Operating and Financial Review and Prospects
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68
Ahold Annual Report 2003
Operating and Financial Review and Prospects
foodservice operations in 2002 compared to 2001 was
mainly attributable to decreased net sales and higher
operating expenses as discussed above. There was no
impairment of goodwill for the Deli XL foodservice
operations in 2002 or 2001.
Other activities
2003
Other activities include operations of three real estate
companies which acquire, develop and manage store
locations in Europe and the U.S. and corporate
overhead costs of the Ahold parent company. Operating
loss in other activities in 2003 amounted to EUR 194
million, against a loss of EUR 367 million in 2002. This
improvement is primarily the result of the loss on related
party default guarantee recorded in 2002 as a result of
the default by VRH on debt that we had guaranteed of
EUR 372 million.
The higher corporate costs in the 2003 period
were mainly caused by the significant costs incurred in
connection with the forensic accounting and legal
investigations that have been conducted, ongoing
litigation and ongoing government and regulatory
investigations, as well as higher audit fees in connection
with the audit of our 2002 financial statements, of
approximately EUR 130 million. Furthermore, corporate
costs in 2003 increased by EUR 45 million as a result
of additional additions to our provision for self-insurance.
Gains from the sale of real estate included in the
other segment are at the same level in 2003 compared
to 2002.
2002
The operating loss for the other activities segment was
EUR 367 million in 2002 compared to operating income
of EUR 75 million in 2001. As discussed above, the
2002 operating loss was caused by an loss of EUR 372
million that resulted from the default by VRH on certain
indebtedness, which resulted in our parent company
having to purchase, or cause to be purchased,
substantially all of VRH's shares in DAIH and to
repurchase, or cause to be purchased, certain of
VRH's indebtedness. For additional information about
the transaction with VRH, please see "Significant
Factors Affecting Results of Operations in 2003 and
2002 - Loss on Related Party Default Guarantee" above
and Note 9 to our consolidated financial statements
included in this annual report.
Share in income (loss) of joint ventures and equity investees
The following table sets out, for the periods indicated,
the net sales and store count of our joint ventures in
Europe and South America, which were not
consolidated for all or part of 2003, 2002 and 2001.
In addition, we have a number of equity investees,
the primary being Luis Paez.
As of and for the year-ended
2003 2002 2001
Net Store Net Store Net Store
sales count sales count sales count
(in EUR (in EUR (in EUR
millions) millions) millions)
ICA1 7,893 2,793 7,742 2,937 7,010 2,991
JMR 1,598 217 1,540 198 1,562 198
DAIH2 - - 616 - 2,914 354
CARHCO3 1,613 332 1,595 289 712 144
Total Unconsolidated
Joint Ventures 11,104 3,342 11,493 3,424 12,198 3,687
1 Some of the stores serviced by ICA are retailer-owned.
2 Includes DAIH for periods in 2002 and 2001 in which it was not consolidated
in our financial statements.
3 The results in 2002 and 2001 reflect the results of Paiz Ahold. In January 2002, Paiz
Ahold entered into a new joint venture with CSU International, forming CARHCO.
As discussed above, in addition to our consolidated
subsidiaries, we also have interests in retail trade
operations through our joint ventures. The income
or losses generated by our joint ventures are included
in our share in income (loss) of joint ventures and equity
investees. As of year-end 2003, we had interests in
three significant entities that we accounted for as
unconsolidated joint ventures. These three joint ventures
are ICA, JMR and CARHCO. Paiz Ahold, the 50/50 joint
venture between us and the Paiz family, joined with CSU
International in January 2002 to form CARHCO. Paiz
Ahold owns a 66%% interest in CARHCO.
In our results for 2001, we accounted for DAIH
as unconsolidated joint venture for the periods prior to
obtaining a majority of the voting power. In the second
quarter of 2002, we began consolidating Disco in our
financial statements as a result of acquiring a direct
equity interest in Disco in consideration for capitalizing
intercompany loans we had directly made to Disco.
DAIH was accounted for using the equity method of
accounting until June 2002. DAIH and Santa Isabel
were consolidated as of July 2002 in connection with
our purchase of the shares of capital stock of DAIH
from our former joint venture partner VRH. For
additional information about the transaction with VRH,
please see "Significant Factors Affecting Results of
Operations in 2003 and 2002 - Loss on Related Party
Default Guarantee" above and Note 9 to our
consolidated financial statements included in this
annual report. For additional information about the
changes in consolidation of certain of our current
or former joint ventures, please see "Events in 2003"
above.
Significant unconsolidated joint ventures and equity investees
Date of
formation
Consolidated
since
Our ownership
interest as of fiscal
year-end 2003
ICA
April 2000
50%
JMR
Jan. 1992
49%
Paiz Ahold(1)
Dec. 1999
50%
DAIH(2)
Jan. 1998
July 2002
100%
Bomprefo
1996
July 2000
100%
1 In January 2002, Paiz Ahold formed CARHCO, a new joint venture, with CSU
International. Paiz Ahold owns a 662/3% interest in CARHCO.
2 DAIH is a holding company of Disco and had owned a controlling stake in Santa Isabel
until it was sold during 2003. Disco was consolidated since the second quarter of2002
and Santa Isabel was consolidated since the third quarter of 2002.
