UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2012
COMMISSION FILE NO. 1 - 10421
LUXOTTICA GROUP S.p.A.
VIA C. CANTÙ 2, MILAN, 20123 ITALY
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ý Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No ý
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
F O R M 6-K
for the three- and six-months
ended June 30 of
Fiscal Year 2012
INDEX TO FORM 6-K
Board of Directors | ||
In office until the approval of the financial statements as of and for the year ending December 31, 2014. | ||
Chairman |
Leonardo Del Vecchio |
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Deputy Chairman |
Luigi Francavilla |
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Chief Executive Officer |
Andrea Guerra |
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Directors |
Roger Abravanel* |
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Mario Cattaneo* | |
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Enrico Cavatorta | |
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Claudio Costamagna* | |
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Claudio Del Vecchio | |
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Sergio Erede | |
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Elisabetta Magistretti* | |
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Marco Mangiagalli* | |
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Anna Puccio* | |
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Marco Reboa* (Lead Independent Director) | |
*Independent director. |
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Human Resources Committee |
Claudio Costamagna (Chairman) |
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Roger Abravanel | |
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Anna Puccio | |
Internal Control Committee |
Mario Cattaneo (Chairman) |
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Elisabetta Magistretti | |
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Marco Mangiagalli | |
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Marco Reboa | |
Board of Statutory Auditors |
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In office until the approval of the financial statements as of and for the year ending December 31, 2014 | ||
Regular Auditors |
Francesco Vella (Chairman) |
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Alberto Giussani | |
|
Barbara Tadolini | |
Alternate Auditors |
Giorgio Silva |
|
|
Fabrizio Riccardo di Giusto | |
Officer Responsible for Preparing the Company's Financial Reports |
Enrico Cavatorta |
|
Auditing Firm |
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Until approval of the financial statements as of and for the year ending December 31, 2020. | ||
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PricewaterhouseCoopers SpA |
Luxottica Group S.p.A.
Headquarters and registered office Via C. Cantù 2, 20123 Milan, Italy
Capital Stock € 28,183,305.72
authorized and issued
ITEM 1. MANAGEMENT REPORT ON THE INTERIM FINANCIAL RESULTS
AS OF JUNE 30, 2012
(UNAUDITED)
The following discussion should be read in connection with the disclosure contained in the consolidated financial statements as of December 31, 2011, which includes a study about risks and uncertainties that can influence the Group's operational results or financial position.
1. OPERATING PERFORMANCE FOR THE THREE- AND THE SIX-MONTH PERIODS ENDED JUNE 30, 2012
During the course of the second quarter of 2012, the Group's growth trend continued. In a more challenging macroeconomic environment, the Group achieved positive results in the majority of the geographic areas in which it operates, with excellent performance in North America, Australia and all emerging countries.
Net sales for the quarter were Euro 1882.2 million, and increased by 15.2% (+7.0% at constant exchange rates1), from Euro 1,633.5 million in the same period of 2011. Net income increased by 20.6% to Euro 195.5 million from Euro 162.1 million in the same quarter of 2011.
During the half-year ended June 30, 2012, net sales grew by 15.1% (+9.0% current exchange rates) to Euro 3,670.4 million (Euro 3,189.6 million during the same period in 2011).
EBITDA in the second quarter of 2012 rose by 18.1% over the same period in 2011, going from Euro 352.2 million in 2011 to Euro 415.9 million in the same period of 2012. Additionally, adjusted EBITDA2 in the first half of 2012 increased by 20.2 percent to Euro 761.2 million from Euro 635.1 million in the same period of 2011.
Operating income for the second quarter of 2012 amounted to Euro 332.6 million (Euro 276.8 million during the same period of the previous year) and increased by +20.2%, as compared to the same period in 2011. The Group's operating margin grew even further rising from 16.9% in the second quarter of 2011 to 17.7% in the current quarter.
During the first sixth months of 2012, adjusted operating income3 amounted to Euro 590.6 million, up by 22.0% as compared to Euro 484.2 million in the same period of 2011. The Group's adjusted operating margin4 therefore rose from 15.2% during the first six months of 2011 to 16.1% in the same period of 2012.
In the second quarter of 2012, net income attributable to Luxottica Stockholders was Euro 195.5 million (Euro 162.1 million in the same period of 2011). In the second quarter 2012 earnings
1
per share ("EPS") was Euro 0.42 and EPS expressed in USD was 0.54 (at an average exchange rate of Euro/USD of 1.2814).
By carefully controlling working capital, the Group generated positive free cash flow5 in both the first six months of the year (Euro 216 million) and the second quarter (Euro 180 million). After the payment of dividends of approximately Euro 227 million, net debt as of June 30, 2012 was Euro 2,164 million (Euro 2,032 million at the end of 2011), with the ratio of net debt to adjusted EBITDA6 of 1.7x, unchanged compared to December 31, 2011.
2. SIGNIFICANT EVENTS DURING THE SIX MONTHS ENDED JUNE 30, 2012
January
On January 20, 2012, the Group successfully completed the acquisition of 80% of share capital of the Brazilian entity Grupo Tecnol Ltd. The remaining 20% will be acquired evenly (five percent per year) starting from 2013 over a four year period. The consideration paid for the 80% was approximately 143.7 million Brazilian Reais (approximately Euro 59.4 million); additionally the Group assumed Tecnol's net debt amounting to approximately Euro 31.5 million. The acquisition furthers the Group's strategy of continued expansion of its wholesale business and acquiring a manufacturing facility in South America.
On January 24, 2012, the Board of Directors of Luxottica Group S.p.A. (hereinafter, also the "Company") approved the reorganization of the retail business in Australia. As a result of the reorganization, the Group will close approximately 10% of its Australian and New Zealand stores, redirecting resources into its market-leading OPSM brand.
March
On March 19, 2012, the Company closed an offering in Europe to institutional investors of Euro 500 million of senior unsecured guaranteed notes due March 19, 2019. The notes are listed on the Luxembourg Stock Exchange under ISIN XS0758640279. Interest on the Notes accrues at 3.625% per annum. The Notes are guaranteed on a senior unsecured basis by Luxottica U.S. Holdings Corp. ("U.S. Holdings") and Luxottica S.r.l., both of which are wholly-owned subsidiaries. On March 19, 2012, the notes were assigned a BBB+ credit rating by Standard & Poor's.
April
At the Stockholders' Meeting on April 27, 2012, the stockholders approved the Statutory Financial Statements as of December 31, 2011, as proposed by the Board of Directors and the distribution of a cash dividend of Euro 0.49 per ordinary share, reflecting a year-over-year 11.4 percent increase. The aggregate dividend amount of Euro 227.0 million was fully paid in May 2012.
May
On May 17, 2012, the Company entered into an agreement pursuant to which it will acquire approximately 120 Sun Planet stores in Spain and Portugal. Over time, the stores will be rebranded under the Sunglass Hut brand. In 2011, net sales of the chain totaled approximately Euro 22 million.
June
On June 8, 2012, Armani Group and the Company signed an exclusive license agreement for the design, manufacture and worldwide distribution of sun and prescription eyewear under the Giorgio Armani, Emporio Armani and A/X Armani Exchange brands. The 10-year license agreement,
2
incorporating market conditions, will begin on January 1, 2013. The first collection will be presented during 2013.
3. FINANCIAL RESULTS
We are a global leader in the design, manufacture and distribution of fashion, luxury and sport eyewear, with net sales reaching Euro 6.2 billion in 2011, over 65,000 employees and a strong global presence. We operate in two industry segments: (i) manufacturing and wholesale distribution; and (ii) retail distribution. See Note 5 to the Condensed Consolidated Half Year Financial Report as of June 30, 2012 (unaudited) for additional disclosures about our operating segments. Through our manufacturing and wholesale distribution segment, we are engaged in the design, manufacture, wholesale distribution and marketing of house and designer lines of mid- to premium-priced prescription frames and sunglasses. We operate our retail distribution segment principally through our retail brands, which include, among others, LensCrafters, Sunglass Hut, Pearle Vision, OPSM, Laubman & Pank, Bright Eyes, Oakley "O" Stores and Vaults, David Clulow, Multiopticas and our Licensed Brands (Sears Optical and Target Optical).
As a result of our numerous acquisitions and the subsequent expansion of our business activities in the United States through these acquisitions, our results of operations, which are reported in Euro, are susceptible to currency rate fluctuations between the Euro and the U.S. dollar. The Euro/U.S. dollar exchange rate has fluctuated from an average exchange rate of Euro 1.00 = U.S. $1.2965 in the first six months of 2012 to Euro 1.00 = U.S. $1.4032 in the same period of 2011. With the acquisition of OPSM and Bright Eyes (acquired through Oakley), our results of operations have also been rendered susceptible to currency fluctuations between the Euro and the Australian dollar. Additionally, we incur part of our manufacturing costs in Chinese Yuan; therefore, the fluctuation of the Chinese Yuan relative to other currencies in which we receive revenues could impact the demand of our products or the profitability in consolidation. Although we engage in certain foreign currency hedging activities to mitigate the impact of these fluctuations, they have impacted our reported revenues and expenses during the periods discussed herein. This discussion should be read in conjunction with the risk factor discussion in Note 10 of the Management Report of the 2011 Consolidated Financial Statements.
3
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (UNAUDITED)
In accordance with IFRS
|
Six months ended June 30, |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands of Euro) |
2012 |
% of net sales |
2011 |
% of net sales |
|||||||||
Net sales |
3,670,358 | 100.0 | % | 3,189,646 | 100.0 | % | |||||||
Cost of sales |
1,229,042 | 33.5 | % | 1,097,127 | 34.4 | % | |||||||
Gross profit |
2,441,316 | 66.5 | % | 2,092,519 | 65.6 | % | |||||||
Selling |
1,134,419 |
30.9 |
% |
980,366 |
30.7 |
% |
|||||||
Royalties |
68,104 | 1.9 | % | 57,052 | 1.8 | % | |||||||
Advertising |
225,407 | 6.1 | % | 203,673 | 6.4 | % | |||||||
General and administrative |
444,238 | 12.1 | % | 367,194 | 11.5 | % | |||||||
Total operating expenses |
1,872,168 |
51.0 |
% |
1,608,285 |
50.4 |
% |
|||||||
Income from operations |
569,148 | 15.5 | % | 484,234 | 15.2 | % | |||||||
Other income/(expense) |
|||||||||||||
Interest income |
11,895 | 0.3 | % | 7,235 | 0.2 | % | |||||||
Interest expense |
(72,988 | ) | (2.0 | )% | (60,434 | ) | (1.9 | )% | |||||
Othernet |
(489 | ) | (0.1 | )% | (2,896 | ) | (0.1 | )% | |||||
Income before provision for income taxes |
507,566 | 13.8 | % | 428,140 | 13.4 | % | |||||||
Provision for income taxes |
(178,077 | ) | (4.9 | )% | (147,221 | ) | (4.6 | )% | |||||
Net income |
329,489 | 9.0 | % | 280,919 | 8.8 | % | |||||||
Attributable to |
|||||||||||||
Luxottica Group stockholders |
326,321 | 8.9 | % | 276,781 | 8.7 | % | |||||||
non-controlling interests |
3,168 | 0.1 | % | 4,138 | 0.1 | % | |||||||
NET INCOME |
329,489 | 9.0 | % | 280,919 | 8.8 | % | |||||||
Adjusted Measures7 |
2012 |
% of net sales |
2011 |
% of net sales |
% change |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Adjusted income from Operations |
590,580 | 16.1 | % | 484,234 | 15.2 | % | 22.0 | % | ||||||||
Adjusted EBITDA |
721,227 | 20.7 | % | 635,140 | 19.9 | % | 19.9 | % | ||||||||
Adjusted Net Income attributable to Luxottica Group Stockholders |
341,323 | 9.3 | % | 276,781 | 8.7 | % | 23.3 | % | ||||||||
Net Sales. Net sales increased by Euro 480.8 million, or 15.1 percent, to Euro 3,670.4 million in the first six months of 2012 from Euro 3,189.6 million in the same period of 2011. Euro 169.9 million of such increase was attributable to the increased sales in the manufacturing and wholesale distribution segment in the first six months of 2012 as compared to the same period in 2011 and to increased sales in the retail distribution segment of Euro 310.9 million for the same period.
Net sales for the retail distribution segment increased by Euro 310.9 million, or 16.9 percent, to Euro 2,155.4 million in the first six months of 2012 from Euro 1,844.5 million in the same period in 2011. The increase in net sales for the period was partially attributable to a 6.1 percent improvement in
4
comparable store sales8. In particular, we saw a 6.4 percent increase in comparable store sales for the North American retail operations, and an increase for the Australian/New Zealand retail operations of 5.3 percent. The effects from currency fluctuations between the Euro (which is our reporting currency) and other currencies in which we conduct business, in particular the strengthening of the U.S. dollar and Australian dollar compared to the Euro, increased net sales in the retail distribution segment by Euro 159.8 million during the period.
Net sales to third parties in the manufacturing and wholesale distribution segment increased by Euro 169.9 million, or 12.6 percent, to Euro 1,515.0 million in the first six months of 2012 from Euro 1,345.1 million in the same period in 2011. This increase was mainly attributable to increased sales of most of our house brands, in particular Ray-Ban, Oakley and Persol, and of some designer brands such as Chanel, Prada, Polo, Tiffany and the recently launched Coach line. These sales volume increases occurred in most of the geographic markets in which the Group operates. These positive effects were partially confirmed by positive currency fluctuations, in particular the strengthening of the U.S. dollar and other minor currencies, including but not limited to the Japanese Yen and Canadian Dollar, despite the weaknesses of the Brazilian Real and Turkish Lira, the total effect of which was to increase net sales to third parties in the manufacturing and wholesale distribution segment by Euro 34.7 million.
