-
In 2004, the most significant impairments consisted of
impairments for underperforming stores in the U.S. retail
businesses, capitalized commercial expenses and loan
receivables at Schuitema, and loans to joint ventures and
associates in the Group Support Office.
Gains/losses on the sale of assets
The Company recorded the following gains (losses) on the
sale of non-current assets in 2006, 2005 and 2004:
EUR in millions
2006
2005
2004
Stop Shop/Giant-Landover Arena
17
7
2
Giant-Carlisle/Tops Arena
4
19
1
Albert Heijn Arena
6
4
5
Central Europe Arena
5
12
9
Schuitema
2
(2)
Total Retail
34
42
15
U.S. Foodservice
11
19
1
Total
45
61
16
In 2006, the most significant gains on the sale of assets were
the sale of two distribution facilities in the Stop Shop/Giant-
Landover Arena and the sale of an office facility and
warehouse at U.S. Foodservice.
In 2005, the most significant gains on the sale of assets
included the disposal of a shopping center in the Central
Europe Arena, the disposal of stores in the Giant-Carlisle/Tops
Arena and the sale of U.S. Foodservice's Sofco business.
In 2004, the most significant gain on the sale of assets
was from the sale of a shopping center in the Central
Europe Arena.
Operating income
In 2006, operating income increased EUR 1.0 billion from
the same period last year to EUR 1.3 billion. Excluding the
EUR 803 million impact of the Securities Class Action
settlement in 2005, the increase was EUR 237 million or
22.4 percent. Retail operating income was up
EUR 30 million at EUR 1.2 billion, an operating margin of
3.9 percent. Excluding the impact of impairment of assets,
gains/losses on the sale of assets and restructuring and
other related charges, retail operating income was
4.3 percent of net sales compared to 4.1 percent in 2005.
U.S. Foodservice operating income was up EUR 172 million
to EUR 258 million, an operating margin of 1.7 percent
compared to 0.6 percent in the same period last year.
Group Support Office costs of EUR 116 million were down
EUR 35 million compared to last year, excluding the
Security Class Action settlement.
Operating income decreased in 2005 compared to 2004
mainly due to impact of the settlement of the Securities Class
Action of EUR 803 million. Retail operating income
decreased EUR 52 million at EUR 1.1 billion, an operating
margin of 3.9 percent compared to 4.1 percent in 2004.
U.S. Foodservice operating income was up EUR 32 million
to EUR 86 million, an operating margin of 0.6 percent
compared to 0.4 percent in 2004. Group Support Office
costs were down EUR 109 million compared to 2004,
excluding the Securities Class Action settlement, in part
due to a EUR 37 million release of a legal provision
in 2005.
Net financial expense
In 2006, net financial expense decreased EUR 132 million
compared to 2005 primarily as a result of lower interest
expense and a one-time cost of EUR 53 million relating
to a bond buyback in 2005. Interest expense decreased
EUR 118 million in 2006 compared to 2005 mainly due to
lower outstanding debt balances resulting from significant
debt repayments in 2005 totaling EUR 2.3 billion.
In 2005, net financial expense increased EUR 380 million
compared to 2004 primarily due to the non-repetition of the
2004 net gain of EUR 379 million relating to a ICA put
option transaction.
For further information about interest and borrowings, see
Notes 10 and 26 to the consolidated financial statements
included in this Annual Report.
Income taxes
In 2006, Ahold recognized an income tax expense of
EUR 91 million compared to a EUR 214 million benefit
last year. The effective tax rate, calculated as a percentage
of income (loss) before income taxes, decreased to
9.8 percent (76.7 percent in 2005). The lower effective tax
rate in 2006 was primarily attributable to the non-recurrence
of the charge in 2005 related to the settlement of the
Securities Class Action and the subsequent partial
reallocation of that charge from the Group Support Office
to U.S. Foodservice in 2006. Furthermore, rulings with the
tax authorities and developments in Dutch tax laws enabled
Ahold to reduce its tax contingency reserve, which had a
positive impact on the effective tax rate in 2006.
In 2005, the income tax benefit amounted to
EUR 214 million; the effective tax rate was 76.7 percent
(17.5 percent in 2004). The main factor contributing to
the increase in effective tax rate in 2005 compared to 2004
was the impact of the charge relating to the settlement of
the Securities Class Action recorded at the Group Support
Office, which significantly reduced Ahold's income before
taxes in 2005.
For more information on the Company's accounting
treatment of income taxes, see Notes 3 and 11 to the
consolidated financial statements included in this
Annual Report.
Share in income of joint ventures and associates
In 2006, the Company's share in income of joint ventures
and associates increased 28.8 percent to EUR 152 million.
The improvement was attributable to strong net sales and
improved margins at ICA, particularly in Sweden, and an
increase in gains on the sale of assets, most significantly the
sale of ICA's foodservice business, ICA Meny. In 2006, net
gains on the sales of assets at ICA increased EUR 42 million
from 2005.
Ahold Annual Report 2006 45
