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 March 31, 2013
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-
INDEX TO FORM 6-K
Luxottica Group S.p.A.
Headquarters and registered office Via C. Cantù 2, 20123 Milan, Italy
Capital Stock € 28,542,649.98
authorized and issued
ITEM
1. MANAGEMENT REPORT ON THE INTERIM
FINANCIAL RESULTS AS OF MARCH 31, 2013
(UNAUDITED)
The following discussion should be read in connection with the disclosure contained in the consolidated financial statements as of December 31, 2012, 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-MONTH PERIOD ENDED MARCH 31, 2013
During the course of the first quarter of 2013, the Group's growth trend continued. The Group achieved positive growth both in net sales and net income. The results confirm the continuing and strong growth in net sales and profits, particularly in the emerging markets (+17.0 percent at constant exchange rates(1)).
Net sales for the quarter were Euro 1,864.1 million, and increased by 4.2 percent (+5.6 percent at constant exchange rates(1)), from Euro 1,788.2 million in the same period of 2012. Net income attributable to Luxottica Stockholders increased by 23.5 percent to Euro 159.2 million from Euro 129.0 million in the same quarter of 2012.
Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")(2) in the first quarter of 2013 rose by 13.8 percent to Euro 365.3 million from Euro 321.0 in the same quarter of 2012. Additionally, EBITDA as of March 31, 2013, increased by 6.6 percent as compared to adjusted EBITDA in the first quarter of 2012, that was Euro 342.6 million.
Operating income for the first quarter of 2013 increased by 17.6 percent to Euro 274.8 million from Euro 233.6 million during the same period of the previous year. The Group's operating margin continued to grow rising from 13.1 percent in the first quarter of 2012 to 14.7 percent in the current quarter. Additionally, operating income in the first quarter of 2013 increased by 7.7 percent as compared to the adjusted operating income(3) in the first quarter of 2012, that was Euro 255.3 million.
In the first three months of 2013, net income attributable to Luxottica Stockholders increased to Euro 159.2 million as compared to Euro 129.0 million in the same period of 2012. In the first three months of 2013, earnings per share ("EPS") was Euro 0.34 and EPS expressed in USD was 0.45 (at an average exchange rate of Euro/USD of 1.3200).
Net debt(4) as of March 31, 2013 was Euro 1,816.3 million (Euro 1,662.4 million at the end of 2012), with the ratio of net debt to EBITDA(4) of 1.3x (1.2x as of December 31, 2012).
1
2. SIGNIFICANT EVENTS DURING THE THREE MONTHS ENDED MARCH 31, 2013
January
On January 23, 2013, the Company closed the acquisition of Alain Mikli International, a French luxury and contemporary eyewear company. Net sales generated by Alain Mikli International in 2012 were approximately Euro 55.5 million. The purchase price paid in the first quarter of 2013, including the assumption of approximately Euro 15 million of Alain Mikli's debt, totaled Euro 91 million.
March
On November 27, 2012, the Company entered into an agreement with Salmoiraghi & Viganò S.p.A. and Salmoiraghi & Viganò Holding S.r.l. pursuant to which Luxottica subscribed to shares as part of a capital injection, corresponding to a 36.33% equity stake in the Italian optical retailer. The transaction is valued at Euro 45 million and was completed on March 25, 2013.
In March 2013, Standard & Poor's confirmed its long-term credit rating of BBB+ and revised its outlook on the Group from stable to positive.
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 7.1 billion in 2012, over 70,000 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 Financial Report as of March 31, 2013 (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 proprietary 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 to an average exchange rate of Euro 1.00 = U.S. $1.3200 in the first three months of 2013 from Euro 1.00 = U.S. $1.3108 in the same period of 2012. 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 Section 8 of the Management Report included with the 2012 Consolidated Financial Statements.
2
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012 (UNAUDITED)
In accordance with IFRS
|
Three months ended March 31, |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands of Euro) |
2013 |
% of net sales |
2012 |
% of net sales |
|||||||||
Net sales |
1,864,119 | 100.0 | % | 1,788,172 | 100.0 | % | |||||||
Cost of sales |
645,713 | 34.6 | % | 622,564 | 34.8 | % | |||||||
Gross profit |
1,218,406 | 65.4 | % | 1,165,608 | 65.2 | % | |||||||
Selling |
562,685 | 30.2 | % | 571,572 | 32.0 | % | |||||||
Royalties |
36,170 | 1.9 | % | 32,518 | 1.8 | % | |||||||
Advertising |
111,553 | 6.0 | % | 101,978 | 5.7 | % | |||||||
General and administrative |
233,181 | 12.5 | % | 225,945 | 12.6 | % | |||||||
Total operating expenses |
943,589 | 50.6 | % | 932,013 | 52.1 | % | |||||||
Income from operations |
274,817 | 14.7 | % | 233,595 | 13.1 | % | |||||||
Other income/(expense) |
|||||||||||||
Interest income |
2,548 | 0.1 | % | 5,417 | 0.3 | % | |||||||
Interest expense |
(26,555 | ) | (1.4 | )% | (36,984 | ) | (2.1 | )% | |||||
Othernet |
177 | 0.1 | % | (69 | ) | (0.1 | )% | ||||||
Income before provision for income taxes |
250,987 | 13.5 | % | 201,960 | 11.3 | % | |||||||
Provision for income taxes |
(90,366 | ) | (4.8 | )% | (71,061 | ) | (4.0 | )% | |||||
Net income |
160,622 | 8.6 | % | 130,899 | 7.3 | % | |||||||
Attributable to |
|||||||||||||
Luxottica Group stockholders |
159,234 | 8.5 | % | 128,976 | 7.2 | % | |||||||
non-controlling interests |
1,387 | 0.1 | % | 1,923 | 0.1 | % | |||||||
NET INCOME |
160,622 | 8.6 | % | 132,899 | 7.3 | % | |||||||
In the first three months of 2013, the Group did not incur any non-recurring expense or gain, while in the first three months of 2012 the Group recognized a non-recurring expense of Euro 21.7 million related to the restructuring of the Australian retail business (Euro 15.2 million, net of taxes).
Net Sales. Net sales increased by Euro 75.9 million, or 4.2 percent, to Euro 1,864.1 million in the first three months of 2013 from Euro 1,788.2 million in the same period of 2012. Euro 54.2 million of such increase was attributable to the increased sales in the manufacturing and wholesale distribution segment in the first three months of 2013 as compared to the same period in 2012 and to increased sales in the retail distribution segment of Euro 21.7 million for the same period.
Net sales for the retail distribution segment increased by Euro 21.7 million, or 2.0 percent, to Euro 1,083.1 million in the first three months of 2013 from Euro 1,061.4 million in the same period in 2012. The increase in net sales for the period was partially attributable to a 3.7 percent improvement in comparable store sales(5). In particular, we saw a 2.8 percent increase in comparable store sales for the North American retail operations, and an increase for the Australian/New Zealand retail operations of
3
9.6 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 weakening of the U.S. dollar and Australian dollar compared to the Euro, decreased net sales in the retail distribution segment by Euro (10.8) million during the period.
Net sales to third parties in the manufacturing and wholesale distribution segment increased by Euro 54.2 million, or 7.5 percent, to Euro 781.0 million in the first three months of 2013 from Euro 726.8 million in the same period in 2012. This increase was mainly attributable to increased sales of most of our proprietary brands, in particular Ray-Ban, Oakley, which recorded high growth in optical, and of some licensed brands such as Miu Miu and Tiffany. Almost all business markets in which the Group operates recorded an increase in net sales. These positive effects were partially offset by negative currency fluctuations, in particular the weakening of the U.S. dollar and other currencies including but not limited to the Brazilian Real and the Japanese Yen, despite the strengthening of the Chinese Renminbi, the net effect of which was to decrease net sales to third parties in the manufacturing and wholesale distribution segment by Euro (13.4) million.
In the first three months of 2013, net sales in the retail distribution segment accounted for approximately 58.1 percent of total net sales, as compared to approximately 59.4 percent of total net sales for the same period in 2012.
In the first three months of 2013, net sales in our retail distribution segment in the United States and Canada comprised 78.1 percent of our total net sales in this segment as compared to 78.5 percent of our total net sales in the same period of 2012. In U.S. dollars, retail net sales in the United States and Canada increased by 2.3 percent to U.S. $1,116.9 million in the first three months of 2013 from U.S. $1,092.2 million for the same period in 2012, due to sales volume increases. During the first three months of 2013, net sales in the retail distribution segment in the rest of the world (excluding the United States and Canada) comprised 21.9 percent of our total net sales in the retail distribution segment and increased by 3.9 percent to Euro 236.9 million in the first three months of 2013 from Euro 228.2 million, or 21.5 percent of our total net sales in the retail distribution segment for the same period in 2012, primarily due to sales from stores acquired by the Company in the third quarter of 2012 and in the first quarter of 2013 of approximately Euro 7.2 million
In the first three months of 2013, net sales to third parties in our manufacturing and wholesale distribution segment in Europe were Euro 334.6 million, comprising 42.8 percent of our total net sales in this segment, compared to Euro 329.0 million, or 45.3 percent of total net sales in the segment, for the same period in 2012. Net sales to third parties in our manufacturing and wholesale distribution segment in the United States and Canada were U.S. $270.1 million and comprised 26.2 percent of our total net sales in this segment for the first three months of 2013, compared to U.S. $247.2 million, or 25.9 percent of total net sales in the segment, for the same period of 2012. The increase in net sales in the United States and Canada was primarily due to a general increase in consumer demand. In the first three months of 2013, net sales to third parties in our manufacturing and wholesale distribution segment in the rest of the world were Euro 241.8 million, comprising 31.0 percent of our total net sales in this segment, compared to Euro 209.2 million, or 28.8 percent of our net sales in this segment, in the same period of 2012. The increase of Euro 32.6 million, or 15.6 percent, in the first three months of 2013 as compared to the same period of 2012, was due to an increase in consumer demand.