In the first six months of 2012, net sales in the retail distribution segment accounted for approximately 58.7 percent of total net sales, as compared to approximately 57.8 percent of total net sales for the same period in 2011. This increase in sales for the retail distribution segment as a percentage of total net sales was primarily attributable to a 16.9 percent increase in net sales to third parties in our retail distribution segment for the first six months of 2012 as compared to the same period of 2011, which exceeded a 12.6 percent increase in net sales for the manufacturing and wholesale distribution segment for the first six months of 2012 as compared to the same period of 2011.
In the first six months of 2012, net sales in our retail distribution segment in the United States and Canada comprised 79.3 percent of our total net sales in this segment as compared to 81.8 percent of our total net sales in the same period of 2011. In U.S. dollars, retail net sales in the United States and Canada increased by 4.7 percent to U.S. $2,214.9 million in the first six months of 2012 from U.S. $2,116.2 million for the same period in 2011, due to sales volume increases. During the first six months of 2012, net sales in the retail distribution segment in the rest of the world (excluding the United States and Canada) comprised 20.7 percent of our total net sales in the retail distribution segment and increased by 32.8 percent to Euro 446.9 million in the first six months of 2012 from Euro 336.5 million, or 18.2 percent of our total net sales in the retail distribution segment for the same period in 2011, mainly due to a general increase in consumer demand and to recent acquisitions in Latin America.
In the first six months of 2012, net sales to third parties in our manufacturing and wholesale distribution segment in Europe were Euro 691.5 million, comprising 45.6 percent of our total net sales in this segment, compared to Euro 682.0 million, or 50.7 percent of total net sales in the segment, for the same period in 2011. The increase in net sales in Europe of Euro 9.5 million in the first six months of 2012 as compared to the same period of 2011 constituted a 1.4 percent increase in net sales to third parties, due to a general increase in consumer demand. Net sales to third parties in our manufacturing and wholesale distribution segment in the United States and Canada were U.S. $511.0 million and comprised 26.0 percent of our total net sales in this segment for the first six months of 2012, compared to U.S. $422.5 million, or 22.4 percent of total net sales in the segment, for the same period of 2011. The increase in net sales in the United States and Canada was primarily due to a general increase in consumer demand. In the first six months of 2012, net sales to third parties in our manufacturing and wholesale distribution segment in the rest of the world were Euro 429.4 million, comprising 28.3 percent
5
of our total net sales in this segment, compared to Euro 362.0 million, or 26.9 percent of our net sales in this segment, in the same period of 2011. The increase of Euro 67.4 million, or 18.6 percent, in the first six months of 2012 as compared to the same period of 2011, was due to the positive effect of currency fluctuations as well as an increase in consumer demand.
Cost of Sales. Cost of sales increased by Euro 131.9 million, or 12.0 percent, to Euro 1,229.0 million in the first six months of 2012 from Euro 1,097.1 million in the same period of 2011. As a percentage of net sales, cost of sales decreased to 33.5 percent in the first six months of 2012 as compared to 34.4 percent in the same period of 2011 due to efficiencies achieved in the production cycle. In the first six months of 2012, the average number of frames produced daily in our facilities increased to approximately 271,000 as compared to approximately 266,000 in the same period of 2011, which was attributable to increased production in all manufacturing facilities in response to an overall increase in demand.
Gross Profit. Our gross profit increased by Euro 348.8 million, or 16.7 percent, to Euro 2,441.3 million in the first six months of 2012 from Euro 2,092.5 million for the same period of 2011. As a percentage of net sales, gross profit increased to 66.5 percent in the first six months of 2012 as compared to 65.6 percent for the same period of 2011, due to the factors noted above.
Operating Expenses. Total operating expenses increased by Euro 263.9 million, or 16.4 percent, to Euro 1,872.2 million in the first six months of 2012 from Euro 1,608.3 million in the same period of 2011. As a percentage of net sales, operating expenses increased to 51.0 percent in the first six months of 2012, from 50.4 percent in the same period of 2011.
Adjusted operating expenses9, excluding the non-recurring expenses related to the reorganization of the Retail business in Australia amounting to approximately Euro 20.1 million, increased by Euro 243.8 million, or 15.2 percent, to Euro 1,852.1 million in the first six months of 2012 from Euro 1,608.3 million in the same period of 2011. As a percentage of net sales, operating expenses are in line with last year at 50.5 percent in the first six months of 2012, and 50.4 percent in the same period of 2011.
Selling and advertising expenses (including royalty expenses) increased by Euro 186.8 million, or 15.1 percent, to Euro 1,427.9 million in the first six months of 2012 from Euro 1,241.1 million in the same period of 2011. Selling expenses increased by Euro 154.1 million, or 15.7 percent. Advertising expenses increased by Euro 21.7 million, or 10.7 percent. Royalties increased by Euro 11.1 million, or 19.4 percent. As a percentage of net sales, selling and advertising expenses were 38.9 percent in the first six months of 2012 and 2011.
Adjusted selling expenses10, excluding the non-recurring expenses related to the reorganization of the Retail business in Australia amounting to approximately Euro 17.1 million, increased by Euro 137.0 million, or 14.0 percent to Euro 1,117.3 million from Euro 980.4 million in the same period of 2011.
General and administrative expenses, including intangible asset amortization increased by Euro 77.0 million, or 21.0 percent, to Euro 444.2 million in the first six months of 2012 as compared to Euro 367.2 million in the same period of 2011. As a percentage of net sales, general and administrative expenses were 12.1 percent in the first six months of 2012 as compared to 11.5 percent in the same period of 2011.
6
Adjusted general and administrative expenses11, including intangible asset amortization and excluding the non-recurring expenses related to the reorganization of the Retail business in Australia amounting to approximately Euro 3.0 million, increased by Euro 74.1 million, or 20.2 percent, to Euro 441.2 million in the first six months of 2012 as compared to Euro 367.2 million in the same period of 2011. As a percentage of net sales, adjusted general and administrative expenses were 12.0 percent in the first six months of 2012 as compared to 11.5 percent in the same period of 2011.
Income from Operations. For the reasons described above, income from operations increased by Euro 84.9 million, or 17.5 percent, to Euro 569.1 million in the first six months of 2012 from Euro 484.2 million in the same period of 2011. As a percentage of net sales, income from operations increased to 15.5 percent in the first six months of 2012 from 15.2 percent in the same period of 2011.
Adjusted income from operations,12 excluding the non-recurring expenses related to the reorganization of the Retail business in Australia amounting to Euro 21.4 million, increased by Euro 106.3 million, or 22.0 percent, to Euro 590.6 million in the first six months of 2012 from Euro 484.2 million in the same period of 2011. As a percentage of net sales, adjusted income from operations increased to 16.1 percent in the first six months of 2012 from 15.2 percent in the same period of 2011.
Other Income (Expense)Net. Other income (expense)net was Euro (61.6) million in the first six months of 2012 as compared to Euro (56.1) million in the same period of 2011. Net interest expense was Euro 61.1 million in the first six months of 2012 as compared to Euro 53.2 million in the same period of 2011. The increase was mainly due to the acquisition of Tecnol and to the arrangement of a new long term loan in the second quarter of 2012.
Net Income. Income before taxes increased by Euro 79.4 million, or 18.6 percent, to Euro 507.6 million in the first six months of 2012 from Euro 428.1 million in the same period of 2011, for the reasons described above. As a percentage of net sales, income before taxes increased to 13.8 percent in the first six months of 2012 from 13.4 percent in the same period of 2011. Adjusted income before taxes13 increased by Euro 100.9 million, or 23.6 percent, to Euro 529.0 million in the first six months of 2012 from Euro 428.1 million in the same period of 2011. As a percentage of net sales, adjusted income before taxes was 14.4 percent in the first six months of 2012 as compared to 13.4 percent in the first six months of 2011. Net income attributable to non-controlling interests decreased to Euro 3.2 million in the first six months of 2012 as compared to Euro 4.1 million in the same period of 2011. Our effective tax rate was 35.1 percent in the first six months of 2012 as compared to 34.4 percent for the same period of 2011.
Net income attributable to Luxottica Group stockholders increased by Euro 49.5 million, or 17.9 percent, to Euro 326.3 million in the first six months of 2012 from Euro 276.8 million in the same period of 2011. Net income attributable to Luxottica Group stockholders as a percentage of net sales increased to 8.9 percent in the first six months of 2012 from 8.7 percent in the same period of 2011.
Adjusted net income attributable to Luxottica Group Stockholders14 increased by Euro 64.5 million, or 23.3 percent, to Euro 341.3 million in the first six months of 2012 from Euro 276.8 million in the same period of 2011. Adjusted net income attributable to Luxottica Group stockholders as a percentage of net sales increased to 9.3 percent in the first six months of 2012 from 8.7 percent in the same period of 2011.
Basic and diluted earnings per share were Euro 0.70 in the first six months of 2012 as compared to Euro 0.60 in the same period of 2011.
Adjusted basic and diluted earnings per share15 were Euro 0.74 in the first six months of 2012 as compared to Euro 0.60 in the same period of 2011.
7
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2012 AND 2011 (UNAUDITED)
In accordance with IFRS
|
Three months ended June 30, |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands of Euro) |
2012 |
% of net sales |
2011 |
% of net sales |
|||||||||
Net sales |
1,882,185 | 100.0 | % | 1,633,544 | 100.0 | % | |||||||
Cost of sales |
606,477 | 32.2 | % | 542,674 | 33.2 | % | |||||||
Gross profit |
1,275,708 | 67.8 | % | 1,090,871 | 66.8 | % | |||||||
Selling |
562,847 |
29.9 |
% |
488,101 |
29.9 |
% |
|||||||
Royalties |
35,586 | 1.9 | % | 28,509 | 1.7 | % | |||||||
Advertising |
123,429 | 6.6 | % | 113,260 | 6.9 | % | |||||||
General and administrative |
221,213 | 11.8 | % | 184,183 | 11.3 | % | |||||||
Total operating expenses |
943,075 |
49.8 |
% |
814,053 |
49.8 |
% |
|||||||
Income from operations |
332,633 | 16.9 | % | 276,819 | 16.9 | % | |||||||
Other income/(expense) |
|||||||||||||
Interest income |
6,478 | 0.3 | % | 5,148 | 0.3 | % | |||||||
Interest expense |
(36,004 | ) | 1.9 | % | (31,172 | ) | 1.9 | % | |||||
Othernet |
(421 | ) | 0.1 | % | (1,152 | ) | 0.1 | % | |||||
Income before provision for income taxes |
302,686 | 16.1 | % | 249,642 | 15.3 | % | |||||||
Provision for income taxes |
(105,896 | ) | 5.6 | % | (85,822 | ) | 5.3 | % | |||||
Net income |
196,790 | 10.5 | % | 163,820 | 10.0 | % | |||||||
Attributable to |
|||||||||||||
Luxottica Group stockholders |
195,545 | 10.4 | % | 162,087 | 9.9 | % | |||||||
non-controlling interests |
1,245 | 0.1 | % | 1,734 | 0.1 | % | |||||||
NET INCOME |
196,790 | 10.5 | % | 163,820 | 10.0 | % | |||||||
Net Sales. Net sales increased by Euro 248.7 million, or 15.2 percent, to Euro 1,882.2 million in the three-month period ended June 30, 2012 from Euro 1,633.5 million in the same period of 2011. Euro 84.2 million of such increase was attributable to the increased sales in the manufacturing and wholesale distribution segment in the three-month period ended June 30, 2012 as compared to the same period in 2011 and to the increased sales in the retail distribution segment of Euro 164.4 million for the same period.
Net sales for the retail distribution segment decreased by Euro 164.4 million, or 17.7 percent, to Euro 1,094.0 million in the three-month period ended June 30, 2012 from Euro 929.6 million in the same period in 2011. The segment experienced a 5.1 percent improvement in comparable store sales16. In particular, there was a 5.6 percent increase in comparable store sales for the North American retail operations, and 4.6 percent increase for the Australian/New Zealand retail operations. The effects from currency fluctuations between the Euro (which is our reporting currency) and other currencies in which we conduct business, in particular the strengthening of the U.S. dollar and Australian Dollar, increased net sales in the retail distribution segment by Euro 109.6 million during the period.
8
Net sales to third parties in the manufacturing and wholesale distribution segment increased by Euro 84.2 million, or 12.0 percent, to Euro 788.2 million in the three-month period ended June 30, 2012 from Euro 704.0 million in the same period in 2011. This increase was mainly attributable to increased sales of most of our house brands, in particular Ray-Ban, Oakley and Persol and of some designer brands such as Chanel, Polo, Prada, Tiffany and the recently launched Coach line. These sales volume increases occurred in most of the geographic markets in which the Group operates. These positive effects were partially decreased by negative currency fluctuations, in particular a strengthening of the U.S. dollar and other minor currencies, including but not limited to the Canadian dollar and the Japanese Yen, which increased net sales to third parties in the manufacturing and wholesale distribution segment by Euro 25.4 million, notwithstanding the weaknesses of the Brazilian Real and Turkish Lira.
