Administrative cost structure right-sizing program
Review of underperforming assets Reduce
corporate overhead
RESULTS OF OPERATIONS
Adoption of International Financial Reporting
Standards
Multi-Unit strategy
The Multi-Unit strategy is intended fo make the Multi-Unit
business profitable based on the following initiatives:
Dedicated operating unit with focused management.
Multi-Unit customers are now served by a separate
business, which provides more focus on the needs of this
segment.
Efficiency focus. The improvement in the Multi-Unit
business will be driven primarily from initiatives to
mitigate operating cost pressures and to drive productivity
improvements. U.S. Foodservice is working with its
customers to reduce overall supply chain costs by
optimizing inbound and outbound distribution logistics,
reducing working capital and optimizing drop size and
drop frequency. As part of the USFAST initiative,
U.S. Foodservice has installed new support systems at
approximately half of its Multi-Unit distribution centers
and will continue to install these support systems at the
remaining distribution centers.
Operational Excellence program. The Multi-Unit business
is participating in the Operational Excellence program
to improve end-to-end business processes. The Multi-Unit
business is also working with its customers to provide
value-added services including integrated supply-chain
management, non-food and equipment purchases and
other services. U.S. Foodservice believes that a broader
service offering is a key component of long-term success
in the Multi-Unit business.
U.S. Foodservice's significant operational integration
programs, executed as part of the Road to Recovery strategy,
have provided the foundation upon which additional
administrative cost reductions can be achieved. U.S.
Foodservice is implementing a plan to reduce total
administrative costs by approximately USD 100 million,
with more than half of these savings to be realized in 2006
and the balance in 2007 and 2008.
As part of this cost reduction plan, the Broadline field
operations were consolidated from four regions to three. In
addition, U.S. Foodservice is consolidating certain support
office functions and locations and the previously announced
headcount reductions involving nearly 700 positions.
We expect that U.S. Foodservice's operating margin in U.S.
dollars before impairment of goodwill will exceed 1.7% no
later than 2006.
In 2006, our focus will be on a comprehensive review of
underperforming assets and a reduction of corporate
overhead.
The tables summarizing our consolidated results below are
followed by discussions of the consolidated Company results
and then the results of operations for each of our business
segments. These discussions should be read in conjunction
with our consolidated financial statements and the notes
thereto, which are included in this annual report.
The following discussions contain certain non-GAAP
financial measures which are further discussed under
"Reconciliation of non-GAAP financial measures."
Beginning with 2005, we are required by a EU regulation to
prepare our consolidated financial statements in accordance
with International Financial Reporting Standards ("IFRS")
as adopted by the EU. Under IFRS, net sales figures are
adjusted to exclude discontinued operations, which we
present separately from our continuing operations.
As required under IFRS, the prior year net sales figures
included as comparatives have been adjusted to exclude net
sales from discontinued operations.
The impact of the adoption of IFRS is discussed in Note 36
to our consolidated financial statements included in this
annual report.
AHOLD ANNUAL REPORT 2005 59