Cost of Sales. Cost of sales increased by Euro 23.1 million, or 3.7 percent, to Euro 645.7 million in the first three months of 2013 from Euro 622.6 million in the same period of 2012, including the non-recurring expense of Euro 1.4 million related to the reorganization of the Retail business in Australia. As a percentage of net sales, cost of sales decreased to 34.6 percent in the first three months of 2013 as compared to 34.8 percent in the same period of 2012 due to efficiencies achieved in the production cycle. In the first three months of 2013, the average number of frames produced daily in our facilities increased to approximately 302,700 as compared to approximately 262,600 in the same period of 2012, which was
4
attributable to increased production in all manufacturing facilities in response to an overall increase in demand.
Gross Profit. Our gross profit increased by Euro 52.8 million, or 4.5 percent, to Euro 1,218.4 million in the first three months of 2013 from Euro 1,165.6 million for the same period of 2012, including Euro 1.4 million related to the reorganization of the Retail business in Australia. As a percentage of net sales, gross profit increased to 65.4 percent in the first three months of 2013 as compared to 65.2 percent for the same period of 2012, due to the factors noted above.
Operating Expenses. Total operating expenses increased by Euro 11.6 million, or 1.2 percent, to Euro 943.6 million in the first three months of 2013 from Euro 932.0 million in the same period of 2012, including Euro 20.3 million related to the reorganization of the Retail business in Australia. As a percentage of net sales, operating expenses decreased to 50.6 percent in the first three months of 2013, from 52.1 percent in the same period of 2012.
Adjusted operating expenses(6) in the first quarter of 2012, excluding the non-recurring expenses related to the reorganization of the Retail business in Australia amounting to approximately Euro 20.3 million, amounted to Euro 911.7 million. As a percentage of net sales, adjusted operating expenses were at 51.0 percent.
Please find the reconciliation between adjusted operating expenses and operating expenses in the following table:
(Amounts in millions of Euro) |
2013 |
2012 |
|||||
---|---|---|---|---|---|---|---|
Operating expenses |
943.6 | 932.0 | |||||
> Adjustment for OPSM reorganization |
| (20.3 | ) | ||||
Adjusted operating expenses |
943.6 | 911.7 | |||||
Selling and advertising expenses (including royalty expenses) increased by Euro 4.3 million, or 0.6 percent, to Euro 710.4 million in the first three months of 2013 from Euro 706.1 million in the same period of 2012, including the non-recurring expenses related to the reorganization of the Retail business in Australia of Euro 17.3 million. Selling expenses decreased by Euro (8.9) million, or (1.6) percent. Advertising expenses increased by Euro 9.6 million, or 9.4 percent. Royalties increased by Euro 3.7 million, or 11.2 percent. As a percentage of net sales, selling and advertising expenses were 38.1 percent in the first three months of 2013 and 39.5 percent in the first three months of 2012.
Adjusted selling expenses(7) in the first three months of 2012, excluding the non-recurring expenses related to the reorganization of the Retail business in Australia amounting to approximately Euro 17.3 million, totaled Euro 554.3 million, or 31%, as a percentage of net sales.
Please find the reconciliation between adjusted selling expenses and selling expenses in the following table:
(Amounts in millions of Euro) |
2013 |
2012 |
|||||
---|---|---|---|---|---|---|---|
Selling expenses |
562.7 | 571.6 | |||||
> Adjustment for OPSM reorganization |
| (17.3 | ) | ||||
Adjusted selling expenses |
562.7 | 554.3 | |||||
General and administrative expenses, including intangible asset amortization increased by Euro 7.2 million, or 3.2 percent, to Euro 233.2 million in the first three months of 2013 as compared to
5
Euro 225.9 million in the same period of 2012, including the non-recurring expenses related to the reorganization of the Retail business in Australia amounting to approximately Euro 3.0 million. As a percentage of net sales, general and administrative expenses are in line with 2012 first quarter amounts totaling 12.6 percent, as compared to 12.5 percent in the first quarter of 2013.
Adjusted general and administrative expenses(8), including intangible asset amortization and excluding, in the first three months of 2012, the non-recurring expenses related to the reorganization of the Retail business in Australia amounting to approximately Euro 3.0 million, totaled Euro 222.9 million. As a percentage of net sales, adjusted general and administrative expenses were 12.5 percent in the first three months of 2012.
Please find the reconciliation between adjusted general and administrative expenses and general and administrative expenses in the following table:
(Amounts in millions of Euro) |
2013 |
2012 |
|||||
---|---|---|---|---|---|---|---|
General and administrative expense |
233.2 | 225.9 | |||||
> Adjustment for OPSM reorganization |
| (3.0 | ) | ||||
Adjusted general and administrative expense |
233.2 | 222.9 | |||||
Income from Operations. For the reasons described above, income from operations increased by Euro 41.2 million, or 17.6 percent, to Euro 274.8 million in the first three months of 2013 from Euro 233.6 million in the same period of 2012. As a percentage of net sales, income from operations increased to 14.7 percent in the first three months of 2013 from 13.1 percent in the same period of 2012.
Adjusted income from operations,(9) excluding, in the first three months of 2012, the above mentioned non-recurring expenses, amounted to Euro 255.3 million. As a percentage of net sales, adjusted income from operations was at 14.3 percent in the first three months of 2012.
Please find the reconciliation between adjusted income from operations and income from operations in the following table:
(Amounts in millions of Euro) |
2013 |
2012 |
|||||
---|---|---|---|---|---|---|---|
Income from operations |
274.8 | 233.6 | |||||
> Adjustment for OPSM reorganization |
| 21.7 | |||||
Adjusted income from operations |
274.8 | 255.3 | |||||
Other Income (Expense)Net. Other income (expense)net was Euro (23.8) million in the first three months of 2013 as compared to Euro (31.6) million in the same period of 2012. Net interest expense was Euro 24.0 million in the first three months of 2013 as compared to Euro 31.6 million in the same period of 2012.
Net Income. Income before taxes increased by Euro 49.0 million, or 24.3 percent, to Euro 251.0 million in the first three months of 2013 from Euro 202.0 million in the same period of 2012, for the reasons described above. As a percentage of net sales, income before taxes increased to 13.5 percent in the first three months of 2013 from 11.3 percent in the same period of 2012. Income before taxes in the first quarter of 2013, amounting to Euro 251.0, increased by 12.2 percent, or Euro 27.4 million
6
as compared to adjusted income before taxes(10) in the first quarter of 2012 totaling Euro 223.6 million. As a percentage of net sales, adjusted income before taxes was 12.5 percent in the first three months of 2012. Our effective tax rate was 36.0 percent in the first three months of 2013 as compared to 35.2 percent for the same period of 2012.
Net income pertaining to non-controlling interests, in the first three months of 2013, decreased to Euro 1.4 million from Euro 1.9 million in the first three months of 2012.
Net income attributable to Luxottica Group stockholders increased by Euro 30.3 million, or 23.5 percent, to Euro 159.2 million in the first three months of 2013 from Euro 129.0 million in the same period of 2012. Net income attributable to Luxottica Group stockholders as a percentage of net sales increased to 8.5 percent in the first three months of 2013 from 7.2 percent in the same period of 2012. Net income attributable to Luxottica Group stockholders also increased by Euro 15.1 million, or 10.5 percent, as compared to adjusted net income attributable to Luxottica Group(11) stockholders in the first quarter of 2012, amounting to Euro 144.1 million. As a percentage of net sales, adjusted net income attributable to Luxottica Group stockholders in the first quarter of 2012 was at 8.1 percent.
Please find the reconciliation between adjusted net income attributable to Luxottica Group stockholders and net income attributable to Luxottica Group stockholders in the following table:
(Amounts in millions of Euro) |
2013 |
2012 |
|||||
---|---|---|---|---|---|---|---|
Net income attributable to Luxottica Group stockholders |
159.2 | 129.0 | |||||
> Adjustment for OPSM reorganization |
| 15.2 | |||||
Adjusted net income attributable to Luxottica Group stockholders |
159.2 | 144.1 | |||||
Basic and diluted earnings per share were Euro 0.34 in the first three months of 2013 as compared to Euro 0.28 in the same period of 2012.