During the three-month period ended June 30, 2012, net sales in the retail distribution segment accounted for approximately 58.1 percent of total net sales, as compared to approximately 56.9 percent of total net sales for the same period in 2011. This increase in sales for the retail distribution segment as a percentage of total net sales was primarily attributable to a 17.7 percent increase in net sales to third parties in our retail distribution segment for the three-month period ended June 30, 2012 from the same period of 2011, as compared to a 12.0 percent decrease in net sales in the manufacturing and wholesale distribution segment for the three-month period ended June 30, 2012 from the same period of 2011.
During the three-month period ended June 30, 2012, net sales in our retail distribution segment in the United States and Canada comprised 80.0 percent of our total net sales in this segment as compared to 81.6 percent of our total net sales in the same period of 2011. In U.S. dollars, retail net sales in the United States and Canada increased by 2.9 percent to U.S. $1,122.7 million in the three-month period ended June 30, 2012 from U.S. $1,091.1 million for the same period in 2011, due to sales volume increases. During the three-month period ended June 30, 2012, net sales in the retail distribution segment in the rest of the world (excluding the United States and Canada) comprised 20.0 percent of our total net sales in the retail distribution segment and increased by 28.1 percent to Euro 218.7 million in the three-month period ended June 30, 2012 from Euro 170.9 million, or 18.4 percent of our total net sales in the retail distribution segment for the same period in 2011, mainly due to an increase in consumer demand and to recent acquisitions in Latin America.
During the three-month period ended June 30, 2012, net sales to third parties in our manufacturing and wholesale distribution segment in Europe were Euro 362.5 million, comprising 46.0 percent of our total net sales in this segment, compared to Euro 370.2 million, or 52.6 percent of total net sales in the segment, for the same period in 2011. The decrease in net sales in Europe of Euro (7.7) million in the three-month period ended June 30, 2012 as compared to the same period of 2011 constituted a (2.1) percent decrease in net sales to third parties, due to a general decrease in consumer demand. Net sales to third parties in our manufacturing and wholesale distribution segment in the United States and Canada were U.S. $263.8 million and comprised 26.1 percent of our total net sales in this segment for the three-month period ended June 30, 2012, compared to U.S. $212.8 million, or 21.0 percent of total net sales in the segment, for the same period of 2011. The increase in net sales in the United States and Canada was primarily due to a general increase in consumer demand. In the three-month period ended June 30, 2012, net sales to third parties in our manufacturing and wholesale distribution segment in the rest of the world were Euro 220.2 million, comprising 27.9 percent of our total net sales in this segment, compared to Euro 186.0 million, or 26.4 percent of our net sales in this segment, in the same period of 2011. The increase of Euro 34.2 million, or 18.4 percent, in the three-month period ended June 30, 2012 as compared to the same period of 2011, was due to an increase in consumer demand.
Cost of Sales. Cost of sales increased by Euro 63.8 million, or 11.8 percent, to Euro 606.5 million in the three-month period ended June 30, 2012 from Euro 542.7 million in the same period of 2011. As a percentage of net sales, cost of sales decreased to 32.3 percent in the three-month period ended June 30, 2012 compared to 33.2 percent in the three-month period ended June 30, 2011 due to efficiencies achieved in the production cycle. The average number of frames produced daily in our
9
facilities increased to approximately 278,100 in the three-month period ended June 30, 2012, as compared to approximately 280,700 in the same period of 2011.
Gross Profit. Our gross profit increased by Euro 184.8 million, or 16.9 percent, to Euro 1,275.7 million in the three-month period ended June 30, 2012 from Euro 1,090.9 million for the same period of 2011. As a percentage of net sales, gross profit increased to 67.8 percent in the three month period ended June 2012 as compared to 66.8 percent in the three-month period ended June 30, 2011, due to the factors noted above.
Operating Expenses. Total operating expenses increased by Euro 129.0 million, or 15.8 percent, to Euro 943.1 million in the three-month period ended June 30, 2012 from Euro 814.1 million in the same period of 2011. As a percentage of net sales, operating expenses increased to 50.1 percent in the three-month period ended June 30, 2012, from 49.8 percent in the same period of 2011.
Selling and advertising expenses (including royalty expenses) increased by Euro 92.0 million, or 14.6 percent, to Euro 721.9 million in the three-month period ended June 30, 2012 from Euro 629.9 million in the same period of 2011. Selling expenses increased by Euro 74.7 million, or 15.3 percent. Advertising expenses increased by Euro 10.2 million, or 9.0 percent. Royalties increased by Euro 7.1 million, or 24.8 percent. As a percentage of net sales, selling and advertising expenses are in line at 38.3 percent in the three-month period ended June 30, 2012, compared to 38.6 percent for the same period of 2011.
General and administrative expenses, including intangible asset amortization increased by Euro 37.0 million, or 20.1 percent, to Euro 221.2 million in the three-month period ended June 30, 2012 as compared to Euro 184.2 million in the same period of 2011. As a percentage of net sales, general and administrative expenses were 11.8 percent in the three-month period ended June 30, 2012 as compared to 11.3 percent in the same period of 2011.
Income from Operations. For the reasons described above, income from operations increased by Euro 55.8 million, or 20.2 percent, to Euro 332.6 million in the three-month period ended June 30, 2012 from Euro 276.8 million in the same period of 2011. As a percentage of net sales, income from operations increased to 17.7 percent in the three-month period ended June 30, 2012 from 16.9 percent in the same period of 2011.
Other Income (Expense)Net. Other income (expense)net was Euro (29.9) million in the three-month period ended June 30, 2012 as compared to Euro (27.2) million in the same period of 2011. Net interest expense was Euro 29.5 million in the three-month period ended June 30, 2012 as compared to Euro 26.0 million in the same period of 2011.
Net Income. Income before taxes increased by Euro 53.0 million, or 21.2 percent, to Euro 302.7 million in the three-month period ended June 30, 2012 from Euro 249.6 million in the same period of 2011, for the reasons described above. As a percentage of net sales, income before taxes increased to 16.1 percent in the three-month period ended June 30, 2012 from 15.3 percent in the same period of 2011. Net income attributable to non-controlling interests decreased to Euro 1.2 million in the three-month period ended June 30, 2012 as compared to Euro 1.7 million in the same period of 2011. Our effective tax rate was 35.0 percent in the three-month period ended June 30, 2012 as compared to 34.4 percent for the same period of 2011.
Net income attributable to Luxottica Group stockholders increased by Euro 33.5 million, or 20.6 percent, to Euro 195.5 million in the three-month period ended June 30, 2012 from Euro 162.1 million in the same period of 2011. Net income attributable to Luxottica Group stockholders as a percentage of net sales increased to 10.4 percent in the three-month period ended June 30, 2012 from 9.9 percent in the same period of 2011.
Basic and diluted earnings per share were Euro 0.42 in the three-month period ended June 30, 2012 as compared to Euro 0.35 in the same period of 2011.
10
OUR CASH FLOWS
The following table sets forth for the periods indicated certain items included in our statements of consolidated cash flows included in Item 2 of this report.
|
|
As of June 30, 2012 |
As of June 30, 2011 |
||||||
---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands of Euro) |
(unaudited) |
||||||||
A) |
Cash and cash equivalents at the beginning of the period |
905,100 | 679,852 | ||||||
B) |
Cash provided by operating activities |
372,233 | 272,300 | ||||||
C) |
Cash used in investing activities |
(210,479 | ) | (162,508 | ) | ||||
D) |
Cash used in financing activities |
57,450 | (260,339 | ) | |||||
|
Effect of exchange rate changes on cash and cash equivalents |
13,205 | (20,908 | ) | |||||
E) |
Net change in cash and cash equivalents |
232,409 | (171,455 | ) | |||||
F) |
Cash and cash equivalents at the end of the period |
1,137,510 | 508,397 | ||||||
Operating activities. Cash provided by operating activities was Euro 372.3 million and Euro 272.3 million for the first six months of 2012 and 2011, respectively.
Depreciation and amortization were Euro 170.6 million in the first six months of 2012 as compared to Euro 150.9 million in the same period of 2011.
Cash used in accounts receivable was Euro 229.2 million in the first six months of 2012, compared to Euro 179.7 million in the same period of 2011. This change was primarily due to an increase in sales volume in the first six months of 2012 as compared to the same period of 2011. Cash used in inventory was Euro 30.5 million in the first six months of 2012 as compared to Euro 9.5 million in the same period of 2011. The increase in inventory in the first six months of 2012 is mainly related to new acquisitions starting from the second half of 2011, which increased inventory by Euro 20.8 million. Cash used in accounts payable was Euro 0.5 million in the first six months of 2012 compared to Euro 40.0 million in the same period of 2011. This change is mainly due to more favorable payment terms agreed during 2011. Income taxes paid were Euro 108.2 million in the first six months of 2012 as compared to Euro 95.6 million in the same period of 2011. This change was mainly due to the timing of tax payments made by the Group in the different jurisdictions. Interest paid was Euro 57.3 million and Euro 60.9 million in the first six months of 2012 and 2011, respectively.
Investing activities. Our cash used in investing activities was Euro 210.5 million for the first six months of 2012 as compared to Euro 162.5 million for the same period in 2011. The cash used in investing activities in the first six months of 2012 primarily consisted of (i) Euro 91.4 million in capital expenditures, (ii) Euro 63.1 million for the acquisition of intangible assets related to the creation of a new IT structure, (iii) Euro 53.0 million for the acquisition of Tecnol, and (iv) other acquisitions of Euro 3.0 million.
Cash used in investing activities in the first six months of 2011 primarily consisted of (i) Euro 131.6 million in capital expenditures, (ii) the acquisition of two retail chains of Euro 19.5 million, the acquisition of a retail chain in Australia of Euro 6.0 million and other minor acquisitions of Euro 5.4 million in the first six months of 2011.
Financing activities. Our cash provided by/(used in) financing activities for the first six months of 2012 and 2011 was Euro 57.5 million and Euro (279.8) million, respectively. Cash used in financing activities for the first six months of 2012 consisted primarily of (i) Euro 508.4 million of proceeds from the issuance of long-term borrowings, (ii) Euro (176.6) million used to repay long-term debt expiring during the first six months of 2012 and (iii) Euro (227.4) million in cash used to pay dividends to the Company's stockholders. Cash (used in)/provided by financing activities for the first six months of 2011 consisted primarily of (i) Euro (95.2) million in cash used to repay long-term debt expiring during the first six months of 2011 and (ii) Euro (204.6) million in cash used to pay dividends.
11
OUR CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS (Amounts in thousands of Euro) |
June 30, 2012 (unaudited) |
December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
CURRENT ASSETS: |
|||||||
Cash and cash equivalents |
1,137,510 | 905,100 | |||||
Accounts receivablenet |
962,798 | 714,033 | |||||
Inventoriesnet |
708,023 | 649,506 | |||||
Other assets |
208,846 | 230,850 | |||||
Total current assets |
3,017,177 | 2,499,489 | |||||
NON-CURRENT ASSETS: |
|||||||
Property, plant and equipmentnet |
1,191,892 | 1,169,066 | |||||
Goodwill |
3,240,651 | 3,090,563 | |||||
Intangible assetsnet |
1,407,292 | 1,350,921 | |||||
Investments |
8,971 | 8,754 | |||||
Other assets |
136,558 | 147,625 | |||||
Deferred tax assets |
199,438 | 377,739 | |||||
Total non-current assets |
6,184,802 | 6,144,667 | |||||
TOTAL ASSETS |
9,201,979 | 8,468,624 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
June 30, 2012 (unaudited) |
December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
CURRENT LIABILITIES: |
|||||||
Short term borrowings |
116,535 | 193,834 | |||||
Current portion of long-term debt |
722,471 | 498,295 | |||||
Accounts payable |
628,528 | 608,327 | |||||
Income taxes payable |
79,285 | 39,859 | |||||
Short term provisions for risks and other charges |
70,081 | 53,337 | |||||
Other liabilities |
612,404 | 579,595 | |||||
Total current liabilities |
2,229,305 | 1,973,247 | |||||
NON-CURRENT LIABILITIES: |
|||||||
Long-term debt |
2,462,397 | 2,244,583 | |||||
Employee benefits |
224,898 | 197,675 | |||||
Deferred tax liabilities |
268,740 | 280,842 | |||||
Long term provisions for risks and other charges |
99,523 | 80,400 | |||||
Other liabilities |
65,918 | 66,756 | |||||
Total non-current liabilities |
3,121,476 | 2,870,256 | |||||
STOCKHOLDERS' EQUITY: |
|||||||
Luxottica Group stockholders' equity |
3,838,417 | 3,612,928 | |||||
Non-controlling interests |
12,782 | 12,192 | |||||
Total stockholders' equity |
3,851,199 | 3,625,120 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
9,201,979 | 8,468,624 | |||||
As of June 30, 2012, total assets increased by Euro 733.4 million to Euro 9,202.0 million, compared to Euro 8,468.6 million as of December 31, 2011.
In the first six months of 2012, non-current assets increased by Euro 215.7 million, due to increases in intangible assets (including goodwill) of Euro 206.5 million, property, plant and equipment of
12
Euro 22.8 million, investments of Euro 0.2 million and partially offset by decreases of other assets of Euro 11.1 million and of deferred tax assets of Euro 2.8 million.
The increase in intangible assets was primarily due to the positive effects of foreign currency fluctuations from December 2011 to June 2012 of Euro 97.3 million, the software additions of Euro 63.1 and Euro 119.0 related to the acquisition that occurred in the first six months of 2012 and partially offset by the amortization for the period of Euro 67.3 million.
