Operating and Financial Review and Prospects
72
Ahold Annual Report 2003
Operating and Financial Review and Prospects
relating to our recent credit rating downgrades, please
see "Risk Factors - Further downgrading of our credit
ratings could make it more difficult and expensive to
finance our business and our future operating income
could be diminished as a result."
Cash flows
In 2003, our net cash inflows were EUR 2.5 billion,
compared to net cash outflows of EUR 611 million in
2002 and net cash inflows of EUR 459 million in 2001.
Net cash used for investing activities was EUR 0.4 billion,
EUR 2.6 billion and EUR 4.6 billion in 2003, 2002 and
2001, respectively. In 2003, we had net cash inflows of
EUR 1.1 billion relating to financing activities, compared
to net cash outflows from financing activities of EUR 504
million in 2002 and net cash inflows of EUR 3.1 billion
in 2001. Our total debt was approximately EUR 10.5
billion, EUR 12.9 billion and EUR 13.7 billion at year-
end 2003, year-end 2002 and year-end 2001,
respectively.
For additional information about cash flows,
please see our statement of cash flows included in
our consolidated financial statements included in this
annual report. The following table summarizes the
sources of our cash flows for the periods indicated:
Cash flows from investing activities
and capital expenditures
Historically, the majority of our capital expenditures
incurred were for new stores and store improvements,
distribution centers, computer hardware and other
assets. In 2002 and 2001, capital expenditures were
EUR 2.2 billion and EUR 2.5 billion, respectively. In
2003, we scrutinized and restricted capital expenditures
in order to strengthen our cash flow. We recorded in
2003 total capital expenditures of EUR 1.4 billion, which
were financed primarily from cash generated from
operations, of which approximately 59% was used
in retail trade in the U.S., approximately 24% was used
in retail trade in Europe and approximately 6% was
used in foodservice in the U.S. We used these capital
expenditures principally to open new stores and to
remodel existing stores. Of these capital expenditures,
EUR 337 million was committed as of year-end 2003.
Of the capital expenditures for tangible and intangible
fixed assets and acquisitions in 2003, 2002 and 2001,
approximately 6%, 34% and 54%, respectively, was
attributable to acquisitions, and approximately 94%,
66% and 46%, respectively, was attributable to new
stores and store improvements, distribution centers,
computer hardware and other assets.
(in EUR millions)
2003
2002
2001
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
1,909 2,486 1,961
(448) (2,593) (4,565)
1,065 (504) 3,063
Cash flows from investing activities
The table below shows our cash flows from investing
activities by category:
Net change in cash
2,526 (611) 459 (in EUR millions)
2003
2002
2001
Cash flows from operating activities
In 2003, cash inflows from operating activities were
EUR 1.9 billion, compared to EUR 2.5 billion in 2002.
Cash flows from operating activities decreased in 2003
compared to 2002 primarily as a result of lower income
from operations, excluding non-cash charges.
The decrease was offset by a working capital
improvement of EUR 446 million. This was primarily
due to a reduction of inventory, primarily in the U.S.,
as a result of our focus on reducing the amount of
product on hand. Additionally, shorter payment terms
imposed by certain suppliers to USF as a result of the
February 24, 2003 announcement and subsequent
events negatively impacted our working capital. Our
2003 net cash flows from operating activities were also
negatively impacted by increased competition and
continuing weak economies in many of our operating
areas, which we believe will continue to impact our
operations in 2004.
The weakened US dollar against the Euro also had
a negative impact on our cash flow from operating
activities, along with higher consultancy and other
administrative cost and higher interest expense and bank
fees, all of which were primarily due to the February 24,
2003 announcement.
In 2004, we expect the principal uses of cash from
operating activities will be for debt repayments, capital
expenditures, store efficiency-improving measures and
retailing innovations.
Purchases of tangible and intangible fixed assets (1,357) (2,160) (2,459)
Acquisitions of businesses (79) (1,136) (2,843)
Fixed and intangible assets disposals 555 590 1,134
Divestment of subsidiaries and interest
in joint ventures and equity investees 298 19 3
Other 135 94 (400)
Cash flows from investing activities
(448) (2,593) (4,565)
Investing activities in 2003 were positively impacted by
the reduction in our capital expenditures, along with the
divestment of certain of our operations. Cash inflows
from the disposal of fixed and intangible assets were
EUR 555 million in 2003, compared to EUR 590 million
in 2002. Disposal of fixed assets generally relates to the
sale of individual stores, shopping centers or parcels of
land that were no longer in use or being held for sale,
and also includes proceeds from sale-leaseback
transactions. Additionally, as previously discussed in
"Strategy - Restoring our Financial Health" above, during
late 2002 and in 2003, we announced our intention to
sell various subsidiaries and stores. In 2003, we
completed the sales of our Indonesian and Malaysian
operations, Santa Isabel and Supermercados in Chile,
Peru and Paraguay, two Hypernova hypermarkets in
Poland, De Tuinen, De Walvis and Jamin in The
Netherlands and Golden Gallon in the U.S. for total
net proceeds to us in the amount of EUR 284 million.
Additionally, as of April 1, 2004, we sold Bompreqo and
Hipercard in Brazil and our Thailand operations for total