Adjusted basic and diluted earnings per share(12) were Euro 0.31 in the first three months of 2012.
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.
(Amounts in thousands of Euro) |
As of March 31, 2013 |
As of March 31, 2012 |
|||||||
---|---|---|---|---|---|---|---|---|---|
|
|
(unaudited) |
|||||||
A) |
Cash and cash equivalents at the beginning of the period |
790,093 | 905,100 | ||||||
B) |
Cash provided by operating activities |
23,760 | 88,932 | ||||||
C) |
Cash used in investing activities |
(187,615 | ) | (119,070 | ) | ||||
D) |
Cash (used in)/provided by financing activities |
(51,976 | ) | 418,872 | |||||
E) |
Effect of exchange rate changes on cash and cash equivalents |
7,831 | (16,049 | ) | |||||
F) |
Net change in cash and cash equivalents |
(215,831 | ) | 388,734 | |||||
G) |
Cash and cash equivalents at the end of the period |
582,096 | 1,277,788 | ||||||
Operating activities. Cash provided by operating activities was Euro 23.8 million and Euro 88.9 million for the first three months of 2013 and 2012, respectively.
7
Depreciation and amortization were Euro 90.5 million in the first three months of 2013 as compared to Euro 87.4 million in the same period of 2012.
Cash used in accounts receivable was Euro 215.6 million in the first three months of 2013, compared to Euro 122.2 million in the same period of 2012. This change was primarily due to an increase in sales volume in the first three months of 2013 as compared to the same period of 2012. Cash used in inventory was Euro 9.8 million in the first three months of 2013 as compared to Euro 6.8 million in the same period of 2012. The change in inventory in the first three months of 2013 is due to an increase in wholesale division inventories as a result of implementing SAP in our Italian manufacturing facilities at the beginning of 2013. Cash used in accounts payable was Euro 48.4 million in the first three months of 2013 compared to Euro 85.0 million in the same period of 2012. This change is mainly due to more favorable payment terms agreed during 2012. Cash used to fund other assets and liabilities was Euro 29.8 million and 6.6 million in the first three months of 2013 and 2012, respectively. This change is mainly due to advance payments made to certain designers for future contracted minimum royalties in the first quarter of 2013. Income taxes paid were Euro 14.2 million in the first three months of 2013 as compared to Euro 12.6 million in the same period of 2012. This change was mainly due to the timing of tax payments made by the Group in the different jurisdictions. Interest paid was Euro 37.3 million and Euro 35.2 million in the first three months of 2013 and 2012, respectively.
Investing activities. Our cash used in investing activities was Euro 187.6 million for the first three months of 2013 as compared to Euro 119.1 million for the same period in 2012. The cash used in investing activities in the first three months of 2013 primarily consisted of (i) Euro 42.6 million in capital expenditures, (ii) Euro 27.0 million for the acquisition of intangible assets related to the creation of a new IT structure, (iii) Euro 72.1 million (net of cash acquired) for the acquisition of Alain Mikli International , (iv) Euro 45.0 million for the acquisition of 36.33% of the share capital of Salmoiraghi & Vigano, and (v) other acquisitions of Euro 0.8 million (net of cash acquired).
Cash used in investing activities in the three months of 2012 primarily consisted of (i) Euro 37.0 million in capital expenditures, (ii) Euro 24.4 million for the acquisition of intangible assets, (iii) Euro 55.3 million for the acquisition of Tecnol, and (iv) other acquisition for Euro 2.4 million.
Financing activities. Our cash used in financing activities for the first three months of 2013 and 2012 was Euro (52.0) million and Euro 418.9 million, respectively. Cash provided by/(used in) financing activities for the first three months of 2013 consisted primarily of (i) Euro (98.0) million used to repay short and long-term debt expiring during the first three months of 2013 and (ii) Euro 44.1 million related to the exercise of stock options. Cash provided by/(used in) financing activities for the first three months of 2012 consisted primarily of (i) Euro 500 million related to the issuance of a new bond, and (ii) Euro (108.0) million in cash used to repay short and long-term debt expiring during the first three months of 2012.
8
OUR CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS (Amounts in thousands of Euro) |
March 31, 2013 (unaudited) |
December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
CURRENT ASSETS: |
|||||||
Cash and cash equivalents |
582,096 | 790,093 | |||||
Accounts receivablenet |
893,286 | 698,755 | |||||
Inventoriesnet |
765,732 | 728,767 | |||||
Other assets |
228,202 | 209,250 | |||||
Total current assets |
2,469,315 | 2,426,866 | |||||
NON-CURRENT ASSETS: |
|||||||
Property, plant and equipmentnet |
1,200,668 | 1,192,394 | |||||
Goodwill |
3,299,528 | 3,148,770 | |||||
Intangible assetsnet |
1,389,867 | 1,345,688 | |||||
Investments |
57,225 | 11,745 | |||||
Other assets |
163,804 | 147,036 | |||||
Deferred tax assets |
162,696 | 169,662 | |||||
Total non-current assets |
6,273,790 | 6,015,294 | |||||
TOTAL ASSETS |
8,743,105 | 8,442,160 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
March 31, 2013 (unaudited) |
December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
CURRENT LIABILITIES: |
|||||||
Short term borrowings |
92,257 | 90,284 | |||||
Current portion of long-term debt |
240,311 | 310,072 | |||||
Accounts payable |
653,970 | 682,588 | |||||
Income taxes payable |
126,614 | 66,350 | |||||
Short term provisions for risks and other charges |
85,443 | 66,032 | |||||
Other liabilities |
597,533 | 589,658 | |||||
Total current liabilities |
1,796,127 | 1,804,984 | |||||
NON-CURRENT LIABILITIES: |
|||||||
Long-term debt |
2,065,820 | 2,052,107 | |||||
Employee benefits |
154,500 | 191,710 | |||||
Deferred tax liabilities |
211,671 | 227,806 | |||||
Long term provisions for risks and other charges |
123,697 | 119,612 | |||||
Other liabilities |
55,349 | 52,702 | |||||
Total non-current liabilities |
2,611,036 | 2,643,936 | |||||
STOCKHOLDERS' EQUITY: |
|||||||
Luxottica Group stockholders' equity |
4,323,579 | 3,981,372 | |||||
Non-controlling interests |
12,363 | 11,868 | |||||
Total stockholders' equity |
4,335,942 | 3,933,240 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
8,743,105 | 8,442,160 | |||||
As of March 31, 2013, total assets increased by Euro 300.9 million to Euro 8,743.1 million, compared to Euro 8,442.2 million as of December 31, 2012.
9
In the first three months of 2013, non-current assets increased by Euro 258.5 million, due to increases in intangible assets (including goodwill) of Euro 194.9 million, investments of Euro 45.5 million, other assets of Euro 16.8 million, property, plant and equipment of Euro 8.3 million and partially offset by decreases in deferred tax assets of Euro 7.0 million.
The increase in intangible assets was due to the positive effects of foreign currency fluctuations from December 2012 to March 2013 of Euro 111.2 million, capitalized software additions of Euro 27.0 million and Euro 78.8 million related to the acquisitions that occurred in the first three months of 2013 and partially offset by the amortization for the period of Euro 37.4 million.
The increase in investment is due to the acquisition on March 25, 2013 of 36.33% of the share capital of Salmoiraghi and Viganò for Euro 45.0 million.
The increase in property, plant and equipment was primarily due to positive currency fluctuation effects of Euro 24.8 million, the additions of Euro 42.6 million and Euro 4.2 million related to the acquisitions made in the first three months of 2013, and partially offset by the depreciation and the disposals for the period of Euro 53.1 million and Euro 7.0 million, respectively.
As of March 31, 2013 as compared to December 31, 2012:
Our net financial position as of March 31, 2013 and December 31, 2012 was as follows:
(Amounts in thousands of Euro) |
March 31, 2013 (unaudited) |
December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
Cash and cash equivalents |
582,096 | 790,093 | |||||
Bank overdrafts |
(92,257 | ) | (90,284 | ) | |||
Current portion of long-term debt |
(240,311 | ) | (310,072 | ) | |||
Long-term debt |
(2,065,820 | ) | (2,052,107 | ) | |||
Total |
(1,816,292 | ) | (1,662,369 | ) | |||
Bank overdrafts consist of the utilized portion of short-term uncommitted revolving credit lines borrowed by various subsidiaries of the Group.
10
As of March 31, 2013, Luxottica, together with our wholly-owned Italian subsidiaries, had credit lines aggregating Euro 333.8 million. The interest rate is a floating rate of EURIBOR plus a margin on average of approximately 1.00 percent. At March 31, 2013 Euro 36.9 million was utilized under these credit lines.
As of March 31, 2013, our wholly-owned subsidiary Luxottica U.S. Holdings Corp. maintained unsecured lines of credit with an aggregate maximum availability of Euro 101.5 million, (USD 130.0 million converted at applicable exchange rate for the three-month period ended March 31, 2013). The interest rate is a floating rate and is approximately LIBOR plus 100 basis points. At March 31, 2013 Euro 6.2 million was utilized under these credit lines.
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 29 to the Condensed Consolidated Financial Statements as of March 31, 2013 (unaudited).
