Management's discussion and analysis
Net cash from financing activities
In 2006, net cash used in financing activities was
EUR 1.3 billion, a EUR 1.9 billion lower outflow than last year
primarily due to a reduction in long-term debt redemptions.
In 2006, Ahold redeemed total long-term debt of
EUR 282 million primarily due to the repayment of
EUR 227 million bond upon maturity. In 2005, Ahold
redeemed total long-term debt of EUR 2.9 billion, consisting
mainly of the redemption of EUR 1.5 billion notes and a
EUR 1.0 billion bond buyback. Resulting from these debt
repayments, interest paid in 2006 decreased by
EUR 207 million from 2005.
In 2005, net cash used in financing activities was
EUR 3.2 billion, an increase in cash outflow of
EUR 1.2 billion from 2004 primarily due to higher long-term
debt redemptions. In 2005, Ahold redeemed total long-term
debt of EUR 2.9 billion, detailed above. In 2004, Ahold
redeemed total long-term debt of EUR 1.0 billion consisting
mainly of an early redemption of EUR 920 million notes.
For more disclosure about the Company's 2006 debt
redemption see "Debt" below.
Debt
Ahold's total gross debt was approximately EUR 6.5 billion
as of December 31, 2006 - down EUR 1.3 billion from the
end of 2005.
The following table sets forth a breakdown of the Company's
gross debt:
Loans, including current portion 4,650 5,123
Finance lease liabilities,
including current portion 1,277 1,362
Cumulative preferred financing shares 497 666
Short-term borrowings 56 597
Total gross debt 6,480 7,748
In 2006, loans, including the current portion, decreased by
EUR 473 million or 9.2 percent. Of this decrease,
EUR 279 million was attributable to the repayment of loans
and EUR 226 million to favorable changes in exchange
rates, principally between the U.S. dollar and the euro.
A total of EUR 480 million of long-term debt will mature in
2007 and EUR 4.2 billion between 2008 and 2031, of which
EUR 1.2 billion is due in 2008.
During 2006 Ahold repaid the following indebtedness:
USD 620 million related to outstanding short-term
borrowings under U.S. Foodservice's securitization
program;
EUR 227 million of notes issued by Ahold Finance USA;
EUR 15 million in semi-annual principal installment of
EUR 100 loan of Schuitema that matures in March 2012
with an amortizing principal through maturity.
The EUR 169 million decrease in cumulative preferred
financing shares under debt was related to the transfer into
equity following the conversion notification Ahold received
on November 30, 2006.
For a detailed discussion of the Company's debt, see
Notes 23, 26, 27 and 29 to the consolidated financial
statements included in this Annual Report.
The Company has a Euro Medium Term Note ("EMTN")
Program, of which it had outstanding in aggregate of
EUR 2.4 billion in notes at year end 2006. The notes have
maturities ranging from 2007 through 2031. Notes issued
under the EMTN program contain customary restrictive
covenants, including but not limited to negative pledge
covenants and default provisions in the event of a change
of control. During 2006, the Company updated the
program documentation.
Group credit facility
On May 17, 2005, Ahold signed a five-year
EUR 2,000 million syndicated multi-currency unsecured
credit facility (the "May 2005 Credit Facility"). The May
2005 Credit Facility may be used for working capital and for
general corporate purposes of the Ahold group and provides
for the issuance of USD 800 million of letters of credit. As of
December 31, 2006 there were no outstanding loans under
the May 2005 Credit Facility other than letters of credit of
USD 337 million.
Accounts receivable securitization program
U.S. Foodservice and certain of its subsidiaries participate
in an accounts receivable securitization program. Under this
program, they sell, on a revolving basis, their receivables to
a wholly-owned, special purpose, bankruptcy remote
subsidiary of U.S. Foodservice ("Receivables Company")
which in turn transfers, assigns and conveys all of its present
and future rights, titles and interests in the eligible
receivables to a special purpose entity (the "Master Trust").
Ahold consolidates the Master Trust and consequently the
transfer of the receivables is a transaction internal to the
Ahold group and the receivables have not been
derecognized from the consolidated balance sheets.
The Master Trust issues certificates, representing fractional,
undivided interests in the accounts receivable held in the
Master Trust, which are financed by third-party investors
(generally commercial paper conduits, banks or other
financial institutions) in exchange for cash or are retained by
the Receivables Company as subordinate interests to those
held by the third party. The cash is included in Ahold's
consolidated balance sheets in cash and cash equivalents
and amounts corresponding to the certificates financed
are recognized under short-term borrowings. Included in
Ahold's receivable balance is USD 1,100 million
(EUR 833 million), which is effectively pledged collateral
in support of that financing. The securitization program was
restructured as of June 29, 2006 to a three-year program
with the maximum purchaser group limit under the
securitization program being USD 816 million
(EUR 618 million) with a sublimit of USD 400 million
(EUR 303 million) for issuance of letters of credits.
There was USD 394 million (EUR 299 million) outstanding
in issued letters of credit as of December 31, 2006.
December 31,
January 1,
EUR in millions
2006
2006
50 Ahold Annual Report 2006
