At the outset of 2005, U.S. Foodservice and certain of its subsidiaries participated in two separate accounts receivable sale and related agreements (“Receivables Agreements”). On May 6, 2005 U.S. Foodservice merged its two accounts receivable securitization programs into one. Under the Receivables Agreement, U.S. Foodservice and certain of its subsidiaries sell, on a revolving basis, their receivables to a wholly-owned, special purpose, bankruptcy remote subsidiary of U.S. Foodservice (“Receivables Company”) which in turn transfers, assigns and conveys all of its present and future rights, titles and interests in the eligible receivables as defined by the Receivables Agreements to a special purpose entity (the “Master Trust”).
Ahold consolidates the special purpose entity and consequently the transfer of the receivables is a transaction internal to the Ahold group and the receivables have not been derecognized from the consolidated balance sheets. The Master Trust issues certificates, representing fractional, undivided interests in the accounts receivable held in the Master Trust, which are financed by third-party investors in exchange for cash or are retained by the Receivables Company as subordinate interests to those held by the third party. These third-party investors are generally either commercial paper conduits, banks or other financial institutions. In return for the receivables transferred, the Receivables Company receives cash and the remaining certificates.
The cash is included in Ahold’s consolidated balance sheets in cash and cash equivalents and amounts corresponding to the certificates financed are recognized under short-term borrowings. Included in Ahold’s receivable balance is USD 1,092 (EUR 922), which is effectively pledged collateral in support of that financing. The maximum purchaser group limit under the Receivables Agreement is USD 1,020 (EUR 861).
The aggregate amount of outstanding balances under the accounts receivable securitization program was USD 620 (EUR 524) and USD 702 (EUR 518), as of January 1, 2006 and January 2, 2005, respectively. The costs associated with the sale of interests in the receivables ranged between 2.4% and 4.2% during 2005, plus fees and expenses. Ahold received proceeds from the collection under the Receivables Agreements of USD 18,005 (EUR 14,496) and USD 17,968 (EUR 14,465) in 2005 and 2004, respectively. Under the terms of the Receivables Agreements, these proceeds are legally restricted to the Master Trust. As of January 1, 2006 and January 2, 2005, such restricted receivables collection proceeds held by Ahold amounted to USD 122 (EUR 103) and USD 93 (EUR 79), which are included in cash and cash equivalents in the balance sheets. The funds received from the Master Trust on a revolving basis have been used to redeem the short-term borrowings
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Note 22, 23
that have been recognized by the Receivables Company. Losses in the form of discounts on the sale of receivables, primarily representing interest, totaled USD 26 (EUR 21) and USD 17 (EUR 14) in 2005 and 2004, respectively and are included in the consolidated statements of operations in interest expense.
22 CASH AND CASH EQUIVALENTS
January 1, 2006
January 2, 2005
Cash on hand 391 267
Cash in banks and cash equivalents 1,837 2,938
Total cash and cash equivalents 2,228 3,205
The effective interest rate on USD and EUR cash equivalents was 3.21% and 2.04% respectively for 2005 (2004: USD 1.28% and EUR 2.03%) and they are callable on demand. The carrying amount of these cash equivalents approximates their fair value.
Of the cash and cash equivalents as of January 1, 2006 EUR 23 was restricted (January 2, 2005: EUR 92). This consisted of cash held for insurance purposes for U.S. workers’ compensation and general liability programs (EUR 23 and EUR 74 for 2005 and 2004, respectively). In addition, as of January 2, 2005, EUR 18 of restricted cash related to collateralized cash held for letters of credit. For a discussion of the receivables collection proceeds held by Ahold under the accounts receivable securitization program, see Note 21.
Net cash book overdrafts of EUR 517 and EUR 365 have been classified in accounts payable as of January 1, 2006 and January 2, 2005, respectively. These amounts represent the excess of total issued checks over available cash balances within the Group cash concentration structure. No right to offset with other bank balances exists.
23 EQUITY ATTRIBUTABLE TO COMMON SHAREHOLDERS OF AHOLD
Changes in issued and paid-in capital are summarized as follows:
Number of common
shares issued and fully paid
(x 1,000) Share capital
Additional paid in capital
Total share capital
Balance as of December 28, 2003 1,552,603 388 13,406 13,794
Issue of common shares 1,634 1 10 11
Equity settled share-based payments 17 – – –
Converted subordinated notes 9 – – –
Balance as of January 2, 2005 1,554,263 389 13,416 13,805
Issue of common shares 100 – 1 1
Equity settled share-based payments 950 – 5 5
Balance as of January 1, 2006 1,555,313 389 13,422 13,811
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Financial statements – Notes to the consolidated financial statements
Note 23
Changes in legal reserves are summarized as follows:
Currency translation
reserve
Cash fl ow hedging
reserve
Other legal reserves
Total legal reserves
Balance as of December 28, 2003 – (58) 536 478
Exchange rate differences in foreign interests (313) – – (313)
Recognition of cumulative translation difference related to divestments 1 – – 1
Cash fl ow hedges:
Fair value gains in year – 165 – 165
Transfers to net income – (130) – (130)
Income taxes – (8) – (8)
Release to accumulated defi cit – – (194) (194)
Balance as of January 2, 2005 (312) (31) 342 (1)
Exchange rate differences in foreign interests 610 – – 610
Recognition of cumulative translation difference related to divestments 24 – – 24
Cash fl ow hedges:
Fair value losses in year – (371) – (371)
Transfers to net income – 323 – 323
Income taxes – 14 – 14
Release to accumulated defi cit – – (3) (3)
Balance as of January 1, 2006 322 (65) 339 596
Ahold is a company incorporated under Dutch law. In accordance with the Netherlands Civil Code, legal reserves have to be established in certain circumstances. The currency translation reserve and cash flow hedging reserve are both legal reserves.
The other legal reserves primarily consist of the cumulative share in income of joint ventures and associates less dividends received from these joint ventures and associates with any direct equity movements of joint ventures and associates added or deducted. Legal reserves are not available for distribution to the Company’s shareholders. If the currency translation reserve or the cash flow hedging reserve has a negative balance, distributions to the Company’s shareholders are restricted to the extent of the negative balance.
Changes in accumulated deficit are summarized as follows:
Accumulated defi cit
Net income attributable to common shareholders
Total accumulated
defi cit
Balance as of December 28, 2003 (10,998) – (10,998)
Net income – 885 885
Recognition of share-based payments 18 – 18
Release from legal reserve 194 – 194
Other (15) – (15)
Balance as of January 2, 2005 (10,801) 885 (9,916)
Net income 885 (752) 133
Recognition of share-based payments 24 – 24
Release from legal reserve 3 – 3
Balance as of January 1, 2006 (9,889) 133 (9,756)
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