5. SUBSEQUENT EVENTS
For further details regarding subsequent events, please refer to Note 34 to the Condensed Consolidated Financial Statements as of March 31, 2013 (unaudited).
6. ADAPTATION TO THE ARTICLES 36-39 OF THE REGULATED MARKETS
In relation to the acquisition of the French company, Alain Mikli International S.A.S., none of its extra-European subsidiaries are considered relevant to the applications of art. 36 and 39 of the CONSOB market regulations. However, as an internal procedure, all Alain Mikli International S.A.S. subsidiaries are required to release a quarterly representation letter that contains a self-certification of the completeness of the accounting information and the controls in place which are necessary for the preparation of the consolidated financial statements of the Group.
7. 2013 OUTLOOK
The financial results reported for the first three months of 2013 lead management to an optimistic outlook for the full fiscal year primarily driven by the strong performance of the Group's brand portfolio.
8. OTHER INFORMATION
On January 29, 2012 the Company elected to avail itself of the options provided by Article 70, Section 8, and Article 71, Section 1-bis, of CONSOB Issuers' Regulations and, consequently, will no longer comply with the obligation to make available to the public an information memorandum in connection with transactions involving significant mergers, spin-offs, increases in capital through contributions in kind, acquisitions and disposals.
11
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, net income and earnings per share by excluding in the first quarter of 2012 the non-recurring costs related to the reorganization of the retail business in Australia of Euro 21.7 million (Euro 15.2 million net of taxes). We have also made adjustments to selling expenses and general and administrative expenses for these items in Item 3 of the Management Report for the quarter ended March 31, 2013. No adjustments were made to the above measures in first quarter of 2013.
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 measures or, in the case of adjusted EBITDA, to EBITDA, which is also a non-IFRS measure. For a 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 |
1Q 2013 | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in millions of Euro) |
Net sales |
EBITDA |
EBITDA margin |
Operating Income |
Operating Income margin |
Income before taxes |
Net Income |
EPS base |
EPS dilutive |
|||||||||||||||||||
Reported |
1,864.1 | 365.3 | 19.6 | % | 274.8 | 14.7 | % | 251.0 | 159.2 | 0.34 | 0.34 | |||||||||||||||||
> Adjustment for OPSM reorganization |
| | | | | | | | | |||||||||||||||||||
Adjusted |
1,864.1 | 365.3 | 19.6 | % | 274.8 | 14.7 | % | 251.0 | 159.2 | 0.34 | 0.34 | |||||||||||||||||
12
Luxottica Group |
1Q 2012 | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in millions of Euro) |
Net sales |
EBITDA |
EBITDA margin |
Operating Income |
Operating Income margin |
Income before taxes |
Net Income |
EPS base |
EPS dilutive |
|||||||||||||||||||
Reported |
1,788.2 | 321.0 | 18.0 | % | 233.6 | 13.1 | % | 202.0 | 129.0 | 0.28 | 0.28 | |||||||||||||||||
> Adjustment for OPSM reorganization |
| 21.7 | 1.2 | % | 21.7 | 1.2 | % | 21.7 | 15.2 | 0.03 | 0.03 | |||||||||||||||||
Adjusted |
1,788.2 | 342.6 | 19.2 | % | 255.3 | 14.3 | % | 223.6 | 144.1 | 0.31 | 0.31 | |||||||||||||||||
Non-IFRS Measure: Reconciliation between reported and adjusted P&L items
|
1Q 2013 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail Division |
Net sales |
EBITDA |
Operating Income |
Net Income |
EPS |
|||||||||||
Reported |
1,083.1 | 175.7 | 132.2 | n.a. | n.a. | |||||||||||
> Adjustment for OPSM reorganization |
| | | | | |||||||||||
Adjusted |
1,083.1 | 175.7 | 132.2 | n.a. | n.a. | |||||||||||
|
1Q 2012 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retail Division (Amounts in millions of Euro) |
Net sales |
EBITDA |
Operating Income |
Net Income |
EPS base |
|||||||||||
Reported |
1,061.4 | 146.6 | 103.2 | N/A | N/A | |||||||||||
> Adjustment for OPSM reorganization |
| 21.7 | 21.7 | | | |||||||||||
Adjusted |
1,061.4 | 168.3 | 124.8 | N/A | N/A | |||||||||||
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:
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.
13
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 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
(Amounts in millions of Euro) |
1Q 2012 |
1Q 2013 |
FY 2012 |
LTM March 31, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net income/(loss) |
129.0 | 159.2 | 534.0 | 564.2 | |||||||||
(+) |
|||||||||||||
Net income attributable to non-controlling interest |
1.9 |
1.4 |
4.2 |
3.7 |
|||||||||
(+) |
|||||||||||||
Provision for income taxes |
71.1 |
90.4 |
306.0 |
325.3 |
|||||||||
(+) |
|||||||||||||
Other (income)/expense |
31.6 |
23.8 |
125.7 |
117.9 |
|||||||||
(+) |
|||||||||||||
Depreciation & amortization |
87.4 |
90.5 |
358.5 |
361.7 |
|||||||||
(+) |
|||||||||||||
EBITDA |
321.0 |
365.3 |
1,328.4 |
1,372.8 |
|||||||||
(=) |
|||||||||||||
Net sales |
1,788.2 |
1,864.1 |
7,086.1 |
7,162.0 |
|||||||||
(/) |
|||||||||||||
EBITDA margin |
18.0 |
% |
19.6 |
% |
18.7 |
% |
19.2 |
% |
|||||
(=) |
|||||||||||||
14
Non-IFRS Measure: Adjusted EBITDA and Adjusted EBITDA margin
(Amounts in millions of Euro) |
1Q 2012(1) |
1Q 2013 |
FY 2012(1)(2) |
LTM March 31, 2013(1)(2) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Adjusted Net income/(loss) |
144.1 | 159.2 | 560.0 | 575.1 | |||||||||
(+) |
|||||||||||||
Net income attributable to non-controlling interest |
1.9 |
1.4 |
4.2 |
3.7 |
|||||||||
(+) |
|||||||||||||
Adjusted provision for income taxes |
77.6 |
90.4 |
302.0 |
314.8 |
|||||||||
(+) |
|||||||||||||
Other (income)/expense |
31.6 |
23.8 |
125.7 |
117.9 |
|||||||||
(+) |
|||||||||||||
Adjusted depreciation & amortization |
87.4 |
90.5 |
358.2 |
361.3 |
|||||||||
(+) |
|||||||||||||
Adjusted EBITDA |
342.6 |
365.3 |
1,350.1 |
1,372.8 |
|||||||||
(=) |
|||||||||||||
Net sales |
1,788.2 |
1,864.1 |
7,086.1 |
7,162.0 |
|||||||||
(/) |
|||||||||||||
Adjusted EBITDA margin |
19.2 |
% |
19.6 |
% |
19.1 |
% |
19.2 |
% |
|||||
(=) |
|||||||||||||
The adjusted figures exclude the following measures:
Free Cash Flow
Free cash flow represents net income before non controlling interests, taxes, other income/expense, depreciation and amortization (i.e., EBITDA) plus or minus the decrease/(increase) in working capital over the 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:
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
15
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
(Amounts in millions of Euro) |
1Q 2013 |
|||
---|---|---|---|---|
EBITDA(1) |
365 | |||
D working capital |
(255 | ) | ||
Capex |
(69 | ) | ||
Operating cash flow |
41 | |||
Financial charges(2) |
(24 | ) | ||
Taxes |
(14 | ) | ||
Othernet |
| |||
Free cash flow |
4 | |||
Net debt to EBITDA ratio
Net debt represents the sum of bank overdrafts, the 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.
16
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.
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
17
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.
Non-IFRS Measure: Net debt and Net debt/EBITDA
(Amounts in millions of Euro) |
1Q 2013 |
FY 2012 |
|||||
---|---|---|---|---|---|---|---|
Long-term debt |
2,065.8 | 2,052.1 | |||||
(+) |
|||||||
Current portion of long-term debt |
240.3 |
310.1 |
|||||
(+) |
|||||||
Bank overdrafts |
92.3 |
90.3 |
|||||
(+) |
|||||||
Cash |
(582.1 |
) |
(790.1 |
) |
|||
(-) |
|||||||
Net debt |
1,816.3 |
1,662.4 |
|||||
(=) |
|||||||
EBITDA |
1,372.8 |
1,328.4 |
|||||
Net debt/EBITDA |
1.3 |
x |
1.3 |
x |
|||
Net debt @ avg. exchange rates(1) |
1,813.1 |
1,679.0 |
|||||
Net debt @ avg. exchange rates(1)/EBITDA |
1.3 |
x |
1.3 |
x |
|||
Non-IFRS Measure: Net debt and Net debt/Adjusted EBITDA
(Amounts in millions of Euro) |
1Q 2013 |
FY 2012(2) |
|||||
---|---|---|---|---|---|---|---|
Long-term debt |
2,065.8 | 2,052.1 | |||||
(+) |
|||||||
Current portion of long-term debt |
240.3 |
310.1 |
|||||
(+) |
|||||||
Bank overdrafts |
92.3 |
90.3 |
|||||
(+) |
|||||||
Cash |
(582.1 |
) |
(790.1 |
) |
|||
(-) |
|||||||
Net debt |
1,816.3 |
1,662.4 |
|||||
(=) |
|||||||
LTM Adjusted EBITDA |
1,372.8 |
1,350.1 |
|||||
Net debt/LTM Adjusted EBITDA |
1.3 |
x |
1.2 |
x |
|||
Net debt @ avg. exchange rates(1) |
1,813.1 |
1,679.0 |
|||||
Net debt @ avg. exchange rates(1)/LTM EBITDA |
1.3 |
x |
1.2 |
x |
|||
18
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.
