<PAGE>
CONFORMED COPY
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
[_]
Registration Statement pursuant to Section 12 (b) or (g)
of the Securities Exchange Act of 1934
or
[X]
Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the fiscal year ended January 2, 2000
or
[_]
Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the transition period from to
Commission file number 0-18898
Koninklijke Ahold N.V.
(Exact name of Registrant as specified in its charter)
Royal Ahold
(Translation of Registrant's name into English)
The Netherlands
(Jurisdiction of incorporation or organization)
Albert Heijnweg 1, 1507 EH Zaandam, The Netherlands
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
<S> <C>
Common Shares at a par value of NLG 0.50 each, New York Stock Exchange
represented by American Depositary Shares
Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None.
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the Annual
Report:
Cumulative Preferred Shares par value NLG 1,000 per share none
Cumulative Preferred Financing Shares par value NLG 0.50 per share 144,000,000
Convertible Cumulative Preferred Shares par value NLG 0.50 per share none
Common Shares par value NLG 0.50 per share 646,484,126
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 [_] Item 18 [X]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION.............................................................................................. 1
PART I
Item 1. Description of Business......................................................................... 4
Item 2. Description of Property......................................................................... 19
Item 3. Legal Proceedings............................................................................... 20
Item 4. Control of Registrant........................................................................... 21
Item 5. Nature of Trading Market........................................................................ 22
Item 6. Exchange Controls and Other Limitations Affecting Security Holders.............................. 23
Item 7. Taxation........................................................................................ 23
Item 8. Selected Financial Data......................................................................... 24
Item 9. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 27
Item 9A. Quantitative and Qualitative Disclosures about Market Risk...................................... 40
Item 10. Directors and Officers of Registrant............................................................ 43
Item 11. Compensation of Directors and Officers.......................................................... 45
Item 12. Options to Purchase Securities from Registrant or Subsidiaries.................................. 45
Item 13. Interest of Management in Certain Transactions.................................................. 46
PART II
Item 14. Description of Securities to be Registered...................................................... 47
PART III
Item 15. Defaults upon Senior Securities................................................................. 47
Item 16. Changes in Securities and Changes in Security for Registered Securities......................... 47
PART IV
Item 17. Financial Statements............................................................................ 48
Item 18. Financial Statements............................................................................ 48
Item 19. Financial Statements and Exhibits............................................................... 85
</TABLE>
i
<PAGE>
GENERAL INFORMATION
The consolidated financial statements of Koninklijke Ahold N.V., also referred
to as "we", "us", "our", "Royal Ahold" or "Ahold", appear in Item 18 of this
annual report. Our consolidated financial statements are prepared in accordance
with accounting principles generally accepted in The Netherlands ("Dutch GAAP").
Dutch GAAP differs in certain material respects from generally accepted
accounting principles in the United States ("U.S. GAAP"). The differences
between Dutch GAAP and U.S. GAAP which materially affect our reported net
earnings and stockholders' equity are explained in the notes to the consolidated
financial statements, followed by a reconciliation of Dutch GAAP net earnings
and stockholders' equity to amounts computed under U.S. GAAP.
We are domiciled in The Netherlands, which is one of the countries that
participate in the European Economic and Monetary Union (the "EU"). Prior to
fiscal year 1999, the reporting currency of our financial statements was the
Dutch guilder ("NLG"). Effective from fiscal year 1999, we have adopted as our
reporting currency the euro, the new currency of the EU ("euro" or "EUR"). The
Council of the European Union fixed effective January 1, 1999 the official
exchange rate between the euro and the Dutch guilder at EUR 1 = NLG 2.20371. Our
financial statements for fiscal years 1998 and 1997 and certain other data
included in this annual report were originally stated in Dutch guilders or
"NLG", but we have converted them to euros using the official exchange rate as
of January 1, 1999, of EUR 1 = NLG 2.20371, or the "fixed rate". As a
significant portion of our business is based in the United States, exchange rate
fluctuations between the euro, or the Dutch guilder for fiscal years prior to
1999, and the United States dollar, referred to as "dollar", "$" or "USD", are
among the factors that have influenced year-to-year comparability of
consolidated earnings and equity. The weighted average rate of the euro per
dollar that we used in the preparation of our consolidated financial statements
was:
. euro 0.94 for fiscal year 1999
. euro 0.90 for fiscal year 1998
. euro 0.88 for fiscal year 1997
The year end rates of the euro per dollar that we applied to balances in the
consolidated financial statements were:
. euro 0.99 as of January 2, 2000
. euro 0.86 as of January 3, 1999
The rates for fiscal years 1998 and 1997 included above were converted from the
originally used NLG rate to euros using the fixed rate of EUR 1= NLG 2.20371.
The rates used in the preparation of our consolidated financial statements may
vary in certain minor respects from the rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York ("noon buying rate").The noon buying rate for the euro
was EUR 1.04 per $1.00 as of March 31, 2000.
Solely for convenience of the reader, this annual report contains translations
between certain euro amounts and dollar amounts at specified rates. Unless
otherwise indicated, we have translated euros into dollars at a rate of $1.00 =
EUR 0.99 which is equal to the exchange rate that we used in the preparation of
our 1999 balance sheet. Except for amounts translated for convenience purposes,
we have translated certain foreign currency balance sheet amounts included in
this annual report into euros using the exchange rate prevailing as of the end
of our reporting period. We have translated certain foreign currency income
statement amounts included in this annual report into euros using the weighted
average exchange rate during our reporting period.
1
<PAGE>
Our fiscal year generally consists of 52 weeks and ends on the Sunday nearest to
December 31 of each calendar year. The quarters that we use for interim
financial reporting are determined as follows:
. the first quarter consists of the first 16 weeks of the fiscal year;
. the second, third and fourth quarters consist of the subsequent 12-week
periods, except years containing 53 weeks have a 13-week fourth quarter.
Fiscal year 1999 contained 52 weeks and ended on January 2, 2000. Fiscal year
1998 contained 53 weeks and ended on January 3, 1999. Fiscal year 1997 contained
52 weeks and ended on December 28, 1997.
We have presented certain sales area data in the tables in this annual report in
terms of square feet. Square feet may be converted to square meters, "m/2"/, by
multiplying the number of square feet by 0.093 and square meters may be
converted to square feet by multiplying the number of square meters by 10.75.
Unless otherwise indicated, references to currencies of countries other than The
Netherlands or the United States are as follows:
<TABLE>
<CAPTION>
Country Currency Symbol
- ------- -------- ------
<S> <C> <C>
Brazil Brazilian Reals BRL
Thailand Thai Baht THB
Czech Republic Czech Crowns CZK
</TABLE>
Forward-Looking Statements
Certain statements contained in this annual report are "forward-looking
statements" within the meaning of U.S. federal securities laws. We intend that
these statements be covered by the safe harbors created under these laws. Those
statements include, but are not limited to:
. statements as to expected increases in sales, operating results, market
shares and certain expenses, including interest expenses, in respect of
certain of our operations;
. expectations as to the impact of innovative improvements on productivity
levels, operating results and profitability in the stores;
. expectations as to the savings from new projects and programs and from
increased cooperation between our subsidiaries, in particular in the United
States;
. estimates and financial targets in respect of net earnings growth and net
earnings per share;
. expectations as to synergies to be realized from new acquisitions and the
impact on our results of operations;
. statements as to the anticipated rate of growth of markets in which we have
operations;
. expectations with respect to opportunities for expansion and growth;
. expectations regarding whether conditions of closing new partnerships,
business ventures and acquisitions of businesses or stores will be
satisfied, and whether those transactions will be consummated on schedule
or at all;
. statements as to the funding of future expenditures and investments;
. estimates of euro costs and impact of non-compliance;
. expectations of risks and liabilities of hedging transactions entered into;
. statements as to the expected outcome of certain legal proceedings; and
. estimates of future growth in the number of employees.
These forward-looking statements are subject to risks, uncertainties and other
factors that could cause actual results to differ materially from future results
expressed or implied by the forward-looking statements. Important factors that
could cause actual results to differ materially from the information set forth
in any forward-looking statements include:
. the effect of general economic conditions and changes in interest rates in
the countries in which we operate;
. increases in competition in the markets in which our subsidiaries and
partnerships operate and changes in marketing methods utilized by
competitors;
2
<PAGE>
. difficulties encountered in the integration of new acquisitions and
partnerships and unanticipated costs, diversion of management's attention
and loss personnel that could result; and
. fluctuations in exchange rates between the euro and the other currencies in
which our assets, liabilities and results are denominated, in particular,
the dollar;
as well as the other factors discussed elsewhere in this annual report.
Many of these factors are beyond our ability to control or predict. Given these
uncertainties, readers are cautioned not to place undue reliance on the forward-
looking statements.
Neither our independent auditors, nor any other independent accountants, have
compiled, examined, or performed any procedures, with respect to the prospective
financial information contained herein, nor have they expressed any opinion or
any other form of assurance on such information or its achievability, and assume
no responsibility for, and disclaim any association with, the prospective
financial information.
Our Address
Company Address Mailing Address
Royal Ahold P.O. Box 3050
Albert Heijnweg 1 1500 HB Zaandam
Zaandam, The Netherlands The Netherlands
3
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Overview
We are the largest food provider in The Netherlands based on 1999 sales and one
of the largest food retailers in the United States based on 1999 sales. During
1999, we provided food primarily through retail outlets complemented by our
wholesale and food supply activities. We are also one of the largest and among
the most internationally diverse food providing groups world-wide. As of fiscal
year end 1999, we operated nearly 4,000 stores world-wide, including over 650
franchise stores, and employed approximately 309,000 people. The store format we
primarily use is the supermarket. We also operate through hypermarkets, discount
stores, specialty stores, cash-and-carry stores and convenience stores. The
following table sets out, as of the dates indicated, our store count and sales
area by geographic region:
Store Count and Sales Area by Geographic Region
<TABLE>
<CAPTION>
As of Fiscal Year End
---------------------
1999 1998 1997
---- ---- ----
Store Sales Area Store Sales Area Store Sales Area
Count (sq. ft. 000) Count (sq. ft. 000) Count (sq. ft. 000)
----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
United States (including sales to franchise stores) 1,063 31,495 1,031 30,175 830 23,208
Europe (including sales to franchise stores) 2,442 16,487 2,169 13,858 2,098 12,462
Latin America 408 7,071 292 5,964 93 2,405
Asia Pacific 80 1,872 138 1,715 78 1,487
----- ------ ----- ------ ----- ------
Total 3,993 56,925 3,630 51,712 3,099 39,562
===== ====== ===== ====== ===== ======
</TABLE>
Our operations are located primarily in the United States and Europe. Sales in
the United States accounted for 57% of 1999 net sales, while sales in Europe
accounted for 31% of total net sales in 1999. We also have operations in Latin
America, which accounted for 11% of net sales in 1999, and in several countries
in the Asia Pacific region, which accounted for 1% of net sales in 1999. Our
principal business is retail trade. Retail trade accounted for 93% of total
sales in 1999. We are also engaged in wholesale, food supply and certain
specialty retailing activities in The Netherlands. The following tables set out,
for the periods indicated, our net sales and operating results by business
segment and geographic region:
Net Sales by Business Segment/Geographic Region
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
---- ---- ----
($) (EUR) (%) (EUR) (%) (EUR) (%)
(in millions, except percentages)
<S> <C> <C> <C> <C> <C> <C> <C>
Retail trade:
United States (including sales to franchise stores) (1) 20,333 19,126 57 14,502 55 12,651 55
Europe (including sales to franchise stores) 8,081 8,000 24 7,305 28 6,722 29
Latin America 3,509 3,474 11 2,099 8 1,171 5
Asia Pacific 476 471 1 407 1 418 2
------ ------ --- ------ --- ------ ----
Total retail trade 32,399 31,071 93 24,313 92 20,962 91
Food wholesaling and food supply 2,407 2,383 7 2,080 8 1,906 9
Other activities 107 106 -- 91 -- 79 --
------ ------ --- ------ --- ------ ----
Total 34,913 33,560 100 26,484 100 22,947 100
====== ====== === ====== === ====== ====
</TABLE>
__________
(1) Dollar amount in 1999 represents the actual amount before conversion into
euros and were $16,174 million in fiscal 1998 and $14,291 in fiscal 1997.
4
<PAGE>
Operating Results by Business Segment
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
---- ---- ----
($) (EUR) (%) (EUR) (%) (EUR) (%)
(in millions, except percentages)
<S> <C> <C> <C> <C> <C> <C> <C>
Retail trade 1,333 1,323 94 957 94 762 92
Food wholesaling and food supply 56 56 4 41 4 37 4
Real estate and other 80 80 6 59 6 67 8
Unallocated corporate costs (44) (44) (4) (40) (4) (32) (4)
----- ----- --- ----- --- --- ----
Total 1,425 1,415 100 1,017 100 834 100
===== ===== === ===== === === ====
</TABLE>
Operating Results by Geographic Region
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
---- ---- ----
($) (EUR) (%) (EUR) (%) (EUR) (%)
(in millions, except percentages)
<S> <C> <C> <C> <C> <C> <C>
United States (1) 1,001 944 67 639 63 508 61
Europe 464 459 32 402 40 357 43
Latin America 98 97 7 63 6 37 4
Asia Pacific (41) (41) (3) (47) (5) (36) (4)
Unallocated corporate costs (44) (44) (3) (40) (4) (32) (4)
----- ----- --- ----- --- --- ----
Total 1,478 1,415 100 1,017 100 834 100
===== ===== === ===== === === ====
</TABLE>
__________
(1) Dollar amount in 1999 represents the actual amount before translation into
euros and were $714 million in fiscal 1998 and $574 million in fiscal 1997.
The following table shows average capital employed by geographic region.
"Capital employed" is defined as fixed assets, including capitalized leases,
plus goodwill, at initial cost at date of acquisition, and net working capital.
Average Capital Employed by Geographic Region
<TABLE>
<CAPTION>
Average Capital Employed for Fiscal Year
----------------------------------------
1999 1998 1997
---- ---- ----
(EUR in millions)
<S> <C> <C> <C>
United States (1) 8,433 5,557 4,883
Europe 2,449 2,018 1,634
Latin America 1,752 1,110 496
Asia Pacific 275 191 116
------ ----- -----
Total 12,909 8,876 7,129
====== ===== =====
</TABLE>
__________
(1) Amounts reflected in dollars prior to conversion into euros were $8,935
million in fiscal 1999, $6,232 million in fiscal 1998 and $5,661 million in
fiscal 1997.
In addition to traditional food and specialty retailing channels, sales from
existing or expanded e-commerce activities at several of our subsidiaries
contributed to overall net sales. We provided both business-to-consumer and
business-to-business services. In 1999, business-to-consumer sales amounted to
approximately EUR 61 million. The majority of our subsidiaries currently
maintains websites, six of which also facilitate electronic ordering and home
delivery for customers.
5
<PAGE>
United States
We have, through acquisitions and organic growth, established ourselves as one
of the largest food retailers in the United States and the largest supermarket
operator on the east coast of the United States based on 1999 sales. At the end
of fiscal year 1999, we operated 939 supermarkets, including seven franchise
supermarkets, and 124 convenience stores, including nine franchise stores, in 16
states in the eastern United States and Washington, D.C.
We have organized our U.S. operations into five independently-managed operating
companies, each operating in its own local marketing area, in order to better
serve individual customers:
. Stop & Shop, which operates 202 stores in Massachusetts, Connecticut, Rhode
Island and New York;
. Giant Food Stores, headquartered in Carlisle, Pennsylvania, or "Giant-
Carlisle", which operates 156 stores in Pennsylvania, Virginia, West
Virginia, Maryland, New Jersey and New York;
. BI-LO, which operates 281 stores in the Carolinas, Tennessee, Alabama and
Georgia;
. Tops, which operates 248 stores in western and central New York,
northwestern Pennsylvania and in northeast Ohio; and
. Giant Food, headquartered in Landover, Maryland, or "Giant-Landover", which
operates 176 stores in Maryland, Virginia, Delaware, New Jersey and the
District of Columbia.
In March 2000, we entered into a merger agreement to acquire U.S. Foodservice,
the second largest food service distributor in the United States for
approximately EUR 3.6 billion in cash. U.S. Foodservice, with annual net sales
of over $6 billion for its fiscal year ending July 3, 1999, distributes food and
related products to restaurants and food service establishments across the
United States. Pursuant to the merger agreement, we commenced a tender offer for
the outstanding shares of common stock of U.S. Foodservice that was succesfully
completed April 7, 2000. We expect to complete the transaction in April 2000.
In March 2000, Tops signed an agreement to acquire Sugar Creek convenience/gas
stores. Sugar Creek operates 87 merchandise and fuel outlets in New York State
with annual net sales of approximately $142 million in 1999. We expect to
complete the acquisition in the second quarter of 2000.
Europe
We have significant operations in The Netherlands, Portugal, the Czech Republic,
Poland and Spain. We recently announced our partnership with the
Swedish/Norwegian ICA Group. This partnership will give us a substantial
presence in Northern Europe. We expect to complete the transaction in the second
quarter of 2000.
The Netherlands. We pioneered the supermarket concept in The Netherlands and are
currently the leading Dutch food provider through our Albert Heijn supermarket
chain, as measured by both sales volume and number of stores. With 691
supermarkets, including 175 franchise stores, Albert Heijn enjoys wide brand and
name recognition in the Dutch market. According to AC Nielsen, an international
research agency, Albert Heijn had a market share of approximately 28% in The
Netherlands in 1999 based on sales. It achieved this position by implementing a
retailing strategy of offering customers a wide range of competitively priced
products and high service levels in modern stores.
We also own 73% of the outstanding shares of Schuitema, a Dutch food wholesaler
which supplies and provides retail support to approximately 450 independent food
retailers in The Netherlands. According to AC Nielsen, the food retailers
associated with Schuitema had a market share of approximately 11% in The
Netherlands in 1999 based on sales volume.
We also operate stores in the following specialty retailing areas in The
Netherlands:
. wine and spirits through Gall & Gall;
. health, beauty care and natural products through Etos; and
. confectionery through Jamin.
In addition, we provide a wide range of food and non-food products to hospitals,
schools, other customers and hospitality
6
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enterprises, such as hotels and restaurants, under the marketing name Deli XL.
Portugal. We are a 49% partner with Jeronimo Martins, SGPS, S.A. or "JM".
Through the partnership with JM, we have created Jeronimo Martins Retail, also
referred to as "JMR", in Portugal. JMR operates Pingo Doce, a chain of 163
supermarkets as of the end of fiscal year 1999, and Feira Nova, a chain of 21
hypermarkets as of the end of fiscal year 1999.
Czech Republic. Since 1991, we have operated in the Czech Republic. As of the
end of fiscal year 1999, we operated 173 supermarkets, hypermarkets and discount
food stores through our 99% owned subsidiary, Ahold Czech Republic, formerly
known as Euronova. We are one of the largest food retailers in the Czech
Republic as measured by sales volume.
Poland. At the end of fiscal year 1999, we operated 115 discount food stores,
supermarkets and hypermarkets in Poland through our wholly-owned subsidiary
Ahold Polska.
Spain. We operate in Spain through our wholly-owned subsidiary Ahold
SuperMercados. Through a series of acquisitions we operated a total of 185
stores in Spain as of the end of fiscal year 1999. In January 2000, we acquired
Kampio, a prominent regional supermarket chain in Catalonia. This chain operates
39 large supermarkets, 24 of which are located in Barcelona, and had annual net
sales of approximately EUR 100 million in the fiscal year 1999.
Scandinavia. In December 1999, we entered into an agreement to acquire 50% of
ICA AB, the parent company of the ICA Group. The ICA Group is a prominent,
integrated food retail and wholesale group, servicing over 3,100 supermarkets,
superstores, hypermarkets and discount stores in Sweden, Norway and the Baltic
states, with annual net sales of EUR 6.6 billion in the fiscal year 1999. The
present ICA Group was formed in early 1999 when ICA AB acquired an additional
55% of Norway's Hakon Gruppen, which became a wholly-owned subsidiary. In August
1999, the ICA Group entered into a joint-venture with Statoil, acquiring 50% of
Statoil Detajhandel Scandinavia AS or "Statoil Retail". Statoil Retail generated
1999 sales of EUR 2.9 billion. Statoil Retail operates and services 1,500
Statoil gas stations and forecourt stores in Denmark, Norway and Sweden.
Latin America
Brazil. In December 1996, we entered the Latin American market by indirectly
acquiring 50% of the voting shares and 50.1% of the total capital of Bompreco
S.A. Supermercados do Nordeste or "Bompreco". Bompreco is the leading food
retailer in northeastern Brazil. At the end of fiscal year 1999, Bompreco
operated 100 supermarkets, hypermarkets and other food retail stores, including
49 Bompreco Bahia stores.
Argentina, Chile, Peru, Paraguay and Ecuador. In January 1998, we continued our
expansion in Latin America through the formation of a 50% owned partnership with
Velox Retail Holdings. The partnership, Disco Ahold International Holdings, or
"DAIH", owns a 98.1% stake in Disco, the largest supermarket company in
Argentina based on sales, and a 69% stake in Santa Isabel, the second-largest
supermarket company in Chile and Peru based on sales. As of the end of fiscal
year 1999, Disco operated 213 stores in Argentina, and Santa Isabel operated 95
stores, with 62 stores in Chile, 24 in Peru, seven in Paraguay and two in
Ecuador.
Guatemala, El Salvador and Honduras. In December 1999, we established a new
50/50 partnership, Paiz Ahold, which controls an 80.5% stake in La Fragua, the
leading supermarket and hypermarket company in the Central American republic of
Guatemala with a presence in El Salvador and Honduras. The partnership intends
to expand the retail activities of La Fragua in the region. As of the end of
fiscal year 1999, La Fragua operated 93 stores in Guatemala, 20 stores in El
Salvador and six in Honduras. These 119 stores comprise 83 discount stores, 26
supermarkets, four hypermarkets and six other stores.
Asia Pacific
Since 1996, we have been in the Asia Pacific market operating through
partnerships with local partners. In 1999, we restructured our presence in Asia
Pacific, focusing on Thailand and Malaysia. As a result, we sold our stake in
the
7
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unprofitable operations in China and Singapore in the fourth quarter of 1999. At
fiscal year end 1999, we, through partnerships, owned and operated 80 retail
stores in Asia Pacific.
Real Estate
We have real estate subsidiaries in The Netherlands and the United States. These
subsidiaries acquire, develop and manage retail sites in support of our retail
operations.
History
Royal Ahold was founded in 1887. In 1948, we, then named Albert Heijn N.V.,
listed our shares on the Amsterdam Exchanges. In 1973, our name was changed to
Ahold N.V., indicative of our development as a holding company with interests in
retail trade and related areas. On our one hundredth anniversary in 1987, the
Queen of The Netherlands granted us the title "Koninklijke" (Dutch for "Royal"),
and we changed our full name of Ahold N.V. to Koninklijke Ahold N.V.
In order to further develop our strategy of sustained growth, we began our
international expansion in 1977. Acquisitions in the United States have
consisted of:
. BI-LO in 1977;
. Giant-Carlisle in 1981;
. First National (Finast) in 1988;
. Tops in 1991;
. Red Food Stores in 1994;
. Mayfair in 1995;
. Stop & Shop in 1996; and
. Giant-Landover in 1998.
This growth in the United States is expected to continue in 2000 with the
acquisition of U.S. Foodservice. We expect to complete this acquisition in April
2000.
Acquisitions and partnerships formed in other regions include:
. JMR in Portugal in 1992;
. Bompreco in Brazil in 1996;
. Supermar in Brazil in 1997;
. Disco and Santa Isabel in Argentina and Chile in 1998;
. Dialco, Dumaya, Guerrero and Castillo del Barrio in Spain in 1999;
. Gastronoom in The Netherlands in 1999;
. Supermar and Gonzalez in Argentina in 1999; and
. La Fragua in Guatemala in 1999.
The planned partnership with the Swedish/Norwegian ICA Group will allow us to
expand into Northern Europe.
Corporate and Organizational Structure
We are incorporated under the laws of The Netherlands as a holding company
conducting business through our subsidiaries and partnerships. In The
Netherlands, we manage our businesses along operational lines. In other European
countries and the United States, we manage our businesses along geographical
lines. Management of each individual chain is responsible for merchandising,
store formats and marketing strategies. Decisions regarding the strategic
direction and overall management of group companies are taken at the holding
company level.
In The Netherlands, operational management is divided into supermarkets,
specialty retailing, food wholesaling, food supply, food production and other
operations. Retail operations outside The Netherlands primarily consist of
supermarkets. In the United States, Ahold U.S.A., Inc., the U.S. holding
company, coordinates the activities of the U.S.
8
<PAGE>
operating companies. In countries where we operate through partnerships, the
local partnership typically manages operations, but requires approval from us
for significant actions, such as certain investments.
Below is the organizational structure of our principal consolidated activities
as of the end of fiscal year 1999:
Principal Activities of Royal Ahold
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
------------------------
Corporate Executive
Board
------------------------
----------------- --------------
Corporate Staff Other
----------------- Activities
--------------
- ---------------- -------------------- ------------ -----------------------
Stop & Shop Albert Heijn Bompreco Ahold Kuok Malaysia
(Supermarkets (Brazil) (Malaysia)
The Netherlands)
- ---------------- -------------------- ------------ -----------------------
- ---------------- -------------------- ------------ -----------------------
Giant-Carlisle Schuitema Disco CRC Ahold
(Supermarkets (Argentina) (Thailand)
The Netherlands)
- ---------------- -------------------- ------------ -----------------------
BI-LO Specialty Santa
(The Netherlands) (Chile)
- ---------------- -------------------- ------------
- ---------------- -------------------- ------------
Tops Food Production La Fragua
(The Netherlands) (Guatemala)
- ---------------- -------------------- ------------
- ---------------- --------------------
Giant-Landover Deli XL
(Food supply
The Netherlands)
- ---------------- --------------------
- ---------------- --------------------
Real Estate Real Estate
(The Netherlands)
- ---------------- --------------------
------------------------
Jeronimo Martins Retail
(Portugal)
------------------------
------------------------
Ahold Czech Republic
(Czech Republic)
------------------------
------------------------
Ahold Polska
(Poland)
------------------------
------------------------
Ahold SuperMercados
(Spain)
------------------------
- ---------------- -------------------- --------------- -----------------------
UNITED STATES EUROPE LATIN AMERICA ASIA PACIFIC
- ---------------- -------------------- --------------- -----------------------
</TABLE>
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<PAGE>
Retail Trade
We are an internationally diverse food provider with operations in the markets
of the eastern United States, Europe, Latin America and Asia Pacific. Our
business primarily consists of retail trade through retail chains, as well as
wholesale and food supply operations. The following table sets out, for the
periods indicated, retail trade sales by geographic region:
Retail Trade Sales by Geographic Region
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
---- ---- ----
(EUR) (%) (EUR) (%) (EUR) (%)
(in millions, except percentages)
<S> <C> <C> <C> <C> <C> <C>
United States (including sales to franchise stores) 19,126 62 14,502 60 12,651 60
Europe (including sales to franchise stores) 8,000 26 7,305 30 6,722 32
Latin America 3,474 11 2,099 8 1,171 6
Asia Pacific 471 1 407 2 418 2
------ --- ------ --- ------ ----
Total Retail trade 31,071 100 24,313 100 20,962 100
====== === ====== === ====== ====
</TABLE>
As of the end of fiscal year 1999, we operated 3,993 stores, including 669
franchise stores. Over 2,700 of these stores are supermarkets. Where local
market conditions require, we have expanded into other formats, including
specialty retailing, hypermarkets, cash-and-carry stores and convenience stores.
Most of our franchise stores are in The Netherlands and operate under trade
names owned by us. They are indistinguishable from the stores owned by us in
terms of store design and formula, but are operated by third parties. The
following table sets out, at the end of fiscal year 1999, store count and sales
area, in thousands of square feet, by company stores and franchise stores:
Company and Franchise Stores
<TABLE>
<CAPTION>
As of Fiscal Year End 1999
--------------------------
Company Franchise Company Franchise
Supermarkets (1) Supermarkets (1) Other (2) Other (2) Total
---------------- ---------------- --------- --------- -----
Store Sales Store Sales Store Sales Store Sales Store Sales
Count Area Count Area Count Area Count Area Count Area
------ ------- ------ -------- -------- -------- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States 932 30,940 7 259 115 250 9 46 1,063 31,495
Europe 1,140 11,507 175 1,693 649 2,658 478 629 2,442 16,487
Latin America 369 5,544 -- -- 39 1,527 -- -- 408 7,071
Asia Pacific 80 1,872 -- -- -- -- -- -- 80 1,872
------ ------ ------ ------ ------- ------- ----- ------ ------- -------
Total 2,521 49,863 182 1,952 803 4,435 487 675 3,993 56,925
====== ====== ====== ====== ======= ======= ===== ====== ======= =======
</TABLE>
__________
(1) Includes grocery stores and food retail stores considered supermarkets under
local market conditions.
(2) Includes certain specialty retail stores in The Netherlands, hypermarkets,
mostly in Portugal and Brazil, minimarkets in Brazil, and convenience stores
in the United States.
The following table gives an overview of changes in total store count, including
franchise stores, for the periods indicated:
Changes in Consolidated Store Count
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
<S> <C> <C> <C>
Beginning of period 3,630 3,099 2,819
Opened/acquired 570 745 393
Disposed (207) (214) (113)
------- ------- ------
End of period 3,993 3,630 3,099
======= ======= ======
</TABLE>
10
<PAGE>
Retail Trade in the United States
We have established ourselves, through acquisitions and organic growth, as a
leading food retailer in the United States, operating in 16 states in the
eastern United States and Washington, D.C. Based on 1999 sales, we were among
the top five food retailers in the United States. While management of each
individual chain is responsible for its merchandising, store formats and
marketing strategies, the operations of the five regional operating companies
are coordinated as a group through Ahold U.S.A. Each chain operates in its own
local marketing area.