The increase in property, plant and equipment was primarily due to positive currency fluctuation effects of Euro 22.2 million, the additions of Euro 109.6 million, including financial leases of Euro 18.2 million and Euro 10.2 million related to the acquisition made in the first six months of 2012, and partially offset by the depreciation for the period of Euro 103.4 and decreases of the period of Euro 18.7 million.
As of June 30, 2012, as compared to December 31, 2011:
Our net financial position as of June 30, 2012 and December 31, 2011 was as follows:
(Amounts in thousands of Euro) |
June 30, 2012 (unaudited) |
December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Cash and cash equivalents |
1,137,510 | 905,100 | |||||
Bank overdrafts |
(116,535 | ) | (193,834 | ) | |||
Current portion of long-term debt |
(722,471 | ) | (498,295 | ) | |||
Long-term debt |
(2,462,397 | ) | (2,244,583 | ) | |||
Total |
(2,163,894 | ) | (2,031,612 | ) | |||
Bank overdrafts consist of the utilized portion of short-term uncommitted revolving credit lines borrowed by various subsidiaries of the Group.
As of June 30, 2012, Luxottica, together with our wholly-owned Italian subsidiary Luxottica S.r.l., had credit lines aggregating Euro 311.7 million. The interest rate is a floating rate of EURIBOR plus a margin on average of approximately 0.45 percent. As of June 30, 2012, we have not utilized these credit lines.
As of June 30, 2012, our wholly-owned subsidiary Luxottica U.S. Holdings maintained unsecured lines of credit with an aggregate maximum availability of Euro 103.2 million (U.S. $130 million). The interest rate is a floating rate and is approximately USD LIBOR plus 80 basis points. At June 30, 2012, these lines were not used.
13
4. RELATED PARTY TRANSACTIONS
Our related party transactions are neither atypical nor unusual and occur in the ordinary course of our business. Management believes that these transactions are fair to the Company. For further details regarding related party transactions, please refer to Note 30 to the Condensed Consolidated Half Year Financial Report as of June 30, 2012 (unaudited).
5. SUBSEQUENT EVENTS
For further details regarding subsequent events, please refer to Note 37 to the Condensed Consolidated Half Year Financial Report as of June 30, 2012 (unaudited).
6. 2011 OUTLOOK
Management believes that the results obtained in the first six months of 2012 are an excellent basis for the second half of 2012. Management looks to the year optimistically, relying on the strength of the Group's brands and aware of the need to deliver on its plans with impeccable execution.
14
NON-IFRS MEASURES
Adjusted measures
We use in this Management Report certain performance measures that are not in accordance with IFRS. Such non-IFRS measures are not meant to be considered in isolation or as a substitute for items appearing on our financial statements prepared in accordance with IFRS. Rather, these non-IFRS measures should be used as a supplement to IFRS results to assist the reader in better understanding our operational performance.
Such measures are not defined terms under IFRS and their definitions should be carefully reviewed and understood by investors. Such non-IFRS measures are explained in detail and reconciled to their most comparable IFRS measures below.
In order to provide a supplemental comparison of current period results of operations to prior periods, we have adjusted for certain non-recurring transactions or events.
We have made such adjustments to the following measures: operating income and operating margin, EBITDA, EBITDA margin and net income by excluding non-recurring costs related to the reorganization of the retail business in Australia of Euro 21.4 million
The Group believes that these adjusted measures are useful to both management and investors in evaluating the Group's operating performance compared with that of other companies in its industry because they exclude the impact of non-recurring items that are not relevant to the Group's operating performance.
The adjusted measures referenced above are not measures of performance in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). We include these adjusted comparisons in this presentation in order to provide a supplemental view of operations that excludes items that are unusual, infrequent or unrelated to our ongoing core operations. See the tables below for a reconciliation of the adjusted measures discussed above to their most directly comparable IFRS financial measure or, in the case of adjusted EBITDA, to EBITDA, which is also a non-IFRS measure. For reconciliation of EBITDA to its most directly comparable IFRS measure, see the pages following the tables below:
Non-IFRS Measure: Reconciliation between reported and adjusted P&L items
Luxottica Group
|
6M12 |
|||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Millions of Euro |
Net sales |
EBITDA |
EBITDA margin |
Operating Income |
Operating Income margin |
Income before taxes |
Net Income |
EPS base |
EPS dilutive |
|||||||||||||||||||
Reported |
3,670.4 | 739.8 | 20.2 | % | 569.1 | 15.5 | % | 507.6 | 326.3 | 0.70 | 0.70 | |||||||||||||||||
> Adjustment for OPSM reorganization |
| 21.4 | 0.5 | % | 21.4 | 0.6 | % | 21.4 | 15.0 | 0.04 | 0.03 | |||||||||||||||||
Adjusted |
3,670.4 | 761.2 | 20.7 | % | 590.6 | 16.1 | % | 529.0 | 341.3 | 0.74 | 0.73 | |||||||||||||||||
15
Non-IFRS Measure: Reconciliation between reported and adjusted P&L items
Luxottica Group
|
6M11 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Millions of Euro |
Net sales |
EBITDA |
Operating Income |
Net Income |
|||||||||
Reported |
3,189.6 | 635.1 | 484.2 | 276.8 | |||||||||
> Adjustment for OPSM reorganization |
| | | | |||||||||
Adjusted |
3,189.6 | 635.1 | 484.2 | 276.8 | |||||||||
Non-IFRS Measure: Reconciliation between reported and adjusted P&L items
Retail Division
|
6M12 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Millions of Euro |
Net sales |
EBITDA |
Operating Income |
|||||||
Reported |
2,155.4 | 353.0 | 272.6 | |||||||
> Adjustment for OPSM reorganization |
| 21.4 | 21.4 | |||||||
Adjusted |
2,155.4 | 374.5 | 294.1 | |||||||
Retail Division
|
6M11 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Millions of Euro |
Net sales |
EBITDA |
Operating Income |
|||||||
Reported |
1,844.5 | 295.9 | 226.6 | |||||||
> Adjustment for OPSM reorganization |
| | | |||||||
Adjusted |
1,844.5 | 295.9 | 226.6 | |||||||
EBITDA and EBITDA margin
EBITDA represents net income attributable to Luxottica Group stockholders, before non-controlling interest, provision for income taxes, other income/expense, depreciation and amortization. EBITDA margin means EBITDA divided by net sales. We believe that EBITDA is useful to both management and investors in evaluating our operating performance compared with that of other companies in our industry. Our calculation of EBITDA allows us to compare our operating results with those of other companies without giving effect to financing, income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to the overall operating performance of a company's business.
EBITDA and EBITDA margin are not measures of performance under IFRS. We include them in this Management Report in order to:
16
EBITDA and EBITDA margin are not meant to be considered in isolation or as a substitute for items appearing on our financial statements prepared in accordance with IFRS. Rather, these non-IFRS measures should be used as a supplement to IFRS results to assist the reader in better understanding the operational performance of the Group.
The Group cautions that these measures are not defined terms under IFRS and their definitions should be carefully reviewed and understood by investors.
Investors should be aware that our method of calculating EBITDA may differ from methods used by other companies. We recognize that the usefulness of EBITDA has certain limitations, including:
We compensate for the foregoing limitations by using EBITDA as a comparative tool, together with IFRS measurements, to assist in the evaluation of our operating performance and leverage. The
17
following table provides a reconciliation of EBITDA to net income, which is the most directly comparable IFRS financial measure, as well as the calculation of EBITDA margin on net sales:
Non-IFRS Measure: EBITDA and EBITDA margin
Millions of Euro |
2Q 2011 |
2Q 2012 |
6M 2011 |
6M 2012 |
FY 2011 |
LTM June 30, 2012 |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net income/(loss) |
162.1 | 195.5 | 276.8 | 326.3 | 452.3 | 501.9 | |||||||||||||
(+) |
|||||||||||||||||||
Net income attributable to non-controlling interest |
1.7 |
1.2 |
4.1 |
3.2 |
6.0 |
5.0 |
|||||||||||||
(+) |
|||||||||||||||||||
Provision for income taxes |
85.8 |
105.9 |
147.2 |
178.1 |
237.0 |
267.8 |
|||||||||||||
(+) |
|||||||||||||||||||
Other (income)/expense |
27.2 |
29.9 |
56.1 |
61.6 |
111.9 |
117.4 |
|||||||||||||
(+) |
|||||||||||||||||||
Depreciation & amortization |
75.3 |
83.3 |
150.9 |
170.6 |
323.9 |
343.6 |
|||||||||||||
(+) |
|||||||||||||||||||
EBITDA |
352.2 |
415.9 |
635.1 |
739.8 |
1,131.0 |
1,235.7 |
|||||||||||||
(=) |
|||||||||||||||||||
Net sales |
1,633.5 |
1,882.2 |
3,189.6 |
3,670.4 |
6,222.5 |
6,703.2 |
|||||||||||||
(/) |
|||||||||||||||||||
EBITDA margin |
21.6 |
% |
22.1 |
% |
19.9 |
% |
20.2 |
% |
18.2 |
% |
18.4 |
% |
|||||||
(=) |
|||||||||||||||||||
18
Non-IFRS Measure: Adjusted EBITDA and Adjusted EBITDA margin
Millions of Euro |
2Q 2011 |
2Q 2012 |
6M 2011 |
6M 2012(1) |
FY 2011(1) |
LTM June 30, 2012(1) |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Adjusted Net income/(loss) |
162.1 | 195.5 | 276.8 | 341.3 | 455.6 | 520.2 | |||||||||||||
(+) |
|||||||||||||||||||
Net income attributable to non-controlling interest |
1.7 |
1.2 |
4.1 |
3.2 |
6.0 |
5.0 |
|||||||||||||
(+) |
|||||||||||||||||||
Adjusted provision for income taxes |
85.8 |
105.9 |
147.2 |
184.5 |
247.4 |
284.7 |
|||||||||||||
(+) |
|||||||||||||||||||
Other (income)/expense |
27.2 |
29.9 |
56.1 |
61.6 |
111.9 |
117.4 |
|||||||||||||
(+) |
|||||||||||||||||||
Adjusted depreciation & amortization |
75.3 |
83.3 |
150.9 |
170.6 |
315.0 |
334.7 |
|||||||||||||
(+) |
|||||||||||||||||||
Adjusted EBITDA |
352.2 |
415.9 |
635.1 |
761.2 |
1,135.9 |
1,261.9 |
|||||||||||||
(=) |
|||||||||||||||||||
Net sales |
1,633.5 |
1,882.2 |
3,189.6 |
3,670.4 |
6,222.5 |
6,703.2 |
|||||||||||||
(/) |
|||||||||||||||||||
Adjusted EBITDA margin |
21.6 |
% |
22.1 |
% |
19.9 |
% |
20.7 |
% |
18.3 |
% |
18.8 |
% |
|||||||
(=) |
|||||||||||||||||||
Free Cash Flow
Free cash flow represents net income before noncontrolling interests, taxes, other income/expense, depreciation and amortization (i.e., EBITDA) plus or minus the decrease/(increase) in working capital over the prior period, less capital expenditures, plus or minus interest income/(expense) and extraordinary items, minus taxes paid. We believe that free cash flow is useful to both management and investors in evaluating our operating performance compared with other companies in our industry. In particular, our calculation of free cash flow provides a clearer picture of our ability to generate net cash from operations, which is used for mandatory debt service requirements, to fund discretionary investments, pay dividends or pursue other strategic opportunities.
Free cash flow is not a measure of performance under IFRS. We include it in this Management Report in order to:
19
Free cash flow is not meant to be considered in isolation or as a substitute for items appearing on our financial statements prepared in accordance with IFRS. Rather, this non-IFRS measure should be used as a supplement to IFRS results to assist the reader in better understanding the operational performance of the Group.
The Group cautions that this measure is not a defined term under IFRS and its definition should be carefully reviewed and understood by investors.
Investors should be aware that our method of calculation of free cash flow may differ from methods used by other companies. We recognize that the usefulness of free cash flow as an evaluative tool may have certain limitations, including:
We compensate for the foregoing limitations by using free cash flow as one of several comparative tools, together with IFRS measurements, to assist in the evaluation of our operating performance.
The following table provides a reconciliation of free cash flow to EBITDA and the table above provides a reconciliation of EBITDA to net income, which is the most directly comparable IFRS financial measure:
Non-IFRS Measure: Free cash flow
Millions of Euro |
6M 2012 |
|||
---|---|---|---|---|
Adjusted EBITDA(1) |
761 | |||
D working capital |
(229 | ) | ||
Capex |
(146 | ) | ||
Operating cash flow |
386 | |||
Financial charges(2) |
(61 | ) | ||
Taxes |
(108 | ) | ||
Othernet |
(0 | ) | ||
Free cash flow |
216 | |||
20
Non-IFRS Measure: Free cash flow
Millions of Euro |
2Q 2012 |
|||
---|---|---|---|---|
EBITDA(1) |
416 | |||
D working capital |
(26 | ) | ||
Capex |
(84 | ) | ||
Operating cash flow |
305 | |||
Financial charges(2) |
(30 | ) | ||
Taxes |
(96 | ) | ||
Othernet |
(0 | ) | ||
Free cash flow |
180 | |||
Net debt to EBITDA ratio
Net debt means the sum of bank overdrafts, current portion of long-term debt and long-term debt, less cash. EBITDA represents net income before non-controlling interest, taxes, other income/expense, depreciation and amortization. The Group believes that EBITDA is useful to both management and investors in evaluating the Group's operating performance compared with that of other companies in its industry. Our calculation of EBITDA allows us to compare our operating results with those of other companies without giving effect to financing, income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to the overall operating performance of a company's business. The ratio of net debt to EBITDA is a measure used by management to assess the Group's level of leverage, which affects our ability to refinance our debt as it matures and incur additional indebtedness to invest in new business opportunities. The ratio also allows management to assess the cost of existing debt since it affects the interest rates charged by the Company's lenders.