19
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Amounts in thousands of Euro) |
Note reference |
March 31, 2013 (unaudited) |
Of which related parties (note 29) |
December 31, 2012 (audited) |
Of which related parties (note 29) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS |
||||||||||||||||
CURRENT ASSETS: |
||||||||||||||||
Cash and cash equivalents |
6 | 582,096 | | 790,093 | | |||||||||||
Accounts receivable |
7 | 893,286 | 8,606 | 698,755 | 1,248 | |||||||||||
Inventories |
8 | 765,732 | | 728,767 | | |||||||||||
Other assets |
9 | 228,202 | 41 | 209,250 | 13 | |||||||||||
Total current assets |
2,469,315 | 8,647 | 2,426,866 | 1,261 | ||||||||||||
NON-CURRENT ASSETS: |
||||||||||||||||
Property, plant and equipment |
10 | 1,200,668 | | 1,192,394 | | |||||||||||
Goodwill |
11 | 3,299,528 | | 3,148,770 | | |||||||||||
Intangible assets |
11 | 1,389,867 | | 1,345,688 | | |||||||||||
Investments |
12 | 57,225 | 4,536 | 11,745 | 4,265 | |||||||||||
Other assets |
13 | 163,804 | 2,925 | 147,036 | 2,832 | |||||||||||
Deferred tax assets |
14 | 162,696 | | 169,662 | | |||||||||||
Total non-current assets |
6,273,790 | 7,461 | 6,015,294 | 7,097 | ||||||||||||
TOTAL ASSETS |
8,743,105 | 16,108 | 8,442,160 | 8,358 | ||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||||||
CURRENT LIABILITIES: |
||||||||||||||||
Short-term borrowings |
15 | 92,257 | | 90,284 | | |||||||||||
Current portion of long-term debt |
16 | 240,311 | | 310,072 | | |||||||||||
Accounts payable |
17 | 653,970 | 6,937 | 682,588 | 9,126 | |||||||||||
Income taxes payable |
18 | 126,614 | | 66,350 | | |||||||||||
Short term provisions for risks and other charges |
19 | 85,443 | | 66,032 | | |||||||||||
Other liabilities |
20 | 597,533 | 52 | 589,658 | 72 | |||||||||||
Total current liabilities |
1,796,127 | 6,989 | 1,804,984 | 9,198 | ||||||||||||
NON-CURRENT LIABILITIES: |
||||||||||||||||
Long-term debt |
21 | 2,065,820 | | 2,052,107 | | |||||||||||
Employee benefits |
22 | 154,500 | | 191,710 | | |||||||||||
Deferred tax liabilities |
14 | 211,671 | | 227,806 | | |||||||||||
Long term provisions for risks and other charges |
23 | 123,697 | | 119,612 | | |||||||||||
Other liabilities |
24 | 55,349 | | 52,702 | | |||||||||||
Total non-current liabilities |
2,611,036 | | 2,643,936 | | ||||||||||||
STOCKHOLDERS' EQUITY: |
||||||||||||||||
Capital stock |
25 | 28,542 | | 28,394 | | |||||||||||
Legal reserve |
25 | 5,623 | | 5,623 | | |||||||||||
Reserves |
25 | 4,214,208 | | 3,504,908 | | |||||||||||
Treasury shares |
25 | (84,028 | ) | | (91,929 | ) | | |||||||||
Net income |
25 | 159,234 | | 534,376 | | |||||||||||
Luxottica Group stockholders' equity |
25 | 4,323,579 | | 3,981,372 | | |||||||||||
Non-controlling interests |
26 | 12,363 | | 11,868 | | |||||||||||
Total stockholders' equity |
4,335,942 | | 3,993,240 | | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
8,743,105 | 6,989 | 8,442,160 | 9,198 | ||||||||||||
20
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands of Euro)(1) |
Note reference |
Three Months ended March 31, 2013 (unaudited) |
Of which related parties (note 29) |
Three Months ended March 31, 2012 (unaudited) |
Of which related parties (note 29) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales |
27 | 1,864,119 | 672 | 1,788,172 | 449 | |||||||||||
Cost of sales |
27 | 645,713 | 12,866 | 622,564 | 12,915 | |||||||||||
of which nonrecurring |
33 | | | 1,359 | | |||||||||||
Gross profit |
1,218,406 | (12,194 | ) | 1,165,608 | (12,466 | ) | ||||||||||
Selling |
27 | 562,685 | | 571,572 | 6 | |||||||||||
of which nonrecurring |
33 | | | 17,284 | | |||||||||||
Royalties |
27 | 36,170 | 281 | 32,518 | 221 | |||||||||||
Advertising |
27 | 111,553 | 22 | 101,978 | | |||||||||||
General and administrative |
27 | 233,181 | | 225,945 | | |||||||||||
of which nonrecurring |
33 | | | 3,020 | | |||||||||||
Total operating expenses |
943,589 | 303 | 932,013 | 228 | ||||||||||||
Income from operations |
274,817 | (12,497 | ) | 233,595 | (12,694 | ) | ||||||||||
Other income/(expense) |
||||||||||||||||
Interest income |
27 | 2,548 | | 5,417 | | |||||||||||
Interest expense |
27 | (26,555 | ) | | (36,984 | ) | | |||||||||
Othernet |
27 | 177 | | (69 | ) | | ||||||||||
Income before provision for income taxes |
250,987 | (12,497 | ) | 201,960 | (12,694 | ) | ||||||||||
Provision for income taxes |
27 | (90,366 | ) | | (71,061 | ) | | |||||||||
of which nonrecurring |
33 | | | 6,499 | | |||||||||||
Net income |
160,622 | | 130,899 | | ||||||||||||
Of which attributable to: |
||||||||||||||||
Luxottica Group stockholders |
159,234 | | 128,976 | | ||||||||||||
Non-controlling interests |
1,387 | | 1,923 | | ||||||||||||
NET INCOME |
160,622 | | 130,899 | | ||||||||||||
Weighted average number of shares outstanding: |
||||||||||||||||
Basic |
469,697,345 | | 462,217,203 | | ||||||||||||
Diluted |
472,742,228 | | 464,615,581 | | ||||||||||||
EPS: |
||||||||||||||||
Basic |
0.34 | | 0.28 | | ||||||||||||
Diluted |
0.34 | | 0.28 | |
21
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Amounts in thousands of Euro) |
Three Months ended March 31, 2013 (unaudited) |
Three Months ended March 31, 2012 (unaudited) |
|||||
---|---|---|---|---|---|---|---|
Net income |
160,622 | 130,899 | |||||
Other comprehensive income: |
|||||||
Cash flow hedgenet of tax of Euro 0.2 million and 2.1 million as of March 31, 2013 and March 31, 2012, respectively |
150 | 4,988 | |||||
Currency translation differences |
99,813 | (74,865 | ) | ||||
Actuarial gain on defined benefit plansnet of tax of Euro 14.1 million and Euro 0.0 million as of March 31, 2013 and March 31, 2012 |
26,959 | 1,800 | |||||
Total other comprehensive incomenet of tax |
126,922 | (68,077 | ) | ||||
Total comprehensive income for the period |
287,543 | 62,823 | |||||
Attributable to: |
|||||||
Luxottica Group stockholders' equity |
286,029 | 61,433 | |||||
Non-controlling interests |
1,514 | 1,390 | |||||
Total comprehensive income for the period |
287,543 | 62,823 | |||||
|
22
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODS ENDED MARCH 31, 2013 AND 2012 (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 |
|||||||||||||||||||||||
(Amounts in thousands of Euro, except share data) |
Number of shares |
Amount |
|||||||||||||||||||||||||||||
|
Note 25 |
Note 26 |
|||||||||||||||||||||||||||||
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 March 31, 2012 |
| | | | 135,765 | | (74,332 | ) | | 61,433 | 1,390 | ||||||||||||||||||||
Exercise of stock options |
1,348,696 | 82 | | 20,724 | | | | | 20,806 | | |||||||||||||||||||||
Non-cash stock based compensation |
| | | | | 9,540 | | | 9,540 | | |||||||||||||||||||||
Tax benefit on stock options |
| | | 4,598 | | | | | 4,598 | | |||||||||||||||||||||
Granting of treasury shares to employees |
| | | | (25,489 | ) | | | 25,489 | | | ||||||||||||||||||||
Dividends |
| | | | | | | | | (1,891 | ) | ||||||||||||||||||||
Balance as of March 31, 2012 |
468,700,373 | 28,123 | 5,600 | 262,337 | 3,466,208 | 213,279 | (174,312 | ) | (91,929 | ) | 3,709,305 | 11,691 | |||||||||||||||||||
Balance as of January 1, 2013 |
473,238,197 | 28,394 | 5,623 | 328,742 | 3,633,481 | 241,286 | (164,224 | ) | (91,929 | ) | 3,981,372 | 11,868 | |||||||||||||||||||
Total Comprehensive Income as of March 31, 2013 |
| | | | 186,343 | | 99,686 | | 286,029 | 1,514 | |||||||||||||||||||||
Exercise of stock options |
2,472,636 | 148 | | 43,990 | | | | | 44,138 | | |||||||||||||||||||||
Non-cash stock based compensation |
| | | | | 5,847 | | | 5,847 | | |||||||||||||||||||||
Excess tax benefit on stock options |