The table that follows sets out, for the periods indicated, sales in millions of
dollars, store counts and sales area, in thousands of square feet, for Royal
Ahold's retail trade operations in the United States. Sales for fiscal year 1998
include Giant-Landover from its acquisition date of October 28, 1998.
U.S. Retail Trade Sales, Store Count and Sales Area by Chain
<TABLE>
<CAPTION>
As of and for the Fiscal Year Ended
-----------------------------------
1999 1998 1997
---- ---- ----
Store Sales Store Sales Store Sales
$ Sales Count Area $ Sales Count Area $ Sales Count Area
------- ----- ------ ------- ----- ------ ------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stop & Shop 6,672 202 8,184 6,187 193 7,735 5,492 187 7,283
Giant-Carlisle 3,432 156 5,157 3,417 149 4,971 3,156 144 4,528
BI-LO 3,001 281 7,336 2,887 266 6,667 2,826 263 6,255
Tops 2,716 248 5,290 2,846 250 5,390 2,817 236 5,142
Giant-Landover 4,512 176 5,528 837 173 5,412 -- -- --
------- ----- ------ ------- ----- ------ ------- --- ------
Total United States 20,333 1,063 31,495 16,174 1,031 30,175 14,291 830 23,208
======= ===== ====== ======= ===== ====== ======= === ======
</TABLE>
The following table gives, for the periods indicated, changes in store count for
the United States:
Changes in Store Count in the United States
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
<S> <C> <C> <C>
Beginning of period 1,031 830 817
Acquired:
Giant-Landover -- 173 --
Opened 67 53 41
Disposed (35) (25) (28)
------ ------ -----
End of period 1,063 1,031 830
====== ====== =====
</TABLE>
Stop & Shop
We acquired Stop & Shop in July 1996. Stop & Shop, which is headquartered in
Quincy, Massachusetts, pioneered the superstore concept in New England in 1982.
At fiscal year end 1999, Stop & Shop operated 202 superstores and conventional
supermarkets located in Massachusetts, Connecticut, Rhode Island and New York.
Giant-Carlisle
Based in Carlisle, Pennsylvania, Giant-Carlisle operated 156 supermarkets at
fiscal year end 1999. The stores operate under the name "Giant" in Pennsylvania,
under the name "Martin's" in Maryland, Virginia and West Virginia and under the
name "Edwards" in New Jersey and New York. We acquired Giant-Carlisle in 1981.
BI-LO
We acquired BI-LO, based in Mauldin, South Carolina, in 1977. At the end of
fiscal year 1999, BI-LO operated 281 supermarkets in South Carolina, North
Carolina, Tennessee, Alabama and Georgia.
Tops
We acquired Tops in March 1991. As of fiscal year end 1999, Tops owned and
operated 117 supermarkets under the
11
<PAGE>
name "Tops Friendly Markets" and 115 neighborhood food stores under the name
"Wilson Farms". In 1999, Tops completed the sale of its 12 Vix discount
drugstores. In addition, 45 Finast stores were renovated, reformatted and
renamed Tops supermarkets in 1999. At fiscal year end 1999, Tops also had seven
independent supermarket franchisees operating under the "Tops Friendly Markets"
name and nine franchise neighborhood food stores. Tops' primary markets are
Buffalo and Rochester, both in New York, and Cleveland, Ohio.
In March 2000, Tops entered into an agreement to acquire Sugar Creek
convenience/gas stores. We expect to complete the acquisition in the second
quarter of 2000. Sugar Creek operates 87 merchandise and fuel outlets in New
York State. The transaction is subject to various conditions including the
satisfactory completion of due diligence and receipt of regulatory approvals.
Giant-Landover
In October 1998, we acquired Giant Food, based in Landover, Maryland. At the end
of fiscal year 1999, Giant-Landover operated a chain of 176 retail stores
selling food, health care items and general merchandise in Maryland, Virginia,
Delaware, New Jersey and the District of Columbia. Giant-Landover also operates
three free-standing drug stores.
General
All of our U.S. supermarket chains, with the exception of Giant-Carlisle, are
serviced from their own distribution centers. Giant-Carlisle distributes meat,
produce and most other perishable items through its own distribution center and
uses third-party wholesalers for the majority of its grocery items.
One common feature of each U.S. subsidiary's strategy has been a focus on
maximizing consumer value, optimizing store sizes and upgrading the quality and
the number of services offered to consumers. Ahold U.S.A. has undertaken a
number of projects to improve operational efficiency by partially centralizing
certain common functions of its subsidiaries to take advantage of possible
economies of scale. Ahold U.S.A. has three integrated companies, American Sales
Company, Ahold Information Services and Ahold Financial Services, which service
its retail operations. American Sales Company provides purchasing and
distribution services in health and beauty care items and general merchandise to
our U.S. subsidiaries. Ahold Information Services operates a data processing
center on behalf of all of our U.S. subsidiaries, facilitating their information
systems operations. Ahold Financial Services, which will be fully operational by
the end of 2000, will provide all of our U.S. subsidiaries accounting and
financial services.
Efficiency has been further improved by the establishment of a number of working
groups, composed of representatives of each of our U.S. subsidiaries, whose
objective is to identify and implement operational "best practices" and
potential efficiency improvements across the various subsidiaries. Our U.S.
subsidiaries have initiated projects that include advanced product purchasing
systems, joint private label purchasing and a more unified approach to store
construction.
Retail Trade in Europe
We are the leading retailer in The Netherlands and have continued to expand in
other European countries outside of The Netherlands. The following table sets
out, for the periods indicated, sales in millions of euros, store counts and
sales area, in thousands of square feet, for our retailing operations in Europe:
12
<PAGE>
Retail Trade Sales, Store Count and Sales Area by Business in Europe
<TABLE>
<CAPTION>
As of and for the Fiscal Year Ended
-----------------------------------
1999 1998 1997
---- ---- ----
Store Sales Store Sales Store Sales
Sales Count Area Sales Count Area Sales Count Area
----- ----- ------ ----- ----- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Netherlands
Albert Heijn company stores 4,375 516 6,524 4,313 517 6,303 4,075 512 6,140
Albert Heijn franchising 730 175 1,694 710 169 1,588 676 168 1,494
Etos 268 460 790 233 395 769 200 350 535
Gall & Gall 215 488 436 218 485 434 212 471 423
Other 78 134 214 110 185 316 127 249 377
Portugal 1,325 196 2,492 1,187 174 2,182 1,056 156 2,035
Czech Republic 453 173 1,899 325 149 1,393 215 122 799
Poland 221 115 1,063 162 80 731 99 53 482
Spain 335 185 1,375 47 15 142 62 17 177
------ ----- ------ ----- ----- ------ ----- ----- ------
Total Europe 8,000 2,442 16,487 7,305 2,169 13,858 6,722 2,098 12,462
====== ===== ====== ===== ===== ====== ===== ===== ======
</TABLE>
The following table gives, for the periods indicated, the changes in store
count, including franchise stores, for Europe:
Changes in Store Count in Europe
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Beginning of period 2,169 2,098 1,916
Opened/acquired 379 242 231
Disposed/closed (106) (171) (49)
----- ----- -----
End of period 2,442 2,169 2,098
===== ===== =====
</TABLE>
The Netherlands
Albert Heijn is our primary food retailer in The Netherlands. At fiscal year end
1999, Albert Heijn had 691 stores, including 175 franchise stores, consisting
of:
. 190 stores with sales areas of less than 8,600 sq. ft. (800 m/2/);
. 434 stores with sales areas between 8,600 sq. ft. (800 m/2/) and 18,275 sq.
ft. (1,700 m/2/); and
. 67 stores with sales areas over 18,275 sq. ft. (1,700 m/2/).
The Albert Heijn store formula consists of offering customers a wide range of
competitively priced products and a high level of service in innovative stores.
Private label goods form an important part of Albert Heijn's product selection
and represented approximately 39% of its 1999 sales. Albert Heijn operates five
distribution centers for grocery products and a number of processing and other
distribution facilities for produce. In 1999, we sold our meat processing
companies.
In early 1998, Albert Heijn introduced a customer loyalty card program, which
provides insights into customer profiles and buying behavior, while offering
discounts and buying incentives. As of fiscal year end 1999, the loyalty card
program had more than four million participants.
We believe that these and other innovative improvements are leading to increased
productivity levels in Albert Heijn stores, as indicated by an increase in sales
per average full-time equivalent employee from EUR 181,000 in 1996 to EUR
187,000 in 1999.
Albert Heijn operates its home delivery services under the name "Albert Heijn
Thuisservice". The service allows customers to place orders through a variety of
electronic media for home or other delivery, and over the years, we have
improved our internet catalog and distribution.
13
<PAGE>
At the end of fiscal year 1999, Albert Heijn also operated through 175 franchise
stores. These franchise stores typically operate in smaller market areas under
the Albert Heijn formula and are not distinguishable from company-owned stores.
For each franchise, Albert Heijn has agreed to provide:
. merchandise at wholesale prices, including a franchise fee;
. various support services, including logistical and warehouse services; and
. management support and training, marketing support and administrative and
financial assistance.
Franchise agreements typically have a term of five years, and are renewable for
additional five-year terms. Franchise stores are primarily smaller stores, with
37% of franchise stores having a sales area of less than 8,600 sq. ft.
(800 m/2/) while company-owned stores are generally larger, with only 24% of
company stores having a sales area of less than 8,600 sq. ft. (800 m/2/).
Other retailing in The Netherlands includes our specialty retailing operations,
which are organized as a separate group. The companies in this group include
Gall & Gall and Etos. Gall & Gall operates wine and spirit stores, and Etos
operates stores specialized in health, beauty care and natural products. At
fiscal year end 1999, Gall & Gall operated 335 stores and supplied 153 franchise
stores while Etos operated 199 stores and supplied 261 franchise stores. Other
specialty operations include confectionery stores, operating under the name
Jamin.
Portugal
In 1992, we established JMR, a partnership with Jeronimo Martins, SGPS, S.A., a
leading Portuguese food processor, supplier and retailer. JMR owns both Pingo
Doce, which at the end of fiscal year 1999 operated 163 supermarkets, and Feira
Nova, which at the end of fiscal year 1999 operated 21 hypermarkets. Pingo Doce
is a major supermarket chain in Portugal, offering a wide variety of products at
competitive prices. The Feira Nova hypermarkets offer a wide variety of food and
non-food products at low prices.
In January 2000, we announced that discussions are pending with JM to
significantly extend and enlarge our existing partnership. We intend to
establish a new 50/50 partnership with JM, which could include the current
retail and wholesale operations of JM in Portugal and Madeira. The new
partnership may also include JM's Polish operations and its Se Supermarkets in
Brazil as well as our operations in the Czech Republic, Poland and Spain. On
April 12, we and JMR decided to suspend discussions about the future of our
cooperation until September 2000. If the new partnership is not entered into,
then the partners will consider to either continue or terminate the existing
partnership. In the meantime, there will be no changes to the structure of
operations of our current partnership, JMR.
Czech Republic
Ahold Czech Republic, formerly known as Euronova, an indirect 99% owned
subsidiary, started food retail operations in the Czech Republic in 1991. At the
end of 1999, Ahold Czech Republic operated 173 food retail stores, making it one
of the largest food retailers in the country as measured by sales volume. As of
the fiscal year end 1999, we had 88 stores operating under the name "Mana", 63
discount stores operating under the name "Sesam", 19 "Prima" general merchandise
stores and three "Hypernova" hypermarkets.
Poland
In 1995, we established a 50/50 joint venture with German retailer Allkauf-
Gruppe to develop retail operations in Poland. In January 1999, we purchased
Allkauf-Gruppe's share of the joint venture. This company was renamed Ahold
Polska in February 1999. In 1999, Ahold Polska acquired eight Centrum
supermarkets. As of fiscal year end 1999, Ahold Polska operated 78 discount food
stores operating under the name Sesam, 35 supermarkets operating under the name
Max and two hypermarkets in Poland.
Spain
In 1996, we established Store2000, a joint venture with the parent company of
Caprabo, a privately-held food retailing company based in Barcelona, Spain. In
October 1998, we sold our interest in the joint venture. In 1998, we acquired 15
stores from Longinos Velasco through our wholly-owned subsidiary Ahold
SuperMercados. These stores are located
14
<PAGE>
primarily in the Madrid area. In January 1999, we expanded our operations in
Spain by acquiring Dialco, Dumaya, Castillo del Barrio and Guerrero, four
supermarket companies located in southern Spain. These chains operated a total
of 160 stores at the time of the acquisitions. During the course of 1999, we
acquired Mercasol and Las Postas supermarket chains which operated a total of
ten stores in Spain. As of fiscal year end 1999, we operated 185 stores in
Spain.
In January 2000, we acquired Kampio, a prominent regional supermarket chain in
Catalonia. The chain operates 39 large supermarkets, of which 24 are located in
Barcelona, and had sales of approximately EUR 100 million in 1999. We intend to
develop further and expand in Spain through our existing operations as well as
through acquisitions.
Scandinavia
In December 1999, we entered into an agreement to acquire 50% of ICA AB, the
parent company of the ICA Group. The ICA Group is a prominent, integrated food
retail and wholesale group, servicing over 3,100 supermarkets, superstores,
hypermarkets and discount stores in Sweden, Norway and the Baltic states, with
annual net sales of EUR 6.6 billion in the fiscal year 1999. The present ICA
Group was formed in early 1999 when ICA AB acquired an additional 55% of
Norway's Hakon Gruppen, which became a wholly-owned subsidiary. In August 1999,
the ICA Group entered into a joint-venture with Statoil, acquiring 50% of
Statoil Retail. Statoil Retail generated 1999 sales of EUR 2.9 billion. Statoil
Retail operates and services 1,500 Statoil gas stations and forecourt stores in
Denmark, Norway and Sweden. Statoil Retail is not consolidated in the financial
statements of the ICA Group.
In Sweden, the ICA Group supports over 2,000 stores, most of which are retailer-
owned and operated. The retail stores associated with the ICA Group have been a
market leader in food retail in Sweden since 1966, with a market share of
approximately 35% in 1999. In Norway, Hakon Gruppen AS services approximately
1,100 stores, which are either wholly-owned or retailer-owned with franchise
agreements. The wholly-owned stores generated approximately 55% of sales in
Norway in 1999. In Norway, the ICA Group had a market share of approximately 28%
in 1999, making it the second largest in terms of retail market share. In
addition, the ICA Group owns stores in two Baltic countries: twenty in Latvia
and one in Estonia, and operates 11 stores through a joint venture in Lithuania.
The transaction is subject to certain conditions, including ICA Forbundet AB
receiving the necessary approvals from the ICA retailers and Canica AS obtaining
a favorable tax ruling in Norway in connection with the transaction. We expect
to complete the transaction in the second quarter of 2000.
The joint venture with the ICA Group will give us immediate access to the
developed markets of Sweden and Norway. At the time of the initial announcement
of the transaction, we anticipated annual synergies of EUR 33 million. We
believe this now to be a conservative estimate. This is because, in addition to
traditional areas of synergies, such as in procurement and IT, we expect to
benefit from ICA's experience in the area of loyalty cards, financial services
and convenience store formats. We also anticipate opportunities for the exchange
of knowledge and best practices with regard to the ICA Group's food supply,
supermarket franchise and wholesaling operations, which may be compared to U.S.
Foodservice, Albert Heijn and Schuitema, respectively. We expect margin
enhancement at the ICA Group to be driven by greater operational efficiency,
increased penetration of private label brands and non-food products, and
increases in retail sales in Norway and the Baltics. The joint venture will
enhance our position as a food provider in Europe, with leading market positions
in both Sweden and Norway and the opportunity to expand in the Baltic countries
and elsewhere in Northern Europe.
Retail Trade in Latin America
In December 1996, we entered the Latin American market through an agreement with
Bomprecopar S.A. Under this agreement we indirectly acquired 50% of the voting
shares and 50.1% of the total capital of Bompreco. Bompreco is the leading food
retailer in northeastern Brazil. In June 1997, Bompreco acquired SuperMar, a
regional supermarket chain in northeastern Brazil, which was subsequently
renamed Bompreco Bahia S.A. All Bompreco Bahia stores operate under the Bompreco
and Hyper Bompreco names. In May 1999 Bompreco acquired the six store chain,
Petitpreco. At the end of fiscal year 1999, Bompreco operated 100 supermarkets,
hypermarkets and other food retail stores, including 49 Bompreco Bahia stores.
15
<PAGE>
We continued to develop our Latin American operations through the formation of a
50% owned partnership with Velox Retail Holdings in January 1998. The
partnership controls a 98.1% stake in Disco, the largest supermarket company in
Argentina based on sales, and a 69% interest in Santa Isabel, the second largest
supermarket company in Chile and Peru, based on sales, and with operations in
Paraguay and Ecuador. In May 1999, Disco acquired Supamer and Gonzalez, which
operated a total of 75 stores at the time of the acquisition. In 1999, Disco
acquired the eight store Pinocho supermarket chain. Disco operated 213 stores
with a total selling area of 2,392,000 sq. ft. at fiscal year end 1999. In
January 2000, Disco agreed to acquire Supermercados Ekono, which operates ten
large supermarkets in Buenos Aires.
At year end 1999, Santa Isabel operated 95 stores, with 62 stores in Chile, 24
in Peru, seven in Paraguay and two in Ecuador and with a total selling area of
1,832,000 sq. ft.
In December 1999, we established a new 50/50 partnership, Paiz Ahold, which
controls an 80.5% stake in La Fragua, the leading supermarket and hypermarket
company in the Central American republic of Guatemala with a presence in El
Salvador and Honduras. The partnership intends to expand the retail activities
of La Fragua in the region. As of fiscal year end 1999, La Fragua operates 93
stores in Guatemala, 20 stores in El Salvador and six in Honduras. These 119
stores comprised 83 discount stores, 26 supermarkets, four hypermarkets and six
other stores.
Retail Trade in Asia Pacific
In 1999, we have restructured our presence in Asia Pacific, focusing on Thailand
and Malaysia. As a result, we sold our stake in the unprofitable operation in
China.
Our partnership in Singapore operated 14 stores that, due to the restructuring
referred to above, were sold to Dairy Farm International during the fourth
quarter of 1999. This 60% owned partnership was formed in 1996, together with
the 60% owned Malaysian partnership, with companies of the Kuok Group. The
Malaysian partnership, Ahold Kuok Malaysia, acquired the Parkson and Looking
Good store chains in 1998, which operated 39 stores at the end of fiscal 1999.
In 1999, we increased our stake in the Malaysian partnership to 65% (after a
reduction in 1998 to 52%).
Early in 1997, we entered into a 49%-owned consolidated partnership in Thailand
with the Central Robinson Group, CRC Ahold Thailand. In 1998, we acquired 100%
ownership of the partnership, subject to repurchase options of up to 50% of the
outstanding shares granted to the Central Robinson Group. At the end of 1999,
the partnership operated 41 stores in Thailand.
In July 1997, we entered into a technical assistance agreement with the PSP
Group in Indonesia in connection with the potential development of a supermarket
chain in that country. At the end of 1999, the PSP Group operated nine stores in
Indonesia.
At fiscal year end 1999, we, through partnerships, operated 80 retail stores in
Asia Pacific. We believe that, despite the losses in 1999, the Malaysian, Thai
and Indonesian retail food market offer medium to long term opportunities for
expansion and growth.
Food Wholesaling and Food Supply
The Netherlands
We conduct food wholesaling through Schuitema, a publicly-traded Dutch company
in which we own a 73% stake, and supply food through Deli XL, the new marketing
name for Grootverbruik Ahold and Gastronoom. Schuitema provides goods and
services to approximately 450 independent food retailers operating under various
trade names and formats. Schuitema and certain independent food retailers are
members of an association that has developed and controls several store formats,
including C1000, Spar Voordeelmarkt, Kopak and Casper. Schuitema services these
independent food retailers, which accounted for over 90% of Schuitema's sales
for fiscal year 1999. Schuitema also supports these independent member
retailers, on a commercial level, and in some instances, financially. In
December 1999, Schuitema announced its intention to acquire the Dutch Hermans
Group, which operates 125 A&P supermarkets and six hypermarkets. The Dutch anti-
trust authorities are currently reviewing the transaction.
16
<PAGE>
We have established ourselves in the Dutch food supply market, primarily through
Grootverbruik Ahold. Grootverbruik Ahold supplies hospitals, schools, other
institutional customers and hospitality enterprises, including hotels and
restaurants. In July 1999 we finalized our acquisition of Gastronoom, a food
supplier to the Dutch hospitality sector, and both Grootverbruik Ahold and
Gastronoom act jointly under the name Deli XL.
United States
In March 2000, we entered into a merger agreement to acquire U.S. Foodservice,
the second largest food-service distributor in the United States based on sales.
U.S. Foodservice, with annual net sales of $6.2 billion for its fiscal year
ending July 3, 1999, distributes food and related products to restaurants and
institutional food-service establishments across the United States. U.S.
Foodservice is a national marketer and distributor of food and food related
equipment, services and supplies to a range of commercial and institutional
customers. Overall U.S. Foodservice currently provides over 143,000 customers of
varying size with a broad range of items including national signature and
private-label brands as well as kitchen equipment and restaurant supplies. The
company employed approximately 13,000 people as of the end of 1999. The
acquisition of U.S. Foodservice will provide us with access to a new food
distribution channel. We expect to complete the transaction in April 2000.
The proposed acquisition in the highly fragmented food-service distribution
industry will create a number of unique opportunities for growth, innovation,
cost reduction and synergies. With access to a larger share of the U.S. "food
dollar", we expect to show faster growth in the United States. Together with
U.S. Foodservice, we have identified opportunities for innovation between
institutional and retail businesses that will benefit consumers in both
industries and synergies, which may amount to between $75 and $100 million per
annum, once fully phased in.
Real Estate
In 1989, we established a wholly-owned subsidiary, Ahold Real Estate Company or
ARC. ARC is primarily engaged in acquiring and developing strip centers and
store locations in the United States where our stores will be anchor tenants. At
the end of fiscal year 1999, ARC owned 19 strip centers or free-standing stores
and had two developments in progress.
Ahold Vastgoed or AVG, a 100%-owned Dutch real estate subsidiary, is engaged in
the acquisition, development and management of store locations in The
Netherlands. At fiscal year end 1999, it managed or owned approximately 2,100
locations, of which about 56% were rented to our Dutch subsidiaries.
Construction of new store locations and enlargement of existing locations in The
Netherlands is subject to strict building regulations, hence the availability of
scarce selling space at attractive locations is an important factor in
competition among Dutch retail companies.
Other Activities
Our other activities primarily include a food production company "Marvelo",
operating as an independent profit center. The company is principally engaged in
producing a portion of Albert Heijn's private label products and selling to
third parties. Major product groups include coffee, tea and wine.
Unconsolidated Companies
We had investments of EUR 132 million in unconsolidated companies at the end of
1999, relating primarily to investments by Schuitema in an unconsolidated
company "Eembrug" which owns a distribution center and real estate in The
Netherlands. Other investments include our interest in "Luis Paez SA", a Spanish
wine producer.
European Cooperative Association
We are a member of a group of 11 European retailers cooperating in AMS Marketing
Service AG, a Swiss company engaged in organizing and supervising active
cooperation between retailers and manufacturers in Europe to reduce distribution
and production costs.
17
<PAGE>
E-Commerce
Business-to-customer
In addition to traditional food retailing channels, sales from existing or
expanded e-commerce activities at several subsidiaries contributed approximately
EUR 61 million to our net sales in 1999. The majority of our subsidiaries
currently maintains websites, six of which facilitate electronic ordering and
home delivery.
In the United States, Stop & Shop was in a cooperative agreement for home
delivery services, however, in March 2000, Stop & Shop launched its own e-
commerce initiative, including an agreement with Priceline.com.. Giant Landover
also participates in Priceline.com's business-to-customer initiative.
In the Netherlands, Albert Heijn continues home delivery services under the name
"Albert Heijn Thuisservice". This service allows customers to place orders
through a variety of electronic media for home delivery. In the fall of 1999,
the specialty chain Gall & Gall became active in business-to-consumer e-commerce
activities through the introduction of an information and order entry website.
In Latin America, our Argentine partnership operation, Disco S.A., provides home
delivery services with electronic ordering.
Our e-commerce initiatives are expected to gather pace upon the completion of
our acquisition of U.S. Foodservice, which has an active e-commerce initiative
for both business-to-business and business-to-consumer.
Through NextDayGourmet.com U.S. Foodservice offers restaurant equipment,
supplies and other services.
Business-to-business
In 1999, our business-to-business sales conducted electronically, including
Electronic Data Interchange, amounted to 60% and 80% of grocery procurement at
Albert Heijn and our U.S. subsidiaries, respectively. Our business-to-business
sales conducted via the internet are expected to increase significantly.
On March 31, 2000, we announced our participation in the WorldWide Retail
Exchange ("WWR Exchange"), which is expected to begin operations in mid-2000.
The WWR Exchange is a web-based, business-to-business exchange designed to
facilitate simplified trading between retailers and suppliers, distributors and
other partners. Initially we will own 5% of the share capital in the new
venture. Participation in the Exchange is anticipated to result in lower supply
chain costs for participating retailers. We expect these savings to rapidly
exceed the cost of our investment within the first three years.
Employees
The average number of employees employed by us in fiscal year 1999 were:
. 145,394 in the U.S.;
. 89,128 in Europe;
. 46,924 in Latin America; and
. 10,536 in Asia Pacific.
A large portion of these 291,982 employees were part-time employees. At the end
of fiscal year 1999, we had 219,587 full-time employee equivalents compared to
201,461 at the end of 1998 and 148,615 at the end of 1997. The number of
employees rose in 1999 primarily because of acquisitions and opening of new
stores.
18
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
As of fiscal year end 1999, we operated 3,324 retail stores and 163 support
facilities (warehouse/distribution centers, offices and food processing
facilities). Of these locations, 32% were owned by us, 13% were held under
capital leases and 55% were held under operating leases. The following table
summarizes our property locations as of fiscal year end 1999, by industry and
geographic segment:
<TABLE>
<CAPTION>
Percentage of locations
-----------------------
Retail Support Capital Operating
Stores facilities Total Owned lease lease
------ ---------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Retail Trade
- ------------
United States 1,047 47 1,094 13% 42% 45%
Europe 1,789 63 1,852 27% -- 73%
Latin America 408 47 455 38% 1% 61%
Asia Pacific 80 6 86 -- -- 100%
----- --- -----
3,324 163 3,487 32% 13% 55%
===== === =====
Food Wholesaling and Food Supply
- --------------------------------
The Netherlands -- 26 26 8% -- 92%
Other Activities
- ----------------
The Netherlands -- 5 5 -- -- 100%
</TABLE>
Retail Trade
In the United States, our subsidiaries operated 1,047 retail stores, 28
warehouse/distribution centers (18 owned and 10 under lease) and 19 office
locations at the end of fiscal 1999. All our operations in the United States are
in the eastern part of the country. The terms of the leases in the United States
typically range from 10 to 25 years and contain renewal options. Also in the
United States, our retail subsidiaries lease or own 183 other sites which are
generally former supermarket locations or sites held for future development. Of
these additional sites not in company use, 74% have been subleased to third
parties.
In The Netherlands, our four retail chains used five warehouse/distribution
centers (of which two are owned by us), ten production facilities and 29 office
locations in support of the operations as of the end of fiscal 1999. We operate
food stores in all provinces in The Netherlands, and have 516 company-owned
supermarkets and 604 other company and franchise retail outlets. The stores in
The Netherlands are generally rented under contracts which provide for non-
cancelable, five to ten year rental periods with renewal options, and with rents
which may be adjusted annually based on predetermined indices. Our retail
companies in The Netherlands lease or own an additional 224 locations, almost
all of which are leased to franchisees.
At the end of fiscal 1999, we had 196, 173, 115 and 185 retail stores in
Portugal, the Czech Republic, Poland and Spain, respectively. Of these stores, a
total of 106, 69, 78 and 167 stores operate under leases in Portugal, the Czech
Republic, Poland and Spain, respectively, and the remainder are owned by us.
Support facilities in these countries consist of 15 warehouses and distribution
centers (of which eight are owned by our subsidiaries) and four office locations
(of which one is owned by our subsidiaries). Lease terms generally range from
five to ten years, with renewal options. Additionally, 96 other locations are
controlled by our subsidiaries in these countries, of which substantially all
are subleased to third parties. These locations consist primarily of smaller
retail areas shopping centers.
In Latin America, at the end of fiscal 1999, our partnerships operated 408
retail stores (152 owned), 34 warehouse/distribution centers (15 owned) and 13
office locations (seven owned), excluding the stores operated by La Fragua. The
leased locations in Latin America operate under leases with terms of four to ten
years with renewal options.
At the end of fiscal year 1999, our Asia Pacific operations included 80 retail
stores, three warehouse/distribution centers
19
<PAGE>
and three offices. All of the locations operated under leases with terms of five
to ten years, except for one owned warehouse/distribution center.
Food Wholesaling and Food Supply
Schuitema, our Dutch wholesaler, serviced 453 affiliated food stores from eight
distribution centers (all eight are held under operating leases) and utilized
two offices at fiscal year end 1999. Additionally, Schuitema owns 137 locations
and leases another 269 locations, almost all of which are in turn leased to
independent retailers utilizing Schuitema's retail formulas and wholesale
services. We operate 14 distribution centers under the new marketing name Deli
XL. These distribution centers are leased and two offices to support its sales
to restaurants, caterers and similar organizations.
Other Activities
Other activities in the above table consist of one leased food-processing
facility that is utilized by our Dutch food production company as well as
production company offices and corporate offices.