EBITDA and ratio of net debt to EBITDA are not measures of performance under International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).
We include them in this Management Report in order to:
EBITDA and ratio of net debt to EBITDA are not meant to be considered in isolation or as a substitute for items appearing on our financial statements prepared in accordance with IFRS. Rather, these non-IFRS measures should be used as a supplement to IFRS results to assist the reader in better understanding the operational performance of the Group.
21
The Group cautions that these measures are not defined terms under IFRS and their definitions should be carefully reviewed and understood by investors.
Investors should be aware that Luxottica Group's method of calculating EBITDA and the ratio of net debt to EBITDA may differ from methods used by other companies.
The Group recognizes that the usefulness of EBITDA and the ratio of net debt to EBITDA as evaluative tools may have certain limitations, including:
Because we may not be able to use our cash to reduce our debt on a dollar-for-dollar basis, this measure may have material limitations. We compensate for the foregoing limitations by using EBITDA and the ratio of net debt to EBITDA as two of several comparative tools, together with IFRS measurements, to assist in the evaluation of our operating performance and leverage.
See the table below for a reconciliation of net debt to long-term debt, which is the most directly comparable IFRS financial measure, as well as the calculation of the ratio of net debt to EBITDA. For a reconciliation of EBITDA to its most directly comparable IFRS measure, see the table on the earlier page.
22
Non-IFRS Measure: Net debt and Net debt/EBITDA
Millions of Euro |
June 30, 2012 |
Dec. 31, 2011 |
|||||
---|---|---|---|---|---|---|---|
Long-term debt |
2,462.4 | 2,244.6 | |||||
(+) |
|||||||
Current portion of long-term debt |
722.5 |
498.3 |
|||||
(+) |
|||||||
Bank overdrafts |
116.5 |
193.8 |
|||||
(+) |
|||||||
Cash |
(1,137.5 |
) |
(905.1 |
) |
|||
(-) |
|||||||
Net debt |
2,163.9 |
2,031.6 |
|||||
(=) |
|||||||
EBITDA |
1,235.7 |
1,131.0 |
|||||
Net debt/EBITDA |
1.8 |
x |
1.8 |
x |
|||
Net debt @ avg. exchange rates(1) |
2,097.0 |
1,944.4 |
|||||
Net debt @ avg. exchange rates(1)/EBITDA |
1.7 |
x |
1.7 |
x |
|||
Non-IFRS Measure: Net debt and Net debt/Adjusted EBITDA
Millions of Euro |
June 30, 2012(2) |
Dec. 31, 2011(2) |
|||||
---|---|---|---|---|---|---|---|
Long-term debt |
2,462.4 | 2,244.6 | |||||
(+) |
|||||||
Current portion of long-term debt |
722.5 |
498.3 |
|||||
(+) |
|||||||
Bank overdrafts |
116.5 |
193.8 |
|||||
(+) |
|||||||
Cash |
(1,137.5 |
) |
(905.1 |
) |
|||
(-) |
|||||||
Net debt |
2,163.9 |
2,031.6 |
|||||
(=) |
|||||||
LTM Adjusted EBITDA |
1,261.9 |
1,135.9 |
|||||
Net debt/LTM Adjusted EBITDA |
1.7 |
x |
1.8 |
x |
|||
Net debt @ avg. exchange rates(1) |
2,097.0 |
1,944.4 |
|||||
Net debt @ avg. exchange rates(1)/LTM EBITDA |
1.7 |
x |
1.7 |
x |
|||
23
FORWARD-LOOKING INFORMATION
Throughout this report, management has made certain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 which are considered prospective. These statements are made based on management's current expectations and beliefs and are identified by the use of forward-looking words and phrases such as "plans," "estimates," "believes" or "belief," "expects" or other similar words or phrases.
Such statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those which are anticipated. Such risks and uncertainties include, but are not limited to, our ability to manage the effect of the uncertain current global economic conditions on our business, our ability to successfully acquire new businesses and integrate their operations, our ability to predict future economic conditions and changes in consumer preferences, our ability to successfully introduce and market new products, our ability to maintain an efficient distribution network, our ability to achieve and manage growth, our ability to negotiate and maintain favorable license arrangements, the availability of correction alternatives to prescription eyeglasses, fluctuations in exchange rates, changes in local conditions, our ability to protect our proprietary rights, our ability to maintain our relationships with host stores, any failure of our information technology, inventory and other asset risk, credit risk on our accounts, insurance risks, changes in tax laws, as well as other political, economic, legal and technological factors and other risks and uncertainties described in our filings with the U.S. Securities and Exchange Commission. These forward-looking statements are made as of the date hereof, and we do not assume any obligation to update them.
24
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Amounts in thousands of Euro) |
Note reference |
June 30, 2012 (unaudited) |
Of which related parties (note 30) |
December 31, 2011 (audited) |
Of which related parties (note 28) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS |
||||||||||||||||
CURRENT ASSETS: |
||||||||||||||||
Cash and cash equivalents |
6 | 1,137,510 | | 905,100 | | |||||||||||
Accounts receivable |
7 | 962,798 | 1,221 | 714,033 | 4,168 | |||||||||||
Inventories |
8 | 708,023 | | 649,506 | | |||||||||||
Other assets |
9 | 208,846 | 39 | 230,850 | | |||||||||||
Total current assets |
3,017,177 | 1,260 | 2,499,489 | 4,168 | ||||||||||||
NON-CURRENT ASSETS: |
||||||||||||||||
Property, plant and equipment |
10 | 1,191,892 | | 1,169,066 | | |||||||||||
Goodwill |
11 | 3,240,651 | | 3,090,563 | | |||||||||||
Intangible assets |
11 | 1,407,292 | | 1,350,921 | | |||||||||||
Investments |
12 | 8,971 | 4,387 | 8,754 | 391 | |||||||||||
Other assets |
13 | 136,558 | 2,431 | 147,625 | 2,358 | |||||||||||
Deferred tax assets |
14 | 199,438 | | 202,206 | | |||||||||||
Total non-current assets |
6,184,802 | 6,818 | 5,969,135 | 2,749 | ||||||||||||
TOTAL ASSETS |
9,201,979 | 8,078 | 8,468,624 | 6,917 | ||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||||||
CURRENT LIABILITIES: |
||||||||||||||||
Short-term borrowings |
15 | 116,535 | | 193,834 | | |||||||||||
Current portion of long-term debt |
16 | 722,471 | | 498,295 | | |||||||||||
Accounts payable |
17 | 628,528 | 15,353 | 608,327 | 18,004 | |||||||||||
Income taxes payable |
18 | 79,285 | | 39,859 | | |||||||||||
Short term provisions for risks and other charges |
19 | 70,081 | | 53,337 | | |||||||||||
Other liabilities |
20 | 612,404 | 61 | 579,595 | 2,568 | |||||||||||
Total current liabilities |
2,229,305 | 15,413 | 1,973,247 | 20,572 | ||||||||||||
NON-CURRENT LIABILITIES: |
||||||||||||||||
Long-term debt |
21 | 2,462,397 | | 2,244,583 | | |||||||||||
Employee benefits |
22 | 224,898 | | 197,675 | | |||||||||||
Deferred tax liabilities |
23 | 268,740 | | 280,842 | | |||||||||||
Long term provisions for risks and other charges |
24 | 99,523 | | 80,400 | | |||||||||||
Other liabilities |
25 | 65,918 | | 66,756 | | |||||||||||
Total non-current liabilities |
3,121,476 | 0 | 2,870,256 | | ||||||||||||
STOCKHOLDERS' EQUITY: |
||||||||||||||||
Luxottica Group stockholders' equity |
26 | 3,838,417 | | 3,612,928 | | |||||||||||
Non-controlling Interests |
27 | 12,782 | | 12,192 | | |||||||||||
Total stockholders' equity |
3,851,199 | 0 | 3,625,120 | | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' |
9,201,979 | 15,413 | 8,468,624 | 20,572 | ||||||||||||
25
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands of Euro)(1) |
Note reference |
1 Half 2012 (unaudited) |
Of which related parties (note 30) |
1 Half 2011 (unaudited) |
Of which related parties (note 28) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales |
28 | 3,670,358 | 855 | 3,189,646 | 5,484 | |||||||||||
Cost of sales |
1,229,042 | 23,785 | 1,097,127 | 21,855 | ||||||||||||
of which nonrecurring |
34 | 1,344 | | | | |||||||||||
Gross profit |
2,441,316 | (22,930 | ) | 2,092,519 | (16,371 | ) | ||||||||||
Selling |
28 | 1,134,419 | | 980,366 | 9 | |||||||||||
of which nonrecurring |
34 | 17,100 | | | | |||||||||||
Royalties |
28 | 68,104 | 683 | 57,052 | 158 | |||||||||||
Advertising |
28 | 225,407 | 44 | 203,673 | 48 | |||||||||||
General and administrative |
28 | 444,238 | 34 | 367,194 | 66 | |||||||||||
of which nonrecurring |
34 | 2,988 | | | | |||||||||||
Total operating expenses |
1,872,168 | 761 | 1,608,285 | 281 | ||||||||||||
Income from operations |
569,149 | (23,691 | ) | 484,235 | (16,652 | ) | ||||||||||
Other income/(expense) |
||||||||||||||||
Interest income |
28 | 11,895 | | 7,235 | | |||||||||||
Interest expense |
28 | (72,988 | ) | | (60,434 | ) | | |||||||||
Othernet |
28 | (489 | ) | | (2,896 | ) | (9 | ) | ||||||||
Income before provision for income taxes |
507,567 | (23,691 | ) | 428,140 | (16,661 | ) | ||||||||||
Provision for income taxes |
28 | (178,077 | ) | | (147,221 | ) | | |||||||||
Net income |
329,490 | | 280,919 | | ||||||||||||
Of which attributable to: |
||||||||||||||||
Luxottica Group stockholders |
326,321 | | 276,781 | | ||||||||||||
Non-controlling interests |
3,168 | | 4,138 | | ||||||||||||
NET INCOME |
329,489 | | 280,919 | | ||||||||||||
Weighted average number of shares outstanding: |
||||||||||||||||
Basic |
463,228,972 | | 460,118,653 | | ||||||||||||
Diluted |
465,560,791 | | 462,153,860 | | ||||||||||||
EPS: |
||||||||||||||||
Basic |
0.70 | | 0.60 | | ||||||||||||
Diluted |
0.70 | | 0.60 | | ||||||||||||
26
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
|
1 Half 2012 (unaudited) |
1 Half 2011 (unaudited) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
(Amounts in thousands of Euro) |
||||||||
Net income |
329,489 | 280,919 | ||||||||
Other comprehensive income: |
||||||||||
Cash flow hedgenet of tax of Euro 2.5 million and 5.3 million as of June 30, 2012 and June 30, 2011, respectively. |
10,435 | 11,886 | ||||||||
Currency translation differences |
74,364 | (183,405 | ) | |||||||
Actuarial gain/(loss) on defined benefit plansnet of tax of Euro 10.7 million and Euro 0.2 million as of June 30, 2012 and June 30, 2011. |
22 | (18,544 | ) | 339 | ||||||
Total other comprehensive incomenet of tax |
66,255 | (171,180 | ) | |||||||
Total comprehensive income for the period |
395,745 | 109,739 | ||||||||
Attributable to: |
||||||||||
Luxottica Group stockholders' equity |
392,827 | 107,416 | ||||||||
Non-controlling interests |
2,918 | 2,323 | ||||||||
Total comprehensive income for the period |
395,745 | 109,739 |
27
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIODS ENDED JUNE 30, 2012 AND 2011 (UNAUDITED)
|
Capital stock | |
|
|
|
|
|
|
|
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Legal reserve |
Additional paid-in capital |
Retained earnings |
Stock options reserve |
Translation of foreign operations and other |
Treasury shares |
Stockholders' equity |
Non- controlling interests |
|||||||||||||||||||||||
|
Number of shares |
Amount |
|||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||
|
Note 26 | Note 27 | |||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||
|
(Amounts in thousands of Euro, except share data) | ||||||||||||||||||||||||||||||
Balance as of January 1, 2011 |
466,077,210 | 27,964 | 5,578 | 218,823 | 3,129,786 | 159,184 | (172,431 | ) | (112,529 | ) | 3,256,375 | 13,029 | |||||||||||||||||||
Total Comprehensive Income as of June 30, 2011 |
| | | | 289,006 | | (181,590 | ) | | 107,416 | 2,323 | ||||||||||||||||||||
Exercise of Stock Options |
801,133 | 48 | | 11,488 | | | | | 11,536 | | |||||||||||||||||||||
Non-cash Stock based compensation net of tax effect of Euro 1.3 million. |
| | | | | 20,514 | | | 20,514 | | |||||||||||||||||||||
Investment in Treasury shares |
| | | | | | | (10,473 | ) | (10,473 | ) | | |||||||||||||||||||
Dividends (0.44 Euro per ordinary share) |
| | | | (202,524 | ) | | | | (202,524 | ) | (2,044 | ) | ||||||||||||||||||
Allocation of Legal Reserve |
| | 22 | | (22 | ) | | | | | | ||||||||||||||||||||
Balance as of June 30, 2011 |
466,878,343 | 28,012 | 5,600 | 230,311 | 3,216,247 | 179,698 | (354,021 | ) | (123,002 | ) | 3,182,845 | 13,308 | |||||||||||||||||||
Balance as of January 1, 2012 |
467,351,677 | 28,041 | 5,600 | 237,015 | 3,355,931 | 203,739 | (99,980 | ) | (117,418 | ) | 3,612,928 | 12,192 | |||||||||||||||||||
Total Comprehensive Income as of June 30, 2012 |
| | | | 318,213 | | 74,614 | | 392,827 | 2,918 | |||||||||||||||||||||
Exercise of Stock Options |
2,370,085 | 142 | | 35,094 | | | | | 35,236 | | |||||||||||||||||||||
Non-cash Stock based compensation |
| | | | | 19,523 | | | 19,523 | | |||||||||||||||||||||
Excess tax benefit on Stock Options |
| | | 5,288 | | | | | 5,288 | | |||||||||||||||||||||
Granting of treasury shares to employees |
| | | | (25,489 | ) | | | 25,489 | | | ||||||||||||||||||||
Dividends (0.49 Euro per ordinary share) |
| | | | (227,386 | ) | | | | (227,386 | ) | (2,328 | ) | ||||||||||||||||||
Allocation of Legal Reserve |
| | 23 | | (23 | ) | | | | | | ||||||||||||||||||||
Balance as of June 30, 2012 |
469,721,762 | 28,183 | 5,623 | 277,397 | 3,421,246 | 223,262 | (25,366 | ) | (91,929 | ) | 3,838,417 | 12,782 | |||||||||||||||||||
28
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of Euro) |
Note reference |
1 Half 2012 (unaudited) |
1 Half 2011 (unaudited) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Net income |
507,567 | 428,140 | ||||||||
Stock-based compensation |
35 | 19,523 | 19,191 | |||||||
Depreciation and amortization |
10/11 | 170,649 | 150,905 | |||||||
Net loss fixed assets and other |
10 | 18,675 | 6,693 | |||||||
Financial charges |
72,988 | 60,434 | ||||||||
Other non-cash items(*) |
15,314 | (146 | ) | |||||||
Changes in accounts receivable |
(229,194 |
) |
(179,746 |
) |
||||||
Changes in inventories |
(30,532 | ) | (9,504 | ) | ||||||
Changes in accounts payable |
(479 | ) | (40,045 | ) | ||||||
Changes in other assets/liabilities |
(6,712 | ) | (7,193 | ) | ||||||
Total adjustments |
30,232 |
589 |
||||||||
Cash provided by operating activities |
537,799 |
428,728 |
||||||||
Interest paid |
(57,328 |
) |
(60,857 |
) |
||||||
Tax paid |
(108,238 | ) | (95,571 | ) | ||||||
Net cash provided by operating activities |
372,233 |
272,300 |
||||||||
Property, plant and equipment: |
||||||||||
Additions |
10 | (91,354 | ) | (131,582 | ) | |||||
Purchases of businessesnet of cash acquired(**) |
4 | (56,071 | ) | (30,926 | ) | |||||
Additions to intangible assets |
11 | (63,054 | ) | | ||||||
Cash used in investing activities |
(210,479 | ) | (162,508 | ) | ||||||
For the same period of 2011, purchases of businessesnet of cash acquired include (i) two retail chains in Mexico for Euro 19.5 million, (ii) of one retail chain in Australia for Euro 6.0 million and (iii) other acquisitions for Euro 5.4 million.