| | | 6,192 | | | | | 6,192 | | |||||||||||||||||||||
Granting of treasury shares to employees |
| | | | (7,901 | ) | | | 7,901 | | | ||||||||||||||||||||
Dividends |
| | | | | | | | | (1,020 | ) | ||||||||||||||||||||
Balance as of March 31, 2013 |
475,710,833 | 28,542 | 5,623 | 378,924 | 3,811,923 | 247,133 | (64,538 | ) | (84,028 | ) | 4,323,579 | 12,363 | |||||||||||||||||||
23
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of Euro) |
Note reference |
March 31, 2013 (unaudited) |
March 31, 2012 (unaudited) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Income before provision for income taxes |
250,987 | 201,960 | ||||||||
Stock-based compensation |
6,666 | 9,540 | ||||||||
Depreciation and amortization |
10/11 | 90,529 | 87,390 | |||||||
Net loss fixed assets and other |
10 | 6,699 | 10,979 | |||||||
Financial charges |
26,555 | 36,984 | ||||||||
Other non-cash items(*) |
(2,492 | ) | 10,385 | |||||||
Changes in accounts receivable |
(215,641 | ) | (122,217 | ) | ||||||
Changes in inventories |
(9,848 | ) | (6,796 | ) | ||||||
Changes in accounts payable |
(48,398 | ) | (84,961 | ) | ||||||
Changes in other assets/liabilities |
(29,793 | ) | (6,553 | ) | ||||||
Total adjustments |
(175,723 | ) | (65,249 | ) | ||||||
Cash provided by operating activities |
75,264 | 136,711 | ||||||||
Interest paid |
(37,340 | ) | (35,205 | ) | ||||||
Tax paid |
(14,164 | ) | (12,574 | ) | ||||||
Net cash provided by operating activities |
23,760 | 88,932 | ||||||||
Additions of Property, plant and equipment: |
10 | (42,648 | ) | (37,025 | ) | |||||
Purchases of businessesnet of cash acquired(**) |
4 | (72,922 | ) | (57,652 | ) | |||||
Increase in investment(***) |
12 | (45,000 | ) | | ||||||
Additions to intangible assets |
11 | (27,046 | ) | (24,393 | ) | |||||
Cash used in investing activities |
(187,615 | ) | (119,070 | ) |
24
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of Euro) |
Note reference |
March 31, 2013 (unaudited) |
March 31, 2012 (unaudited) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Long-term debt: |
||||||||||
Proceeds |
21 | 2,900 | 507,981 | |||||||
Repayments |
21 | (94,460 | ) | (106,938 | ) | |||||
Short-term debt: |
||||||||||
Proceeds |
| | ||||||||
Repayments |
(3,534 | ) | (1,086 | ) | ||||||
Exercise of stock options |
25 | 44,138 | 20,806 | |||||||
Dividends |
(1,020 | ) | (1,891 | ) | ||||||
Cash used in financing activities |
(51,976 | ) | (418,872 | ) | ||||||
Increase (decrease) in cash and cash equivalents |
(215,831 | ) | 388,735 | |||||||
Cash and cash equivalents, beginning of the period |
790,093 | 905,100 | ||||||||
Effect of exchange rate changes on cash and cash equivalents |
7,831 | (16,049 | ) | |||||||
Cash and cash equivalents, end of the period |
582,096 | 1,277,788 | ||||||||
25
Luxottica Group S.p.A.
Headquarters and registered office Via C. Cantù 220123 Milan, Italy
Capital Stock: € 28,542,649.98
authorized and issued
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of MARCH 31, 2013
(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 April 29, 2013, approved the Group's interim condensed consolidated financial statements as of March 31, 2013 (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, 2012, 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 March 31, 2013.
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, 2012, 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 projected 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 changes in equity, the consolidated statements of cash flows and these Notes to the Interim Consolidated Financial Statements as of March 31, 2013.
26
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
2. BASIS OF PREPARATION (Continued)
The Group also applied the CONSOB resolution n. 15519 of July 27, 2006 and the CONSOB communication n. 6064293 of July 28, 2006.
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.
In addition to the new accounting principles indicated in Note 2 "New Accounting Principles" of the notes to the consolidated financial statements as of December 31, 2012, the Group has applied starting from January 1, 2013 the IAS 19 revised standard "Employee benefits," which was published in June 2011.
The new standard requires that the expense for a funded benefit plan include net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability. Furthermore actuarial gains and losses are recognized immediately in 'other comprehensive income' (OCI) and will not be recycled to profit and loss in subsequent periods.
The new standard is applied retrospectively to all periods presented.
As a result of the application of this new standard (i) income from operations and net income attributable to Luxottica Stockholders decreased by Euro 2.9 million and Euro 1.8 million, respectively, in the first quarter of 2012 and (ii) net income attributable to Luxottica Stockholders decreased by Euro 7.3 million in the twelve month period ended December 31, 2012.
4. BUSINESS COMBINATIONS
On January 23, 2013, the Company completed the acquisition of Alain Mikli International, a French luxury and contemporary eyewear company. The cash portion of the consideration for the acquisition was Euro 85.4 million. The purchase price paid in the first quarter of 2013, including the assumption of approximately Euro 15 million of Alain Mikli's debt, totaled Euro 91 million. Net sales generated by Alain Mikli International in 2012 were approximately Euro 55.5 million.
The Company uses various methods to calculate the fair value of the Alain Mikli assets acquired and the liabilities assumed. The valuation processes have not been concluded as of the date these financial statements were authorized for issue. In accordance with IFRS 3Business Combinations, the fair value of the net assets and liabilities assumed will be defined within 12 months from the acquisition date
27
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
4. BUSINESS COMBINATIONS (Continued)
The difference between the consideration paid and the net assets acquired was provisionally recorded as goodwill.
The following table summarizes the consideration paid, the fair value of assets acquired and liabilities assumed at the acquisition date (in thousands of Euro):
Consideration |
85,424 | |||
Total consideration |
85,424 | |||
Recognized amount of net identifiable assets |
||||
Cash and cash equivalents |
3,773 | |||
Accounts receivablenet |
10,371 | |||
Inventory |
16,474 | |||
Other current receivables |
4,646 | |||
Fixed assets |
3,903 | |||
Trademarks and other intangible assets |
6,114 | |||
investments |
140 | |||
Other long term receivables |
6,376 | |||
Deferred tax assets |
126 | |||
Accounts payable |
(10,569 | ) | ||
Other current liabilities |
(5,630 | ) | ||
Short term loan |
(3,227 | ) | ||
Long-term debt |
(15,567 | ) | ||
Other long-term liabilities |
(2,395 | ) | ||
Total net identifiable assets |
14,535 | |||
Goodwill |
70,889 | |||
Total |
85,424 | |||
5. SEGMENT REPORTING
In accordance with IFRS 8Operating segments, the Group operates in two industry segments: (1) Manufacturing and Wholesale Distribution, and (2) Retail Distribution.
The criteria applied to identify the reporting segments are consistent with the way the Group is managed. In particular, the disclosures are consistent with the information periodically analyzed by the
28
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
5. SEGMENT REPORTING (Continued)
Group's Chief Executive Officer, in his role as Chief Operating Decision Maker, to make decisions about resources to be allocated to the segments and assess their performance.