Real Estate Companies
Our real estate companies, ARC operating in the United States and AVG operating
in Europe, are engaged in the acquisition, development and management of retail
sites in support of our retail operations. In doing so, the real estate
companies may own or lease individual store sites, shopping centers or
buildings. Real estate locations controlled by ARC or AVG and rented to our
consolidated subsidiaries are included in the above table under the segment
using the property and are included as owned or leased based on the interest of
ARC or AVG.
In addition to the locations rented to our companies, the real estate companies
may own or lease locations which are adjacent to store sites, locations held for
future development or other sites related to securing and developing sites for
our retail stores.
ARC owns 19 retail centers or self-standing stores. Of these, we are the anchor
tenant in all but three of the retail centers, while other, smaller shops in the
centers are rented to third-party retailers. Additionally, at January 2, 2000,
ARC had two retail centers under development.
In The Netherlands, AVG controls 2,082 locations, of which about 68% are leased
under operating leases and 32% are owned. Over 56% are in turn leased to our
consolidated subsidiaries and about 11% are leased to franchisees. The remaining
690 locations (split between retail sites and apartments located adjacent to our
retailers) are leased to third parties.
ITEM 3. LEGAL PROCEEDINGS
Prior to July 1, 1992, Stop & Shop assigned certain leases to Bradlees, Inc. or
"Bradlees" which was, at the time, a subsidiary of Stop & Shop. On June 23,
1995, Bradlees filed for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code in the Southern District of New York. On February 2,
1999, Bradlees emerged from Chapter 11. As part of its plan of reorganization,
upon its emergence from bankruptcy, Bradlees assumed approximately 102 leases, a
majority of which were leases that had been assigned to Bradlees by Stop & Shop.
Under certain circumstances, Stop & Shop will have a liability under these
leases in the event of non-performance by Bradlees. We have recorded a provision
of approximately EUR 31 million at January 2, 2000 related to this exposure. We
do not believe that any remaining contingent liability will be material.
We are currently involved in two litigation matters arising out of an Agreement
and Plan of Merger, dated March 9, 1999 (the "Merger Agreement"), between us,
our subsidiary Ahold Acquisition, and SMG-II Holdings Corp. ("SMG-II"), the
indirect parent of the entity owning the Pathmark chain of supermarkets.
Pursuant to the Merger Agreement, Ahold Acquisition was to acquire the Pathmark
stores by merging with SMG-II. In accordance with the terms of the Merger
Agreement, we terminated the Merger Agreement on December 16, 1999 because we
did not obtain the necessary governmental antitrust approvals for the merger.
Prior to our termination, SMG-II alleged that we had breached the Merger
Agreement by failing to use "best efforts" to obtain all necessary approvals. We
commenced an
20
<PAGE>
action seeking a declaratory judgment in New York state court that we did not
breach the Merger Agreement and that we properly terminated the Merger
Agreement. SMG-II filed a counterclaim seeking damages for alleged breaches of
the Merger Agreement. The damages sought by SMG-II are not quantified. We have
replied to SMG-II's counterclaims and we also filed an amended complaint seeking
damages for SMG-II breaches of the Merger Agreement. The parties are taking
discovery on these claims.
In a separate matter, a holder of preferred stock in Supermarkets General
Holding Corporation ("SMG"), a subsidiary of SMG-II, commenced a class action in
a Delaware state court challenging the terms of the transaction contemplated by
the Merger Agreement, essentially claiming that the consideration offered by
Ahold Acquisition was unfairly allocated between SMG's preferred stockholders
and its common stockholders. The parties to this litigation reached a class
settlement dated June 9, 1999 (the "Settlement") and, as a result, Ahold
Acquisition revised the tender offer. Following our termination of the Merger
Agreement, the preferred stockholder filed a motion to enforce the Settlement.
Ahold Acquisition asserts that it has complied fully with the Settlement, and we
also moved for a stay of this action pending resolution of the New York action
described above. Those matters were argued on April 3, 2000. The court directed
the parties to file supplemental briefs, which will be completed by May 1, 2000.
The court indicated that it would rule thereafter.
We believe that we have good defenses to both of these claims and that any
damages awarded against us would not be material to us. Accordingly, we believe
these cases will not have a material effect on our financial position or results
of operations.
There are no other material pending legal proceedings, other than ordinary
routine litigation incidental to us and our subsidiaries' businesses, to which
we or any of our subsidiaries is a party or of which any of our property is the
subject.
ITEM 4. CONTROL OF REGISTRANT
We are not directly or indirectly owned or controlled by another corporation or
by any foreign government. Except as described under "Cumulative Preferred
Shares" below, there are no arrangements known to us that may, at a subsequent
date, result in a change in our control.
Cumulative Preferred Shares
In March 1989 we, together with Stichting Ahold Continuiteit ("SAC" or, in
English, "Ahold Continuity Foundation"), entered into an agreement (the "option
agreement"). This option agreement was amended and restated in April 1994 and
March 1997. Pursuant to this option agreement, SAC was granted an option to
acquire from us, from time to time until March 2004, cumulative preferred shares
up to a total par value that is equal to the total par value of all issued and
outstanding shares of our capital stock at the time of exercising the option. We
have the right, pursuant to the option agreement, to place cumulative preferred
shares with SAC up to a total par value that is equal to the total nominal value
of all issued and outstanding shares of our capital stock at the time of placing
the cumulative preferred shares. The holders of the cumulative preferred shares
are entitled to 2,000 votes per share. Subject to limited exceptions, each
transfer of cumulative preferred shares requires the approval of the Corporate
Executive Board. Cumulative preferred shares can only be issued in registered
form. No share certificates are issued for cumulative preferred shares.
We may stipulate that only 25% of the nominal value will be paid upon
subscription for cumulative preferred shares until payment in full of the par
value is later called by us. No cumulative preferred shares have been issued or
were outstanding during 1999, 1998 or 1997.
The option agreement and the cumulative preferred shares have certain anti-
takeover effects. The issuance of all authorized cumulative preferred shares
will cause substantial dilution of the effective voting power of any
shareholder, including a shareholder that attempts to acquire us, and could have
the effect of delaying, deferring and preventing a change in our control.
SAC is a non-membership organization with a self-appointed managing board,
organized under the laws of The
21
<PAGE>
Netherlands. Its statutory objectives are to enhance our continuity and identity
in case of a hostile take-over attempt. As of March 31, 2000, the members of the
board of the SAC were:
Name Principal occupation or relation to Royal Ahold
Voting members
J.J. Slechte Former President of Shell Nederland B.V.
A.M. Knulst Former Managing Director of BV Trustkantoor Gestor
P.J. van Dun Former Executive Vice President of Royal Ahold
Non-voting members
H. de Ruiter Chairman of the Supervisory Board of Royal Ahold
C.H. van der Hoeven President of the Corporate Executive Board of Royal Ahold
Significant ownership of voting shares, including cumulative preferred financing
shares
Under the 1996 Netherlands' Act of Disclosure of Holdings in Listed Companies,
or the Disclosure Act, any person who, directly or indirectly, acquires or
disposes of an interest in the capital or the voting rights of a public limited
liability company incorporated under Dutch law with an official listing on a
stock exchange within the European Economic Area, must give a written notice to
the company of such acquisition or disposal, if as a result of such acquisition
or disposal the percentage of legal or beneficial capital interest or voting
rights held by such person falls within another percentage range as compared to
the percentage range held by such person prior to such acquisition or disposal.
The percentage ranges are 0-5, 5-10, 10-25, 25-50, 50-66/2//3 and over 66/2//3.
As of March 31, 2000, the only persons known by us to own of record or
beneficially more than 5% of any class of capital interest and/or our voting
rights are the following institutional investors which notified us of their
capital interest in us following the issuance of the cumulative preferred
financing shares on June 25, 1996: Fortis N.V.; ING Groep N.V.; Cooperatie
Achmea U.A.; and AEGON N.V. As of March 31, 2000, no directors or officers were
among the holders of registered common shares.
With respect to the bearer common shares, we do not maintain a register of
holders of such shares. Therefore, we do not know of the existence and identity
of parties, if any, which own more than 10% of our common shares. We do not know
the number and percentage of common shares in bearer form held by directors and
officers as a group.
ITEM 5. NATURE OF TRADING MARKET
The Official Segment of Amsterdam Exchanges N.V.'s stock market, also referred
to as Amsterdam Exchanges (formerly known as the AEX-Stock Exchange) is the
principal trading market of our common shares. As of March 31, 2000, we were the
ninth largest company quoted on Amsterdam Exchanges (symbol "AHLN") in terms of
market capitalization (EUR 17.6 billion). Our common shares are also listed on
the Swiss Exchange. The common shares trade in the United States on the New York
Stock Exchange in the form of American Depositary Shares or ADSs and are
evidenced by American Depositary Receipts or ADRs. The ADRs trade under the
symbol "AHO".
The Depositary for the ADSs is The Bank of New York (the "Depositary"). Each ADS
evidences the right to receive one common share deposited under the Deposit
Agreement for the ADSs. We have been informed by the Depositary that in the
United States, as of January 2, 2000, there were 10,491,243 ADSs outstanding and
3,437 record owners.
As of January 2, 2000, the register of holders of registered common shares
contained no names of holders having their registered address in the United
States.
The table below sets forth the high and low last sales prices during the periods
indicated for our common shares on Amsterdam Exchanges and the closing prices
for our ADSs on the NYSE. The quarters used are our fiscal quarters.
Prior to January 1999, Amsterdam Exchanges quoted sales prices in Dutch
guilders. Effective January 1999, Amsterdam Exchanges quotes sales prices in
euro only. The prices indicated below in euros for the fiscal year 1998 have
been
22
<PAGE>
translated into euros at the fixed rate of EUR 1 = NLG 2.20371.
<TABLE>
<CAPTION>
Amsterdam Exchanges NYSE
High Low High Low
in EUR per common share in $ per ADR
<S> <C> <C> <C> <C>
Fiscal Year 2000
Through March 31, 2000 29.75 21.25 31/1//8 20/7//8
Fiscal Year 1999
First quarter 35.80 32.40 41/3//8 35/9//16
Second quarter 38.55 32.90 41/9//16 34/3//16
Third quarter 35.65 30.45 37/1//16 32/7//8
Fourth quarter 32.35 25.61 32/15//16 25/7//8
Fiscal Year 1998
First quarter 31.76 23.46 34/5//16 25
Second quarter 31.08 27.45 34/3//16 30/3//16
Third quarter 30.04 24.23 32/3//4 27
Fourth quarter 31.76 23.87 37 29/1//8
</TABLE>
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
Currently, there are no limitations other than those described in Item 7
"Taxation" below regarding the payment by us to non-residents with regard to the
remittances of dividends, or any other payments to or from non-resident holders
of our securities.
The Disclosure Act (see Item 4 "Control of Registrant" for a more complete
description) provides that a civil court can issue an order suspending voting
rights of a shareholder up to three years for non-compliance with the reporting
requirements under that Act. This penalty is applicable to both resident and
non-resident holders of common shares. The existing laws and regulations of The
Netherlands impose no other limitations on non-resident or foreign owners with
respect to holding or voting common shares than on resident owners. Our Articles
of Association do not impose any limitation on (i) remittances to or from abroad
regarding dividends or capital or (ii) rights of non-resident or foreign owners
to hold or vote common shares.
ITEM 7. TAXATION
The information set out below is only a summary of certain material tax
consequences of the purchase, ownership and disposition of ADSs. Dutch, U.S. and
other taxation may change from time to time. Prospective and current investors
should consult their professional advisors as to the tax consequences of the
purchase, ownership and disposition of our common shares or ADSs, including in
particular the effect of tax laws of any other jurisdiction.
Income and Withholding Tax
In general, for Dutch tax purposes, holders of ADSs will be treated as the
beneficial owners of our shares represented by such ADSs. Dividends on our
common shares are subject to Dutch withholding tax of 25%. Pursuant to the
Income Tax Convention between the United States and The Netherlands of December
18, 1992, dividends paid by us on our common shares to a resident of or
corporation organized in the United States, having no permanent establishment or
business property in The Netherlands, qualifying as a U.S. resident for the
purpose of that Convention and is entitled to the benefits of that convention,
qualify for a reduction of Dutch withholding tax on dividends from 25% to 15%
(5% if the beneficial owner is a corporation which holds directly at least 10%
of the voting power of our shares).
Where a resident of or a corporation organized in the United States has a
permanent establishment in The Netherlands
23
<PAGE>
and our common shares form a part of the business property of such permanent
establishment, dividends received on such shares are included in the profit of
such establishment and subject to Dutch income tax or corporation tax (assuming
it relates to a shareholding of less than 5%), as the case may be. The
Netherlands' withholding tax on dividends will be applied at the full rate of
25% and allowed as a credit against the Dutch income tax on such income. Such
tax will be treated as foreign income tax eligible for credit against the
shareholder's United States income taxes.
A qualifying U.S. pension trust or charitable or other exempt organization may
be exempt from Dutch withholding tax on dividends from its investment in our
common shares. In order to qualify for this exemption, a pension trust must be a
resident of the United States, generally exempt from U.S. taxes and constituted
and operated exclusively to administer or provide benefits under one or more
funds or plans established to provide pension, retirement or other employee
benefits.
In order to qualify for this exemption, a U.S. charitable organization must be a
resident of the United States, exempt from U.S. taxes and would be exempt from
Dutch taxes if it were organized and carried on all of its activities in The
Netherlands.
Net Wealth Tax
A holder of common shares or ADSs will not be subject to Dutch net wealth tax in
respect of the common shares or ADSs provided that such holder is not an
individual or, if such holder is an individual:
(1) the holder is not a resident or deemed resident of The Netherlands; and
(2) the holder does not have an enterprise, or an interest in an enterprise,
which carries on business in The Netherlands through a permanent
establishment or a permanent representative to which or to whom the common
shares or ADSs are attributable.
Gift, Estate or Inheritance Tax
No gift, estate or inheritance tax will arise in The Netherlands in respect of
the transfer or deemed transfer of common shares or ADSs by way of a gift or
inheritance from a shareholder that is neither resident nor deemed resident in
The Netherlands, unless either such shareholder has an enterprise or an interest
in an enterprise that is, in whole or in part, carried on through a permanent
establishment or permanent representative to which or to whom the common shares
or ADSs are attributable, or such shareholder dies within 180 days after having
made a gift, while being, on the moment of his or her death, a resident or
deemed resident of The Netherlands.
Taxes on Income and Capital Gains
A holder of common shares or ADSs will not be subject to Dutch taxes on income
and capital gains provided that:
(1) the holder is not a resident or deemed resident of The Netherlands;
(2) the holder does not have an enterprise, or an interest in an enterprise,
which carries on business in The Netherlands through a permanent
establishment or a permanent representative to which or to whom the common
shares or ADSs are attributable; and
(3) the holder does not have a substantial interest, as defined in Dutch tax
law, or a deemed substantial interest, as defined in Dutch tax law, in our
share capital or, if such holder does not have such interest, it is part of
the assets of an enterprise.
ITEM 8. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with the consolidated financial statements contained in Item 18
"Financial Statements" of this annual report.
Reference is made to note 23 of the notes to the consolidated financial
statements, discussing the differences between Dutch GAAP and U.S. GAAP which
materially affect reported net earnings basic and diluted, net earnings per
common share and stockholders' equity. Additionally, reference is made to Item 1
"Description of Business" and Item 9
24
<PAGE>
"Management Discussion and Analysis of Financial Condition and Results of
Operations--Acquisitions and Consolidations" for information about material
acquisitions and consolidations affecting the periods presented below.
Our fiscal year generally consists of 52 weeks and ends on the Sunday nearest to
December 31. Fiscal years 1995 through 1997 each contained 52 weeks, 1998
contained 53 weeks and 1999 contained 52 weeks.
Consolidated Earnings Data
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year fiscal year fiscal year
1999 1998 1997 1996 1995
(in EUR millions, except per share amounts)
Amounts in accordance with Dutch GAAP
- -------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 33,560 26,484 22,947 16,580 13,440
Net earnings before dividends on cumulative preferred financing shares 752 547 424 287 207
Net earnings per common share 1.15 0.92 0.77 0.62 0.53
Approximate amounts in accordance with U.S. GAAP
- ------------------------------------------------
Net earnings before dividends on cumulative preferred financing shares 586 398 323 235 186
Net earnings per common share 0.89 0.66 0.59 0.51 0.48
Diluted net earnings per common share 0.88 0.66 0.58 0.50 0.48
</TABLE>
Consolidated Balance Sheet Data
<TABLE>
<CAPTION>
Jan. 2 Jan. 3 Dec. 28 Dec. 29 Dec. 31
2000 1999 1997 1996 1995
(in EUR millions)
<S> <C> <C> <C> <C> <C>
Amounts in accordance with Dutch GAAP
- -------------------------------------
Total assets 14,286 11,426 8,549 6,748 4,204
Borrowings, long-term portion 3,574 3,096 1,777 1,417 591
Capitalized lease commitments, long-term portion 1,083 827 678 555 375
Stockholders' equity 2,126 1,553 1,402 1,097 1,017
Approximate amounts in accordance with U.S. GAAP
- ------------------------------------------------
Total assets 20,894 16,919 11,575 9,332 4,962
Stockholders' equity 8,106 6,652 4,353 3,682 1,715
</TABLE>
Dividends
We customarily declare dividends twice a year. An interim dividend is proposed
by our Corporate Executive Board and, with the approval of our Supervisory
Board, is generally paid in September. The proposed total dividend must be
approved by the Annual General Meeting of Shareholders, which is typically held
in May, and the final portion of the total yearly dividend is paid after this
meeting. Historically, shareholders have had the option to elect either a cash
dividend or a stock dividend. Prior to fiscal year 1997, the cash dividend
consisted of a Dutch guilder component and a dollar component. Effective with
fiscal year 1997, we discontinued cash dividend declarations in two currencies
and cash dividends were only declared in Dutch guilders. We declared dividend
for fiscal year 1998 in Dutch guilders. As of fiscal year 1999, dividends will
be declared in euros.
The following table gives certain information relating to dividends declared in
the years indicated. The dividend has been proposed by the Corporate Executive
Board, but must be approved by the Annual General Meeting of Shareholders to be
held on May 16, 2000. The final portion of the total yearly dividend will be
paid after this meeting. For purposes of this table, we have converted dividend
amounts that have been paid in Dutch guilders in fiscal years 1998, 1997, 1996
and 1995 to euros using the fixed rate of EUR 1 = NLG 2.20371.
25
<PAGE>
<TABLE>
<CAPTION>
Total Translated
Cash
Cash Dividend Option Dividend Option (1) Stock Dividend Option
Fiscal Year -------------------- ------------------- ---------------------
- -----------
EUR $ EUR $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 Interim 0.03 and 0.03 0.06 or 0.08 1 common share per 100 owned
Final 0.10 and 0.08 0.15 or 0.20 2 common shares per 100 owned
---- ----- ---- -----
Total 0.13 and 0.11 0.21 0.28
1996 Interim 0.04 and 0.04 0.07 or 0.09 1 common share per 100 owned
Final 0.10 and 0.10 0.18 or 0.21 2 common shares per 100 owned
---- ----- ---- -----
Total 0.14 and 0.14 0.25 0.30
1997 Interim 0.09 0.10 1 common share per 100 owned
Final 0.23 0.26 2 common shares per 100 owned
---- -----
Total 0.32 0.36
1998 Interim 0.12 0.14 1 common share per 100 owned
Final 0.26 0.32 2 common shares per 100 owned
---- -----
Total 0.38 0.46
1999 Interim 0.14 0.15 1 common share per 100 owned
Final (2) 0.35 0.35 2 common shares per 100 owned
---- -----
Total 0.49 0.50
</TABLE>
__________
(1) The translated total dollar dividend amount consists of the euro cash
dividend component, translated into dollars at the noon buying rate on the
applicable dividend payment date, added to the euro cash dividend component
for fiscal year 1999. For fiscal year 1999, the translated total euro
dividend amount consists of the dollar cash dividend component, translated
into euros at the noon buying rate on the applicable dividend payment date,
added to the euro cash dividend component. For fiscal years prior to 1999,
the translated euro dividend amount consists of the dollar cash dividend
component translated to Dutch guilders at the noon buying rate on the
applicable dividend payment date, added to the guilder cash dividend
component, and then translated into euros at the fixed exchange rate. This
information is included only for the readers' convenience.
Exchange Rates
Prior to fiscal year 1999, we utilized the Dutch guilder as our functional
reporting currency, however, beginning in fiscal 1999, we adopted the euro as
our functional reporting currency. As part of the introduction of the euro
throughout the European Union, the exchange rate between the legacy currencies
and the euro were fixed on January 1, 1999. Accordingly, we have converted the
historic financial statements and related disclosures that were reported using
the Dutch guilder to the euro using the fixed conversion rate of EUR 1 = NLG
2.20371. The conversion of our historical financial statements from Dutch
guilders to euro at a fixed rate depicts the same trends as would have been
presented if we would have continued to present our financial statements in
Dutch guilders. The following table sets forth, for our fiscal years indicated,
certain information concerning the exchange rate of the dollar relative to the
euro, expressed in euro per dollar, at the noon buying rate:
<TABLE>
<CAPTION>
Period End Average(1) High Low
---------- ---------- ------ ------
<S> <C> <C> <C> <C>
1995................................................................................. 0.7276 0.7280 0.7938 0.6894
1996................................................................................. 0.7926 0.7663 0.7968 0.7295
1997................................................................................. 0.9075 0.8887 0.9610 0.7850
1998................................................................................. 0.8517 0.8996 0.9459 0.8481
1999................................................................................. 0.9930 0.9445 0.9984 0.8466
</TABLE>
__________
(1) The average of the noon buying rates on the last day of each month during
the relevant period.
During the period January 1, 2000 through March 31, 2000, the high and low noon
buying rates of the euro against the dollar were EUR 1.05 and EUR 0.97,
respectively, and the average of the noon buying rates on the last day of each
month was EUR 1.04. The noon buying rate of the euro was EUR 1.04 = $ 1 as of
March 31, 2000.
Fluctuations in the exchange rate between the euro and the dollar, or the Dutch
guilder and the dollar for the periods prior to January 1, 1999, have affected
the dollar equivalent of the euro prices of the common shares on Amsterdam
Exchanges and, as a result, are likely to have affected the market price of the
ADSs on the NYSE. Such fluctuations will also affect the dollar amounts received
by holders of ADSs on conversion by the Depositary of cash dividends paid in
euro on the common shares represented by the ADSs.
26
<PAGE>
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In this section, we explain our general financial condition and the results of
our operations. As you read the following discussion and analysis, you should
refer to our consolidated financial statements and the related notes thereto for
fiscal years 1999, 1998 and 1997 contained in Item 18 of this annual report. We
prepare our consolidated financial statements in accordance with Dutch GAAP. See
note 23 to the consolidated financial statements for a discussion of the
principal material differences between Dutch GAAP and U.S. GAAP, which apply to
our consolidated financial statements. Our results from operations for 1998
include Disco's and Santa Isabel's operating results since the beginning of the
fourth quarter and Giant-Landover's operating results since October 28, 1998.
Our results for fiscal year 1999 were affected by the full year results of these
acquisitions as well as the July 1999 acquisition of Gastronoom and several
supermarket chains in Spain.
Our U.S. and Dutch operations' fiscal years 1999 and 1997 consisted of 52 weeks
of results, while fiscal year 1998 consisted of 53 weeks. The other European,
Latin American and most of the Asia Pacific operations consolidated in our
financial statements report on a calendar-year basis. As a result, the sales and
expenses for fiscal years 1999 and 1997 in comparison to fiscal year 1998
reflect the difference of one week of results of operations for the United
States and The Netherlands, and to this extent do not reflect changes in our
underlying business.
Overview
Net sales in 1999 were EUR 33,560 million compared to EUR 26,484 million in 1998
and EUR 22,947 million in 1997, representing increases in net sales of 27% in
1999 and 15% in 1998. Net earnings in 1999 were EUR 752 million compared to EUR
547 million in 1998 and EUR 424 million in 1997, representing increases in net
earnings of 37% in 1999 and 29% in 1998. Earnings per common share were EUR
1.15, EUR 0.92 and EUR 0.77 in 1999, 1998 and 1997, respectively, representing
an increase of 25% in 1999 and 19% in 1998.
Forward-looking Statements
For a discussion regarding forward-looking statements, see "Forward-Looking
Statements" in the front of this annual report under the heading "General
Information".
Factors Affecting Financial Condition and Results of Operations
Exchange Rates
We adopted the euro as our functional currency for reporting in our consolidated
financial statements effective beginning in fiscal 1999. See "Euro Conversion"
below and Item 8. Because a substantial portion of our assets, liabilities and
operating results are denominated in dollars, we are exposed to fluctuations in
the value of the dollar against the euro. We do not hedge this foreign currency
translation exposure. In fiscal 1999, an increase in the value of the dollar of
EUR 0.01 had a positive effect of approximately EUR 5 million on our
consolidated net earnings.
Our financial and risk management policy is to match the currency distribution
of our borrowings to the denomination of our assets. As a result, fluctuations
in our balance sheet ratios resulting from changes in exchange rates are
generally limited. The effect of other currency changes on our results is
limited due to the smaller size of our net earnings, assets and liabilities
denominated in other foreign currencies.
Foreign Investment Risks
We have operations and other investments in a number of countries outside of the
United States and Europe. Foreign operations and investments are subject to the
risks normally associated with conducting business in foreign countries such as:
. labor disputes;
. uncertain political and economic environments;
. risks of war and civil disturbances;
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. risks associated with the movement of funds;
. deprivation of contract rights;
. taking of property by nationalization or expropriation without fair
compensation;
. risks relating to changes in laws or policies of particular countries such
as foreign taxation;
. risks associated with obtaining necessary governmental permits, limitations
on ownership and on repatriation of earnings; and
. foreign exchange and currency fluctuations.
We cannot assure you that these problems or other problems relating to foreign
operations will not be encountered by us in the future. Foreign operations and
investments may also be adversely affected by laws and policies of the United
States, Europe and the other countries in which we operate governing foreign
trade, investment and taxation.
Inflation and Changing Prices
Inflation continues to cause moderate increases in our costs, including the cost
of merchandise, labor, utilities and acquiring property, plant and equipment.
Cost inflation in our primary markets, the United States and The Netherlands,
however, has been relatively low in each of the last three years. In the United
States, the inflation rate for food prices has been roughly equivalent to the
general increase in consumer prices, while in The Netherlands, the inflation
rate for food prices has remained below general price increases. Although there
is the risk that inflation in Asia Pacific, other European countries and Latin
America could have an effect on our results, we do not believe inflation has had
a material effect on sales or results of operations in these regions to date,
primarily because we have been able to pass along merchandise price increases to
our customers.
Euro Conversion
On January 1, 1999, the member countries of the EU established a new single
currency known as the euro. For the three years thereafter there will be a
transitional period during which each EU member country will have two
currencies, the euro and its local currency, for electronic fund transfers. Dual
pricing of goods and services in euro and local currency is already established
in most of the countries participating in the EU, in particular in our markets
in Spain and Portugal. In The Netherlands the introduction of dual pricing is
expected around summer 2001. In all EU countries there is a movement to shorten
the dual currency period, i.e. the period in which the national currency and the
euro notes and coins will coincide, to a maximum of two months after the
official introduction on January 1, 2002. In The Netherlands, a dual currency
period of a maximum of four weeks is foreseen. Final details of these dual
currency periods have yet to be established.
The introduction of the euro will have a significant effect on our European
operations and financial systems. The impact of the euro can be separated in two
main effects:
. business-to-business conversion, and
. business-to-consumer conversion.
For the business-to-business conversion, that is the transfer to euro
denominated billing, we have been in formal communications with our suppliers to
establish a conversion date. For Albert Heijn in The Netherlands, more than 25%
of suppliers already send euro denominated invoices. Business-to-consumer
conversion, that is, the introduction of the euro notes and coins, is the second
and larger effect. Several issues have been identified, and action plans have
been developed and put into practice to address these issues. The largest
concern is consistent pricing of our products in all the EU countries. Due to
differences in distribution structures and competitive pressure, the
introduction of the euro is not expected immediately to lead to consumer pricing
equivalency in all EU countries. However, the price differences between the EU
countries are expected to diminish in the long run.
At fiscal year end 1999, our consolidated balance sheet included a provision of
EUR 22 million for the introduction of the euro. During 1999 and 1998 we
recorded expenses of EUR 3 million and EUR 1 million, respectively, relating to
the euro issues and we expect to spend EUR 15 million in 2000 and EUR 7 million
in the two years thereafter. These projected costs are based on our best
estimates, which were derived using a number of assumptions as to future events,
including the continued availability of certain resources. However, our actual
results could differ materially from those
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anticipated.
Year 2000
We did not observe any significant failures in connection with the Year 2000
computer issue. We continue to monitor our operations in connection with this
issue, but we do not believe that we will experience any Year 2000 problems. Our
preparation for the Year 2000 computer issue resulted in operating expenses
totaling EUR 27 million in 1999, EUR 51 million in 1998 and EUR 8 million in
1997.
Acquisitions and Consolidations
Acquisitions are a key component of our growth strategy in the United States, in
Europe and in the relatively underdeveloped markets of Latin America and Asia
Pacific. We have substantially expanded our business through acquisitions and
new partnerships in 1999, 1998 and 1997. Over this period, we completed eight
significant business acquisitions, with an aggregate consideration of
approximately EUR 4.6 billion in cash and assumed indebtedness. Our acquisition
program has considerably broadened the geographical scope of our business.
Through the acquisitions and new partnerships completed in 1999, 1998 and 1997,
we have established a significant presence in a number of new markets, including
Guatemala, Spain, Brazil, Argentina, Chile and Thailand, in addition to
significantly expanding operations in the United States.
In March 1999, we entered into an agreement to acquire SMG-II Holdings, which
owns 132 supermarkets, which operate under the Pathmark name. On December 16,
1999 we exercised our contractual right to terminate this agreement as we had
not been able to close the transaction by that date. The failure to close the
transaction by December 16, 1999 was caused by strong opposition from the
Federal Trade Commission.