29
CONSOLIDATED STATEMENT OF CASH FLOWS
|
Note reference |
1 Half 2012 (unaudited) |
1 Half 2011 (unaudited) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
(Amounts in thousands of Euro) |
||||||||
Long-term debt: |
||||||||||
Proceeds |
21 | 508,369 | | |||||||
Repayments |
21 | (176,711 | ) | (95,196 | ) | |||||
|
||||||||||
Short-term debt: |
||||||||||
Proceeds |
| 38,361 | ||||||||
Repayments |
(79,732 | ) | | |||||||
Exercise of stock options |
26 |
35,238 |
11,537 |
|||||||
Sale of treasury shares |
|
(10,473 |
) |
|||||||
Dividends |
32 |
(229,714 |
) |
(204,568 |
) |
|||||
Cash used in financing activities |
57,450 | (260,339 | ) | |||||||
Increase (decrease) in cash and cash equivalents |
219,204 | (150,547 | ) | |||||||
Cash and cash equivalents, beginning of the period |
905,100 | 679,852 | ||||||||
Effect of exchange rate changes on cash and cash equivalents |
13,205 | (20,908 | ) | |||||||
Cash and cash equivalents, end of the period |
1,137,510 | 508,397 | ||||||||
30
Luxottica Group S.p.A.
Headquarters and registered office Via C. Cantù 220123 Milan, Italy
Capital Stock: € 28,183,305.72
authorized and issued
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of JUNE 30, 2012
(UNAUDITED)
1. BACKGROUND
Luxottica Group S.p.A. (hereinafter the "Company" or together with its consolidated subsidiaries, the "Group") is a company listed on Borsa Italiana and the New York Stock Exchange with its registered office located at Via C. Cantù 2, Milan (Italy), organized under the laws of the Republic of Italy.
The Company is controlled by Delfin S.à r.l., based in Luxembourg. The chairman of the Board of Directors of the Company, Leonardo Del Vecchio, controls Delfin S.à r.l.
The Company's Board of Directors, at its meeting on July 26, 2012, approved the Group's interim condensed consolidated financial statements as of June 30, 2012 (hereinafter referred to as the "Financial Report") for publication.
The financial statements included in this Financial Report are unaudited.
2. BASIS OF PREPARATION
This Financial Report has been prepared in accordance with article 154-ter of the Legislative Decree No. 58 of February 24, 1998 and subsequent modifications and in accordance with the CONSOB Issuers Regulation in compliance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and endorsed by the European Union in accordance with the regulation (CE) n. 1606/2002 of the European Parliament and of the Council of July 19, 2002. Furthermore, this financial report has been prepared in accordance with International Accounting Standard ("IAS") 34Interim Financial Reporting, and of the provisions which implement Article 9 of Legislative Decree no. 38/2005.
This unaudited Financial Report should be read in connection with the consolidated financial statements as of December 31, 2011, which were prepared in accordance with IFRS.
In accordance with IAS 34, the Group has chosen to publish a set of condensed financial statements in its financial report as of June 30, 2012.
The principles and standards used in the preparation of this unaudited Financial Report are consistent with those used in preparing the audited consolidated financial statements as of December 31, 2011, except as described in Note 3 "New Accounting Principles", and taxes on income which are accrued using the tax rate that would be applicable to expected total annual profit.
In particular, this Financial Report has been prepared on a going concern basis. Management believes that there are no indicators that may cast significant doubt upon the Group's ability to continue as a going concern.
The consolidated financial statements in this Financial Report are composed of the consolidated statements of financial position, the consolidated statements of income, the consolidated statements of comprehensive income, the consolidated statements of stockholders' equity, the consolidated statements of cash flows and these Notes to the Interim Consolidated Financial Statements as of June 30, 2012.
31
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
2. BASIS OF PREPARATION (Continued)
The Group also applied the CONSOB resolution n. 15519 of July 19, 2006 and the CONSOB communication n. 6064293 of July 28, 2006.
In order to provide the reader of this Financial Report with a meaningful comparison of the information included in the consolidated financial statements as of June 30, 2012, the Group implemented certain changes reflected in the Consolidated Statement of Financial Position. Certain prior year comparative information in the financial statements and notes has been reclassified to conform to the current year presentation.
The preparation of an interim report requires management to use estimates and assumptions that affect the reported amounts of revenue, costs, assets and liabilities, as well as disclosures relating to contingent assets and liabilities at the reporting date. Results published on the basis of such estimates and assumptions could vary from actual results that may be realized in the future.
These measurement processes and, in particular, those that are more complex, such as the calculation of impairment losses on non-current assets, and the actuarial calculations necessary to calculate certain employee benefits liabilities, are generally carried out only when the audited consolidated financial statements for the fiscal year are prepared, unless there are indicators which require updates to estimates.
3. NEW ACCOUNTING PRINCIPLES
New and amended accounting standards and interpretations must be adopted in the first interim financial statements issued after the applicable effective date. There are no new IFRSs or IFRICs (International Financial Reporting Interpretations Committee) that are effective for the first time for this interim period that would be expected to have a material impact on the Group.
In addition to the new accounting principles indicated in Note 3 "New Accounting Principles" of the notes to the consolidated financial statements as of December 31, 2011, on May 17, 2012 the IASB issued the Improvements to IFRS, which are summarized below. The amendments have not yet been endorsed by the European Union as of the date this Financial Report was authorized for issuance. The amendments are applicable to reporting periods beginning on or after January 1, 2013. Early adoption is permitted, however the Group has not elected to early adopt any of the following:
32
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
3. NEW ACCOUNTING PRINCIPLES (Continued)
4. BUSINESS COMBINATIONS
On January 20, 2012, the Group successfully completed the acquisition of 80% of share capital of the Brazilian entity Grupo Tecnol Ltd ("Tecnol"). The remaining 20% will be acquired evenly (five percent per year) starting from 2013 over a four year period. The consideration paid for the 80% was approximately 143.7 million Brazilian Reais (approximately Euro 59.4 million). Additionally the Group assumed Tecnol net debt amounting to approximately Euro 31.5 million. The acquisition furthers the Group's strategy of continued expansion of its wholesale business and acquiring a manufacturing facility in South America.
The Company uses various methods to calculate the fair value of the Tecnol assets acquired and the liabilities assumed. Tecnol assets and liabilities have been calculated on an estimated basis, since, as of the date of this Financial Report was authorized for issuance; certain valuation processes have not been concluded. In accordance with IFRS 3, the fair value of the net assets and liabilities assumed will be defined within 12 months from the acquisition date.
33
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
4. BUSINESS COMBINATIONS (Continued)
The following table summarizes the consideration paid, the fair value of assets acquired and liabilities assumed at the acquisition date (in thousands of Euro):
Cash paid for 80% of share capital of Tecnol |
59,379 | |||
Payable for the acquisition of the residual 20% |
14,845 | |||
Total consideration |
74,224 | |||
Recognized amount of identifiable assets and liabilities assumed |
||||
Cash and cash equivalents |
6,297 | |||
Accounts receivable* |
12,642 | |||
Inventory |
20,034 | |||
Other current receivables |
4,825 | |||
Fixed assets |
10,072 | |||
Trademarks and other intangible assets |
36,109 | |||
Other long term receivables |
182 | |||
Accounts payable |
(2,939 | ) | ||
Other current liabilities |
(23,262 | ) | ||
Income tax payable |
(447 | ) | ||
Long-term debt |
(31,789 | ) | ||
Deferred income tax payable |
(11,406 | ) | ||
Provisions for risks |
(24,827 | ) | ||
Other long-term liabilities |
(2,071 | ) | ||
Total net identifiable assets |
(6,580 | ) | ||
Provisional goodwill |
80,803 |
|||
Total |
74,224 | |||
The above-mentioned goodwill is mainly related to the expected growth of Tecnol, taking into account the Group's strategy of expanding its wholesale business in South America. Acquisition related costs were approximately Euro 1.2 million.
5. SEGMENT REPORTING
In accordance with IFRS 8Operating Segments the segment reporting schedules are provided below using a reporting format which includes two market segments: the first relates to Manufacturing and Wholesale Distribution ("Wholesale"), while the second relates to Retail Distribution ("Retail").
34
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
5. SEGMENT REPORTING (Continued)
The following table provides information by business segment, which management considers necessary to assess the Group's performance and to make future determinations relating to the allocation of resources.
(Amounts in thousands of Euro) |
Manufacturing and wholesale distribution |
Retail distribution |
Inter-segment transactions and corporate adjustments(c) |
Consolidated |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three months ended June 30, 2012 (unaudited) |
|||||||||||||
Net sales(a) |
1,514,999 | 2,155,359 | | 3,670,358 | |||||||||
Income from operations(b) |
380,642 | 272,619 | (84,113 | ) | 569,148 | ||||||||
Capital expenditures |
58,674 | 105,205 | | 163,878 | 1 | ||||||||
Depreciation and amortization |
47,599 | 80,424 | 42,627 | 170,649 | |||||||||
Three months ended June 30, 2011 (unaudited) |
|||||||||||||
Net sales(a) |
1,345,101 | 1,844,545 | | 3,189,646 | |||||||||
Income from operations(b) |
336,328 | 226,562 | (78,655 | ) | 484,234 | ||||||||
Capital expenditures |
46,169 | 85,413 | | 131,582 | |||||||||
Depreciation and amortization |
41,523 | 69,313 | 40,069 | 150,906 | |||||||||
35
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CURRENT ASSETS
6. CASH AND CASH EQUIVALENTS
(Amounts in thousands of Euro) |
As of June 30, 2012 (unaudited) |
As of December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Cash at bank and post office |
1,127,838 | 891,406 | |||||
Checks |
6,761 | 9,401 | |||||
Cash and cash equivalents on hand |
2,911 | 4,293 | |||||
Total |
1,137,510 | 905,100 | |||||
7. ACCOUNTS RECEIVABLE
(Amounts in thousands of Euro) |
As of June 30, 2012 (unaudited) |
As of December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Accounts receivable |
1,000,251 | 749,992 | |||||
Bad debt fund |
(37,453 | ) | (35,959 | ) | |||
Total |
962,798 | 714,033 | |||||
The above are exclusively trade receivables and are recognized net of allowances to adjust their carrying amount to estimated realizable value. They are all due within 12 months.
