Energy cost increases. Profit margins and operating
expenses are negatively impacted by increases in
transportation costs, caused by high fuel prices and
energy costs that exceed the rate of food price inflation.
The increase in fuel costs has also affected the purchasing
power of consumers, resulting in a negative impact on
food sales.
Significant factors affecting Ahold's results
of operations and financial position
Ahold's results of operations and financial position have
been impacted by the following significant factors relating
specifically to the Company:
The agreements to settle the securities class action and
litigation with the Vereniging van Effectenbezitters ("VEB")
In November 2005, Ahold entered into an agreement to settle
the securities class action (the "Securities Class Action")
arising out of the events announced on February 24, 2003,
which resulted in the restatement of the Company's financial
position and results of operations for 2001 and 2000. Under
the terms of the agreement, the lead plaintiffs agree to settle
all claims against the Company for the sum of USD 1.1 billion
(EUR 937 million). This amount includes USD 9 million
(EUR 8 million) as compensation to the VEB for facilitating
the global settlement. The settlement covers Ahold, its
subsidiaries, individual defendants and the underwriters.
As a result of the settlement, the Company recorded a charge
to operating income in 2005 of EUR 803 million, net of
insurance proceeds.
The Company also reached an agreement to settle the
litigation with the VEB, pursuant to which VEB has
terminated certain legal proceedings relating to its annual
financial statements for the years 1998 through 2002.
In June 2006, the U.S. District Court for the District of
Maryland entered a final order and judgment approving
the Company's agreement with the lead plaintiffs to settle
the Securities Class Action. The final order and judgment
approving the settlement are no longer subject to appeal.
With this settlement Ahold has dealt with the last material
outstanding litigation with significant financial exposure
arising out of the events of 2003.
In September 2006, the U.S. Department of Justice (the
"DOJ"), through the U.S. Attorney's Office for the Southern
District of New York confirmed in connection with a
non-prosecution agreement that it will not be criminally
prosecuting Ahold and U.S. Foodservice in connection with
events leading to the events of 2003. From 2004 to 2006,
the DOJ brought securities fraud and other criminal charges
against certain individuals, all of them either former
U .S. Foodservice em ployees or former em ployees of vendors
that sold food and food-related products to U.S. Foodservice.
For a further discussion of these settlements, see Note 34
to the consolidated financial statements included in this
Annual Report.
Results of operations
The tables summarizing the consolidated results below
are followed by discussions of the consolidated results and
the results of operations for each of the Company's business
segments. These discussions should be read in conjunction
with the 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 in
"Reconciliation of non-GAAP financial measures" included
in this Annual Report.
Consolidated results summary
The following table summarizes the consolidated statements of operations for 2006, 2005 and 2004:
EUR in millions, except percentages and per share data
2006 2005 2004
(52 weeks) of net sales (52 weeks) of net sales (53 weeks) of net sales
Net sales
44,872
100.0
43,979
100.0
44,040
100.0
Gross profit
9,331
20.8
9,106
20.7
9,116
20.7
Operating expenses
(8,038)
17.9
(8,853)
20.1
(8,149)
18.5
Operating income
1,293
2.9
253
0.6
967
2.2
Net financial expense
(518)
1.1
(650)
1.5
(270)
0.6
Share in income of joint ventures and associates
152
0.3
118
0.3
104
0.2
Income taxes
(91)
0.2
214
0.5
(140)
0.3
Income (loss) from continuing operations
836
1.9
(65)
0.1
661
1.5
Income from discontinued operations
79
0.1
211
0.4
222
0.5
Net income
915
2.0
146
0.3
883
2.0
Income (loss) per share from continuing
operations attributable to common shareholders
Basic
Diluted
0.53
0.52
(0.06)
(0.06)
0.42
0.42
Ahold Annual Report 2006
43