During 1999, 1998 and 1997, we completed the acquisitions and partnership
investments set forth below. The store counts indicated below represent the
number of stores operated at the time of acquisition, unless otherwise
indicated.
. La Fragua (Guatemala): In December 1999, we established a new 50/50
partnership, Paiz Ahold, which controls an 80.5% interest in La Fragua, the
largest food retailer in Guatemala. At December 31, 1999, La Fragua operated
93 supermarkets, hypermarkets and discount stores in Guatemala, 20 stores in
El Salvador and six in Honduras. We completed this agreement in December 1999
and, as a result, the assets and liabilities of La Fragua are reflected in our
consolidated balance sheet at the end of fiscal 1999 but none of the results
of operations are included in our consolidated statement of earnings for
fiscal 1999.
. Supamer and Gonzales (Argentina): In May 1999, through our 50/50 partnership
with Velox Retail Holdings, Disco Ahold International Holdings acquired 75
stores from Supamer and Gonzales. Supamer operated 46 supermarkets under the
Americanos name and 18 convenience stores under the Minisol name. Gonzales
operated 11 urban supermarkets.
. Gastronoom (The Netherlands): In July 1999, we acquired Gastronoom, a Dutch
institutional food supplier, for EUR 152 million including interest-bearing
debt. Gastronoom specializes in supplying the hospitality sector, including
hotels, restaurants and bars, from its 18 distribution and service centers in
The Netherlands.
. Dialco, Dumaya, Guerrero and Castillo del Barrio (Spain): Throughout 1999, we
acquired several companies for an aggregate of EUR 118 million in cash. Dialco
operated 100 supermarkets in Andalusia. Dumaya operated 30 supermarkets and
five cash and carry stores in and around Malaga and Ceuta, on the Morroccan
coast. Guerrero operated 20 supermarkets and one cash and carry store in
Granada. Castillo del Barrio is a small chain of seven supermarkets in Malaga.
. Giant-Landover (United States): In October 1998, we acquired Giant Food, which
operated 179 supermarkets in the Mid-Atlantic region of the United States, for
$2.7 billion (EUR 2.5 billion) in cash.
. Disco (Argentina) and Santa Isabel (Chile): In January 1998, we established
Disco Ahold International Holdings, or DAIH, a 50% owned partnership with
Velox Retail Holdings. DAIH currently controls a 98.1% stake in Disco, the
largest food retailer in Argentina, with 108 stores, and a 69.0% stake in
Santa Isabel, a Chilean company with 64 stores in Chile, 15 in Peru, six in
Paraguay and two in Ecuador. We paid approximately $538 million (EUR 534
million) to acquire our interest in DAIH.
. SuperMar (Brazil): In June 1997, our 50% owned partnership, Bompreco, acquired
SuperMar, an operator of 50
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food retail stores in the State of Bahia, Brazil, for approximately BRL 65
million (EUR 54 million) in cash.
. CRC Ahold Thailand (Thailand): In January 1997, we established a partnership,
CRC Ahold Thailand, with Central Robinson Group, and the partnership acquired
30 supermarkets in Thailand for approximately THB 4.4 billion (EUR 135
million) in cash. In April 1998, we increased our ownership interest from 49%
to 100%, subject to repurchase options of up to 50% granted to the Central
Robinson Group.
Recent Developments
In December 1999, we entered into an agreement to acquire 50% of ICA AB, the
parent company of the ICA Group, the largest Scandinavian food retailer for
approximately EUR 1.8 billion in cash. The ICA Group is a prominent, integrated
food retail and wholesale group, servicing over 3,100 supermarkets, superstores,
hypermarkets and discount stores in Sweden, Norway and the Baltic states, with
annual net sales of EUR 6.6 billion in the fiscal year 1999. The present ICA
Group was formed in early 1999 when ICA AB acquired an additional 55% of
Norway's Hakon Gruppen, which became a wholly-owned subsidiary. In August 1999,
the ICA Group entered into a joint-venture with Statoil, acquiring 50% of
Statoil Detajhandel Scandinavia AS or "Statoil Retail". Statoil Retail generated
1999 sales of EUR 2.9 billion. Statoil Retail operates and services 1,500
Statoil gas stations and forecourt stores in Denmark, Norway and Sweden. The
transaction is subject to the satisfaction of certain conditions, including ICA
Forbundet AB receiving the necessary approvals from the ICA retailers and Canica
AS obtaining a favorable tax ruling in Norway in connection with the
transaction. We expect to close this transaction in the second quarter of 2000.
In January 2000, we began discussions with JM in Portugal to significantly
extend and enlarge our existing partnership. In cooperation with JM we intend to
establish a new 50/50 partnership, which could include the current retail and
wholesale operations of JM in Portugal and Madeira. The new partnership also
could include JM's Polish operations and JM's Se Supermarkets in Brazil, as well
as our operations in the Czech Republic, Poland, and Spain. On April 12, we and
JM decided to suspend discussions about the future of our cooperation until
September 2000. If the new partnership is not entered into then, the partners
will consider to either continue or terminate the existing partnership. In the
meantime, there will be no changes to the structure or operations of our current
partnership, JMR.
In January 2000, Disco agreed to acquire Supermercados Ekono, which operates ten
large supermarkets in Buenos Aires, for approximately euro 145 million. Ekono
has 10 large supermarkets with annual net sales of approximately euro 160
million.
In January 2000, we acquired Kampio, a prominent regional supermarket chain in
Catalonia. The chain operates 39 large supermarkets, of which 24 are located in
Barcelona, and had annual net sales of approximately EUR 100 million.
In March 2000, we entered into a merger agreement to acquire U.S. Foodservice,
the second largest food service distributor in the United States, for
approximately $3.6 billion in cash, including the assumption of repayment of
approximately $925 million in debt. Pursuant to the merger agreement, we
commenced on March 13, 2000 an offer to purchase for cash all of the issued and
outstanding shares of common stock of U.S. Foodservice, at a price of $26.00 per
share, net to the seller in cash. The tender offer was successfully completed on
April 7, 2000. As soon as practicable following completion of the tender offer,
we intend to cause the merger of one of our wholly-owned subsidiaries into U.S.
Foodservice, with U.S. Foodservice being the surviving corporation. As a result
of the merger, all remaining outstanding shares of common stock of U.S.
Foodservice, subject to certain limited exceptions, will be converted into the
right to receive the cash price paid in the tender offer and U.S. Foodservice
will be an indirectly wholly-owned subsidiary. U.S. Foodservice, which reported
$6.2 billion in revenues for its fiscal year ended July 3, 1999, distributes
food and related products to restaurants and institutional food service
establishments across the United States. We expect the U.S. Foodservice
acquisition to be completed in April 2000.
In March 2000, Tops entered into an agreement for the acquisition of Sugar Creek
convenience/gas stores. Completion is expected during the second quarter of
2000. Sugar Creek operates 87 merchandise and fuel outlets in New York State.
The transaction is subject to various conditions including the satisfactory
completion of due diligence and receipt of regulatory approvals.
In March 2000, we entered into a multi-currency stand-by bridge revolving credit
agreement with two financial
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institutions for a credit facility of up to EUR 4.4 billion for the proposed
acquisition of 50% of the ICA Group and the acquisition of U.S. Foodservice.
This credit facility is unsecured and bears interest at a rate of Euro Interbank
Offered Rate for advances, denominated in euro and the London Interbank Offered
Rate for advances denominated in dollars plus a margin of 40 basis points until
June 30, 2000, and a margin to be agreed upon but not higher than 90 basis
points on or after June 30, 2000. This credit facility expires on December 29,
2000. The borrowings under the credit facility are expected to be repaid with
the proceeds from the global offering of our common shares and/or equity linked
financial instruments, which we anticipate to complete in May 2000, and a bond
issue, to be completed thereafter.
In March 2000, we announced our participation in the WorldWide Retail Exchange
("WWR Exchange"), which is expected to begin operations in mid-2000. The WWR
Exchange is a web-based, business-to-business exchange designed to facilitate
simplified trading between retailers and suppliers, distributors and other
partners. Initially we will own 5% of the share capital in the new venture.
Results of Operations
Selected earnings data are as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
---- ---- ----
EUR % of EUR % of EUR % of
--- ---- --- ---- --- ----
sales sales sales
----- ----- -----
(in EUR millions, except per common share data)
<S> <C> <C> <C> <C> <C> <C>
Net sales 33,560 100.0 26,484 100.0 22,947 100.0
Gross profit 8,257 24.6 6,189 23.4 5,239 22.8
Operating expenses (6,842) (20.4) (5,172) (19.6) (4,405) (19.2)
Operating results 1,415 4.2 1,017 3.8 834 3.6
Net financial expense (366) (1.1) (245) (0.9) (218) (0.9)
Income taxes (283) (0.8) (197) (0.7) (174) (0.8)
Income from unconsolidated subsidiaries and affiliates 7 -- 11 -- 3 --
Minority interests (21) (0.1) (39) (0.1) (21) (0.1)
Net earnings 752 2.2 547 2.1 424 1.8
Net earnings per common share 1.15 0.92 0.77
</TABLE>
Net Sales
Net sales in 1999 increased by EUR 7,076 million, or 27%, to EUR 33,560 million,
from EUR 26,484 million in 1998. At constant exchange rates, consolidated net
sales growth was 25% in 1999 compared to 1998. The major reasons for the
increase in net sales were, in addition to autonomous growth, the full-year
consolidation of Giant-Landover, Disco and Santa Isabel and the July 1999
acquisition of Gastronoom. These increases were partly offset by the additional
week in fiscal 1998 for our operations in The Netherlands and the United States.
Net sales in 1998 increased EUR 3,537 million, or 15%, to EUR 26,484 million
from EUR 22,947 million in 1997. At constant exchange rates, consolidated sales
growth was 15% in 1998 compared to 1997. The major reasons for this increase
were the fourth quarter consolidation of Giant-Landover, Disco and Santa Isabel
and the additional week in fiscal 1998 for our U.S. and Dutch operations.
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Net sales for fiscal year 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
1999 1998 1997
---- ---- ----
Amount Change Amount Change Amount Change
------ ------ ------ ------ ------- ------
(EUR in millions, except percentages)
% % %
<S> <C> <C> <C> <C> <C> <C>
Retail trade
United States
Stop & Shop 6,276 13 5,547 14 4,862 244
Giant-Carlisle 3,228 5 3,064 10 2,794 (14)
BI-LO 2,823 9 2,588 3 2,502 9
Tops 2,555 -- 2,552 2 2,493 3
Giant-Landover 4,244 465 751 -- 0 --
------ ------ ------
Total United States 19,126 32 14,502 15 12,651 47
Europe
Albert Heijn including franchise stores 5,105 2 5,024 6 4,751 5
The Netherlands other 561 -- 560 4 539 7
Portugal 1,325 11 1,187 12 1,056 12
Czech Republic 453 39 325 51 215 22
Poland 221 36 162 64 99 350
Spain 335 613 47 (25) 62 --
------ ------ ------
Total Europe 8,000 10 7,305 9 6,722 30
Latin America 3,474 66 2,099 79 1,171 --
Asia Pacific 471 16 407 (3) 418 --
Food wholesaling and food supply 2,383 15 2,080 9 1,906 11
Real estate and other 106 16 91 16 79 30
------ ------ ------
Net sales 33,560 27 26,484 15 22,947 38
====== ====== ======
</TABLE>
Retail Trade
United States - Net sales in the United States increased by 32% in 1999 compared
to 1998. This substantial increase mainly reflects the full year consolidation
of Giant-Landover, which we acquired in October 1998, contributing an additional
EUR 3,493 million to 1999 retail net sales. Stop & Shop, BI-LO and Giant-
Carlisle generated higher sales, while net sales in dollars at Tops declined,
reflecting the sale of the 12 Vix pharmacy stores. Bonus card programs
introduced in 1998 and 1997 aimed at generating and rewarding customer loyalty
had a positive effect on the U.S. stores, as reflected in a 2.0% increase in
identical store net sales as compared to a 1.6% increase in 1998 and a 3.2%
increase in 1997. In 1998, net sales grew 15% in comparison to 1997, primarily
due to increased market share and new store openings particularly at Stop & Shop
and Giant-Carlisle. The inclusion of net sales from Giant-Landover as of October
28, 1998 increased total net sales in the United States in fiscal 1998 by
approximately 5.9%.
Europe - Net sales in our European operations, consisting of The Netherlands,
Portugal, the Czech Republic, Poland and Spain, increased by 10% in 1999
primarily reflecting the Spanish supermarket chains acquired in 1999 as well as
increased sales in Portugal, the Czech Republic and Poland. In Portugal, the
supermarkets of Pingo Doce and the hypermarkets of Feira Nova contributed to net
sales growth, with additional benefits from the opening of new stores. Sales in
the Czech Republic were boosted by the popularity of the three Hypernova
hypermarkets and 19 Prima general merchandise stores. The net sales increase in
Poland in 1999 resulted from the acquisition of 11 Centrum supermarkets and the
opening of new stores.
At Albert Heijn, net sales increased by 2% and market share, according to AC
Nielsen, remained virtually unchanged at 28% for fiscal years 1999 and 1998. Net
sales in identical stores, including those owned by Albert Heijn as well as
franchise stores, at Albert Heijn increased by 2.0% in 1999. This growth rate,
as compared to the growth rates experienced in our U.S. operations, is evidence
of Albert Heijns significant penetration in the Dutch market.
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Consolidated European net sales in 1998 were EUR 7,305 million compared to EUR
6,722 million in 1997, representing an annual increase of 9%. This net increase
reflected primarily growth in Portugal, offset in part by decreases in Poland
and the Czech Republic. The net sales increase in Portugal in 1998 resulted
largely from the opening of new stores.
Latin America - In Latin America, net sales increased by 66%, primarily due to
the full year inclusion of Disco and Santa Isabel. In local currency, net sales
at all chains increased throughout 1999. Due to the devaluation of the Brazilian
real, net sales in Brazil decreased by approximately EUR 500 million. Net sales
in Latin America in 1998 increased by 79%, reflecting the full year inclusion of
Bompreco Bahia and the fourth quarter consolidation of Disco and Santa Isabel.
Asia Pacific - Despite the divestment of our interests in China and Singapore,
net sales in Asia Pacific increased by 16% in 1999 compared to 1998. This
increase was primarily attributable to the full-year consolidation of 27
Malaysian stores, which we acquired in 1998. Net sales increased in Thailand in
1999, despite the currency crisis and the 11% devaluation of the Thai baht. Net
sales in Asia Pacific decreased in 1998 by 3% compared to 1997, attributable to
the devaluation of the local currencies associated with the overall downturn in
the pan-Asian economy.
Food Wholesaling, Food Supply and Other
Net sales from food wholesaling and food supply increased by 15% in 1999
compared to 1998 and 9% in 1998 compared to 1997. The increase in 1999 was
attributable to our acquisition of Gastronoom, which we consolidated starting in
the second half of 1999, and also to increased net sales to affiliated
customers. The increase in 1998 wholesale and food supply net sales compared to
1997 was attributable to increased net sales to affiliated customers. Sales to
affiliated customers are comprised of sales from our wholesaling subsidiary,
Schuitema, to independent stores supported by Schuitema. The total number of
supermarket outlets affiliated with Schuitema was 453 in 1999, 464 in 1998 and
485 in 1997. The combined market share of total Dutch sales of the supermarket
outlets affiliated with Schuitema, as reported by AC Nielsen, was approximately
11.4% in 1999, 11.0% in 1998 and 10.6% in 1997.
Net sales from food supply through Grootverbruik Ahold and Gastronoom under the
new marketing name, Deli XL, were approximately EUR 550 million in 1999, EUR 360
million in 1998 and EUR 320 million in 1997. In July 1999 Grootverbruik acquired
Gastronoom causing the increase in sales in 1999 compared to 1998.
Our other activities consist primarily of revenues from real estate operations.
Net sales in this category consist of rent revenue generated from third parties,
including franchisees and sales to third parties from our production company. As
a percentage of total net sales, these revenues are insignificant.
Gross Profit
Gross profit in 1999 was EUR 8,257 million, compared to EUR 6,189 million in
1998 and EUR 5,239 million in 1997. The increases in 1999 and 1998 were caused
both by increases in sales and margin improvements. The growth in absolute
amounts was fueled by the 1999 acquisition of Gastronoom, the acquisitions in
Spain and the full-year consolidation of the 1998 acquisitions of Giant-
Landover, Disco and Santa Isabel. In addition, 1999 and 1998 gross profits were
positively affected by a stronger dollar relative to the euro and the Dutch
guilder.
Gross margin as a percentage of net sales was 24.6% in 1999, compared to 23.4%
in 1998 and 22.8% in 1997. Despite strong competition, gross margin as a
percentage of net sales increased by 1.2 percentage points in 1999 and 0.6
percentage points in 1998. These increases were primarily due to the growth in
higher margin operations in the United States, including the addition of Giant-
Landover and growth in Portugal. We expect gross margins to continue to improve
as the operations in the United States become more integrated and supply chain
improvements are implemented and realized.
Operating Expenses
Operating expenses, consisting of selling, general and administrative expenses,
were EUR 6,842 million in 1999, compared to EUR 5,172 million in 1998 and EUR
4,405 million in 1997. These expenses as a percentage of net sales were 20.4% in
1999, 19.5% in 1998 and 19.2% in 1997. The increase in operating expenses as a
percentage of net sales
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in 1999 was due to slightly higher store wages and other store expenses in
almost all operating companies as a result of increased service levels. The
increase in operating expenses relative to net sales in 1998 was due to costs of
integrating our Asia Pacific operations and start-up expenses incurred by our
operations in Asia Pacific and Poland.
Selling expenses were EUR 5,778 million in 1999, EUR 4,413 million in 1998 and
EUR 3,812 million in 1997. Selling expenses as a percentage of net sales were
17.2% in 1999, compared to 16.7% in 1998 and 16.6% in 1997. The increase in
selling expenses as a percentage of net sales in 1999 was attributable to the
increase in store wages and other store expenses as a result of an increased
service level mentioned above. In 1998, selling expenses remained relatively
unchanged compared to 1997.
General and administrative expenses were EUR 1,064 million in 1999, EUR 759
million in 1998 and EUR 594 million in 1997. General and administrative expenses
as a percentage of net sales were 3.2% in 1999, compared to 2.9% in 1998 and
2.6% in 1997. General and administrative expenses in 1999 increased in absolute
terms and as a percentage of net sales due to the inclusion of newly acquired
and consolidated companies, particularly Giant-Landover, that have historically
had a higher level of general and administrative costs than our other operating
units. We also incurred additional costs associated with creating and staffing
our new corporate offices in the United States, from which we expect to realize
future cost savings from the consolidation of certain administrative functions.
Additionally, information system costs increased, representing a continued
investment in systems at all operating companies. In 1998, general and
administrative expenses similarly increased due to the inclusion of newly
acquired and consolidated companies.
To cover the costs of restructuring the distribution system as well as a number
of other planned changes in its organizational structure initiated in 1993,
Albert Heijn has made provisions for severance benefits payable to
administrative, production, distribution and store personnel. These provisions
have been made over several years as Albert Heijn has redefined the extent of
the restructuring. Albert Heijn has accrued provisions in accordance with a
master agreement between Albert Heijn and the respective labor unions dated
March 1993. At January 2, 2000, Albert Heijn has terminated the employment of
2,100 employees under this agreement. The accrued costs at January 2, 2000 of
EUR 47 million and at January 3, 1999 of EUR 50 million include contractual
termination benefits and supplemental monthly payments over a period, which may
extend up to ten years, based on the employee's salary, age and length of
service. Payments of these costs aggregated EUR 12 million in 1999, EUR 9
million in 1998 and EUR 19 million in 1997. We expect payments of EUR 15 million
in 2000 and EUR 12 million in 2001.
Operating Results
Operating results were EUR 1,415 million, or 4.2% of net sales, in 1999, an
increase of 39% over 1998. Operating results improved in 1999 as compared to
1998 in all geographic areas except for Poland, where losses resulted from
continued investment in infrastructure and development of market share.
Operating results were EUR 1,017 million, or 3.8% of net sales, in 1998, an
increase of 22% over 1997. Operating results improved in 1998 as compared to
1997 in all geographic areas except for Asia Pacific, where losses resulted from
start-up costs and the regional economic crisis. Exchange rate fluctuations,
particularly of the dollar against the euro in 1999 and the dollar against the
Dutch guilder in 1998, had a net positive effect on operating results of EUR 30
million in 1999 and EUR 17 million in 1998. At constant rates of exchange,
operating results would have increased 36% in 1999 compared to 1998 and 20% in
1998 compared to 1997. The improvement in operating results is primarily due to
increased contributions from the U.S. operations, fueled by the 1998 acquisition
of Giant-Landover.
Net Financial Expense
Interest expense increased in 1999 to EUR 421 million compared to EUR 319
million in 1998 and EUR 275 million in 1997. The increases in 1999 and 1998 were
primarily due to the September 1998 issuance of 3% subordinated convertible
notes due 2003 and the consolidation of interest expenses of Disco and Santa
Isabel in the fourth quarter of 1998 and Giant-Landover effective October 28,
1998. The increase in 1999 was also due to the April 1999 issuance of $1 billion
(EUR 993 million) aggregate principal amount of senior notes, as discussed under
"Financing Activities" below.
The interest coverage ratio, defined as operating results divided by net
interest expense, was 3.9 in 1999, 4.2 in 1998 and 3.6 in 1997. Net financial
expense is expected to increase in fiscal year 2000, reflecting additional
borrowings necessary
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<PAGE>
to fund the acquisitions of U.S. Foodservice and the partnership with the ICA
Group.
Income from unconsolidated companies was EUR 7 million in 1999, EUR 11 million
in 1998 and EUR 3 million in 1997. A total of EUR 4 million of the 1999 amount
consisted of earnings from our investment in Singapore, which was deconsolidated
when we decided to divest this investment. Of the amount in 1998, EUR 6 million
related to earnings from the acquisitions in Argentina and Chile, which we did
not consolidate until the fourth quarter of 1998.
Income Taxes
Our effective income tax rate was 27.0% in 1999, 25.5% in 1998 and 28.2% in
1997. In 1999, operations in countries with higher effective tax rates, such as
Giant-Landover in the United States, contributed higher pre-tax earnings
relative to countries with lower effective tax rates. In 1998, the decrease in
the effective tax rate compared to 1997 was largely attributable to the 1998
consolidation of the Argentine and Chilean operations and the lower effective
tax rates in these countries.
Net Earnings
Net earnings in 1999 were EUR 752 million, representing an increase of 37%
compared to 1998. Net earnings per common share rose 25% in 1999 to EUR 1.15. At
constant exchange rates, net earnings increased 33% in 1999 compared to 1998,
corresponding to a 22% increase in earnings per share. Net earnings in 1998 were
547 million, representing a 29% increase over 1997, resulting in an 18% increase
in net earnings per common share to EUR 0.92.
Net earnings available to common shareholders as determined in accordance with
U.S. GAAP would have been EUR 573 million in 1999, compared to EUR 388 million
in 1998 and EUR 315 million in 1997. The principal differences between Dutch
GAAP and U.S. GAAP affecting net earnings include the accounting treatment of
pensions, provisions and goodwill. For further information, see note 23 to the
consolidated financial statements.
Liquidity and Capital Resources
Cash Flow and Liquidity
Cash flow generated from operations provides us with a significant source of
liquidity. Our operating activities generated net cash of EUR 1,730 million in
1999, EUR 1,258 million in 1998 and EUR 925 million in 1997. Cash flow from
operations is re-invested each year in new stores, store remodeling and store
expansions, as well as in store efficiency-improving measures and retailing
innovations.
Cash and cash equivalents at year end 1999, 1998 and 1997 totaled EUR 888
million, EUR 519 million and EUR 297 million, respectively. The ratio of current
assets to current liabilities was 84.5%, 87.4% and 81.1% at year end 1999, 1998
and 1997, respectively. At the end of 1999, we held approximately 32 days of
inventory, compared to 30 days at the end of each of 1998 and 1997.
Our primary line of credit, entered into in December 1996, is a $1 billion,
seven-year multi-currency revolving credit facility, under which, at January 2,
2000, $845 million (EUR 839 million) was available for additional borrowings. In
March 1998, we entered into an additional $500 million, four-year standby multi-
currency revolving credit facility. The terms and conditions of this facility
are substantially similar to the existing $1 billion multi-currency revolving
credit facility. At January 2, 2000, no amounts were outstanding under the $500
million, four-year credit facility. These facilities are intended to ensure us
with sufficient financial capacity, and we believe that these lines of credit
represent a sufficient source of funds for future short-term and long-term
financing of ongoing operations.
35
<PAGE>
Investing Activities and Capital Expenditures
Amounts that we incurred for capital expenditures and acquisitions of businesses
were as follows:
<TABLE>
<CAPTION>
Fiscal Year
1999 1998 1997
----------- ---------- ---------
<S> <C> <C> <C>
(EUR millions)
Purchases of tangible fixed assets 1,733 1,320 1,230
Acquisitions of businesses 700 3,069 159
Fixed assets disposals and other (122) (108) (115)
----- ----- -----
Net cash used in investing activities 2,311 4.281 1,274
===== ===== =====
Capitalized lease commitments incurred 181 131 65
</TABLE>
In 1999, capital expenditures were EUR 1,733 million compared to EUR 1,320
million in 1998. Of the amount expended in fiscal years 1999 and 1998,
approximately 71% and 77%, respectively, was incurred for new stores and store
improvements, while the remainder was incurred for distribution centers,
computer hardware and other assets.
We expect our investments in tangible fixed assets to total approximately EUR
2,200 million in 2000, of which approximately EUR 400 million was committed as
of the end of 1999. The following shows the breakdown of expected 2000 tangible
fixed assets expenditures by geographic location:
. EUR 1,110 million in the United States;
. EUR 710 million in Europe;
. EUR 370 million in Latin America; and
. EUR 10 million in Asia Pacific.
In addition, we expect that new capitalized lease commitments in the United
States in fiscal 2000 will total approximately EUR 123 million.
We invested EUR 700 million in 1999 on acquisitions of businesses and
partnership interests, including the partnership in Guatemala, Gastronoom in The
Netherlands, the acquisition through Bompreco of Supamer and Gonzales in
Argentina and the acquisition of several chains in Spain. Acquisitions in 1998,
totaling EUR 3,069 million, consisted primarily of Giant-Landover, and the
partnership interest in DAIH. We invested EUR 159 million in 1997, primarily to
acquire an interest in CRC Ahold Thailand and a partnership interest in Bompreco
in Brazil.
The 1999 acquisitions were financed through the use of available credit
facilities. We financed acquisitions in 1998 primarily out of proceeds from our
issuance of common shares, cumulative preferred financing shares and 3%
subordinated convertible notes due in 2003. For a further discussion of the
financing of transactions see "Financing Activities" below.
Financing Activities
Cash provided by financing activities was EUR 866 million in 1999, EUR 3,317
million in 1998 and EUR 301 million in 1997. Financing activities in 1999
consisted primarily of net additional long-term and short-term debt borrowings
totaling EUR 555 million. These net borrowings include the proceeds from the
$1.0 billion aggregate principal proceeds of senior notes that Ahold Finance
U.S.A., Inc issued in April 1999 to repay the outstanding borrowings under the
credit facilities. The senior notes are guaranteed by Royal Ahold and consist of
two tranches, $500 million principal amount of 6.25% due in May 2009 and $500
million principal amount of 6.875% due in May 2029. Additionally, capital
contributions from minority interest shareholders provided additional financing
totaling approximately EUR 326 million, proceeds from the exercise of stock
options provided EUR 21 million and dividend payments, including dividends on
cumulative preferred financing shares, totaled EUR 46 million.
Cash provided by financing activities in 1998 consisted primarily of proceeds
from the global offerings. In april 1998 we
36
<PAGE>
issued 34,500,000 of our common shares, resulting in total net proceeds of
approximately EUR 998 million. We used the proceeds primarily to repay debt
incurred to finance the acquisition of our 50% participation in DAIH. In August
1998, we issued 24 million cumulative preferred financing shares resulting in
aggregate proceeds of approximately EUR 73 million. In September and October
1998, to finance the acquisition of Giant-Landover, we issued 51,750,000 common
shares, resulting in net proceeds of approximately EUR 1,184 million, and EUR
678 million aggregate principal amount of 3% subordinated convertible notes due
2003. Additionally, net additional long-term and short-term debt borrowings
totaled EUR 288 million, capital contributions from minority interest
shareholders provided additional financing totaling approximately EUR 78
million, proceeds from the exercise of stock options provided EUR 36 million and
dividend payments that we received, including dividends on cumulative preferred
financing shares, totaled EUR 25 million.
Cash provided by financing activities in 1997 consisted of EUR 129 million of
capital contributed by minority interest shareholders and EUR 25 million cash
provided from the exercise of stock options, and EUR 147 million provided by
changes in short and long-term debt, capitalized lease commitment payments and
dividends paid.
In December 1997, Albert Heijn issued EUR 136 million aggregate principal amount
of 5.875% senior obligations due in December 2007, guaranteed by us. We issued
EUR 91 million aggregate principal amount of 5.875% subordinated bonds due
December 2005. We used the proceeds from the issuance of the senior obligations
to repay in part pre-existing debt obligations and the net proceeds of the
subordinated bonds to defease in substance EUR 91 million aggregate principal
amount of 7.625% subordinated loans maturing in 2000.
We have hedged certain risks related to fluctuations of interest rates on our
dollar outstanding debt through the purchase of derivative financial
instruments. Our policy is to hedge only interest-rate or foreign-exchange-
transaction exposure that are clearly identifiable and, in principle, not to
hedge foreign exchange translation exposure.