8. INVENTORIES
(Amounts in thousands of Euro) |
As of June 30, 2012 (unaudited) |
As of December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Raw materials |
150,938 | 128,909 | |||||
Work in process |
56,780 | 49,018 | |||||
Finished goods |
604,027 | 562,141 | |||||
Less: inventory obsolescence reserves |
(103,723 | ) | (90,562 | ) | |||
Total |
708,023 | 649,506 | |||||
36
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
9. OTHER ASSETS
(Amounts in thousands of Euro) |
As of June 30, 2012 (unaudited) |
As of December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Sales taxes receivable |
20,723 | 18,785 | |||||
Short-term borrowing |
1,005 | 1,186 | |||||
Accrued income |
2,756 | 1,573 | |||||
Other financial assets |
45,449 | 38,429 | |||||
Total financial assets |
69,933 | 59,973 | |||||
Income taxes receivable |
12,729 |
59,795 |
|||||
Advances to suppliers |
17,624 | 12,110 | |||||
Prepaid expenses |
84,598 | 69,226 | |||||
Other assets |
23,961 | 29,746 | |||||
Total other assets |
138,913 | 170,877 | |||||
Total other current assets |
208,846 | 230,850 | |||||
Other financial assets included amounts (i) recorded in the North American Retail Division of Euro 13.2 million as of June 30, 2012 and December 31, 2011, respectively, (ii) recorded in Oakley of Euro 8.4 million (Euro 5.4 million as of December 31, 2011), and (iii) derivative financial assets of Euro 0.7 million as of June 30, 2012 and December 31, 2011. The remaining portion of the balance is distributed among the Group's various subsidiaries.
The decrease in income tax receivable is mainly due to the utilization, in 2012, by certain U.S. subsidiaries of the receivable balance as of December 31, 2011.
The net book value of financial assets is approximately equal to their fair value and corresponds to the maximum exposure of the credit risk. The Group has no guarantees or other instruments aimed at diminishing credit risk.
37
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
NON-CURRENT ASSETS
10. PROPERTY, PLANT AND EQUIPMENT
Changes in items of Property, plant and equipment during the first six months of 2012 are illustrated below:
(Amounts in thousands of Euro) |
Land and buildings, including leasehold improvements |
Machinery and equipment |
Aircraft |
Other equipment |
Total |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2012 |
||||||||||||||||
Historical cost |
900,367 | 983,164 | 38,087 | 586,980 | 2,508,598 | |||||||||||
Accumulated depreciation |
(405,526 | ) | (613,127 | ) | (8,776 | ) | (312,103 | ) | (1,339,532 | ) | ||||||
Balance as of January 1, 2012 |
494,841 | 370,037 | 29,311 | 274,877 | 1,169,066 | |||||||||||
Increases |
22,530 | 55,724 | | 31,326 | 109,580 | |||||||||||
Decreases |
(7,149 | ) | | | (11,526 | ) | (18,675 | ) | ||||||||
Business Combinations |
949 | 7,675 | | 1,448 | 10,072 | |||||||||||
Translation differences and other |
17,895 | 12,001 | | (4,664 | ) | 25,232 | ||||||||||
Depreciation expense |
(28,291 | ) | (44,697 | ) | (777 | ) | (29,619 | ) | (103,384 | ) | ||||||
Balance as of June 30, 2012 |
500,776 | 400,740 | 28,534 | 261,842 | 1,191,892 | |||||||||||
Historical cost |
932,174 | 1,068,060 | 38,087 | 593,317 | 2,631,638 | |||||||||||
Accumulated depreciation |
(431,398 | ) | (667,320 | ) | (9,553 | ) | (331,475 | ) | (1,439,746 | ) | ||||||
Balance as of June 30, 2012 |
500,776 | 400,740 | 28,534 | 261,842 | 1,191,892 | |||||||||||
Depreciation of Euro 103.4 million (Euro 108.7 million in the same period in 2011) was included in the consolidated statement of income as follows: (i) cost of sales (Euro 34.9 million, compared to Euro 30.6 million in the same period in 2011), (ii) selling expenses (Euro 55.4 million, compared to Euro 51.2 million in the same period in 2011), (iii) advertising expenses (Euro 1.9 million, compared to Euro 2.2 million in the same period in 2011) and (iv) general and administrative expenses (Euro 11.2 million, compared to Euro 24.7 million in the same period in 2011).
Capital expenditures mainly relate to routine technology upgrades to the manufacturing structure, opening of new stores and the remodeling of older stores whose leases were extended during the period.
Other equipment includes assets under construction of Euro 52.9 million at June 30, 2012 (Euro 54.5 million at December 31, 2011), mainly relating to the opening and renovation of North American retail stores.
Leasehold improvements totaled Euro 170.0 million and Euro 230.4 million at June 30, 2012 and December 31, 2011, respectively.
38
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
11. GOODWILL AND INTANGIBLE ASSETS
Changes in intangible assets in the first six months of 2012 are illustrated below:
(thousands of Euro) |
Goodwill |
Trade names and Trademarks |
Distributor network |
Customer relations, contracts and lists |
Franchise agreements |
Other |
Total |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2012 |
||||||||||||||||||||||
Historical cost |
3,090,563 | 1,576,008 | 287 | 229,733 | 22,181 | 464,712 | 5,383,484 | |||||||||||||||
Accumulated amortization |
| (660,958 | ) | (270 | ) | (68,526 | ) | (7,491 | ) | (204,756 | ) | (942,001 | ) | |||||||||
Balance as of January 1, 2012 |
3,090,563 | 915,050 | 17 | 161,208 | 14,690 | 259,956 | 4,441,484 | |||||||||||||||
Increases |
| 68 | | | | 62,986 | 63,054 | |||||||||||||||
Decreases |
| | | | | (489 | ) | (489 | ) | |||||||||||||
Intangible assets from business acquisitions |
82,971 | 12,515 | | 19,342 | | 4,216 | 119,045 | |||||||||||||||
Translation differences and other |
67,117 | 19,622 | 1 | 3,461 | 391 | 1,521 | 92,113 | |||||||||||||||
Amortization expense |
| (35,239 | ) | (9 | ) | (7,483 | ) | (553 | ) | (23,981 | ) | (67,265 | ) | |||||||||
Balance as of June 30, 2012 |
3,240,651 | 912,017 | 9 | 176,529 | 14,528 | 304,209 | 4,647,944 | |||||||||||||||
Of which |
||||||||||||||||||||||
Historical cost |
3,240,651 | 1,611,482 | 296 | 254,629 | 22,796 | 522,148 | 5,652,001 | |||||||||||||||
Accumulated amortization |
| (699,465 | ) | (287 | ) | (78,099 | ) | (8,268 | ) | (217,939 | ) | (1,004,058 | ) | |||||||||
Balance as of June 30, 2012 |
3,240,651 | 912,017 | 9 | 176,529 | 14,528 | 304,209 | 4,647,944 | |||||||||||||||
The increase in goodwill and intangible assets from business acquisitions mainly relates to the acquisition of Tecnol in January 2012, which accounts for Euro 80.8 million and Euro 36.1 million of the increase in goodwill and intangible assets, respectively. For additional details on the acquisition please refer to Note 4"Business Combinations."
The increase in other intangible assets mainly refers to the continued roll-out of a new IT platform, which was originally introduced in 2008.
12. INVESTMENTS
This item amounted to Euro 9.0 million (Euro 8.8 million at December 31, 2011) and mainly included the investment in the associate company Eyebiz Laboratories Pty Limited of Euro 4.4 million (Euro 4.0 million at December 31, 2011) and other minor investments.
13. OTHER ASSETS
Other non-current assets amounted to Euro 136.6 million (Euro 147.6 million at December 31, 2011) and were primarily comprised of security deposits of Euro 34.0 million (Euro 32.9 million at
39
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
13. OTHER ASSETS (Continued)
December 31, 2011) and advances the Group paid to certain licensees for future contractual minimum royalties, amounting to Euro 79.2 million (Euro 88.3 million at December 31, 2011).
14. DEFERRED TAX ASSETS
Deferred tax assets showed a balance of Euro 199.4 million (Euro 202.2 million at December 31, 2011). Deferred tax assets primarily related to temporary differences between the tax values and carrying amounts of inventories, fixed and intangible assets, pension funds, tax losses and provisions for risks and other charges.
LIABILITIES AND EQUITY
15. SHORT-TERM BORROWINGS
Bank overdrafts at June 30, 2012 reflected bank overdrafts and short term borrowings with various banks. The interest rates on these credit lines are floating, and the credit lines may be used, if necessary, to obtain letters of credit.
16. CURRENT PORTION OF LONG-TERM DEBT
This item consists of the current portion of loans granted to the Group, as further described below in Note 21"Long-term Debt."
17. ACCOUNTS PAYABLE
Accounts payable consists of invoices received and not yet paid at the reporting date, in addition to invoices to be received, accounted for on an accrual basis.
The balance, which is due in its entirety within 12 months, is detailed below:
(Amounts in thousands of Euro) |
As of June 30, 2012 (unaudited) |
As of December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Accounts payable |
447,922 | 452,546 | |||||
Invoices to be received |
180,606 | 155,781 | |||||
Total |
628,528 | 608,327 | |||||
40
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
18. INCOME TAXES PAYABLE
Income taxes payable include liabilities for current taxes which are certain and determined.
(Amounts in thousands of Euro) |
As of June 30, 2012 (unaudited) |
As of December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Current year income taxes payable fund |
99,467 | 59,310 | |||||
Income taxes advance payment |
(20,182 | ) | (19,451 | ) | |||
Total |
79,285 | 39,859 | |||||
19. SHORT TERM PROVISIONS FOR RISKS AND OTHER CHARGES
The balance is detailed below:
|
Legal risk |
Self-insurance |
Tax provision |
Other risks |
Returns |
Total |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of December 31, 2011 |
4,899 | 5,620 | 1,796 | 9,927 | 31,094 | 53,337 | |||||||||||||
Increases |
821 | 4,252 | 9 | 24,831 | 15,298 | 45,211 | |||||||||||||
Decreases |
(3,668 | ) | (4,431 | ) | (131 | ) | (7,854 | ) | (11,181 | ) | (27,265 | ) | |||||||
Business combinations |
| | | | | | |||||||||||||
Foreign translation difference and other movements |
40 | 245 | 47 | (11 | ) | (1,523 | ) | (1,202 | ) | ||||||||||
Balance as of June 30, 2011 |
2,092 | 5,686 | 1,721 | 26,893 | 33,689 | 70,081 | |||||||||||||
Other risks mainly includes provisions for licensing expenses and advertising expenses required by existing license agreements of Euro 12.8 million (Euro 12.0 million as of June 30, 2011), which are based upon advertising expenses that the Group is required to incur under the license agreements, and accruals related to the reorganization of the retail business in Australia of Euro 9.4 million (for further details please refer to note 34 "Non-recurring transactions").
The Company is self-insured for certain losses relating to workers' compensation, general liability, auto liability, and employee medical benefits for claims filed and for claims incurred but not reported. The Company's liability is estimated on an undiscounted basis using historical claims experience and industry averages; however, the final cost of the claims may not be known for over five years.
Legal risk includes provisions for various litigated matters that have occurred in the ordinary course of business.
