USF's net sales compared to approximately 56% of net
sales in fiscal 2000. The decrease in the street sales percentage was due principally to the full-year consolidation of
PYA/Monarch in fiscal 2001, which had a higher ratio of chain sales to street sales.
Due to the full-year consolidation of PYA/Monarch in fiscal 2001 and its higher percentage of sales to lower-margin chain
customers, USF's gross profit margin in fiscal 2001 was lower than for fiscal 2000.
Operating income at USF decreased by EUR 53 million, or 50.5%, to EUR 52 million in fiscal 2001 compared to fiscal
2000. The decline in operating income reflected the EUR 111 million restructuring charge in connection with the Alliant
acquisition. As a percentage of net sales, operating income was 0.4% in fiscal 2001 compared to 1.6% in fiscal 2000.
Currency exchange rates did not have a significant effect on operating income in fiscal 2001 compared to fiscal 2000.
Operating expenses increased in fiscal 2001 compared to fiscal 2000, reflecting costs associated with the December
2000 acquisition of PYA/Monarch along with the related integration costs.
Food service: Europe
Based on net sales, we are the leading food service distributor in The Netherlands through our subsidiary, Deli XL. Based
in Charleroi, Deli XL is also a prominent food service provider in Belgium. In 1985, we acquired a Dutch food service
company which had been operating since 1949. We renamed it the Ahold Institutional Food Service Company (Groot
verbruik Ahold B.V.) ("GVA"). In the summer of 1999, we acquired Gastronoom, another prominent food service operator,
and Gastronoom and GVA continued as major vendors to the Dutch healthcare and hospitality sectors (such as hotels and
restaurants). In January 2000, the two companies introduced a new name for their joint activities, Deli XL. In October
2000, Deli XL acquired the Belgian food service distributor MEA from Compass Group plc. From January 1, 2001, MEA
began operating under the name "Deli XL." Deli XL provides a wide range of some 60,000 food and non-food products to
approximately 30,000 hospitals, schools and other hospitality enterprises.
- Fiscal 2002
Net sales from our food service segment in Europe represent net sales of Deli XL, located in The Netherlands and Belgium.
In fiscal 2002, net sales decreased by EUR 10 million, or 1.1%, to EUR 872 million compared to fiscal 2001. The
decrease in net sales was largely due to the weakened economy, as part of our customer base in the food service business
includes sales to restaurants, hotels and catering services, which were particularly affected by the economic downturn.