At the end of fiscal 1999, we had two outstanding euro-denominated currency swap
contracts related to short-term commitments in U.S. dollars and one cross-
currency swap related to debt denominated in Czech crowns. In addition, we had
one interest rate collar and one interest rate swaption outstanding at the end
of 1999. We also had six interest rate swaps which convert certain fixed-rate
debt into floating-rate debt and two swaps converting floating-rate debt into
fixed-rate debt. We believe that our hedging practices do not expose us to any
unusual risks or significant exposure to potential liabilities from these
transactions. For details regarding the notional amounts and values of such
derivative financial agreements, see note 21 to the consolidated financial
statements, included elsewhere in this annual report.
Interest-bearing debt, including capitalized lease commitments, was EUR 5,970
million at the end of fiscal 1999 compared to EUR 4,803 million at the end of
fiscal 1998 and EUR 3,170 million at the end of 1997. Net gearing, the ratio of
interest-bearing debt, net of cash, to stockholders' equity plus minority
interests ("group equity"), was 206%, 239% and 174% at fiscal year end 1999,
1998 and 1997, respectively. The ratio of interest-bearing debt to total assets
was 42% at each of fiscal year end 1999 and 1998 compared to 37% at fiscal year
end 1997.
Stockholders' equity was EUR 2,126 million, EUR 1,553 million and EUR 1,402
million at year end 1999, 1998 and 1997, respectively. Group equity represented
17% of total assets at the end of 1999 compared to 16% at the end of fiscal 1998
and 19% at the end of fiscal 1997.
Stockholders' equity determined in accordance with U.S. GAAP would have been EUR
8,106 million at fiscal year end 1999, compared to EUR 6,652 million at fiscal
year end 1998 and EUR 4,353 million at fiscal year end 1997. The principal
differences between Dutch GAAP and U.S. GAAP affecting stockholders' equity are
the accounting treatment of goodwill, pensions, provisions and proposed
dividends on common shares. See note 23 to the consolidated financial
statements.
37
<PAGE>
Strategic Outlook
We expect that sales and operating results in fiscal year 2000, which will
consist of 52 weeks, will improve in all regions. Based on our current business
plan and bearing any unforeseen events or economic changes, our overall
financial target is to increase earnings per share by at least 15% per annum
through 2001 (excluding currency impact) while improving our return on invested
capital. Earnings per share growth for fiscal 2000 may increase between 17% and
20% (excluding currency impact). The higher earnings per share in fiscal 2000
would result from synergies and cost savings expected to be realized from the
completion of the acquisition of U.S. Foodservice. Realization of these earnings
targets, of course, is dependent upon many factors and we cannot assure you that
we will be able to realize this growth.
We expect that our subsidiaries will continue generating identical sales growth
and will note profitable investments in square footage. In addition to our core
food retailing activities, autonomous growth will be supplemented by increased
activities involving new channels of distribution, including institutional food
supply and food service, e-commerce and related activities. Further development
in these areas will allow us to benefit from broader developments in food and
related industries, including the increasing proportion of meals consumed away
from the home and the coincidental convergence of various aspects of food
provision.
We also expect to supplement autonomous growth with product innovation and
product-line extension. We anticipate that developments in the area of category
management, micro-merchandising, expansion of specialty and non-food assortment
and offerings of financial and other services will contribute to growth in net
sales.
In the United States, we expect strong autonomous sales growth and expect new
supply chain improvements and centralization of corporate functions to impact
positively operating margins.
In Europe, we expect to open 170 new stores, fueling our autonomous growth. We
anticipate that this growth will be led by Spain, where we have gained market
share and continue to expand floor space growth, and Portugal. We expect growth
in net sales and net earnings in The Netherlands, with continued strong
performances from Albert Heijn, Schuitema and the newly created wholesaling and
food supply activities under the new marketing name Deli XL. Following further
restructuring of our operations in Poland, we are aiming to break even in 2001.
In the Czech Republic we will open a substantial amount of new stores, focusing
on new hypermarkets and further improvement of our supermarkets. We expect sales
and results to grow significantly.
In Latin America, we expect annual net sales and operating results to improve in
all countries. The December 1999 partnership with the owners of a controlling
interest in La Fragua in Guatemala will strengthen our regional presence and
will help bring new economies of scale to the Latin American operations.
In 1999, we re-focused our efforts in Asia Pacific and divested substantially
all our operations in China and Singapore. We expect that the remaining
operations in Thailand, Malaysia and Indonesia will continue to grow through
continued opening of new stores and improved sales in identical stores.
We anticipate that our acquisition strategy will continue into fiscal 2000.
Particularly in growth markets, we may choose to partner with a local operator
to allow us access to new markets and provide us with experience in operating in
these new markets. We believe that we bring value to these partnerships through
our worldwide economies of scale and proven management skills. With regard to
acquisitions, we will continue to apply stringent financial and operational
criteria in evaluating these investments.
We will use our skills in managing new acquisitions and managing new
partnerships in 2000 as we integrate the operations of the ICA Group and U.S.
Foodservice. Our partnership with the ICA Group will be a positive addition to
our European operations and will provide us with access to the retail markets in
Northern Europe. We believe that the acquisition of U.S. Foodservice will
provide us access to a new channel of food providing and consequently a larger
share of the U.S. "food dollar." This acquisition in the highly fragmented food
service distribution industry should produce faster growth in the United States.
38
<PAGE>
The proposed acquisition and partnership will create a number of opportunities
for growth, innovation, cost reduction and synergies, including numerous
opportunities for innovation between institutional and retail businesses. Within
two years, we expect to enjoy annual synergies totaling approximately EUR 50
million from the partnership with the ICA Group. We expect synergies from the
U.S. Foodservice acquisition to total between $75 and $100 million per annum,
once fully phased in. Realization of these synergies is dependent, however, upon
many factors and we cannot assure you that we will be able to realize these
synergies.
Through internal growth and acquisitions in 2000, we will strive to further
develop our worldwide network of food retail and food supply companies offering
a superior shopping experience to customers in their local marketplace.
Autonomous growth can be financed from cash flow available from current
operations. We expect that sizeable acquisitions will be financed from external
sources.
39
<PAGE>
ITEM 9A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our risk management activities includes "forward-
looking statements" that involve risk and uncertainties which are discussed more
fully in "Management's Discussion and Analysis of Financial Condition and
Results of Operation - Factors Affecting Financial Condition and Results of
Operations" above. Actual results could differ materially from those projected
in the forward-looking statements.
Overview
Our primary market risk exposures include exchange rate movements and interest
rate fluctuations. We actively review and monitor our exposure to changes in
exchange rates and interest rates. To manage foreign exchange transaction
exposure and interest rate exposure, we from time to time enter into derivative
financial instruments. The derivative financial instruments that we utilize,
while appropriate for hedging a particular kind of risk, are not considered
specialized or high-risk and are generally available from numerous sources. We
do not enter into contracts or utilize derivative financial instruments for
speculative purposes, and the contracts into which we enter are generally of a
duration that is consistent with the anticipated related underlying exposures.
Gains and losses from derivative financial instruments that are designated as
and deemed to be effective hedges are deferred and are recognized in the
statement of earnings when the hedged transactions occur; gains and losses on
instruments that are not designated as and deemed effective hedges are
recognized immediately into earnings. Our use of financial instruments and its
accounting policies for financial instruments are described more fully in note
21 to the consolidated financial statements.
Financial Instruments
Long-term debt
The following table identifies our long-term indebtedness, including capitalized
lease commitments, by currency and type of interest. The majority of the
borrowings indicated below are fixed or have been fixed through the use of
interest rate swaps.
<TABLE>
<CAPTION>
Fixed Interest Floating Interest Total Total
1999 1999 1999 1998
Long-term debt and capital leases denominated in:
<S> <C> <C> <C> <C>
U.S. Dollar USD 2,788,149 USD 313,005 EUR 3,078,075 EUR 2,280,541
Euro EUR 1,250,359 EUR 220,922 EUR 1,471,281 EUR 1,540,457
Brazilian Real BRL 196,157 EUR 107,836 EUR 102,402
--------- ---------
Total EUR 4,657,192 EUR 3,923,400
========= =========
Long-term debt and capital leases at:
Fixed interest rates EUR 4,017,759 EUR 3,418,508
Floating interest rates EUR 639,433 EUR 504,892
--------- ---------
Total EUR 4,657,192 EUR 3,923,400
========= =========
</TABLE>
Foreign currency exchange contracts
As of fiscal year end 1999, we had two outstanding euro denominated currency
swap contracts for a notional amount of EUR 165 million related to short term
commitments denominated in U.S. dollars. These contracts expired in January
2000. We also had one cross currency swap for a notional amount of 900 million
Czech crowns.
Interest rate swaps and other interest rate derivatives
As of fiscal year end 1999, we had eight outstanding NLG denominated interest
rate swap contracts outstanding for a total notional amount of EUR 531 million.
The contracts expire between 2000 and 2004. Six of these contracts are NLG
receive-fix swaps with an average receive rate of 7.23% and an average pay rate
of 3.35%. The remaining two swaps are pay-fix NLG contracts with an average pay
rate of 7.84% and an average receive rate of 3.36% as of fiscal year end 1999.
We also had one interest rate collar and one interest rate swaption outstanding.
The interest rate collar, for a notional amount of 900 million Czech crowns is
used to reduce interest rate risk on Czech crown denominated debt. The payers
swaption contract with a notional amount of $200 million has a strike rate of
5.998%; the receive rate of this
40
<PAGE>
contract is based on LIBOR and will be determined during the life of the swap.
Sensitivity Analysis
Interest rates
The following analysis sets out the sensitivity of the fair value of our
financial instruments to selected changes in interest rates. Fair values
represent the present value of forecast future cash flows at the assumed market
rates. The sensitivity analysis assumes an immediate 10% change in assumed
market rates for all our financial instruments from their levels at January 2,
2000, with all other variables held constant. A 10% change in assumed market
rates would not have a significant impact on the fair value of our financial
instruments.
<TABLE>
<CAPTION>
As of January 2, 2000
-----------------------------------------------------------------------
Sensitivity analysis
------------------------------------------
<S> <C> <C> <C> <C>
Carrying Fair Fair value at Fair value at
Amount Value + 10 % -10 %
---------- ---------- ---------- ----------
Liabilities (All amounts are stated in thousands of euro)
Long-term debt (3,856,593) (3,686,766) (3,577,562) (3,806,273)
Derivative financial instruments
Cross currency swap agreement -- (2,747) (2,747) (2,747)
Interest rate swap agreements -- 14,354 9,465 19,538
Interest rate options and cap agreements -- (1,932) (1,175) (3,414)
---------- ---------- ---------- ----------
Total (3,856,593) (3,677,091) (3,572,019) (3,792,896)
========== ========== ========== ==========
</TABLE>
Foreign currency exchange rates
The following analysis sets out the sensitivity of the fair value of our
financial instruments to selected changes in exchange rates. Fair values
represent the present value of forecast future cash flows at the assumed market
rates. The sensitivity analysis assumes an immediate 10% change in all foreign
currency exchange rates against the euro from their levels as of fiscal year end
1999, with all other variables held constant. A +10% change indicates a
strengthening of the currency in which our financial instruments are
denominated, primarily the dollar, against the euro and a -10% change indicates
a weakening of the currency in which our financial instruments are denominated,
primarily the dollar, against the euro. Based on our analysis included below, we
do not believe that a 10% change in foreign currency exchange rates would have a
significant impact on the fair value of our financial instruments.
<TABLE>
<CAPTION>
As of January 2, 2000
----------------------------------------------------------------
Sensitivity analysis
-------------------------------
<S> <C> <C> <C> <C>
Carrying Fair Fair value at Fair value at
Amount Value +10% -10%
------ ----- --- ---
Liabilities (All amounts are stated in thousands of euro)
Long-term debt (3,856,593) (3,686,766) (3,916,979) (3,498,410)
Derivative financial instruments
Cross currency swap agreement -- (2,747) (3,009) (2,446)
Interest rate swap agreements -- 14,354 14,354 14,354
Interest rate options and cap agreements -- (1,932) (2,126) (1,738)
---------- ---------- ---------- ----------
Total (3,856,593) (3,677,091) (3,907,760) (3,488,240)
========== ========== ========== ==========
</TABLE>
We have not changed the way that we manage our market risks, however, in prior
years, we have presented the disclosures related to quantitative and qualitative
market risks in a tabular presentation. We believe that the sensitivity analysis
presented above is more meaningful and easier to understand. Based on similar
analyses related to our market exposures in 1998, no significant changes in our
market exposures were identified.
For comparison purposes, we have performed a sensitivity analysis based on the
same assumptions as for 1999 on the
41
<PAGE>
financial instruments outstanding as of the end of fiscal 1998 as well. The
amounts indicated below for the fiscal year 1998 have been translated into euros
at the fixed rate of EUR 1 = NLG 2.20371.
Interest rates
<TABLE>
<CAPTION>
As of January 3, 1999
-----------------------------------------------------------------------------
Sensitivity analysis
---------------------------------------------
<S> <C> <C> <C> <C>
Carrying Fair Fair value at Fair value at
Amount Value + 10 % -10 %
---------- ---------- ---------- ----------
Liabilities (All amounts are stated in thousands of euro)
Long-term debt (3,312,531) (3,544,078) (3,504,417) (3,585,000)
Derivative financial instruments
Cross currency swap agreement -- -- -- --
Interest rate swap agreements -- 14,596 13,232 16,024
Interest rate options and cap agreements (1) -- (5,109) (5,109) (5,109)
---------- ---------- ---------- ----------
Total (3,312,531) (3,534,591) (3,496,294) (3,574,085)
========== ========== ========== ==========
</TABLE>
(1) Sensitivity analysis not available due to a conversion of computers systems.
Foreign currency exchange rates
<TABLE>
<CAPTION>
As of January 3, 1999
----------------------------------------------------------------
Sensitivity analysis
--------------------------------
<S> <C> <C> <C> <C>
Carrying Fair Fair value at Fair value at
Amount Value +10% -10%
---------- ---------- ---------- ----------
Liabilities (All amounts are stated in thousands of euro)
Long-term debt (3,312,531) (3,544,078) (3,720,803) (3,367,361)
Derivative financial instruments
Cross currency swap agreement -- -- -- --
Interest rate swap agreements -- 14,596 13,934 15,405
Interest rate options and cap agreements -- (5,109) (5,573) (4,541)
---------- ---------- ---------- ----------
Total (3,312,531) (3,534,591) (3,712,442) (3,356,497)
========== ========== ========== ==========
</TABLE>
42
<PAGE>
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
Supervisory Board
Our Supervisory Board is an independent and self-electing entity. The
Supervisory Board must consist of at least three members. As a member's term
expires or as a member retires, the ongoing members vote on replacement or re-
appointment. Supervisory Board members are elected for a term of four years and
may be re-elected thereafter. A member of the Supervisory Board must retire upon
reaching the age of 72. Persons employed by us or a dependent company
(afhankelijke maatschappij) cannot be members of the Supervisory Board.
The Supervisory Board has the power to appoint and discharge members of our
Corporate Executive Board, the right to approve certain important management
decisions, and the power to adopt the annual financial accounts. In addition,
the Supervisory Board supervises the policies conducted by the Corporate
Executive Board, as well as our general course of affairs and our business. In
performing their duties, members of the Supervisory Board must consider the
interests of Royal Ahold and its business.
The general meeting of shareholders or a duly appointed committee thereof, the
Corporate Executive Board and the Central Works Council, in its capacity as the
representative of our employees, may make a non-binding recommendation for
candidates to fill a vacancy on the Supervisory Board. In addition, the general
meeting of shareholders and the Central Works Council have the right to object
to a proposed appointment of a member of the Supervisory Board. The appointment
will take place if such objection is declared invalid by the Enterprise Chamber
(Ondernemingskamer) of the Amsterdam Court of Appeal.
A member of the Supervisory Board may be dismissed by the Enterprise Chamber of
the Amsterdam Court of Appeal for neglect of duties, for certain other serious
reasons or following a significant change in circumstances as a result of which
continued membership is no longer reasonable.
The remuneration of each member of the Supervisory Board is determined by the
Supervisory Board, subject to approval by the general meeting of shareholders.
As of March 31, 2000, the members of the Supervisory Board were as follows:
<TABLE>
<CAPTION>
Principal Year of
Name Age Occupation Appointment
<S> <C> <C> <C>
H. de Ruiter 66 Former Group Managing Director and Managing 1994
(Chairman) Director of Royal Dutch Petroleum Company
R.J. Nelissen 68 Former Chairman of the Managing 1981
(Vice Chairman) Board of ABN AMRO Holding N.V.
J.A. van Kemenade 63 Governor-General for the Dutch Province of 1996
North-Holland and Former Minister of Education
and Science of the Dutch Government
A.J. Kranendonk (1) 69 Former President of the Management 1985
Board of Friesland W.A.
R.F. Meyer (1) 67 Professor of Business Administration 1988
Harvard Business School
Sir Michael Perry 66 Former Chairman of the Managing 1997
Board of Unilever Plc.
L.J.R. de Vink 55 President and Chief Executive Officer 1998
of Warner-Lambert Company
(1) Expected to retire in the year 2000.
</TABLE>
Corporate Executive Board
43
<PAGE>
The Corporate Executive Board is responsible for the management of our business.
The Corporate Executive Board must consist of at least three members. Members of
the Corporate Executive Board are appointed and discharged by the Supervisory
Board. There is no stated term of office for Corporate Executive Board members
or other executive officers.
As of March 31, 2000, the members of the Corporate Executive Board were as
follows:
<TABLE>
<CAPTION>
Year having Year of appointment
joined the to Corporate
Name Age Areas of Responsibility Company Executive Board
<S> <C> <C> <C> <C>
C.H. van der Hoeven 52 President and Chief Executive 1985 1985
President Officer, management development
and organization, communications, global sourcing
and legal affairs
J.G. Andreae 53 European operations, including 1979 1997
Executive Vice-President Netherlands food retailing
A.M. Meurs 49 Administration, finance, internal 1992 1997
Executive Vice-President audit and business development
A.S Noddle 59 Latin American and Asia Pacific 1981 1998
Executive Vice-President operations
R.G. Tobin 61 U.S. operations 1996 1998
Executive Vice-President
</TABLE>
Other Executive Officers
Key executive officers who are not members of the Corporate Executive Board were
as of March 31, 2000 as follows:
G.J.G. van Breen Senior Vice-President Global Sourcing since January
2000. He joined Royal Ahold in March 1987.
A.J. Brouwer Senior Vice-President Management Development and
Organization since October 1997. He joined Royal Ahold
in August 1992.
A. Buitenhuis Senior Vice-President Finance and Fiscal Affairs since
April 1996. He has been employed by Royal Ahold since
March 1983.
M.J. Dorhout Mees Senior Vice-President Business Development since June
1997. He has been employed by Royal Ahold since August
1983.
P.P.M. Ekelschot Senior Vice-President Internal Audit since April 1997.
He has been employed by Royal Ahold since March 1989.
H. Gobes Senior Vice-President Communications since joining
Royal Ahold in 1990.
A.H.P.M. van Tielraden Senior Vice-President Legal Affairs and General Counsel
since January 2000. He has been employed by Royal Ahold
since November 1997.
C. Sterk Senior Vice-President Financial Services since January
2000. He has been employed by Royal Ahold since 1979.
L.A.P.A. Verhelst Senior Vice-President Administration since joining
Royal Ahold in April 1997.
N.L.J. Berger Corporate Secretary since April 1994. He has been
employed by Royal Ahold since 1989.
44
<PAGE>
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
The aggregate amount of compensation paid by us in 1999 for services in all
capacities to the Supervisory Board (the "Directors") and the Corporate
Executive Board, the Senior Vice-Presidents and the Corporate Secretary of Royal
Ahold (collectively referred to as the "Officers") was EUR 7,529,121. In
addition in 1999, we made aggregate contributions in the amount of EUR 614,872
to pension plans on behalf of the Directors and Officers. A portion of the
compensation of the members of the Corporate Executive Board is based on the
outcome of key performance indicators.
Reference is made to Item 12 of this annual report, which contains a description
of our stock option plans. We do not report to our stockholders, or otherwise
make public, the information specified in this Item, except for stock option
information for individually named Directors and Officers.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
We established stock option plans in The Netherlands and the United States,
pursuant to which a number of options to acquire common shares are granted to
executive and other key salaried employees who are employed at certain specified
job levels and who are designated by the Corporate Executive Board as eligible
to be granted options, and as such other employees as are designated by the
Corporate Executive Board. The exercise price of such options is equal to the
closing price of the common shares on Amsterdam Exchanges on the day prior to
the day the options are granted. The exercise price will be determined on the
last day of the fiscal year.
In The Netherlands, options granted are exercisable for a period of five years
after the grant date. Options granted prior to the beginning of fiscal year 1997
vested immediately. Options granted in 1998 have a vesting period of two years.
During 1999, The Netherlands' plan was amended and restated and the vesting
period was changed to a period of three years.
In the United States, we established stock option plans in 1986 (the "1986 U.S.
Plan") and in 1990 (the "1990 U.S. Plan"), which were both amended and restated,
effective January 3, 2000. Options granted under the 1990 U.S. Plan, as amended
and restated, are exercisable after a vesting period of five years, after which
the options may be exercised in full, or in part, during a five year period.
Under the 1986 Plan, as amended and restated, options granted thereunder are
exercisable after a vesting period determined by the Corporate Executive Board
and specified in each option award agreement, after which the options may be
exercised in full, or in part, during the remainder of the five year period from
the date of grant.
Currently, option rights have been granted to 820 employees to obtain common
shares. The exercise of option rights is regulated to comply with our
regulations designed to prevent insider trading. Effective December 1997, the
number of option rights granted is dependent on the growth in earnings per
share. Starting January 2000, employees are also allowed to utilize "out of the
money" option rights with higher exercise prices. New shares will be granted
upon the exercise of option rights, subject to a yearly maximum of 1% of the
issued shares.
At March 31, 2000, the number of options outstanding was 21,361,215. The total
number of such unexercised outstanding options held by Officers as a group on
March 31, 2000 was 3,307,207.
For further information regarding the stock option plans, also see note 15 to
the consolidated financial statements contained in Item 18 of this annual
report.
45
<PAGE>
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
In January 1994, a group of approximately 300 of our Dutch managers and
employees replaced a EUR 15 million capital investment in the AH Dutch Customer
Fund (the "Fund"), an independent investment fund which invests all of its
assets in our shares and debt. The capital investment had been held by Het
Weerpad B.V., an investment company of the Heijn family, founders of Royal
Ahold. We made loans to this group of managers and employees, which included our
Officers, to assist them with their investment in the Fund. These floating-rate
loans, bearing fluctuating interest based on the ECB interest on deposits, are
generally due in ten years from issuance or upon an individual's termination of
employment, if earlier, and are secured by each individual's corresponding
investment in the Fund.
In July 1996 and April 1998, additional loans were granted to our Dutch managers
and employees to purchase additional investments in the Fund. No Directors or
Officers participated in these purchases. At the end of fiscal year 1999 a total
of EUR 61.7 million was outstanding to Dutch managers and employees, including
EUR 1.7 million in amounts due from our Officers.
46
<PAGE>
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Not applicable.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
None.
47
<PAGE>
PART IV
ITEM 17. FINANCIAL STATEMENTS
Not applicable.
ITEM 18. FINANCIAL STATEMENTS
Index of consolidated financial statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report [50]
Consolidated Statements of Earnings for fiscal years 1999, 1998 and 1997 [51]
Consolidated Balance Sheets as of January 2, 2000 and January 3, 1999 [52]
Consolidated Statements of Cash Flows for fiscal years 1999, 1998 and 1997 [54]
Consolidated Statements of Stockholders' Equity for fiscal years 1999, 1998 and 1997 [55]
Notes to the Consolidated financial statements [56]
</TABLE>
Royal Ahold's condensed consolidated financial statements prepared under U.S.
GAAP are presented in note 23 to the
consolidated financial statements.
Schedules are omitted because, under applicable rules, the omitted schedules are
not required, are inapplicable or the information required therein is included
in the financial statements or in the notes thereto.
48
<PAGE>
Independent Auditors' Report
To the Supervisory Board and Stockholders of Koninklijke Ahold N.V.:
We have audited the accompanying consolidated balance sheets of Koninklijke
Ahold N.V. as of January 2, 2000 and January 3, 1999 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the three fiscal years in the period ended January 2, 2000, expressed in
euros. These consolidated financial statements are the responsibility of Royal
Ahold's management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in The Netherlands and the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Koninklijke Ahold N.V. at January 2, 2000, January 3, 1999 and the results of
its operations, changes in its equity and its cash flows for each of the three
fiscal years in the period ended January 2, 2000, in conformity with generally
accepted accounting principles in The Netherlands.
Generally accepted accounting principles in The Netherlands vary in certain
significant respects from generally accepted accounting principles in the United
States. The application of the latter would have affected the determination of
net earnings for each of the three fiscal years in the period ended January 2,
2000 and the determination of stockholders' equity at January 2, 2000 and
January 3, 1999 to the extent summarized in Note 23.