(Amounts in thousands of Euro) |
Manufacturing and Wholesale Distribution |
Retail Distribution |
Inter-segment transactions and corporate adjustments(c) |
Consolidated |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three months ended March 31, 2013 (unaudited) |
|||||||||||||
Net sales(a) |
780,999 | 1,083,120 | | 1,864,119 | |||||||||
Income from operations(b) |
188,398 | 132,193 | (45,774 | ) | 274,817 | ||||||||
Interest income |
| | | 2,548 | |||||||||
Interest expense |
| | | (26,555 | ) | ||||||||
Other-net |
| | | 177 | |||||||||
Income before provision for income taxes |
| | | 250,987 | |||||||||
Provision for income taxes |
| | | (90,366 | ) | ||||||||
Net income |
| | | 160,622 | |||||||||
Of which attributable to: |
| | | ||||||||||
Luxottica stockholders |
| | | 159,234 | |||||||||
Non-controlling interests |
| | | 1,387 | |||||||||
Capital expenditures |
28,393 | 40,437 | | 68,830 | |||||||||
Depreciation and amortization |
25,333 | 43,535 | 21,661 | 90,529 | |||||||||
Three months ended March 31, 2012 (unaudited) |
|||||||||||||
Net sales(a) |
726,794 | 1,061,378 | | 1,788,172 | |||||||||
Income from operations(b) |
172,919 | 103,157 | (42,480 | ) | 233,595 | ||||||||
Interest income |
| | | 5,417 | |||||||||
Interest expense |
| | | (36,984 | ) | ||||||||
Other-net |
| | | (69 | ) | ||||||||
Income before provision for income taxes |
| | | 201,960 | |||||||||
Provision for income taxes |
| | | (71,061 | ) | ||||||||
Net income |
| | | 130,899 | |||||||||
Of which attributable to: |
| | | ||||||||||
Luxottica Stockholders |
| | | 128,976 | |||||||||
Non-controlling Interests |
| | | 1,923 | |||||||||
Capital expenditures |
22,758 | 52,864 | | 75,622 | (d) | ||||||||
Depreciation and amortization |
23,112 | 43,461 | 20,818 | 323,888 | |||||||||
29
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CURRENT ASSETS
6. CASH AND CASH EQUIVALENTS
(Amounts in thousands of Euro) |
As of March 31, 2013 (unaudited) |
As of December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
Cash at bank and post office |
570,833 | 779,683 | |||||
Checks |
7,258 | 7,506 | |||||
Cash and cash equivalents on hand |
4,005 | 2,904 | |||||
Total |
582,096 | 790,093 | |||||
7. ACCOUNTS RECEIVABLE
(Amounts in thousands of Euro) |
As of March 31, 2013 (unaudited) |
As of December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
Accounts receivable |
931,018 | 733,854 | |||||
Allowance for doubtful accounts |
(37,732 | ) | (35,098 | ) | |||
Total |
893,286 | 698,755 | |||||
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 March 31, 2013 (unaudited) |
As of December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
Raw materials |
192,716 | 154,403 | |||||
Work in process |
45,486 | 59,565 | |||||
Finished goods |
643,584 | 625,386 | |||||
Less: inventory obsolescence reserves |
(116,054 | ) | (110,588 | ) | |||
Total |
765,732 | 728,767 | |||||
30
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
9. OTHER ASSETS
(Amounts in thousands of Euro) |
As of March 31, 2013 (unaudited) |
As of December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
Sales taxes receivable |
31,018 | 15,476 | |||||
Short-term borrowings |
1,181 | 835 | |||||
Accrued income |
2,551 | 2,569 | |||||
Other assets |
30,583 | 35,545 | |||||
Total financial assets |
65,333 | 54,425 | |||||
Income tax receivable |
19,583 | 47,354 | |||||
Advances to suppliers |
14,469 | 15,034 | |||||
Prepaid expenses |
98,533 | 74,262 | |||||
Other assets |
30,284 | 18,175 | |||||
Total other assets |
162,869 | 154,825 | |||||
Total other current assets |
228,202 | 209,250 | |||||
Other financial assets included amounts (i) recorded in the North American Retail Division totaling Euro 8.5 million as of March 31, 2013 and Euro 13.2 million as of December 31, 2012, respectively, (ii) recorded in Oakley of Euro 7.0 million (Euro 4.6 million as of December 31, 2012), and (iii) derivative financial assets of Euro 0.5 million as of March 31, 2013 and Euro 6.0 million as of December 31, 2012 respectively. The remaining portion of the balance is distributed among the Group's various subsidiaries.
The reduction of the income tax receivable is mainly due to certain U.S.-based subsidiaries utilizing in 2013 the receivable balance existing as of December 31, 2012.
The net book value of financial assets is approximately equal to their fair value and this value also corresponds to the maximum exposure of the credit risk. The Group has no guarantees or other instruments to manage credit risk.
31
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
NON-CURRENT ASSETS
10. PROPERTY, PLANT AND EQUIPMENT
Changes in items of property, plant and equipment during the first quarter of 2012 and 2013 were as follows:
(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 |
8,414 | 31,958 | | 10,857 | 51,229 | |||||||||||
Decreases |
(1,144 | ) | | | (10,662 | ) | (11,806 | ) | ||||||||
Business combinations |
952 | 7,673 | | 1,560 | 10,185 | |||||||||||
Translation differences and other |
(6,649 | ) | (2,817 | ) | | (10,691 | ) | (20,157 | ) | |||||||
Depreciation expense |
(15,425 | ) | (22,399 | ) | (388 | ) | (14,981 | ) | (53,193 | ) | ||||||
Balance as of March 31, 2012 |
480,989 | 384,452 | 28,923 | 250,960 | 1,145,324 | |||||||||||
Historical cost |
883,895 | 1,015,680 | 38,087 | 559,577 | 2,497,239 | |||||||||||
Accumulated depreciation |
(402,906 | ) | (631,228 | ) | (9,164 | ) | (308,617 | ) | (1,351,915 | ) | ||||||
Balance as of March 31, 2012 |
480,989 | 384,452 | 28,923 | 250,960 | 1,145,324 | |||||||||||
32
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
10. PROPERTY, PLANT AND EQUIPMENT (Continued)
(Amounts in thousands of Euro) |
Land and buildings, including leasehold improvements |
Machinery and equipment |
Aircraft |
Other equipment |
Total |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2013 |
||||||||||||||||
Historical cost |
913,679 | 1,074,258 | 38,087 | 615,957 | 2641,981 | |||||||||||
Accumulated depreciation |
(438,046 | ) | (668,561 | ) | (10,337 | ) | (332,644 | ) | (1,449,588 | ) | ||||||
Balance as of January 1, 2013 |
475,633 | 405,697 | 27,750 | 283,313 | 1,192,394 | |||||||||||
Increases |
5,984 | 14,547 | | 22,117 | 42,648 | |||||||||||
Decreases |
(805 | ) | | | (5,894 | ) | (6,699 | ) | ||||||||
Business combinations |
2,471 | 770 | | 913 | 4,154 | |||||||||||
Translation differences and other |
11,632 | 27,399 | | (17,776 | ) | 21,255 | ||||||||||
Depreciation expense |
(15,293 | ) | (22,860 | ) | (382 | ) | (14,548 | ) | (53,083 | ) | ||||||
Balance as of March 31, 2013 |
479,622 | 425,553 | 27,368 | 268,125 | 1,200,668 | |||||||||||
Historical cost |
941,767 | 1,113,242 | 38,087 | 617,671 | 2,710,767 | |||||||||||
Accumulated depreciation |
(462,145 | ) | (687,689 | ) | (10,719 | ) | (349,546 | ) | (1,510,099 | ) | ||||||
Balance as of March 31, 2013 |
479,622 | 425,553 | 27,368 | 268,125 | 1,200,668 | |||||||||||
Of the total depreciation expense of Euro 53.1 million (Euro 53.2 million in the same period of 2012), Euro 17.4 million (Euro 17.0 million in the same period of 2012) is included in cost of sales, Euro 28.5 million (Euro 29.1 million in the same period of 2012) in selling expenses, Euro 1.1 million (Euro 1.1 million in the same period of 2012) in advertising expenses and Euro 6.1 million (Euro 6.0 million in the same period of 2012) in general and administrative expenses.
Capital expenditures mainly relate to routine technology upgrades to the manufacturing infrastructure, opening of new stores and the remodeling of older stores the leases for which were extended during the period.
Other equipment includes Euro 53.7 million for assets under construction at March 31, 2013 (Euro 66.9 million at December 31, 2012) mainly relating to the opening and renovation of North America retail stores.
Leasehold improvements totaled Euro 159.2 million and Euro 220.9 million at March 31, 2013 and March 31, 2012, respectively.
