Our overall financial recovery is on track. We closed 2005
with EUR 2.2 billion of total cash balances and we reduced
gross debt by 22.7% (EUR 2.3 billion) during 2005. The
lower average outstanding debt balances, lower average cost
of debt and lower banking fees contributed to lower net
interest expense in 2005 than 2004. Our financial health is
steadily improving and we remain committed to meeting
what we understand to be the criteria for investment grade
rating from the two applicable rating agencies.
Improved liquidity and stronger balance sheet
The lower average outstanding debt balances, lower average
cost of debt and lower banking fees contributed to lower net
interest expense in 2005 than 2004. In June 2005, Ahold
Finance USA redeemed its EUR 1.5 billion notes.
In October 2005, we successfully closed solicitations to sell
selected outstanding notes of Ahold which decreased our
indebtedness by approximately EUR 1 billion equivalent,
which will further reduce our annualized net interest
expense going forward. We also made a voluntary funding of
EUR 236 million to our pension program in the U.S. These
transactions all utilized available cash balances. Our
improved liquidity position and stronger balance sheet
enabled us in February 2005 to terminate our three-year
revolving December 2003 credit facility (the "December
2003 Credit Facility"). In May 2005, Ahold signed a new
five-year EUR 2 billion unsecured syndicated multi-currency
credit facility (the "May 2005 Credit Facility") with a
syndicate of banks having more favorable terms and
conditions than the December 2003 Credit Facility. The new
credit facility is intended to be used for general corporate
purposes and for the issuance of letters of credit and
remained undrawn except for EUR 588 million (USD 696
million) utilized for letters of credit at the end of 2005.
For further details and information, see Note 26 to our
consolidated financial statements included in this annual
report and "Liquidity and capital resources - Assessment of
liquidity and capital resources."
Divestment program
In 2003, we announced our intention to generate at least
EUR 2.5 billion of gross proceeds by divesting non-core
businesses and under-performing assets by the end of
2005. For these purposes, "gross proceeds" means cash
consideration and assumed debt. We have succeeded in our
mission and by the end of 2005, the aggregate gross
proceeds from the divestments amounted to EUR 3.1
billion. Of this amount, EUR 1.6 billion was generated in
2005, EUR 1.1 billion in 2004 and EUR 0.4 billion in
2003 resulting in net cash from the divestment of
consolidated subsidiaries of EUR 1,058 million in 2005,
EUR 978 million in 2004 and EUR 284 million in 2003.
We applied the cash received from our divestments to
reduce indebtedness and, in January 2006, to pay litigation
claims. The tables below summarize the status of our
divestment program through January 1, 2006.
Gross proceeds from divestment program 2003 through
January 1, 2006:
Euros in millions
1 The gross proceeds from the divestment of BI-LO and Bruno's exclude contingent
payments of approximately USD 100 million that we may receive. ^s of March 28,
2006, we have received approximately USD 69 million.
2 The amount was converted from USD (the transaction currency) to EUR using the
exchange rate in effect when the transaction closed.
3 The gross proceeds from the divestment of Disco represents the final purchase
amount that we received from escrow for the approximately 85% of the shares
of Disco that we had transferred to Disco as of November 1, 2004. Pending the
transfer of the remaining 15% stake, we do not have any voting power in Disco.
We incurred a gain on divestments of EUR 172 million in
2005 and a gain on divestments of EUR 238 million in
2004. For additional information, see Note 12 to our
consolidated financial statements included in this annual
report. Our divestments of these non-core and under-
performing assets will have, in the aggregate, a positive
impact on our operating income as a percentage of net sales
in subsequent years.
Other divestments
Outside the scope of the divestment program discussed
above, we are also in the process of disposing of assets
that no longer meet our criteria for investment. These
divestments form part of our ordinary business and include
the divestments of U.S. Foodservice's specialty distributor
Sofco, 31 Tops stores located in eastern New York and the
Adirondacks region, three shopping centers in Poland and
the Czech Republic and two distribution facilities and one
dairy processing plant in the U.S. For additional
U.S.
Golden Gallon 2
157
BI-LO and Bruno's 1 2
822
Europe
Ahold Supermercados, Spain
633
Deli XL, the Netherlands
139
South America
Bomprego, Hipercard, Brazil 2
410
Disco S.A., Argentina 2, 3
198
Central America
CARHCO2
266
Other Divestment Activities 2
474
Total
3,099
AHOLD ANNUAL REPORT 2005 55