/s/ Deloitte & Touche
Deloitte & Touche
Accountants
March 7, 2000 (April 12, 2000 as to note 22)
Amsterdam, The Netherlands
49
<PAGE>
Consolidated Statements of Earnings of Royal Ahold
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
(All amounts, except per share amounts, are expressed in thousands of 1999 1998 1997
euro. Amounts reported for 1998 and 1997 have been converted from Dutch
guilders to euro at the fixed rate of EUR 1 = NLG 2.20371)
<S> <C> <C> <C>
Net sales 33,560,391 26,484,210 22,946,976
Cost of sales (25,303,075) (20,295,007) (17,707,560)
----------- ----------- -----------
Gross profit 8,257,316 6,189,203 5,239,416
Selling expenses (5,777,702) (4,413,052) (3,812,296)
General and administrative expenses (1,064,942) (758,885) (593,603)
----------- ----------- -----------
Operating results 1,414,672 1,017,266 833,517
Interest income 58,589 76,358 42,878
Interest expenses (420,820) (319,479) (274,543)
Exchange rate differences (6,479) (1,877) 13,793
Other financial income 2,516 -- --
----------- ----------- -----------
Net financial expense (366,194) (244,998) (217,872)
----------- ----------- -----------
Earnings before income taxes and minority interests 1,048,478 772,268 615,645
Income taxes (283,001) (197,075) (173,520)
----------- ----------- -----------
Earnings after taxes and before minority interests 765,477 575,193 442,125
Income from unconsolidated companies 7,437 11,105 2,845
Minority interests (20,807) (39,099) (21,216)
----------- ----------- -----------
Net earnings 752,107 547,199 423,754
=========== =========== ===========
Appropriation of net earnings:
Retained earnings and reserves 424,031 299,133 242,838
Dividend common shares 315,909 238,141 172,590
Dividend cumulative preferred financing shares 12,167 9,925 8,326
----------- ----------- -----------
752,107 547,199 423,754
=========== =========== ===========
Net earnings after preferred dividends 739,940 537,274 415,428
Weighted average number of common shares outstanding (x 1,000) 643,167 585,975 536,950
Earnings per common share 1.15 0.92 0.77
Diluted earnings per common share 1.13 0.91 0.76
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
50
<PAGE>
Consolidated Balance Sheets of Royal Ahold
<TABLE>
(All amounts, except share and per share amounts, are expressed in thousands of euro. January 2, January 3,
Amounts reported at January 3, 1999 have been converted from Dutch guilders to euro at 2000 1999
the fixed rate of EUR 1 = NLG 2.20371)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents 887,592 519,395
Receivables 1,696,748 1,509,047
Inventories 2,552,323 1,996,290
---------- ----------
5,136,663 4,024,732
Fixed assets
Tangible fixed assets, net of depreciation
Buildings and land 4,377,756 3,480,362
Machinery and equipment and other 3,489,675 2,850,577
Under construction 607,563 415,664
---------- ----------
8,474,994 6,746,603
Loans receivable 168,404 140,319
Investments in unconsolidated companies 171,988 184,007
Intangible fixed assets 209,905 195,586
Deferred income taxes 123,688 135,126
---------- ----------
9,148,979 7,401,641
---------- ----------
14,285,642 11,426,373
========== ==========
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
51
<PAGE>
Consolidated Balance Sheets of Royal Ahold (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
(All amounts, except share and per share amounts, are expressed in thousands of January 2, January 3,
euro. Amounts reported at January 3, 1999 have been converted from Dutch guilders 2000 1999
to euro at 2000 1999 the fixed rate of EUR 1 = NLG 2.20371)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loans payable 1,312,320 879,198
Taxes payable 447,514 233,905
Accounts payable 2,860,584 2,229,582
Accrued expenses 869,397 800,402
Other current liabilities 590,404 463,976
---------- ----------
6,080,219 4,607,063
Long-term liabilities
Subordinated loans 859,914 859,914
Other loans 2,713,975 2,236,143
---------- ----------
3,573,889 3,096,057
Capitalized lease commitments 1,083,303 827,343
Deferred income taxes 102,793 140,377
Other provisions 983,794 959,490
---------- ----------
5,743,779 5,023,267
Minority interests 336,048 243,290
Stockholders' equity
Cumulative preferred shares--NLG 1,000 par value;
authorized--650,000 shares; issued--none -- --
Cumulative preferred financing shares--NLG 0.50 par value;
authorized--195,000,000 shares; outstanding in 1999 and 1998--144,000,000
shares 32,672 32,672
Convertible cumulative preferred financing shares--NLG 0.50 par value;
authorized--60,000,000 shares; issued--none -- --
Common shares--NLG 0.50 par value; authorized--1,045,000,000 shares;
outstanding in 1999--646,484,126 shares and in 1998--628,096,550
shares 146,681 142,509
Additional paid-in capital 4,224,505 4,207,841
Revaluation reserve 30,221 52,674
Reserve for exchange rate differences (60,552) (337,734)
General reserve (2,247,931) (2,545,209)
---------- ----------
2,125,596 1,552,753
---------- ----------
14,285,642 11,426,373
========== ==========
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
52
<PAGE>
Consolidated Statements of Cash Flows of Royal Ahold
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(All amounts are expressed in thousands of euro. Amounts reported for 1998 and fiscal year fiscal year fiscal year
1997 have been converted from Dutch guilders to euro at the fixed rate of 1999 1998 1997
EUR 1 = NLG 2.20371)
Cash flows from operating activities
Net earnings 752,107 547,199 423,754
Adjustments to reconcile to net cash from operating activities
Minority interests in earnings 20,807 39,099 21,216
Depreciation and amortization 868,123 672,991 540,258
Result divestments of subsidiaries 1,847 -- --
Unremitted earnings of unconsolidated companies (3,255) (6,827) 1,627
Changes in assets and liabilities providing (using) cash (excluding
assets and liabilities acquired):
Receivables (45,709) (241,401) (85,388)
Inventories (256,343) (52,133) (175,303)
Other current liabilities 512,012 221,004 161,618
Deferred income taxes (37,309) 52,695 10,381
Other provisions (82,286) 25,068 26,529
---------- ---------- ----------
Net cash provided by operating activities 1,729,994 1,257,695 924,692
Cash flows from investing activities
Purchase of tangible fixed assets (1,732,798) (1,319,514) (1,230,251)
Purchase of intangible assets (30,853) (26,426) (28,952)
Sale or disposal of tangible fixed assets 149,828 143,616 142,287
Acquisitions of consolidated subsidiaries (699,846) (3,069,231) (159,424)
Acquisitions of interests in unconsolidated companies (18,493) (31,220) (1,309)
Divestment of subsidiaries 20,898 21,305 3,492
---------- ---------- ----------
Net cash used in investing activities (2,311,264) (4,281,470) (1,274,157)
Cash flows from financing activities
Net proceeds from issuance of common shares -- 2,181,640 --
Net proceeds from issuance of cumulative preferred financing shares -- 73,035 --
Net proceeds from issuance of convertible subordinated notes -- 678,402 --
Net proceeds from exercised stock options 20,836 36,480 25,454
Additional capital contributions from minority shareholders 325,872 77,679 129,038
Proceeds from long-term debt 1,375,118 1,217,512 261,115
Repayments of long-term debt (1,106,920) (961,016) (201,967)
Repayments of capitalized lease commitments (53,043) (38,539) (38,965)
Change in short-term loans payable 339,463 70,526 216,900
Issuance of loans receivable (45,405) (60,924) (81,938)
Repayments of loans receivable 27,621 78,657 17,402
Change in amounts due from unconsolidated companies 29,006 (11,544) (2,989)
Payment of dividend on common shares (34,522) (16,651) (14,362)
Payment of dividend on cumulative preferred financing shares (11,971) (8,326) (8,326)
---------- ---------- ----------
Net cash provided by financing activities 866,055 3,316,931 301,362
Effects of changes in exchange rates on cash 44,184 (128,872) (339)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 328,969 164,284 (48,442)
Cash and cash equivalents at beginning of the year 519,395 297,093 324,059
Cash brought in through acquisitions and new consolidations 39,228 58,018 21,476
---------- ---------- ----------
Cash and cash equivalents at end of the year 887,592 519,395 297,093
========== ========== ==========
Supplemental cash flow information
Income taxes paid 145,832 316,655 146,081
Interest paid, net of amounts capitalized 397,832 307,947 272,725
Capitalized lease commitments incurred 181,441 130,588 64,668
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
53
<PAGE>
Consolidated Statements of Stockholders' Equity of Royal Ahold
<TABLE>
<CAPTION>
(All amounts are expressed in thousands of
euro. Amounts reported for 1998 and 1997 have Cumulative Reserve for
been converted from Dutch guilders to euro at preferred Additional exchange
the fixed rate of EUR 1 = NLG 2.20371) Common financing paid-in Revaluation rate General
shares shares capital reserve differences reserve Total
------ ------ ------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 95,607 22,689 1,948,117 58,875 (123,641) (904,921) 1,096,726
Net earnings -- -- -- -- -- 423,754 423,754
Dividend proposed on common shares -- -- -- -- -- (172,590) (172,590)
Dividend on cumulative preferred financing
shares -- -- -- -- -- (8,326) (8,326)
Three-for-one-stock split 19,542 4,538 (24,080) -- -- -- --
Common shares issued as final optional stock
dividend 1996 1,719 -- (1,719) -- -- 88,302 88,302
Common shares issued as interim optional
stock dividend 1997 1,072 -- (1,072) -- -- 45,040 45,040
Common shares issued from exercise of
option rights 635 -- 24,819 -- -- -- 25,454
Appropriation of earnings 1996 -- -- -- -- -- (4,761) (4,761)
Goodwill paid -- -- -- -- -- (177,147) (177,147)
Realized revaluation -- -- -- (491) -- -- (491)
Exchange rate differences in foreign interests -- -- -- -- 31,640 54,151 85,791
------- ---------- ---------- ----------- ---------- --------- ----------
Balance at December 28, 1997 118,575 27,227 1,946,065 58,384 (92,001) (656,498) 1,401,752
Net earnings -- -- -- -- -- 547,199 547,199
Dividend proposed on common shares -- -- -- -- -- (238,141) (238,141)
Dividend on cumulative preferred financing
shares -- -- -- -- -- (9,925) (9,925)
Common shares issued as final optional stock
dividend 1997 2,325 -- (2,325) -- -- 120,892 120,892
Common shares issued as interim optional
stock dividend 1998 1,179 -- (1,179) -- -- 61,308 61,308
Common shares issued from exercise of
options rights 861 -- 35,619 -- -- -- 36,480
Common shares issued 19,569 -- 2,162,071 -- -- -- 2,181,640
Cumulative preferred financing shares issued -- 5,445 67,590 -- -- -- 73,035
Appropriation of earnings 1997 -- -- -- -- -- (11,697) (11,697)
Goodwill paid -- -- -- -- -- (2,362,476) (2,362,476)
Realized revaluation -- -- -- (5,710) -- -- (5,710)
Exchange rate differences in foreign interests -- -- -- -- (245,733) 4,129 (241,604)
------- ---------- --------- ----------- ----------- ---------- ----------
Balance at January 3, 1999 142,509 32,672 4,207,841 52,674 (337,734) (2,545,209) 1,552,753
Net earnings -- -- -- -- -- 752,107 752,107
Dividend proposed on common shares -- -- -- -- -- (315,909) (315,909)
Dividend on cumulative preferred financing
shares -- -- -- -- -- (12,167) (12,167)
Common shares issued as final optional stock
dividend 1998 2,480 -- (2,480) -- -- 148,807 148,807
Common shares issued as interim optional
stock dividend 1999 1,258 -- (1,258) -- -- 77,621 77,621
Common shares issued from exercise of
option rights 434 -- 20,402 -- -- -- 20,836
Appropriation of earnings 1998 -- -- -- -- -- (300) (300)
Goodwill paid -- -- -- -- -- (372,847) (372,847)
Realized revaluation -- -- -- (22,453) -- 19,217 (3,236)
Exchange rate differences in foreign interests -- -- -- -- 277,182 749 277,931
------- ---------- --------- ----------- ----------- ---------- ----------
Balance at January 2, 2000 146,681 32,672 4,224,505 30,221 (60,552) (2,247,931) 2,125,596
======= ========== ========= =========== =========== ========== ==========
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
54
<PAGE>
Notes to the Consolidated financial statements
Note 1 Significant accounting policies
Company's business
Royal Ahold's principal activity is the operation of food retail supermarkets
both in the United States and in Europe with additional activities in several
potential growth markets. Such retail operations are primarily conducted through
the following consolidated subsidiaries or partnerships:
<TABLE>
<CAPTION>
Region Number of stores
Europe: at January 2, 2000
<S> <C>
The Netherlands--Albert Heijn:
Company owned 516
Franchised 175
Portugal--Jeronimo Martins Retail, SGPS, S.A. 196
The Czech Republic--Ahold Czech Republic A.S. 173
Poland--Ahold Polska Sp. z o.o. 115
Spain--Ahold SuperMercados S.L. 185
United States:
Stop & Shop 202
Giant-Carlisle 156
BI-LO 281
Tops 248
Giant-Landover 176
</TABLE>
Royal Ahold ("Ahold" or the "Company") also operates food retail stores in other
regions throughout the world. Such retail operations are primarily conducted
through the following consolidated subsidiaries or partnerships:
<TABLE>
<CAPTION>
Region Number of stores
Latin America: at January 2, 2000
<S> <C>
Brazil--Bompreco S.A. Supermercados do
Nordeste 100
Argentina--Disco S.A. 213
Chile--Santa Isabel S.A. 95
Guatemala - La FraguaS.A. (stores not included) --
Asia Pacific:
Malaysia--Royal Ahold - Perlis (Tops) Sdn. Bhd. 39
Thailand--CRC Ahold Company Ltd. 41
</TABLE>
In The Netherlands, Royal Ahold operates 1,082 specialty retail stores (mainly
liquor stores, drugstores and confectionery stores) and is also involved in food
supply and, through its subsidiary Schuitema N.V. (73%-owned), in the wholesale
distribution of food products to independent Dutch food retailers.
Royal Ahold has two wholly-owned real estate affiliates, Ahold Real Estate
Company, Inc. in the United States and Ahold Vastgoed B.V. ("AVG") in The
Netherlands. These two companies are engaged in the financing, development and
management of store sites and shopping centers primarily in support of Royal
Ahold's retail operations.
Consolidation
The financial statements of Royal Ahold presented herein, and the notes thereto,
are prepared on a consolidated basis in conformity with Dutch GAAP. Generally,
all companies in which Royal Ahold can exercise control or where Royal Ahold has
a direct or indirect interest of more than 50% are included in the
consolidation. All significant intercompany transactions and accounts are
eliminated in consolidation.
Comparability of the financial statements with those included in the Annual
Report of Royal Ahold
The financial statements and related notes of Royal Ahold presented herein
differ in certain respects from the financial statements and related notes
presented in the printed English language version of the 1999 Annual Report of
Royal Ahold. The principal differences are reclassifications within certain
financial statement categories, terminology changes and additional disclosures
have been provided in order to present these financial statements in a format
more customary
55
<PAGE>
to readers of U.S. annual reports.
Basis of accounting
The valuation of assets, liabilities and stockholders' equity and the
determination of earnings are based on historical cost, except for AVG's 1988
revaluation of its real estate holdings and its related subsequent effects.
Fiscal year
Royal Ahold's fiscal year generally consists of 52 weeks and ends on the Sunday
nearest to December 31. Fiscal year 1999 contained 52 weeks and ended on January
2, 2000. Fiscal year 1998 contained 53 weeks and ended on January 3, 1999.
Fiscal year 1997 contained 52 weeks and ended on December 28, 1997.
Foreign exchange
Transactions, receivables and liabilities denominated in foreign currencies
resulting from ordinary activities are translated at the prevailing rates of
exchange. The resulting exchange rate differences are added or charged to
operating results. Exchange rate differences resulting from financing activities
are added or charged to net financial expenses.
In the consolidation, subsidiaries' balance sheets whose functional currency is
other than euros are translated at the rates of exchange prevailing at the end
of the fiscal year; the amounts in the subsidiaries' statements of earnings
denominated in currencies other than euros are translated per quarter at the
quarter's average rate of exchange. The resulting exchange rate differences are
added or charged directly to stockholders' equity. On a cumulative basis, the
aggregate amount of foreign exchange rate differences charged against
stockholders' equity was EUR 61 million as of January 2, 2000.
Prior to fiscal 1999, the Company utilized the Dutch guilder as its functional
reporting currency, however, beginning in fiscal 1999, Royal Ahold adopted the
euro as its functional reporting currency. As part of the introduction of the
euro throughout the European Union, the exchange rate between the legacy
currencies and the euro were fixed on January 1, 1999. Accordingly, the historic
financial statements and related disclosures that were reported using the Dutch
guilder have been converted to the euro using the fixed conversion rate of EUR 1
= NLG 2.20371. The conversion of the historical financial statements from Dutch
guilders to euro at a fixed rate depicts the same trends as would have been
presented if we would have continued to present our financial statements in
Dutch guilders. The rates of exchange (euro per dollar) applied for the dollar
are as follows:
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Balance Sheet
Year-end rate 0.9926 0.8558 0.9080
Statement of Earnings
1st quarter 0.9015 0.9306 0.8481
2nd quarter 0.9573 0.9159 0.8794
3rd quarter 0.9461 0.8958 0.9263
4th quarter 0.9681 0.8512 0.8974
</TABLE>
The effect of changes in currencies other than the dollar have not been
material.
Receivables/Loans receivable
Receivables and loans receivable are recorded at face value less provisions for
uncollectible amounts. Project financing represents advances for the
construction of projects that are to be sold upon their completion and are
generally leased-back.
Inventories
Inventories are stated at the lower of historical cost or manufacturing cost
based on the first-in, first-out ("FIFO") method or market value.
Tangible fixed assets
56
<PAGE>
Tangible fixed assets are stated at cost less accumulated depreciation and
amortization. Depreciation is calculated using the straight-line method based on
the estimated useful lives of the related assets. In the case of capital leases
and leasehold improvements, the estimated useful lives of the related assets do
not exceed the remaining term of the corresponding leases. Assigned economic
lives of Royal Ahold's tangible fixed assets are as follows:
<TABLE>
<CAPTION>
Category Assigned economic life
<S> <C>
Buildings 30-40 years
Machinery and equipment (primarily distribution and production facilities) 8 years
Other fixed assets (including renovations and store equipment) 5-8 years
</TABLE>
Interest incurred during construction is capitalized as part of the related
asset, and totaled EUR 15 million, EUR 13 million, and EUR 10 million in fiscal
years 1999, 1998 and 1997, respectively. The amount recorded for buildings also
includes capitalized leases for real estate (located primarily in the United
States).
Investments in unconsolidated companies
Royal Ahold participates in certain joint ventures and partnerships, as well as
maintaining investments in other companies. Royal Ahold consolidates all
companies over which it exercises significant control, as evidenced by majority
ownership or through effective control of management. Companies over which Royal
Ahold can exercise considerable influence in terms of business and financial
policy, and owns more than a 20% interest, are accounted for using the equity
method. Other unconsolidated companies are stated at historical cost unless
there is a permanent decline in value.
Intangible fixed assets
Goodwill including any necessary restructuring provisions incurred upon
acquisitions is charged directly to stockholders' equity. Intangible assets
primarily represent the discounted value of the difference between the fair
rental value and the contractual rents due on leases as recorded at the time of
the acquisition of a business or takeover of such leases. These discounted
intangible assets are amortized over the remaining length of the lease
agreements on a straight-line basis. Computer software costs are capitalized as
part of intangible assets and are amortized over three years.
Recoverability of long-lived assets
In evaluating useful lives and carrying values of long-lived assets, Royal Ahold
reviews certain indicators of potential impairment, such as undiscounted cash
flows and profitability projections that incorporate the impact on existing
company businesses. In the event that an impairment seems likely, the fair value
of the related asset is determined, and Royal Ahold would record a charge to
earnings based on comparing the asset's carrying value to the estimated fair
value. Historically, Royal Ahold has generated sufficient returns from acquired
businesses to recover the cost of assets, including intangible assets.
Taxes payable
Taxes payable include income taxes (net of investment credits), value added
taxes, payroll taxes and other taxes which are expected to be paid within one
year.
Revaluation reserve
In October 1988, a one-time revaluation of certain relevant real estate held by
AVG was recorded. Royal Ahold added the difference between market value and book
value, net of deferred taxes, to a revaluation reserve in stockholders' equity.
The revalued amounts are amortized on a straight-line basis over the remaining
estimated life of the related real estate.
Income taxes/Deferred income taxes
Income taxes are determined based on the earnings reported in the Consolidated
Statement of Earnings, adjusted for permanent differences between income as
calculated for financial and tax reporting purposes at the prevailing tax rates.
Deferred income tax assets and liabilities derive from temporary differences
between the financial and tax reporting of assets and liabilities and from loss
carryforward facilities available and are included under "Deferred income
taxes".
57
<PAGE>
Netting of deferred tax assets and liabilities occurs on a fiscal unity basis.
Deferred tax assets and liabilities are based on the tax rates prevailing at the
end of the fiscal year. A valuation allowance is established, when necessary, to
reduce deferred tax assets to the amount that is more likely than not to be
realized based on available evidence.
Use of estimates
The preparation of Royal Ahold's consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the balance
sheet dates and reported amounts of revenue and expense during the reported
periods. Actual results could differ from those estimates.
Revenue recognition
Royal Ahold recognizes retail sales at the point of sale. Wholesale and food
supply revenues are recognized when goods are delivered.
Advertising
Royal Ahold recognizes advertising expenses as incurred. Advertising expenses
totaled EUR 273 million, EUR 217 million and EUR 195 million in fiscal years
1999, 1998 and 1997, respectively.
Earnings per share
The calculation of earnings per common share is calculated based on the weighted
average number of shares outstanding during the fiscal year. The number of
shares outstanding is retroactively adjusted for stock dividends. The
calculation of diluted net earnings per common share is calculated based on the
weighted average number of common shares outstanding, inclusive of the number of
shares that would have been issued upon conversion of all dilutive common
shares, such as convertible subordinated notes and the exercise of employee
stock options outstanding.
Amounts in thousands of euros
Unless indicated otherwise, all amounts included in the notes to the
consolidated financial statements are stated in thousands of euros.
Reclassifications
Certain reclassifications have been made to prior year financial statements to
conform to the current year presentation.
Note 2 Business acquisitions and investments
During 1999, 1998 and 1997, Royal Ahold completed the acquisitions and
partnership investments set forth below. The store counts indicated below
represent the number of stores operated at the time of acquisition, unless
otherwise indicated.
. La Fragua (Guatemala): In December 1999, Royal Ahold established a new 50/50
partnership, Paiz Ahold, which controls an 80.5% interest in La Fragua, the
largest food retailer in Guatemala. At December 31, 1999, La Fragua operated
93 supermarkets, hypermarkets and discount stores in Guatemala, 20 stores in
El Salvador and six in Honduras. Royal Ahold completed this agreement in
December 1999 and, as a result, the assets and liabilities of La Fragua are
reflected in the consolidated balance sheet at the end of fiscal 1999 but
none of the results of operations are included in the consolidated statement
of earnings for fiscal 1999.
. Supamer and Gonzales (Argentina): In May 1999, through Royal Ahold's 50/50
partnership with Velox Retail Holdings, Disco Ahold International Holdings
acquired 75 stores from Supamer and Gonzales. Supamer operated 46
supermarkets under the Americanos name and 18 convenience stores under the
Minisol name. Gonzales operated 11 urban supermarkets.
. Gastronoom (The Netherlands): In July 1999, Royal Ahold acquired Gastronoom,
a Dutch institutional food supplier, for EUR 152 million including interest-
bearing debt. Gastronoom specializes in supplying the hospitality sector,
including hotels, restaurants and bars, from its 18 distribution and service
centers in The Netherlands.
58
<PAGE>
. Dialco, Dumaya, Guerrero and Castillo del Barrio (Spain): Throughout 1999,
Royal Ahold acquired several companies for an aggregate of EUR 118 million in
cash. Dialco operated 100 supermarkets in Andalusia. Dumaya operated 30
supermarkets and five cash and carry stores in and around Malaga and Ceuta,
on the Morroccan coast. Guerrero operated 20 supermarkets and one cash and
carry store in Granada. Castillo del Barrio is a small chain of seven
supermarkets in Malaga.
. Giant-Landover (United States): In October 1998, Royal Ahold acquired Giant
Food, which operated 179 supermarkets in the Mid-Atlantic region of the
United States, for $2.7 billion (EUR 2.5 billion) in cash.
. Disco (Argentina) and Santa Isabel (Chile): In January 1998, Royal Ahold
established Disco Ahold International Holdings, a 50% owned partnership with
Velox Retail Holdings. DAIH currently controls a 98.1% stake in Disco, the
largest food retailer in Argentina, with 108 stores, and a 69.0% stake in
Santa Isabel, a Chilean company with 64 stores in Chile, 15 in Peru, six in
Paraguay and two in Ecuador. Royal Ahold paid approximately $538 million (EUR
534 million) to acquire our interest in DAIH.
. SuperMar (Brazil): In June 1997, Royal Ahold's 50% owned partnership,
Bompreco, acquired SuperMar, an operator of 50 food retail stores in the
State of Bahia, Brazil, for approximately BRL 65 million (EUR 54 million) in
cash.
. CRC Ahold Thailand (Thailand): In January 1997, Royal Ahold established a
partnership, CRC Ahold Thailand, with Central Robinson Group, and the
partnership acquired 30 supermarkets in Thailand for approximately THB 4.4
billion (EUR 135 million) in cash. In April 1998, Royal Ahold increased its
ownership interest from 49% to 100%, subject to repurchase options of up to
50% granted to the Central Robinson Group.
The above acquisitions have been accounted for by the purchase method of
accounting. The purchase price has been allocated based on the estimated fair
values of the assets acquired and the liabilities assumed. As discussed in Note
1 to the consolidated financial statements, under Dutch GAAP, any resulting
goodwill is immediately charged to stockholders' equity in the year of
acquisition. The operating results of all acquisitions are normally included in
the Consolidated Statements of Earnings from the dates of their respective
acquisitions. Under U.S. GAAP, goodwill of approximately EUR 373 million and
approximately EUR 2,362 million in 1999 and 1998, respectively, would be
recorded as an intangible asset to reflect the excess of the purchase price over
the estimated fair value of the assets acquired and liabilities assumed.
Note 3 Cash and cash equivalents
<TABLE>
January 2, January 3,
<S> <C> <C>
2000 1999
Cash and cash equivalents 444,193 414,671
Interest bearing cash and time deposits 443,399 104,724
--------- ---------
887,592 519,395
========= =========
</TABLE>
Reported amounts at January 2, 2000 include restricted cash of EUR 35,398,
relating to required deposits for certain pension fund agreements.
Items reported as cash generally have an original maturity of less than
three months.
Note 4 Receivables
<TABLE>
<CAPTION>
January 2, January 3,
<S> <C> <C>
2000 1999
Trade receivables 891,273 718,501
Other receivables 458,100 412,102
Prepaid expenses 355,987 398,026
Project financing 84,010 57,677
--------- ---------
1,789,370 1,586,306
Allowances for doubtful receivables (92,622) (77,259)
--------- ---------
1,696,748 1,509,047
========= =========
</TABLE>
Note 5 Inventories
59
<PAGE>
<TABLE>
<CAPTION>
January 2, January 3,
2000 1999
<S> <C> <C>
Raw materials and components 12,991 22,413
Finished products and merchandise inventories 2,549,922 1,982,896
Other inventories 62,639 56,166
--------- ---------
2,625,552 2,061,475
Allowances for obsolete inventories (73,229) (65,185)
--------- ---------
2,552,323 1,996,290
========= =========
</TABLE>
Note 6 Tangible fixed assets
<TABLE>
<CAPTION>
Buildings and Land Machinery Under
--------------------
Stores Other equipment Other construction Total
---------- --------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cost, Jan. 3, 1999 3,548,152 623,722 1,804,240 3,270,423 415,664 9,662,201
Accumulated depreciation (560,518) (130,994) (645,699) (1,578,387) -- (2,915,598)
--------- -------- --------- ---------- ------- ----------
Net book value, Jan. 3, 1999 2,987,634 492,728 1,158,541 1,692,036 415,664 6,746,603
Investments 426,517 78,433 371,090 698,241 158,517 1,732,798
Capitalized leases 178,164 -- 987 2,290 -- 181,441
Assets brought in through
acquisitions 92,267 40,462 25,655 85,906 437 244,727
Company interests sold -- (9,702) (19,850) (14,545) (313) (44,410)
Book value of assets sold or
disposed and
reclassifications (67,220) 17,224 (43,239) (45,765) (5,462) (144,462)
Depreciation (140,737) (28,471) (192,550) (482,479) -- (844,237)
Exchange rate differences 277,862 32,595 110,165 143,192 38,720 602,534
--------- -------- --------- ---------- ------- ----------
Net book value, Jan. 2, 2000 3,754,487 623,269 1,410,799 2,078,876 607,563 8,474,994
========= ======== ========= ========== ======= ==========
Cost, Jan. 2, 2000 4,558,960 794,632 2,236,866 4,082,603 607,563 12,280,624
Accumulated depreciation (804,473) (171,363) (826,067) (2,003,727) -- (3,805,630)
--------- -------- --------- ---------- ------- ----------
Net book value, Jan. 2, 2000 3,754,487 623,269 1,410,799 2,078,876 607,563 8,474,994
========= ======== ========= ========== ======= ==========
</TABLE>
As of January 2, 2000, the aggregate amounts of mortgage and other loans
collateralized by real estate were EUR 114,720. The book values of
mortgaged real estate at January 2, 2000 exceed the amounts due under the
related loans or secured liabilities.
As of January 2, 2000, Royal Ahold had purchase commitments for fixed
assets outstanding of approximately EUR 413 million.
Note 7 Loans receivable
<TABLE>
<CAPTION>
January 2, January 3,
2000 1999
<S> <C> <C>
Employee loans, floating interest 63,913 68,413
Other loans issued 104,491 71,906
------- -------
168,404 140,319
======= =======
</TABLE>
Employee loans include EUR 62 million at January 2, 2000 (January 3, 1999:
EUR 66 million) of loans due from Officers, managers and employees which
were granted to assist these Officers and employees with investments in
the AH Dutch Customer Fund (the "Fund"). These floating-rate loans,
bearing interest based on the ECB interest on deposit, are generally due
ten years from issuance or upon an individual's termination
60
<PAGE>
of employment, if earlier, and are collateralized by each individual's
corresponding investment in the Fund. Loans to Directors and Officers of Royal
Ahold aggregated EUR 1.7 million at January 2, 2000 (January 3, 1999: EUR 2.0
million).
Note 8 Investments in unconsolidated companies
<TABLE>
January 2, January 3,
2000 1999
<S> <C> <C>
Investment in unconsolidated companies 132,035 123,229
Due from unconsolidated companies 39,953 60,778
------- -------
171,988 184,007
======= =======
</TABLE>
Note 9 Intangible fixed assets
<TABLE>
<CAPTION>
fiscal year fiscal year
1999 1998
<S> <C> <C>
Net book value, beginning of year 195,586 191,025
Investments 30,853 26,426
Brought in through acquisitions -- 13,705
Book value of assets sold (14,520) (9,541)
Amortization (23,886) (17,658)
Exchange rate differences 21,872 (8,371)
--------- -------
Net book value, end of year 209,905 195,586
========= =======
End of fiscal year
Cost 288,336 249,612
Accumulated amortization (78,431) (54,026)
--------- -------
Net book value 209,905 195,586
========= =======
Note 10 Loans payable
January 2, January 3,
2000 1999
Bank overdrafts 708,387 375,193
Borrowings, current portion 191,948 125,718
Short-term borrowings 63,412 60,028
Capitalized lease commitments, current portion 62,092 50,672
Albert Heijn Dutch Customer Fund 179,627 166,350
Other loans 106,854 101,237
--------- -------
1,312,320 879,198
========= =======
</TABLE>
Other loans consists of savings stamps held by Albert Heijn customers
and employees' savings accounts.
Note 11 Other current liabilities
<TABLE>
<CAPTION>
January 2, January 3,
2000 1999
<S> <C> <C>
Vacation allowances 263,726 228,738
Interest 73,681 50,692
Pension funds 21,089 8,092
Dividends 231,908 176,454
--------- -------
590,404 463,976
========= =======
</TABLE>
61
<PAGE>
Note 12 Borrowings
<TABLE>
<CAPTION>
January 2, January 3,
2000 1999
<S> <C> <C>
Subordinated Dutch guilder loans at fixed rates:
NLG 200 million 7.625% bonds, maturing in 2000 90,756 90,756
NLG 200 million 6.75% bonds, maturing in 2003 90,756 90,756
NLG 200 million 5.875% bonds, maturing in 2005 90,756 90,756
NLG 1,495 million 3.0% convertible subordinated notes, maturing in 2003 678,402 678,402
Credit facility:
$1 billion, multi-currency facility, floating interest 153,846 792,953
Other loans at fixed rates unless otherwise noted:
NLG 300 million eurobonds, 5.875% 136,134 136,134
NLG 500 million eurobonds, 6.25% 226,890 226,890
NLG 100 million loan, 7.70% 45,378 45,378
NLG 70 million loan, 7.20% 31,765 31,765
$500 million 6.25% bonds 496,279 --
$500 million 6.875% bonds 496,279 --
$250 million 9.75% senior loan 203,331 179,498
$39 million 6.11% loan 38,710 33,377
$50 million 6.23% loan 49,628 42,791
$39 million loan LIBOR plus 70 bps 38,710 33,377
$250 million 9.875% bond 148,884 213,957
$100 million 9.125% bond 34,740 85,583
U.S. dollar mortgage loans, average 7.91% 85,308 86,090
Other U.S. dollar loans, average 5.22% 61,353 99,199
Portuguese Escudo bonds, average 4.37% 167,069 192,001
Other Portugese Escudo loans, average 11.30% 55,013 --
Brazilian Real bonds, average 20.30% 59,811 55,541
Other Brazilian long term debt, average 13.33% 93,535 --
Argentine $ long term debt, average 7.63% 113,842 --
Other loans, average 6.60% 169,418 107,327
--------- ---------
3,856,593 3,312,531
Cash held in escrow (90,756) (90,756)
Current portion (191,948) (125,718)
--------- ---------
Long-term portion of loans 3,573,889 3,096,057
========= =========
</TABLE>
At January 2, 2000, maturities of long-term debt during each of the next five
fiscal years and thereafter are as follows:
2000 282,704
2001 160,687
2002 175,655
2003 1,405,404
2004 37,341
Thereafter 1,794,802
---------
3,856,593
=========
Subordinated Dutch guilder loans
Repayment of the principal of subordinated Dutch guilder loans is subordinated
to the claims of all other existing and
62
<PAGE>
future creditors. The cash proceeds are held in escrow with a bank to be used
when the bonds mature in 2000. In addition, Royal Ahold entered into an interest
rate swap to match the cash flows of interest payments due on the 7.625%
subordinated Dutch guilder bonds that exceed the interest earnings on the cash
held in escrow. See note 21 and note 23 to the consolidated financial
statements.