41
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
20. OTHER LIABILITIES
(Amounts in thousands of Euro) |
As of June 30, 2012 (unaudited) |
As of December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Premiums and discounts to suppliers |
46,557 | 47,519 | |||||
Sales commissions |
1,017 | 904 | |||||
Leasing rental |
25,568 | 23,181 | |||||
Insurance |
10,122 | 9,893 | |||||
Sales taxes payable |
50,645 | 31,740 | |||||
Salaries payable |
213,347 | 204,481 | |||||
Due to social security authorities |
28,104 | 28,678 | |||||
Sales commissions payable |
9,774 | 9,733 | |||||
Royalties payable |
3,039 | 2,218 | |||||
Derivative financial liabilities |
7,195 | 15,824 | |||||
Other financial liabilities |
164,466 | 148,905 | |||||
Total financial liabilities |
559,833 | 523,075 | |||||
Deferred income |
2,589 | 3,626 | |||||
Advances from customers |
40,704 | 47,501 | |||||
Other liabilities |
9,279 | 5,393 | |||||
Total liabilities |
52,572 | 56,520 | |||||
Total other current liabilities |
612,404 | 579,595 | |||||
21. LONG-TERM DEBT
The long-term debt is as follows (amount in thousands of Euro):
(thousands of Euro) |
As of June 30, 2012 (unaudited) |
As of December 31, 2011 (audited) |
|||||
---|---|---|---|---|---|---|---|
Luxottica Group S.p.A. credit agreement with various financial institutions (a) |
427,324 | 487,363 | |||||
Senior unsecured guaranteed notes (b) |
1,751,935 | 1,226,246 | |||||
Credit agreement with various financial institutions (c) |
226,335 | 225,955 | |||||
Credit agreement with various financial institutions for Oakley acquisition (d) |
714,928 | 772,743 | |||||
Other loans with banks and other third parties, interest at various rates, payable in installments through 2014 (e) |
64,346 | 30,571 | |||||
Total |
3,184,868 | 2,742,878 | |||||
Less: Current maturities |
(722,471 | ) | (498,295 | ) | |||
Long-Term Debt |
2,462,397 | 2,244,583 | |||||
42
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
21. LONG-TERM DEBT (Continued)
Please refer to the schedules below for the roll-forward of long term debts as of June 30, 2012 and 2011:
|
Luxottica Group S.p.A. credit agreement with various financial institutions (a) |
Senior unsecured guaranteed notes (b) |
Credit agreement with various financial institutions (c) |
Credit agreement with various financial institutions for Oakley acquisition (d) |
Other loans with banks and other third parties, interest at various rates, payable in installments through 2014 (e) |
Total |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2012 |
487,363 | 1,226,246 | 225,955 | 772,743 | 30,571 | 2,742,878 | |||||||||||||
Proceeds from new and existing loans |
| 500,000 | | | 39,024 | 539,024 | |||||||||||||
Repayments |
(60,000 | ) | | (5,969 | ) | (77,133 | ) | (33,610 | ) | (176,711 | ) | ||||||||
loans assumed in business combinations |
| | | | 31,509 | 31,509 | |||||||||||||
Amortization of fees and interests |
(39 | ) | 8,314 | 247 | 194 | (4,938 | ) | 3,778 | |||||||||||
Foreign translation difference |
| 17,375 | 6,102 | 19,124 | 1,790 | 44,390 | |||||||||||||
Balance as of June 30, 2012 |
427,324 | 1,751,935 | 226,335 | 714,928 | 64,346 | 3,184,868 | |||||||||||||
|
Luxottica Group S.p.A. credit agreement with various financial institutions (a) |
Senior unsecured guaranteed notes (b) |
Credit agreement with various financial institutions (c) |
Credit agreement with various financial institutions for Oakley acquisition (d) |
Other loans with banks and other third parties, interest at various rates, payable in installments through 2014 (e) |
Total |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2011 |
545,552 | 943,112 | 242,236 | 897,484 | 4,252 | 2,632,636 | |||||||||||||
Proceeds from new and existing loans |
| | | | | | |||||||||||||
Repayments |
| | (22,697 | ) | (71,263 | ) | (1,235 | ) | (95,196 | ) | |||||||||
Loans assumed in business combinations |
| | | | | | |||||||||||||
Amortization of fees and interests |
1,237 | 10,552 | 24 | 131 | | 11,943 | |||||||||||||
Foreign translation difference |
| (26,119 | ) | (17,694 | ) | (65,713 | ) | (200 | ) | (109,726 | ) | ||||||||
Balance as of June 30, 2011 |
546,789 | 927,545 | 201,868 | 760,639 | 2,817 | 2,439,658 | |||||||||||||
(a) On May 29, 2008, the Company entered into a Euro 250.0 million revolving credit facility, guaranteed by its subsidiary, Luxottica U.S. Holdings Corp. ("US Holdings"), with Intesa Sanpaolo S.p.A., as agent, and Intesa Sanpaolo S.p.A., Banca Popolare di Vicenza S.c.p.A. and Banca Antonveneta S.p.A., as lenders. The final maturity of the credit facility is May 29, 2013. This revolving credit facility requires repayments of equal quarterly installments of Euro 30.0 million of principal which started on August 29, 2011, with a repayment of Euro 40.0 million on the final maturity date of May 29, 2013. Interest accrues at EURIBOR (as defined in the agreement) plus a margin between 0.40 percent and 0.60 percent based on the "Net Debt/EBITDA" ratio, as defined in the agreement (1.447 percent as of June 30, 2012). As of June 30, 2012, Euro 130.00 million was borrowed under this credit facility. The credit facility contains certain financial and operating covenants. The Group was in compliance with those covenants as of June 30, 2012.
43
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
21. LONG-TERM DEBT (Continued)
In June and July 2009, the Company entered into eight interest rate swap transactions with an aggregate initial notional amount of Euro 250.0 million with various banks ("Intesa Swaps"). The notional amounts of the Intesa Swaps decreases on a quarterly basis, following the amortization schedule of the underlying facility, which started on August 29, 2011. These Intesa Swaps will expire on May 29, 2013. The Intesa Swaps were entered into as a cash flow hedge on the Intesa Sanpaolo S.p.A. credit facility discussed above. The Intesa Swaps exchange the floating rate of EURIBOR for an average fixed rate of 2.252 percent per annum. The ineffectiveness of cash flow hedges was tested at the inception date and at least every three months. The results of the tests indicated that the cash flow hedges are highly effective.
On November 11, 2009, the Company entered into a Euro 300.0 million Term Facility Agreement, guaranteed by its subsidiaries U.S. Holdings and Luxottica S.r.l., with MediobancaBanca di Credito Finanziario S.p.A., as agent, and MediobancaBanca di Credito Finanziario S.p.A., Deutsche Bank S.p.A., Calyon S.A. Milan Branch and Unicredit Corporate Banking S.p.A., as lenders. The final maturity of the Term Facility was November 30, 2012 prior to the renegotiation discussed below. Interest accrued at EURIBOR (as defined in the agreement) plus a margin between 1.75 percent and 3.00 percent based on the "Net Debt/EBITDA" ratio, as defined in the agreement. In November 2010, the Company renegotiated this credit facility. The final maturity of the Term Facility is November 30, 2014. Interest accrues at EURIBOR (as defined in the agreement) plus a margin between 1.00 percent and 2.25 percent based on the "Net Debt/EBITDA" ratio (1.6405 percent as of June 30, 2012). As of June 30, 2012, Euro 300.0 million was borrowed under this credit facility.
(b) On July 1, 2008, U.S. Holdings closed a private placement of U.S. $275.0 million senior unsecured guaranteed notes (the "2008 Notes"), issued in three series (Series A, Series B and Series C). The aggregate principal amounts of the Series A, Series B and Series C Notes are U.S. $20.0 million, U.S. $127.0 million and U.S. $128.0 million, respectively. The Series A Notes mature on July 1, 2013, the Series B Notes mature on July 1, 2015 and the Series C Notes mature on July 1, 2018. Interest on the Series A Notes accrues at 5.96 percent per annum, interest on the Series B Notes accrues at 6.42 percent per annum and interest on the Series C Notes accrues at 6.77 percent per annum. The 2008 Notes contain certain financial and operating covenants. The Group was in compliance with those covenants as of June 30, 2012. The proceeds from the 2008 Notes received on July 1, 2008 were used to repay a portion of the Bridge Loan Facility (described in (d) below).
On January 29, 2010, U.S. Holdings closed a private placement of U.S. $175.0 million senior unsecured guaranteed notes (the "January 2010 Notes"), issued in three series (Series D, Series E and Series F). The aggregate principal amounts of the Series D, Series E and Series F Notes are U.S. $50.0 million, U.S. $50.0 million and U.S. $75.0 million, respectively. The Series D Notes mature on January 29, 2017, the Series E Notes mature on January 29, 2020 and the Series F Notes mature on January 29, 2019. Interest on the Series D Notes accrues at 5.19 percent per annum, interest on the Series E Notes accrues at 5.75 percent per annum and interest on the Series F Notes accrues at 5.39 percent per annum. The January 2010 Notes contain certain financial and operating covenants. The Group was in compliance with those covenants as of June 30, 2012.
On September 30, 2010, the Company closed a private placement of Euro 100.0 million senior unsecured guaranteed notes (the "September 2010 Notes"), issued in two series (Series G and
44
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
21. LONG-TERM DEBT (Continued)
Series H). The aggregate principal amounts of the Series G and Series H Notes are Euro 50.0 million and Euro 50.0 million, respectively. The Series G Notes mature on September 15, 2017 and the Series H Notes mature on September 15, 2020. Interest on the Series G Notes accrues at 3.75 percent per annum and interest on the Series H Notes accrues at 4.25 percent per annum. The September 2010 Notes contain certain financial and operating covenants. The Group was in compliance with those covenants as of June 30, 2012.
On November 10, 2010, the Company issued senior unsecured guaranteed notes to institutional investors (Eurobond November 10, 2015) for an aggregate principal amount of Euro 500.0 million. The notes mature on November 10, 2015 and interest accrues at 4.00 percent. The notes are listed on the Luxembourg Stock Exchange (ISIN XS0557635777). The notes were issued in order to exploit favorable market conditions and extend the average maturity of the Group's debt. On March 9, 2012, Standard & Poor's assigned the notes a credit rating of BBB+.
On December 15, 2011, U.S. Holdings closed a private placement of U.S. $350 million of senior unsecured guaranteed notes ("Series I"). Interest on the Series I Notes accrues at 4.35 percent per annum. The Series I Notes mature on December 15, 2021. The Series I Notes contain certain financial and operating covenants. The Group was in compliance with those covenants as of June 30, 2012.
On March 19, 2012, the Company issued senior unsecured guaranteed notes to institutional investors (Eurobond March 19, 2019) for an aggregate principal amount of Euro 500.0 million. The notes mature on March 19, 2019 and interest accrues at 3.625 percent. The notes are listed on the Luxembourg Stock Exchange (ISIN XS0758640279). The notes were issued in order to take advantage of favorable market conditions and extend the average maturity of the Group's debt. On March 19, 2012, Standard & Poor's assigned the notes a credit rating of BBB+.
(c) On June 3, 2004, as amended on March 10, 2006, the Company and U.S. Holdings entered into a credit facility with a group of banks providing for loans in the aggregate principal amount of Euro 740.0 million and U.S. $325.0 million. The five-year facility consisted of three Tranches (Tranche A, Tranche B and Tranche C). The March 10, 2006 amendment increased the available borrowings to Euro 1,130.0 million and U.S. $325.0 million, decreased the interest margin and defined a new maturity date of five years from the date of the amendment for Tranche B and Tranche C. In February 2007, the Company exercised an option included in the amendment to the term and revolving facility to extend the maturity date of Tranches B and C to March 2012. In February 2008, the Company exercised an option included in the amendment to the term and revolving facility to extend the maturity date of Tranches B and C to March 2013. Tranche A, which was to be used for general corporate purposes, including the refinancing of existing Company debt as it matures, was a Euro 405.0 million amortizing term loan requiring repayment of nine equal quarterly installments of principal of Euro 45.0 million beginning in June 2007. Tranche A expired on June 3, 2009 and was repaid in full. Tranche B is a term loan of U.S. $325.0 million which was drawn upon on October 1, 2004 by U.S. Holdings to finance the purchase price of the acquisition of Cole National Corporation ("Cole"). Amounts borrowed under Tranche B will mature in March 2013. Tranche C is a Revolving Credit Facility of Euro 725.0 million-equivalent multi-currency (Euro/US dollar). Amounts borrowed under Tranche C may be repaid and reborrowed with all outstanding balances maturing in March 2013. The Company can select interest periods of one, two, three or six months with interest accruing on Euro-denominated loans based on the corresponding
45
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of JUNE 30, 2012
(UNAUDITED)
21. LONG-TERM DEBT (Continued)
EURIBOR rate and US dollar-denominated loans based on the corresponding LIBOR rate, both plus a margin between 0.20 percent and 0.40 percent based on the "Net Debt/EBITDA" ratio, as defined in the agreement. The interest rate on June 30, 2012 was 0.492 percent for Tranche B. The Company cancelled Tranche C effective April 27, 2012. The credit facility contains certain financial and operating covenants. The Group was in compliance with those covenants as of June 30, 2012. Under this credit facility, Euro 226.34 million was borrowed as of June 30, 2012.
During the third quarter of 2007, the Group entered into 13 interest rate swap transactions with an aggregate initial notional amount of U.S. $325.0 million with various banks ("Tranche B Swaps"). These swaps have expired on March 10, 2012. The Tranche B Swaps were entered into as a cash flow hedge on Tranche B of the credit facility discussed above. The Tranche B Swaps swap the LIBOR floating rate for an average fixed rate of 4.634 percent per annum. The ineffectiveness of cash flow hedges was tested at the inception date and at least every three months.
(d) On November 14, 2007, the Group completed the merger with Oakley for a total purchase price of approximately U.S. $2.1 billion. In order to finance the acquisition of Oakley, on October 12, 2007, the Company and US Holdings entered into two credit facilities with a group of banks providing for certain term loans and a short-term bridge loan (with an original principal balance of $500 million which was repaid and cancelled as of December 31, 2011) for an aggregate principal amount of U.S. $2.0 billion. The term loan facility is a term loan of U.S. $1.5 billion, with a five-year term, with options to extend the maturity on two occasions for one year each time. The term loan facility is divided into two facilities, Facility D and Facility E. Facility D is a U.S. $1.0 billion amortizing term loan requiring repayments of U.S. $50.0 million on a quarterly basis starting from October 2009, made available to U.S. Holdings, and Facility E consists of a bullet term loan in an aggregate amount of U.S. $500.0 million, made available to the Company. Interest accrues on the term loan at LIBOR plus 20 to 40 basis points based on "Net Debt to EBITDA" ratio, as defined in the facility agreement (0.830 percent for Facility D and 0.724 percent for Facility E on June 30, 2012). In September 2008, the Company exercised an option included in the agreement to extend the maturity date of Facilities D and E to October 12, 2013. These credit facilities contain certain financial and operating covenants. The Group was in compliance with those covenants as of June 30, 2011. U.S. $900 million was borrowed under this credit facility as of June 30, 2012.