Convertible subordinated notes
In September 1998, Royal Ahold completed a public offering of NLG 1,495 million
principal amount of its 3.0 % convertible subordinated notes due 2003, with
interest payable annually, commencing September 30, 1999. The notes are
convertible into 23,811,914 common shares, subject to adjustment, at EUR 28.49,
or NLG 62.78, per share at any time prior to September 25, 2003. At any time
after September 30, 2001, the notes are redeemable at the option of Royal Ahold,
in whole but not in part, at the principal amount thereof, together with accrued
interest. The notes will mature on September 30, 2003.
Credit facilities
In December 1996, Royal Ahold entered into a $1 billion seven-year multi-
currency revolving credit facility bearing interest at LIBOR (6.13% at January
2, 2000) plus 10 basis points. Royal Ahold pays a facility fee of 10 basis
points per year on the total amount of the facility through the fifth year.
Thereafter, the facility fee will be 11.25 basis points per year. This facility
agreement contains restrictive covenants with regard to maintenance of certain
financial ratios, such as interest coverage and gearing, as defined. The
proceeds of the bond issued by Ahold Finance USA were used in May 1999 to repay
in full the outstanding amount under $1 billion Multi-currency Revolving Credit
Facility, and the remainder was used for other corporate activities.
In March 1998, Royal Ahold entered into a four-year $500 million Multi-currency
Revolving Credit Facility bearing interest at LIBOR plus 10 basis points. The
terms and conditions of this facility are substantially identical to Royal
Ahold's existing $1 billion Multi-currency Revolving Credit Facility. As of
January 2, 2000 there were no outstanding borrowings under this facility.
Other loans (at fixed rates unless otherwise indicated)
NLG 300 million eurobonds, 5.875%. These 10-year eurobonds have been issued by
Albert Heijn B.V., and are guaranteed by Royal Ahold. Matures December 19, 2007.
NLG 500 million eurobonds, 6.25%. These 10-year eurobonds have been issued by
Ahold U.S.A. Inc. and are guaranteed by Royal Ahold. Matures November 28, 2006.
NLG 100 million loan, 7.70%. This loan was issued by AVG, and has principal
repayment due in five equal installments of NLG 20 million starting June 2000
through June 2004.
NLG 70 million loan, 7.20%. This loan was issued by AVG, and matures in
September 2003.
$500 million bonds, 6.25%. These 10-year bonds were issued by Ahold Finance
U.S.A. Inc. and are guaranteed by Royal Ahold. Matures May 1, 2009
$500 million bonds, 6.875%. These 30-year bonds were issued by Ahold Finance
U.S.A. Inc. and are guaranteed by Royal Ahold. Matures May 1, 2029.
$250 million senior loan, 9.75%. This senior loan was issued by Stop & Shop in
February 1992. Matures July 1, 2002. This loan is subordinated to all senior
indebtedness of Stop & Shop.
$39 million loan, 6.11%. This loan was issued by Ahold U.S.A. and is guaranteed
by Royal Ahold. Matures June 30, 2003.
$50 million loan, 6.23%. This loan was issued by Ahold U.S.A. and is guaranteed
by Royal Ahold. Matures June 30,
63
<PAGE>
2006.
$39 million loan, LIBOR plus 70 bps (6.8% at January 2, 2000). This loan was
issued by Tops in a private placement, guaranteed by Royal Ahold. Matures March
15, 2002.
$250 million bond, 9.875%. This bond was issued by Disco. Matures May 15, 2008.
Of the total principal amount of this bond, $100 million is held by Ahold Belgie
N.V.
$100 million bond, 9.125%. This bond was issued by Disco. Matures May 15, 2003.
Of the total principal amount of this bond, $65 million is held by Ahold Belgie
N.V.
Note 13 Capitalized lease commitments
Capital leases are principally for buildings and are generally held by Royal
Ahold's U.S. subsidiaries. Terms typically range from ten to twenty-five years
and contain renewal options. Components of assets held under capital leases are
as follows:
January 2, January 3,
2000 1999
Land and buildings 1,250,242 920,623
Machinery and equipment 40,108 54,319
--------- --------
1,290,350 974,942
Accumulated amortization (391,964) (295,253)
--------- --------
898,386 679,689
========= ========
At the time of entering into capital lease agreements, the commitments are
recorded at present value using the interest rate applicable for long-term
borrowings. At January 2, 2000, existing lease commitments are recorded at
present value equivalent to an average rate of 9.02% (10.10% at January 3,
1999).
As of January 2, 2000, the aggregate amounts of minimum lease payments under
capitalized lease contracts payable in each of the next five fiscal years and
thereafter are as follows:
2000 176,160
2001 168,467
2002 159,048
2003 156,340
2004 155,392
Thereafter 1,610,083
----------
Total future minimum lease payments 2,425,490
Estimated executory costs (3,238)
Amounts representing interest (1,276,857)
----------
Present value of net minimum capital lease payments 1,145,395
Current portion (62,092)
----------
Long-term portion of capitalized lease commitments 1,083,303
==========
Total future minimum lease payments above have not been reduced by minimum
sublease rentals of EUR 76,057 as of January 2, 2000 due in the future under
related non-cancelable subleases. They also do not include contingent rentals
which may be paid under certain store leases on the basis of a percentage of
sales in excess of stipulated amounts. Contingent rentals on such leases
amounted to approximately EUR 10,600 in 1999, EUR 1,600 in 1998 and EUR 1,900 in
1997.
Note 14 Other provisions
64
<PAGE>
The movements in provisions in 1999 were:
<TABLE>
<CAPTION>
Beginning Exchange rate End of fiscal
--------- -------------- -------------
Other provisions of fiscal year Acquisitions Additions Deductions differences year
- ---------------- -------------- ------------- ------------ ------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Pension provisions 168,683 29,449 59,185 (60,086) 20,885 218,116
Loss reserves for self-insurance 226,769 -- 110,586 (100,709) 32,187 268,833
Closed and divested facilities 226,195 (36,494) 19,659 (48,140) 24,834 186,054
Severance and other personnel costs 79,592 5,901 22,369 (30,812) 2,248 79,298
Bankruptcy guarantees 66,132 -- -- (42,997) 8,163 31,298
Conversion costs 54,043 -- -- (28,742) -- 25,301
Maintenance provisions 49,245 1,408 11,878 (11,134) 520 51,917
Straight line rent 23,258 -- 4,687 (64) 3,923 31,804
Other 65,573 12,357 40,736 (33,254) 5,761 91,173
------- ------- ------- -------- ------ -------
959,490 12,621 269,100 (355,938) 98,521 983,794
======= ======= ======= ======== ====== =======
</TABLE>
Pension provisions relate to various defined benefit plans, both in the U.S. and
The Netherlands, including supplemental plans for early retirement in The
Netherlands.
Royal Ahold is self-insured for property, casualty, medical, disability and
general liability costs. Royal Ahold determines it liabilities for self-insured
claims based on an independent actuarial analysis.
The provision for closed and divested facilities represents the estimated future
costs (principally for rent obligations and loss on the disposal of assets) for
facilities, primarily retail stores, that have been closed or announced to be
closed.
Severance and other personnel costs include severance benefits for employees
whose employment will be terminated. This provision includes accrued severance
for certain administrative, production, distribution and store personnel at
Albert Heijn from a restructuring plan entered into between Royal Ahold and the
respective unions in March 1993. At January 2, 2000, the employment of 2,100
employees had been terminated under this agreement. The accrued costs at
January 2, 2000 and January 3, 1999, of EUR 47 million and EUR 50 million,
respectively, include contractual termination benefits and supplemental monthly
payments over a period (which may extend up to ten years) based on the
employee's salary, age and length of service. Payments of such costs aggregated
EUR 12 million and EUR 9 million in 1999 and 1998 and, respectively. Payments
in 2000 and 2001 are expected to be EUR 15 million and EUR 12 million,
respectively.
Bankruptcy guarantees represent lease obligations related to properties operated
by Bradlees, Inc. ("Bradlees"). Bradlees was sold by Stop & Shop in 1992;
however, Stop & Shop remained obligated under approximately 100 of its leases
assigned to Bradlees. Bradlees filed for bankruptcy protection under Chapter 11
of the United States Bankruptcy Code in 1995 and on February 2, 1999 emerged
from the bankruptcy. The provision for bankruptcy guarantees represents the
estimated future lease costs which Royal Ahold may incur for stores Bradlees has
closed or stores in which closure is expected based on available information.
Total future rental payments under all such assigned Bradlees leases aggregated
approximately $213 million (approximately EUR 210 million) at January 2, 2000.
However, Royal Ahold believes that such ongoing contingent liability will not be
material or have a material impact on the Company's future financial condition
or results of operations.
Conversion costs represent the expected costs of systems upgrades for the
introduction of the euro and Year 2000. (See the U.S. GAAP reconciliation in
note 23 to the consolidated financial statements.) Maintenance provisions have
been established for known and estimable repair and upkeep of stores, primarily
in The Netherlands. Straight line rent represents the excess of rent expensed
(on a straight line basis) for financial reporting purposes over amounts paid
for leases with scheduled increases.
At January 2, 2000 and January 3, 1999 approximately EUR 175 million and EUR 188
million, respectively, of these
65
<PAGE>
provisions are expected to mature within one year.
Note 15 Stockholders' equity
Cumulative Preferred Shares
In March 1989, Royal Ahold and Stichting Ahold Continuiteit ("SAC" or, in
English, "Ahold Continuity Foundation") entered into an agreement (the "Option
Agreement"), which was amended and restated in April 1994 and March 1997,
pursuant to which SAC was granted an option to acquire from us, from time to
March 2004, cumulative preferred shares up to a total par value that is equal to
the total par value of all issued and outstanding shares of capital stock at the
time of exercising the option. Royal Ahold had the right pursuant to the Option
Agreement to place cumulative preferred shares with SAC up to a total par value
that is equal to the total nominal value of all issued and outstanding shares of
capital stock of Royal Ahold at the time of placing the cumulative preferred
shares. The holders of the cumulative preferred shares are entitled to 2,000
votes per share. Each transfer of cumulative preferred shares requires the
approval of the Corporate Executive Board.
The issuance of cumulative preferred shares will have certain anti-takeover
effects. The issuance of cumulative preferred shares will cause substantial
dilution of the effective voting power of any shareholder, including a
shareholder that attempts to acquire us, and could have the effect of delaying,
deferring and preventing a change in control.
Royal Ahold may stipulate that only 25% of the nominal value will be paid upon
subscription for cumulative preferred shares until payment in full of the par
value is later called by Royal Ahold. No cumulative preferred shares were issued
and outstanding during the three year period ended January 2, 2000.
Cumulative Preferred Financing Shares
In June 1996, the Corporate Executive Board of Royal Ahold was designated as the
body authorized to issue or grant rights to subscribe for Cumulative Preferred
Financing Shares of whatever series, subject to the prior approval of the
Supervisory Board of Royal Ahold, up to a total nominal amount equal to 25% of
all the outstanding shares of the capital stock of Royal Ahold, excluding
cumulative preferred shares. Cumulative Preferred Financing Shares must be fully
paid up upon issuance.
Dividends are paid on each cumulative preferred financing share at a percentage
(the "Financing Dividend Percentage") based on the average effective yield on
Dutch state loans with a remaining life of nine to ten years and such rate has
been fixed for a period of ten years at a rate of 7.37% per fiscal year for the
share issuance in June 1996 and 5.18% for the share issuance in August 1998.
Convertible Cumulative Preferred Financing Shares
In June 1996, the Corporate Executive Board of Royal Ahold was also designated
as the body authorized to issue or grant rights to subscribe for all convertible
cumulative preferred shares subject to the prior approval of the Supervisory
Board of Royal Ahold. Conversion of convertible cumulative preferred shares into
common shares may take place (i) pursuant to a resolution of the Corporate
Executive Board or (ii) at the request of a holder of convertible cumulative
preferred shares. No convertible cumulative preferred shares were issued and
outstanding during 1999 and 1998. Holders of convertible cumulative preferred
financing shares are entitled to dividends similar to those on cumulative
preferred financing shares.
Common Shares
Prior to 1997, cash dividends consisted of a Dutch guilder component and a
dollar component. Beginning in 1997, all cash dividends were declared and paid
only in Dutch guilders. The dividend for fiscal year 1998 is declared in Dutch
guilders. As of fiscal year 1999, dividends will be declared in euros.
Shareholders have had the option to elect either a cash or a share dividend. The
size and composition of the final 1999 optional share dividend option, will be
announced on May 16, 2000, after the close of trading on Amsterdam Exchanges.
66
<PAGE>
Dividends on common shares paid or proposed are as follows:
<TABLE>
<CAPTION>
Fiscal Year Cash Dividend Option Stock Dividend Option
<S> <C> <C> <C>
1997 Interim EUR 0.09 1 share per 100 shares owned
Final EUR 0.23 2 shares per 100 shares owned
1998 Interim EUR 0.12 1 share per 100 shares owned
Final EUR 0.26 2 shares per 100 shares owned
1999 Interim EUR 0.14 1 share per 100 shares owned
Proposed final EUR 0.35 2 shares per 100 shares owned
</TABLE>
Stock option plans
Royal Ahold established stock option plans in The Netherlands and the United
States, pursuant to which a number of options to acquire common shares are
granted to executive and other key salaried employees of Royal Ahold who are
employed at certain specified job levels and who are designated by the Corporate
Executive Board as eligible to be granted options, and such other employees as
are designated by the Corporate Executive Board. The exercise price of such
options is equal to the closing price of the common shares on Amsterdam
Exchanges on the day prior to the day the options are granted. The exercise
price will be determined by the closing price of our shares on Amsterdam
Exchanges on the last day of the fiscal year.
In The Netherlands, options granted are exercisable for a period of five years
after the grant date. Options granted prior to the beginning of fiscal year 1997
vested immediately. Options granted in 1998 have a vesting period of two years.
During 1999, The Netherlands plan was amended and restated and the vesting
period was changed to a period of three years.
In the United States, Royal Ahold established stock option plans in 1986 (the
"1986 U.S. Plan") and in 1990 (the "1990 U.S. Plan"), which were both amended
and restated, effective January 3, 2000. Options granted under the 1990 U.S.
Plan, as amended, are exercisable after a vesting period of five years, after
which the options may be exercised in full, or in part, during a five year
period. Under the 1986 Plan, as amended, options granted thereunder are
exercisable after a vesting period determined by the Corporate Executive Board
and specified in each option award agreement, after which the options may be
exercised in full, or in part, during the remainder of the five year period from
the date of grant.
Currently option rights have been granted to 820 employees to obtain common
shares. The exercise of option rights is regulated to comply with Royal Ahold's
regulations designed to prevent insider trading. Effective December 1997, the
number of option rights granted is dependent on the growth in earnings per
share. The exercise price will be determined by the closing price of Royal
Ahold's shares on Amsterdam Exchanges on the last day of the fiscal year.
Starting January 2000, employees are also allowed to utilize "out of the money"
option rights with higher exercise prices. New shares will be granted upon the
exercise of option rights, subject to a yearly maximum of 1% of the issued
shares.
67
<PAGE>
A summary of the activity under Royal Ahold's stock option plans is as follows:
<TABLE>
<CAPTION>
Average Average
Beginning of Exercise Exercise
fiscal year Granted Price Exercised Price
----------- ------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
C.H. van der Hoeven 5 yr 398,132 108,060 28.83 15,000 9.46
10 yr 500,000 8,888 31.37 -- --
J.G. Andreae 5 yr 303,994 80,377 28.71 57,865 7.58
A.M. Meurs 5 yr 284,335 80,054 28.86 28,290 7.58
A.S. Noddle 5 yr 172,463 52,401 29.14 37,693 9.46
10 yr 181,452 28,195 27.54 -- --
R.G. Tobin 5 yr 138,336 52,464 29.13 -- --
10 yr 69,168 26,231 29.13 -- --
---------- --------- ----- --------- -----
Total Corporate Executive 2,047,880 436,670 28.87 138,848 8.29
Board members
Other employees 5 yr 11,716,312 4,310,821 29.17 1,581,288 11.75
10 yr 4,014,071 997,271 28.37 192,157 5.77
---------- --------- ----- --------- -----
Total number of option
rights 17,778,263 5,744,762 29.01 1,912,293 10.90
========== ========= ===== ========= =====
<CAPTION>
Average
End of Exercise
Cancelled fiscal year Price
--------- ----------- -----
<S> <C> <C> <C> <C>
C.H. van der Hoeven 5 yr -- 491,192 22.05
10 yr -- 508,888 30.94
J.G. Andreae 5 yr -- 326,506 23.37
A.M. Meurs 5 yr -- 336,099 23.70
A.S. Noddle 5 yr -- 187,171 25.10
10 yr -- 209,647 14.84
R.G. Tobin 5 yr -- 190,800 25.05
10 yr -- 95,399 25.05
--------- ------------ --------
Total Corporate Executive -- 2,345,702 24.36
Board members
Other employees 5 yr 6,784 14,439,061 24.61
10 yr 139,388 4,679,797 19.01
--------- ------------ --------
Total number of option
rights 146,172 21,464,560 23.36
========= ============ ========
<CAPTION>
Fiscal Year
----------
1999 1998 1997
---- ---- ----
Average Average Average
Price Price Price
Shares per Share Shares per Share Shares per Share
EUR EUR EUR
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
Beginning of year 17,778,263 20.50 15,994,594 14.43 14,473,503 10.52
Granted 5,744,762 29.01 5,768,455 30.60 4,860,657 23.42
Exercised (1,912,293) 10.90 (3,794,299) 9.60 (3,133,703) 8.14
Canceled (146,172) 17.41 (190,487) 12.85 (205,863) 9.51
---------- ---------- ----------
Outstanding at end of year 21,464,560 23.36 17,778,263 20.50 15,994,594 14.43
========== ========== ==========
</TABLE>
The following table summarizes information about stock options outstanding at
January 2, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Range of Weighted Average
Exercise Weighted Average Average Exercise
Prices Number Outstanding Remaining Exercise Price Number Exercisable Price
EUR at January 2, 2000 Contractual Life EUR at January 2, 2000 EUR
--- ---------------- ---------------- --- ------------------ ---
<S> <C> <C> <C> <C> <C>
4.52-7.58 1,278,007 3.7 6.67 1,278,007 6,67
9.30-15.51 4,823,171 2.9 13.07 3,572,935 13,18
18.77-25.94 4,425,123 3.8 22.63 -- --
26.58-36.75 10,938,259 5.6 30.16 -- --
---------- ---------
21,464,560 4,850,942
========== =========
</TABLE>
Royal Ahold accounts for the stock option plans under Dutch GAAP which is
comparable to Accounting Principles Board Opinion No. 25 ("APB 25") and related
interpretations for non-compensatory plans. Accordingly, no compensation cost
has been recognized for stock options. The weighted average fair value of stock
options granted during 1999, 1998 and 1997 was EUR 13.38, EUR 10.91 and EUR
7.40, respectively. The fair value of the stock option grants has been estimated
on the date of grant using the Black-Scholes option pricing model with the
following assumptions:
68
<PAGE>
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
Expected life (years):
<S> <C> <C> <C>
1986 Plan 4.0 4.0 4.0
1990 Plan 7.5 7.5 7.5
Interest rate 6.0% 6.0% 6.0%
Volatility 45.0% 30.0% 35.0%
Assumed forfeitures 6.0% 6.0% 7.0%
</TABLE>
Had compensation cost for the stock option plans been determined consistent with
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, ("SFAS 123"), under Dutch GAAP Royal Ahold's pro forma net
earnings and earnings per Common Share would have been as follows:
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
Net earnings after dividends on cumulative preferred financing shares:
<S> <C> <C> <C>
As reported 739,940 537,274 415,428
Pro forma 714,383 527,599 414,491
Earnings per common share:
As reported 1.15 0.92 0.77
Pro forma 1.11 0.90 0.77
Diluted earnings per common share:
As reported 1.13 0.91 0.76
Pro forma 1.06 0.88 0.76
</TABLE>
This pro forma impact only takes into account options granted since the
beginning of fiscal year 1995 and is likely to increase in future years as
additional options are granted and amortized ratably over the vesting period.
Note 16 Rentals and operating leases with third parties
Operating leases of Royal Ahold's U.S. subsidiaries generally are for terms of
ten to twenty-five years, contain renewal options and in some cases require
additional operating lease payments based on sales volume. The rental contracts
of Royal Ahold's Dutch retailing subsidiaries generally provide for non-
cancelable five to ten year rental periods with renewal options, and rents reset
every year based on predetermined indices.
The actual costs of rentals and operational leases were as follows:
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Minimum rentals 605,073 476,464 386,800
Contingent rentals 13,626 11,333 3,310
Lease and sublease income (117,539) (80,786) (41,786)
-------- ------- -------
501,160 407,011 348,324
======== ======= =======
</TABLE>
As of January 2, 2000, the aggregate amounts of minimum lease payments
under existing operational lease contracts are as follows:
<TABLE>
<S> <C>
2000 569,397
2001 543,495
2002 489,176
2003 454,382
2004 411,956
Thereafter 3,594,837
---------
6,063,243
=========
</TABLE>
Minimum lease payments above have not been reduced by minimum lease or
sublease rental income of EUR
69
<PAGE>
587 million due in the future under non-cancelable subleases.
Note 17 Income taxes
The reconciliation of income taxes between the Dutch corporate income tax rate
and Royal Ahold's effective income tax rate as shown in the Consolidated
Statements of Earnings is as follows:
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Dutch corporate income tax rate 35.00% 35.00% 35.00%
Items affecting the corporate income tax rate
Different statutory income tax rate of foreign
subsidiaries (5.60%) (10.40%) (6.55%)
Non-taxable items (2.35%) (0.80%) (0.21%)
Other factors (0.06%) 1.72% (0.05%)
------- ------- -------
Effective tax rate 26.99% 25.52% 28.19%
======= ======= =======
</TABLE>
The components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Current:
Domestic 105,559 68,077 87,832
Foreign 118,742 66,925 71,655
Deferred:
Domestic 14,884 45,470 6,661
Foreign 43,816 16,603 7,372
------- ------- -------
283,001 197,075 173,520
======= ======= =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At January 2, 2000, Royal
Ahold had operating loss carryforwards of approximately EUR 125 million expiring
between 2001 and 2021, general business tax credit carryforwards totaling
approximately EUR 15 million expiring between 2000 and 2015, and alternative
minimum tax carryforwards of EUR 37 million which can be carried forward
indefinitely. Such operating loss carryforwards and tax credits may not be used
to offset income taxes in other jurisdictions. Royal Ahold has established a
valuation allowance to reduce the tax benefit of certain net operating losses
and certain general business tax credits to an amount that is more likely than
not realizable.
Deferred tax assets and liabilities as of January 2, 2000 and January 3, 1999
are as follows:
<TABLE>
<CAPTION>
Net deferred tax asset
(liability)
January 2, January 3,
2000 1999
<S> <C> <C>
Fixed assets (323,589) (241,289)
Capitalized lease commitments 68,309 59,433
Benefit plans 23,252 28,593
Inventories (64,600) (35,410)
Closed locations 39,872 33,205
Provisions not yet deductible 162,342 113,322
Carryforwards
Operating losses 124,979 49,509
Alternative minimum tax 36,725 40,415
General business tax credits 14,730 14,766
Valuation allowances (36,577) (21,064)
Other, net (24,548) (46,731)
-------- --------
20,895 (5,251)
======== ========
</TABLE>
70
<PAGE>
Deferred income taxes are classified in the accompanying balance sheets as of
January 2, 2000 and January 3, 1999 as follows:
<TABLE>
<CAPTION>
January 2, January 3,
2000 1999
<S> <C> <C>
Non-current deferred tax assets 123,688 135,126
Non-current deferred tax liabilities (102,793) (140,377)
-------- --------
20,895 (5,251)
======== ========
</TABLE>
Note 18 Employee benefit plans
Pension plans
Royal Ahold has a number of defined benefit pension plans covering substantially
all of its employees. Such plans have been established in accordance with
applicable legal requirements, customs and existing circumstances in each
country. Benefits are generally based upon compensation and years of service.
Pension plan assets are generally invested in shares, fixed-rate debt
securities, loans and real estate.
Pension costs for all plans are actuarially determined and generally funded
annually. Royal Ahold accounts for its U.S. plans under the provisions of
Financial Accounting Standards No. 87 ("SFAS 87"). Pension expense for the plans
in The Netherlands is calculated using the methodology required under Dutch
GAAP. Pension expense of the qualified plans included in the accompanying
Statement of Earnings for fiscal years 1999, 1998 and 1997 aggregated EUR
33,973, EUR 33,791 and EUR 29,971, respectively. In addition, Royal Ahold
received refunds of EUR 34 million in 1998 and EUR 38 million in 1997 of
overfunded pension plan assets in The Netherlands, which were reflected as a
reduction of general and administrative expenses in the 1998 and 1997
Consolidated Statement of Earnings. (See note 23 to the consolidated financial
statements for the U.S. GAAP accounting treatment.)
For purposes of additional disclosure, information regarding the plans in The
Netherlands has also been provided under the requirements of Financial
Accounting Standards No 132, Employers' Disclosures About Pensions and Other
Postretirement Benefits ("SFAS 132"). The following table summarizes the funded
status and amounts which would be recognized in Royal Ahold's financial
statements under SFAS 132 for all defined benefit plans.
71
<PAGE>
<TABLE>
<CAPTION>
Assets exceed Accumulated benefits
Accumulated benefits Exceed assets
----------------------------- ----------------------------
January 2, January 3, January 2, January 3,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit obligation, beginning of period 1,202,237 1,096,217 372,378 152,187
Service cost 77,387 51,860 871 12,715
Interest cost 87,956 61,170 4,325 23,408
Amendments and reclassifications 325,492 (180,990) (305,907) 161,151
Actuarial loss (gain) (349,953) 97,404 (4,770) 29,732
Acquisition -- 99,044 -- 6,055
Benefits paid (40,764) (22,468) (5,288) (12,870)
--------- --------- -------- -------
Benefit obligation, end of period 1,302,355 1,202,237 61,609 372,378
========= ========= ======== =======
Change in Plan Assets
Fair value of assets, beginning of period 1,233,592 1,187,487 274,302 65,317
Actual return on plan assets 218,110 140,982 -- 37,935
Company contribution (refund) 52,438 (7,959) 5,152 18,233
Plan participant contribution 7,079 -- -- --
Acquisition -- 97,879 -- --
Reclassifications 274,302 (162,329) (274,302) 162,329
Benefits paid (40,764) (22,468) (5,152) (9,511)
--------- --------- -------- -------
Fair value of assets, end of period 1,744,757 1,233,592 -- 274,302
========= ========= ======== =======
Funded status of plan 442,402 31,355 (61,609) (98,076)
Unrecognized actuarial (gain) loss (343,417) 67,013 (5,498) 22,952
Unrecognized prior service cost (7,266) 7,571 655 (17,839)
Unrecognized net transition obligation (16,864) (23,579) 648 3,147
--------- --------- -------- -------
Prepaid (accrued) benefit cost 74,855 82,360 (65,804) (89,816)
========= ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Fiscal year Fiscal year Fiscal year Fiscal year
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Components of Net Periodic Benefit Costs
Service cost of benefits earned 70,503 46,868 872 11,204
Interest cost on benefit obligation 88,440 61,170 4,325 23,190
Actual return on assets (217,440) (135,731) (153) (20,788)
Net amortization and deferral 94,385 41,035 102 3,068
--------- --------- -------- -------
Net periodic benefit cost 35,888 13,34 5,146 16,674
========= ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
January 2, January 3
========== =========
2000 1999
========== =========
<S> <C> <C>
Amounts recognized in the statement of
financial position consist of:
Prepaid benefit cost 126,537 115,532
Accrued benefit liability (117,287) (107,597)
Intangible asset (276) (551)
Accumulated other comprehensive income 77 72
--------- ---------
Net amount recognized 9,051 (7,456)
========= =========
</TABLE>
72
<PAGE>
The assumptions used to develop the actuarial present value of benefit
obligations and pension expense under SFAS 87 were as follows:
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Weighted average expected long-term rate of return on plan assets 7.6% 8.3% 8.3%
Weighted average discount rate 6.6% 5.5% 6.9%
Weighted average rate of increase in salary levels 4.5% 4.4% 4.0%
</TABLE>
Other benefit plans
Royal Ahold also maintains various other employee benefit plans. For employees
of its U.S. subsidiaries, such plans are principally in the form of savings,
incentive compensation and bonus plans. Royal Ahold's Dutch subsidiaries
participate in a profit sharing plan for their employees. Expense for such plans
aggregated EUR 105,941, EUR 94,167 and EUR 84,266 in 1999, 1998 and 1997,
respectively. In the U.S., Royal Ahold also maintains three supplemental
employee retirement plans for officers and executives of its subsidiaries. The
present value of the estimated projected benefit obligation under these plans
has been estimated at approximately EUR 33,164 million at January 2, 2000, the
majority of which is fully vested and accrued.
Additionally, certain union employees in the United States are covered by multi-
employer, defined benefit plans. Plan expenses were EUR 53,893, EUR 31,275 and
EUR 31,413 for 1999, 1998 and 1997, respectively.
Postretirement plans
Royal Ahold provides life insurance and health care benefits for certain retired
employees meeting age and service requirements at its U.S. subsidiaries. The
total costs recognized for postretirement life insurance and health care plans
were approximately EUR 2,416 (service cost of EUR 402 and interest cost of EUR
2,014) in 1999, EUR 1,699 (service cost EUR 313 and interest cost EUR 1,386) in
1998, and EUR 1,910 (service cost EUR 302 and interest cost EUR 1,608) in 1997.
Royal Ahold's postretirement benefits are not funded. The accrued postretirement
benefit cost at January 2, 2000 and January 3, 1999 was EUR 28,435 and EUR
21,033, respectively.
The assumed health care cost trend used in measuring the accumulated
postretirement benefit obligation was 8.25% and 9.00% (5.75% and 7.50% for post-
65 coverage) in 1999 and 1998, respectively, grading down to 5.5% over 6 years
and 5.5% over 8 years for 1999 and 1998, respectively. A 1% increase in the
assumed health care cost trend would increase the accumulated postretirement
benefit obligation by 6% and the service and interest costs by 7% in 1999 and
by 3% and 6% in 1998. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 8.00% and 6.75% in 1999 and
1998, respectively.
Note 19 Business segment information
Royal Ahold operates principally in one business segment, the retail trade of
food and related non-food products. All Dutch specialty retailers, which are not
individually or in the aggregate a separately identifiable segment, are included
under "retail trade" together with the Albert Heijn supermarket chain in The
Netherlands. The segments food wholesaling, including food supply and real
estate operations are also separately disclosed. Royal Ahold's other activities
do not individually constitute a separately reportable industry segment.
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Net Sales (including intersegment)
Retail trade 32,100,317 24,952,491 21,377,375
Food wholesaling 2,411,683 2,105,478 1,927,624
Real estate and other 560,602 528,405 466,393
Intersegment sales (1,512,211) (1,102,164) (824,416)
---------- ---------- ----------
33,560,391 26,484,210 22,946,976
========== ========== ==========
</TABLE>
73
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net Sales
Retail trade 31,072,284 24,313,114 20,962,322
Food wholesaling 2,382,519 2,080,244 1,905,354
Real estate and other 105,588 90,852 79,300
---------- ---------- ----------
33,560,391 26,484,210 22,946,976
========== ========== ==========
Operating Results
Retail trade 1,323,288 957,007 762,229
Food wholesaling 55,650 40,755 37,088
Real estate and other 79,840 59,465 66,574
Corporate costs (44,106) (39,961) (32,374)
---------- ---------- ----------
1,414,672 1,017,266 833,517
========== ========== ==========
Depreciation and amortization
Retail trade 824,638 627,525 497,276
Food wholesaling 19,545 17,627 18,110
Real estate and other 23,940 27,839 24,872
---------- ---------- ----------
868,123 672,991 540,258
========== ========== ==========
Salaries and benefits
Retail trade 4,363,297 3,145,029 2,695,128
Food wholesaling 126,218 102,920 87,292
Real estate and other 37,766 39,713 33,715
Corporate 18,996 20,400 50,430
---------- ---------- ----------
4,546,27 3,308,062 2,866,565
========== ========== ==========
Average number of full-time equivalent employees
Retail trade 204,400 159,236 138,493
Food wholesaling 3,398 2,331 2,260
Real estate and other 989 983 972
Corporate 196 196 295
---------- ---------- ----------
208,983 162,746 142,020
========== ========== ==========
Purchase of tangible and intangible fixed assets
Retail trade 1,835,133 1,358,784 1,223,835
Food wholesaling 39,903 30,077 22,879
Intersegment 70,056 87,667 77,157
---------- ---------- ----------
1,945,092 1,476,528 1,323,871
========== ========== ==========
</TABLE>
<TABLE>
January 2, January 3, December 28,
2000 1999 1997
<S> <C> <C> <C>
Assets in use for operational activities *
Retail trade 12,546,122 9,552,544 7,170,937
Food wholesaling 430,834 312,924 327,454
Real estate and other 1,242,458 1,310,590 802,345
Intersegment (397,852) (209,130) (201,268)
---------- ---------- ---------
13,821,562 10,966,928 8,099,468
========== ========== =========
Liabilities from operational activities **
Retail trade 5,519,437 4,358,111 3,285,437
Food wholesaling 245,975 175,286 197,377
Real estate and other 152,225 186,634 225,544
Intersegment (397,852) (209,130) (201,268)
---------- ---------- ---------
5,519,785 4,510,901 3,507,090
========== ========== =========
</TABLE>
* Assets in use for operational activities are all assets of a segment, less
the loans receivable, investment in subsidiaries and deferred income taxes.
** All liabilities of a segment, less the interest bearing debt and deferred
income tax liabilities.
74
<PAGE>
Note 20 Geographic segment information
Royal Ahold's operations are conducted in four geographical areas: the United
States, Europe (The Netherlands, Portugal, the Czech Republic, Poland and
Spain), Latin America (Brazil, Argentina, Chile, Peru, Paraguay and Ecuador) and
Asia Pacific (Malaysia, Thailand and Indonesia).
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Net Sales (including intersegment)
United States 20,059,234 15,147,989 13,073,814
Europe 11,040,352 9,912,355 9,088,069
Latin America 3,497,173 2,116,411 1,189,922
Asia Pacific 475,843 409,619 419,587
Intersegment sales (1,512,211) (1,102,164) (824,416)
---------- ---------- ----------
33,560,391 26,484,210 22,946,976
========== ========== ==========
Net Sales
United States 19,133,508 14,509,333 12,657,617
Europe 10,453,867 9,448,894 8,679,849
Latin America 3,497,173 2,116,411 1,189,922
Asia Pacific 475,843 409,572 419,588
---------- ---------- ----------
33,560,391 26,484,210 22,946,976
========== ========== ==========
Operating Results
United States 943,768 638,975 508,415
Europe 459,034 402,280 356,592
Latin America 96,732 62,835 36,529
Asia Pacific (40,756) (46,863) (35,645)
Corporate costs and eliminations (44,106) (39,961) (32,374)
---------- ---------- ----------
1,414,672 1,017,266 833,517
========== ========== ==========
Depreciation and amortization
United States 506,947 387,990 319,165
Europe 246,923 230,822 194,601
Latin America 93,368 40,458 17,073
Asia Pacific 19,706 12,484 7,736
Corporate 1,179 1,237 1,683
---------- ---------- ----------
868,123 672,991 540,258
========== ========== ==========
Salaries and benefits
United States 3,104,703 2,157,948 1,850,860
Europe 1,056,067 930,588 843,482
Latin America 330,229 164,900 90,888
Asia Pacific 36,282 34,226 30,905
Corporate 18,996 20,400 50,430
---------- ---------- ----------
4,546,277 3,308,062 2,866,565
========== ========== ==========
Average number of full-timer equivalent employees
United States 101,872 81,490 74,608
Europe 53,613 46,363 42,178
Latin America 43,690 24,340 16,863
Asia Pacific 9,612 10,357 8,076
Corporate 196 196 295
---------- ---------- ----------
208,983 162,746 142,020
========== ========== ==========
Purchase of tangible and intangible fixed assets
United States 1,089,502 782,617 652,377
Europe 531,787 510,923 523,785
</TABLE>
75
<PAGE>
<TABLE>
<S> <C> <C> <C>
Latin America 307,923 140,475 107,599
Asia Pacific 14,986 42,036 38,424
Corporate assets 894 477 1,686
---------- ---------- ----------
1,945,092 1,476,528 1,323,871
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
January 2, January 3, December 28,
2000 1999 1997
<S> <C> <C> <C>
Assets in use for operational activities *
United States 7,192,915 5,708,622 4,345,814
Europe 3,741,977 2,782,397 2,904,613
Latin America 2,508,446 1,852,484 751,280
Asia Pacific 192,927 208,993 158,549
Corporate costs 583,149 623,562 140,480
Intersegment (397,852) (209,130) (201,268)
---------- ---------- ----------
13,821,562 10,966,928 8,099,468
========== ========== ==========
Liabilities from operational activities **
United States 2,688,693 2,194,621 1,662,635
Europe 2,071,651 1,596,823 1,509,775
Latin America 961,131 712,021 301,945
Asia Pacific 134,202 137,108 95,538
Corporate 61,960 79,458 138,465
Intersegment (397,852) (209,130) (201,268)
---------- ---------- ----------
5,519,785 4,510,901 3,507,090
========== ========== ==========
</TABLE>
* Assets in use for operational activities are all assets of a segment,
less the loans receivable, investment in subsidiaries and deferred
income taxes.
** All liabilities of a segment, less the interest bearing debt and
deferred income tax liabilities.
Note 21 Financial instruments
Royal Ahold actively reviews and monitors the exposure to changes in exchange
rates and interest rates. To manage foreign exchange transaction exposure and
interest rate exposure, Royal Ahold may from time to time enter into derivative
financial instruments. The derivative financial instruments utilized by Royal
Ahold, while appropriate for hedging a particular kind of risk, are not
considered specialized or high-risk and are generally available from numerous
sources. Royal Ahold does not enter into contracts or utilize derivative
financial instruments for speculative purposes, and these contracts are
generally for a duration that is consistent with the anticipated related
underlying exposures. Gains and losses from derivative financial instruments
that are designated as and deemed to be effective hedges are deferred and are
recognized in the Statement of Earnings when the hedged transactions occur;
gains on losses on instruments that are not designated as and deemed effective
are recognized immediately into earnings.
Foreign exchange risk management
Since Royal Ahold has extensive operations in a variety of countries throughout
the world, a substantial portion of its assets, liabilities and results are
denominated in foreign currencies, primarily the U.S. dollar. Royal Ahold
actively manages its foreign currency exposure by financing such operations in
local currency borrowings to the extent possible or practical. Using this
"material hedging" technique, Royal Ahold proactively manages its overall debt
portfolio to match its asset investments on a country by country basis. When
local financing is not possible or practical, Royal Ahold will endeavour to
finance its foreign operations through its network of intercompany loans. In
applying this policy, Royal Ahold has substantially mitigated significant
foreign exchange exposure. Royal Ahold does not actively hedge translation risk
through the use of derivative financial instruments. In order to manage its
foreign exchange transaction exposure, Royal Ahold may enter into foreign
exchange contracts to minimize the effects of changes in exchange rates from
transactions that are denominated in a currency other than the currency of
trading.
At January 2, 2000, Royal Ahold had two outstanding euro denominated currency
swap contracts for a notional amount
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of EUR 165 million related to short term commitments denominated in U.S.
dollars. These contracts expired in January 2000. These two contracts had a
negligible fair value at year end 1999.
Royal Ahold also had one cross currency swap for a notional amount of 900
million Czech Crowns.
Interest rate risk management
Royal Ahold uses derivatives to hedge its interest rate risks, such as interest
rate swaps, options and cap agreements.
Interest rate swaps
At January 2, 2000, Royal Ahold had eight outstanding euro denominated interest
rate swap contracts outstanding for a total notional amount of EUR 531 million.
The contracts expire between 2000 and 2004. Six contracts are euro receive-fix
swaps with an average receive rate of 7.23% and an average pay rate of 3.35% at
January 2, 2000. The remaining two swaps are pay-fix euro contracts with an
average pay rate of 7.84% and an average receive rate of 3.36% at January 2,
2000.
Interest rate options and other interest rate derivatives
At January 2, 2000, Royal Ahold had one interest rate collar and one interest
rate swaption outstanding. The interest rate collar, for a notional amount of
CZK 900 million, is used to reduce interest rate risk on CZK denominated debt.
The payers swaption contract with a notional amount of $200 million has a strike
rate of 5.998%; the receive rate of this contract is based on LIBOR and will be
determined during the life of the swap.
Fair value of financial instruments
The following table presents the carrying amounts and fair values of Royal
Ahold's financial instruments:
<TABLE>
<CAPTION>
January 2, 2000 January 3, 1999
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Assets
Loans receivable 168,404 -- 140,319 --
Investment in unconsolidated companies 132,035 -- 123,229 --
Liabilities
Borrowings (3,856,593) (3,686,766) (3,312,531) (3,544,078)
Derivative financial instruments
Swaps, collars and swaptions 0 9,675 0 9,487
</TABLE>
Royal Ahold considers the carrying amount of cash, accounts receivable, accounts
payable, current loans payable and capital lease commitments a reasonable
estimate of those instruments fair value. The market value for the loans
receivable and the investments in unconsolidated companies has not been
determined.
The fair value of long-term debt is estimated using discounted cash flow
analysis based on interest rates from similar types of borrowing arrangements or
at quoted market prices, if applicable. The fair value of swaps is the amount at
which these instruments could be settled, based on estimates obtained from
financial institutions.
Royal Ahold does not believe that it has any significant concentrations of
credit risk.
Note 22 Subsequent events
In December 1999, Royal Ahold entered into an agreement to acquire 50% of ICA
AB, the parent company of the ICA Group, the largest Scandinavian food retailer
for approximately EUR 1.8 billion in cash. The ICA Group is a prominent,
integrated food retail and wholesale group, servicing over 3,100 supermarkets,
superstores, hypermarkets and discount stores in Sweden, Norway and the Baltic
states, with annual net sales of EUR 6.6 billion in the fiscal year 1999. The
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present ICA Group was formed in early 1999 when ICA AB acquired an additional
55% of Norway's Hakon Gruppen, which became a wholly-owned subsidiary. In August
1999, the ICA Group entered into a joint-venture with Statoil, acquiring 50% of
Statoil Detajhandel Scandinavia AS or "Statoil Retail". Statoil Retail generated
1999 sales of EUR 2.9 billion. Statoil Retail operates and services 1,500
Statoil gas stations and forecourt stores in Denmark, Norway and Sweden. The
transaction is subject to the satisfaction of certain conditions, including ICA
Forbundet AB receiving the necessary approvals from the ICA retailers and Canica
AS obtaining a favorable tax ruling in Norway in connection with the
transaction. Royal Ahold expects to close this transaction in the second quarter
of 2000.
In January 2000, Royal Ahold began discussions with JM in Portugal to
significantly extend and enlarge their existing partnership. In cooperation with
JM Royal Ahold intends to establish a new 50/50 partnership, which could include
the current retail and wholesale operations of JM in Portugal and Madeira. The
new partnership also could include JM's Polish operations and JM's Se
Supermarkets in Brazil, as well as Royal Ahold's operations in the Czech
Republic, Poland, and Spain. On April 12, Royal Ahold and JM decided to suspend
discussions about the future of their cooperation until September 2000. If the
new partnership is not entered into then, the partners will consider to either
continue or terminate the existing partnership. In the meantime, there will be
no changes to the structure or operations of our current partnership, JMR.
In January 2000, Disco agreed to acquire Supermercados Ekono, which operates ten
large supermarkets in Buenos Aires, for approximately euro 145 million. Ekono
has 10 large supermarkets with annual sales of approximately euro 160 million.
In January 2000, Royal Ahold acquired Kampio, a prominent regional supermarket
chain in Catalonia. The chain operates 39 large supermarkets, of which 24 are
located in Barcelona, and had sales of approximately EUR 100 million.
In March 2000, Royal Ahold entered into a merger agreement to acquire U.S.
Foodservice, the second largest food service distributor in the United States,
for approximately $3.6 billion in cash, including the assumption of repayment of
approximately $925 million in debt. Pursuant to the merger agreement, Royal
Ahold commenced on March 13, 2000 an offer to purchase for cash all of the
issued and outstanding shares of common stock of U.S. Foodservice, at a price of
$26.00 per share, net to the seller in cash. The tender offer was successfully
completed on April 7, 2000. As soon as practicable following completion of the
tender offer, Royal Ahold intends to cause the merger of one of our wholly-owned
subsidiaries into U.S. Foodservice, with U.S. Foodservice being the surviving
corporation. As a result of the merger, all remaining outstanding shares of
common stock of U.S. Foodservice, subject to certain limited exceptions, will be
converted into the right to receive the cash price paid in the tender offer and
U.S. Foodservice will be an indirectly wholly-owned subsidiary. U.S.
Foodservice, which reported $6.2 billion in revenues for its fiscal year ended
July 3, 1999, distributes food and related products to restaurants and
institutional food service establishments across the United States. Royal Ahold
expects the U.S. Foodservice acquisition to be completed in April 2000.
In March 2000, Tops entered into an agreement for the acquisition of Sugar Creek
convenience/gas stores. Completion is expected during the second quarter of
2000. Sugar Creek operates 87 merchandise and fuel outlets in New York State.
The transaction is subject to various conditions including the satisfactory
completion of due diligence and receipt of regulatory approvals.
In March 2000, Royal Ahold entered into a multi-currency stand-by bridge
revolving credit agreement with two financial institutions for a credit facility
of up to EUR 4.4 billion for the proposed acquisition of 50% of the ICA Group
and the acquisition of U.S. Foodservice. This credit facility is unsecured and
bears interest at a rate of Euro Interbank Offered Rate for advances,
denominated in euro and the London Interbank Offered Rate for advances
denominated in dollars plus a margin of 40 basis points until June 30, 2000 and
a margin to be agreed upon but not higher than 90 basis points on or after June
30, 2000. This credit facility expires on December 29, 2000. The borrowings
under the credit facility are expected to be repaid with the proceeds from the
global offering of our common shares and/or equity linked financial instruments,
which Royal Ahold anticipates to complete in May 2000, and a bond issue, to be
completed thereafter.
In March 2000, Royal Ahold announced its participation in the WorldWide Retail
Exchange ("WWR Exchange"), which is expected to begin operations in mid-2000.
The WWR Exchange is a web-based, business-to-business exchange
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designed to facilitate simplified trading between retailers and suppliers,
distributors and other partners. Initially Royal Ahold will own 5% of the share
capital in the new venture.
Note 23 Reconciliation of individual material variations in net earnings, net
earnings per Common Share and stockholders' equity according to U.S.
GAAP
The consolidated financial statements prepared in accordance with Dutch GAAP
differ in certain material respects from consolidated financial statements
prepared in accordance with U.S. GAAP. Such differences with respect to Royal
Ahold are discussed below.
Goodwill
In accordance with Dutch GAAP, Royal Ahold deducts the amount of goodwill
included in the price of acquired companies from stockholders' equity (and
minority interest when applicable) in the year of acquisition. Under U.S. GAAP,
goodwill is capitalized and amortized on a straightline basis over a period of
40 years. For U.S. GAAP purposes, the disposal or termination of certain
businesses resulted in a write-off of goodwill of EUR 5,306 in 1999, EUR 2,368
in 1998 and EUR 27,257 in 1997.
Royal Ahold continually monitors events and changes in circumstances that could
indicate carrying amounts of intangible assets may not be recoverable. When
events or changes in circumstances are present that indicate the carrying amount
of intangible assets may not be recoverable, Royal Ahold assesses the
recoverability of intangible assets by determining whether the carrying amounts
of such intangible assets will be fully recovered through undiscounted expected
cash flows.
Pensions
Under Dutch GAAP, pension cost with respect to the Dutch plans was calculated in
accordance with required methodology. Under U.S. GAAP, pension cost for Dutch
employees should be calculated in accordance with SFAS 87.
Revaluation of real estate
Under Dutch GAAP, the assets of Ahold Vastgoed B.V. were revalued in 1988. The
resulting unrealized gain was added to the revaluation reserve, which is part of
stockholders' equity. Upon selling revalued real estate, the relevant part of
the revaluation reserve is considered realized and transferred to the Statement
of Earnings. The revaluation amount is depreciated over the life of the related
asset. Such one-time revaluations are not allowed under U.S. GAAP.
Restructuring costs
As a direct result of the acquisition of Giant-Landover and Stop & Shop, Royal
Ahold has recorded costs for necessary restructuring its U.S. operations, which
were included in the determination of the goodwill paid. Under U.S. GAAP,
certain of these restructuring costs were required to be charged to the
statement of earnings.
Other provisions
Under Dutch GAAP, provisions can be recorded for events relating to the current
year and for which the costs involved can be reasonably estimated. Under U.S.
GAAP, recognition of certain of these costs is subject to more stringent rules
and should be recognized when actually incurred.
Other
The items included under this heading include primarily the adoption of
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, which requires capitalization of certain
costs for developing software for internal use when criteria have been met.
Under Dutch GAAP such costs are expensed when incurred.
Proposed dividends on common shares
Under Dutch GAAP, the proposed final dividend on common shares to be approved by
the general meeting of shareholders is recorded in "Other current liabilities."
Under U.S. GAAP, this amount should be classified as part of
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stockholders' equity, until approved.
Dividend cumulative preferred financing shares
Under Dutch GAAP, the dividend on the cumulative preferred financing shares is
recorded as part of the profit distribution and is therefore charged directly to
stockholders' equity. According to U.S. GAAP, such dividend is charged directly
to the income statement. Under both Dutch and U.S. GAAP the dividend on the
cumulative preferred financing shares is taken into account in calculating
earnings per common share.
Earnings per share
The computation of diluted net earnings per common share include common stock
equivalents related to Royal Ahold's stock option plans and the conversion of
the subordinated notes. Anti-dilutive options, reflecting an exercise price
greater than the average market price of the common shares, were not significant
in 1999, 1998 and 1997. The table on the following pages provides a
reconciliation of the calculation of the reported earnings per share.
Comprehensive income
In 1998 Royal Ahold adopted the requirements of SFAS No. 130, Reporting
Comprehensive Income. SFAS 130 establishes standards for the reporting and
display of comprehensive income and its components in financial statements.
Comprehensive income includes all nonshareowner changes in equity, and consists
of net earnings and foreign currency translation adjustments. Royal Ahold's
statement of comprehensive income follows:
Condensed Consolidated Statement of Comprehensive Income
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Net earnings available to common shareholders 739,940 537,274 415,428
Other comprehensive income (loss)
Foreign currency translation adjustments 277,931 (241,604) 85,791
--------- -------- -------
Comprehensive income 1,017,871 295,670 501,219
========= ======== =======
</TABLE>
New accounting pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments and requires that all derivatives be
recognized as either assets or liabilities in the statements of financial
position. This pronouncement will become effective for Royal Ahold for the year
ending December 31, 2001. Royal Ahold has not yet completed its analysis of the
effect of this new standard.
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Reconciliation of reported net earnings to U.S. GAAP
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Net earnings in accordance with Dutch GAAP 752,107 547,199 423,754
Items having the effect of increasing (decreasing) reported net
earnings
Goodwill (147,378) (96,095) (100,648)
Pensions 6,552 (10,874) (27,797)
Revaluation of real estate 2,263 2,725 2,958
Restructuring costs (19,202) (7,378) (19,890)
Other provisions (28,630) (54,535) 43,330
Other 10,109 - -
Income tax effects on reconciling items 9,825 16,484 1,580
-------- ------- --------
Approximate net earnings in accordance with U.S. GAAP 585,646 397,526 323,287
Dividends on Cumulative Preferred Financing Shares (12,167) (9,925) (8,326)
-------- ------- --------
Approximate net earnings in accordance with U.S. GAAP applicable to
common shares 573,479 387,601 314,961
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Approximate net earnings in accordance with U.S. GAAP 585,646 397,526 323,287
Less: Dividends on cumulative preferred financing shares (12,167) (9,925) (8,326)
------- ------- -------
Net earnings available to common shareholders 573,479 387,601 314,961
Income impact from assumed conversion of convertible subordinated notes 18,875 5,350 -
------- ------- -------
Income available to common shareholders plus assumed conversions 592,354 392,951 314,961
======= ======= =======
Weighted average number of common shares outstanding x 1,000 643,167 585,975 536,950
Dilutive effect of:
Convertible subordinated notes 23,812 6,163 -
Employee stock options 6,252 6,868 7,077
------- ------- -------
Weighted average number of diluted common shares outstanding x 1,000 673,231 599,006 544,027
======= ======= =======
Earnings per common share (EUR) 0.89 0.66 0.59
Diluted earnings per common share (EUR) 0.88 0.66 0.58
</TABLE>
Had compensation cost for Royal Ahold's stock option plans described in Note 15
to the consolidated financial statements been determined consistent with SFAS
123 in 1999, 1998 and 1997, approximate pro forma net earnings would have been
547,922, 377,925 and 314,025, respectively, and approximate diluted net earnings
per common share would have been EUR 0.81, EUR 0.63 and EUR 0.57, respectively.
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Reconciliation of reported stockholders' equity to U.S. GAAP
<TABLE>
<S> <C> <C>
January 2, January 3,
2000 1999
Stockholders' equity in accordance with Dutch GAAP 2,125,596 1,552,753
Items having the effect of increasing (decreasing) reported stockholders' equity
(net of tax, as applicable)
Goodwill, net of foreign exchange differences 5,705,620 4,873,630
Pensions 49,262 55,407
Revaluation of real estate (30,221) (33,855)
Proposed dividend on common shares 226,269 171,011
Other 29,579 33,051
--------- ---------
Approximate stockholders' equity in accordance with U.S. GAAP 8,106,105 6,651,997
========= =========
</TABLE>
Reconciliation of reported stockholders' equity under U.S. GAAP
<TABLE>
<CAPTION>
fiscal year fiscal year
1999 1998
<S> <C> <C>
Approximate stockholders' equity, beginning of fiscal year 6,651,997 4,353,223
Changes in stockholders' equity during the fiscal year
Approximate net earnings in accordance with U.S. GAAP 585,646 397,526
Final dividend approved prior year (171,311) (135,015)
Common shares issued as final optional stock dividend prior year 148,807 120,892
Dividend on cumulative preferred financing shares (12,167) (9,925)
Interim dividend (89,640) (67,131)
Common shares issued as interim optional stock dividend 77,621 61,308
Common shares issued from exercise of option rights 20,836 36,480
Common shares issued - 2,181,640
Cumulative preferred financing shares issued - 73,035
Exchange rate differences 894,316 (360,036)
--------- ---------
Approximate stockholders' equity, end of fiscal year 8,106,105 6,651,997
========= =========
</TABLE>
Condensed consolidated financial information prepared in accordance with U.S.
GAAP
The following presents Royal Ahold's condensed Consolidated Balance Sheets,
Consolidated Statements of Earnings and Consolidated Statements of Cash Flows
prepared in accordance with U.S. GAAP considering all the items discussed
previously in this note.
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Condensed Consolidated Statements of Earnings
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Net sales 33,560,391 26,484,210 22,946,976
Cost of sales (25,303,075) (20,295,007) (17,707,560)
----------- ----------- -----------
Gross profit 8,257,316 6,189,203 5,239,416
Selling, general and administrative expenses (7,040,897) (5,351,187) (4,511,718)
----------- ----------- -----------
Operating results 1,216,419 838,016 727,698
Net financial expense (360,437) (245,000) (217,874)
----------- ----------- -----------
Operating earnings before income taxes and minority interests 855,982 593,016 509,824
Income taxes (273,176) (180,590) (171,940)
----------- ----------- -----------
Operating earnings after income taxes and before minority 582,806 412,426 337,884
interests
Income from unconsolidated companies 7,437 11,106 2,847
Minority interests (4,597) (26,006) (17,444)
----------- ----------- -----------
Net earnings 585,646 397,526 323,287
Dividends on cumulative preferred financing shares (12,167) (9,925) (8,326)
----------- ----------- -----------
Net earnings available to common shareholders 573,479 387,601 314,961
=========== =========== ===========
</TABLE>
Condensed Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
January 2, January 3,
2000 1999
Assets
Current assets 5,308,963 4,109,974
Fixed assets
Tangible fixed assets 8,428,501 6,694,518
Intangible fixed assets 6,692,420 5,564,314
Other 464,080 550,209
---------- ----------
15,585,001 12,809,041
---------- ----------
20,893,964 16,919,015
========== ==========
Liabilities and stockholders' equity
Current liabilities 6,124,475 4,561,578
Long-term liabilities 5,564,324 4,929,567
Minority interests 1,099,060 775,873
Stockholders' equity 8,106,105 6,651,997
---------- ----------
20,893,964 16,919,015
========== ==========
</TABLE>
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Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
fiscal year fiscal year fiscal year
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings 585,646 397,526 323,287
Adjustments to reconcile to net cash from operating activities
Depreciation and amortization 1,025,096 779,455 641,721
Other 3,189 19,178 19,071
Changes in assets and liabilities providing (using) cash 121,820 38,879 (74,834)
---------- ---------- ----------
Net cash provided by operating activities 1,735,751 1,235,038 909,245
Cash flows from investing activities
Net investments in fixed assets (1,613,823) (1,202,323) (1,116,916)
Acquisitions of businesses (net of cash acquired) (679,111) (3,019,777) (123,810)
Other 20,898 21,305 3,492
---------- ---------- ----------
Net cash used in investing activities (2,272,036) (4,200,795) (1,237,234)
Cash flows from financing activities
Net change in short-term and long-term borrowings 656,596 294,672 169,558
Net proceeds from issuance of common stock 20,836 2,218,120 25,454
Net proceeds from issuance of preferred stock -- 73,035 --
Net proceeds from issuance of convertible subordinated notes -- 678,402 --
Other 279,379 52,702 106,350
---------- ---------- ----------
Net cash provided by (used in) financing activities 956,811 3,316,931 301,362
Exchange rate differences 44,184 (128,872) (339)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 464,710 222,302 (26,966)
Cash and cash equivalents at beginning of the year 519,395 297,093 324,059
---------- ---------- ----------
Cash and cash equivalents at end of the year 984,105 519,395 297,093
========== ========== ==========
</TABLE>
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ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
List of Financial Statements
Reference is made to Item 18 of this Annual Report which contains the
independent auditors report, the accounting principles used, the financial
statements and the notes to the financial statements as well as an index
thereof.
List of Exhibits
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, Royal Ahold certifies that it meets all of the requirements for filing on
Form 20-F and has duly caused this Annual Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Koninklijke Ahold N.V.
/s/ Cees H. van der Hoeven
President of the Corporate Executive Board
April 12, 2000
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KONINKLIJKE AHOLD N.V.
ANNUAL REPORT ON FORM 20-F
Index of Exhibits
Not applicable
87