33
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
11. GOODWILL AND INTANGIBLE ASSETS
Changes in intangible assets in the quarter of 2012 and 2013 were as follows:
(Amounts in thousands of Euro) |
Goodwill |
Trade names and Trademarks |
Customer relations, contracts and lists |
Franchise agreements |
Other |
Total |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2012 |
|||||||||||||||||||
Historical cost |
3,090,563 | 1,576,008 | 229,733 | 22,181 | 464,999 | 5,383,484 | |||||||||||||
Accumulated amortization |
| (660,958 | ) | (68,526 | ) | (7,491 | ) | (205,026 | ) | (942,000 | ) | ||||||||
Balance as of January 1, 2012 |
3,090,563 | 915,050 | 161,208 | 14,690 | 259,973 | 4,441,484 | |||||||||||||
Increases |
| | | | 24,393 | 24,393 | |||||||||||||
Decreases |
| | | | (689 | ) | (689 | ) | |||||||||||
Intangible assets from business acquisitions |
81,039 | 302 | | | 2,245 | 83,587 | |||||||||||||
Translation differences and other |
(70,463 | ) | (20,878 | ) | (4,357 | ) | (454 | ) | (6,336 | ) | (102,558 | ) | |||||||
Amortization expense |
| (17,180 | ) | (3,635 | ) | (274 | ) | (13,109 | ) | (34,197 | ) | ||||||||
Balance as of March 31, 2012 |
3,101,104 | 877,294 | 153,216 | 13,963 | 266,477 | 4,412,090 | |||||||||||||
Of which |
|||||||||||||||||||
Historical cost |
3,101,104 | 1,534,458 | 223,443 | 21,488 | 460,956 | 5,341,486 | |||||||||||||
Accumulated amortization |
| (657,165 | ) | (70,227 | ) | (7,525 | ) | (194,478 | ) | (928,396 | ) | ||||||||
Balance as of March 31, 2012 |
3,101,104 | 877,294 | 153,216 | 13,963 | 266,477 | 4,412,090 | |||||||||||||
(Amounts in thousands of Euro) |
Goodwill |
Trade names and Trademarks |
Customer relations, contracts and lists |
Franchise agreements |
Other |
Total |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2013 |
|||||||||||||||||||
Historical cost |
3,148,770 | 1,563,447 | 247,730 | 21,752 | 547,254 | 5,528,953 | |||||||||||||
Accumulated amortization |
(713,608 | ) | (83,553 | ) | (8,433 | ) | (228,902 | ) | (1,034,496 | ) | |||||||||
Balance as of January 1, 2013 |
3,148,770 | 849,839 | 164,177 | 13,319 | 318,352 | 4,494,457 | |||||||||||||
Increases |
| | | | 27,046 | 27,046 | |||||||||||||
Decreases |
| | | | (25 | ) | (25 | ) | |||||||||||
Intangible assets from business acquisitions |
73,985 | 4,517 | | | 316 | 78,818 | |||||||||||||
Translation differences and other |
76,774 | 21,466 | 4,420 | 396 | 23,491 | 126,546 | |||||||||||||
Amortization expense |
| (17,283 | ) | (3,730 | ) | (272 | ) | (16,163 | ) | (37,448 | ) | ||||||||
Balance as of March 31, 2013 |
3,299,528 | 858,539 | 164,867 | 13,443 | 353,018 | 4,689,395 | |||||||||||||
Of which |
|||||||||||||||||||
Historical cost |
3,299,528 | 1,604,190 | 254,702 | 22,413 | 605,717 | 5,786,550 | |||||||||||||
Accumulated amortization |
| (745,651 | ) | (89,835 | ) | (8,970 | ) | (252,699 | ) | (1,097,155 | ) | ||||||||
Balance as of March 31, 2013 |
3,299,528 | 858,539 | 164,867 | 13,443 | 353,018 | 4,689,395 | |||||||||||||
34
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
11. GOODWILL AND INTANGIBLE ASSETS (Continued)
The increase in goodwill from business acquisitions mainly relates to the acquisition of Alain Mikli in January 2013, which accounts for Euro 71.0 million. For additional details on the acquisition please refer to Note 4"Business Combinations."
The increase in other intangible assets is mainly due to the continued implementation of a new IT platform, which was originally introduced in 2008.
12. INVESTMENTS
This item amounted to Euro 57.2 million (Euro 11.7 million at December 31, 2012) and mainly included investments in (i) Salmoiraghi & Viganò of Euro 45.0 million, (ii) the associate company Eyebiz Laboratories Pty Limited of Euro 4.5 million (Euro 4.3 million at December 31, 2012) and (iii) other minor investments.
13. OTHER NON-CURRENT ASSETS
Other non-current assets amounted to Euro 163.8 million (Euro 147.3 million at December 31, 2012) and were primarily comprised of security deposits of Euro 39.1 million (Euro 34.3 million at December 31, 2012) and advances the Group paid to certain licensees for future contractual minimum royalties, amounting to Euro 90.6 million (Euro 73.8 million at December 31, 2012).
14. DEFERRED TAX ASSETS
The balance of deferred tax assets and liabilities as of March 31, 2013 and December 31, 2012 is as follows:
(Amounts in thousands of Euro) |
As of March 31 2013 |
As of December 31 2012 |
|||||
---|---|---|---|---|---|---|---|
Deferred tax assets |
162,696 | 169,662 | |||||
Deferred tax liabilities |
211,671 | 227,806 | |||||
Deferred tax liabilities (net) |
48,975 | 58,144 | |||||
Deferred tax assets primarily relate 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. Deferred tax liabilities primarily relate to temporary differences between the tax values and carrying amounts of property, plant and equipment and intangible assets.
15. SHORT-TERM BORROWINGS
Short-term borrowings at March 31, 2013 reflect bank overdrafts and short term borrowings with various banks. The interest rates on these credit lines are floating. The credit lines may be used, if necessary, to obtain letters of credit.
As of March 31, 2013 and December 31, 2012, the Company had unused short-term lines of credit of approximately Euro 609.9 million and Euro 700.4 million, respectively.
35
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
15. SHORT-TERM BORROWINGS (Continued)
The Company and its wholly-owned Italian subsidiary Luxottica S.r.l. maintain unsecured lines of credit with primary banks for an aggregate maximum credit of Euro 260.0 million. These lines of credit are renewable annually, can be cancelled at short notice and have no commitment fees. At March 31, 2013, these credit lines were utilized in the amount of Euro 36.9 million.
Luxottica U.S. Holdings Corp. ("US Holdings") maintains unsecured lines of credit with three separate banks for an aggregate maximum credit of Euro 101.5 million (USD 130.0 million). These lines of credit are renewable annually, can be cancelled at short notice and have no commitment fees. At March 31, 2013, there were no amounts borrowed against these lines. However, there was Euro 23.1 million in aggregate face amount of standby letters of credit outstanding related to guarantees on these lines of credit.
The blended average interest rate on these lines of credit is approximately LIBOR plus 0.50%.
The book value of short-term borrowings is approximately equal to their fair value.
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 were Euro 653.6 million and Euro 682.9 million as of March 31, 2013 and December 31, 2012, respectively and consisted 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 is due in its entirety within 12 months.
18. INCOME TAXES PAYABLE
The balance of income taxes payable is detailed below:
(Amounts in thousands of Euro) |
As of March 31, 2013 (unaudited) |
As of December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
Current year income taxes payable fund |
166,863 | 107,377 | |||||
Income taxes advance payment |
(40,250 | ) | (41,027 | ) | |||
Total |
126,614 | 66,350 | |||||
36
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
19. SHORT TERM PROVISIONS FOR RISKS AND OTHER CHARGES
The balance is detailed below:
(Amounts in thousands of Euro) |
Legal risk |
Self-insurance |
Tax provision |
Other risks |
Returns |
Total |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of December 31, 2012 |
578 | 4,769 | 12,150 | 12,477 | 36,057 | 66,032 | |||||||||||||
Increases |
(50 | ) | 3,597 | 8,164 | 4,637 | 17,050 | 33,399 | ||||||||||||
Decreases |
(95 | ) | (2,579 | ) | (337 | ) | (1,013 | ) | (10,916 | ) | (14,939 | ) | |||||||
Business combinations |
| | | | | | |||||||||||||
Foreign translation difference and other movements |
101 | 156 | 56 | (91 | ) | 730 | 952 | ||||||||||||
Balance as of March 31, 2013 |
534 | 5,944 | 20,033 | 16,011 | 42,921 | 85,443 | |||||||||||||
Other risks mainly includes provisions for licensing expenses and advertising expenses required by existing license agreements of Euro 4.1 million (Euro 5.3 million as of December 31, 2012), which are based upon advertising expenses that the Group is required to incur under the license agreements.
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.
37
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
20. OTHER LIABILITIES
(Amounts in thousands of Euro) |
As of March 31, 2013 (unaudited) |
As of December 31, 2012 (audited) |
|||||
---|---|---|---|---|---|---|---|
Premiums and discounts to suppliers |
4,927 | 4,363 | |||||
Sales commissions |
572 | 683 | |||||
Leasing rental |
25,083 | 24,608 | |||||
Insurance |
10,928 | 9,494 | |||||
Sales taxes payable |
44,640 | 28,550 | |||||
Salaries payable |
211,372 | 245,583 | |||||
Due to social security authorities |
50,891 | 36,997 | |||||
Sales commissions payable |
10,251 | 8,569 | |||||
Royalties payable |
1,818 | 2,795 | |||||
Derivative financial liabilities |
5,764 | 1,196 | |||||
Other financial liabilities |
174,196 | 172,704 | |||||
Total financial liabilities |
540,443 | 535,541 | |||||
Deferred income |
2,400 | 2,883 | |||||
Advances from customers |
49,006 | 45,718 | |||||
Other liabilities |
5,684 | 5,516 | |||||
Total liabilities |
57,090 | 54,117 | |||||
Total other current liabilities |
597,533 | 589,658 | |||||
38
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
21. LONG-TERM DEBT
Long-term debt was Euro 2,306.1 million and Euro 3,135.8 as of March 31, 2013 and 2012, respectively:
The roll-forward of long term debt as of March 31, 2012 and 2013 is as follows:
(Amounts in thousands of Euro) |
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 | | | 22,185 | 522,185 | |||||||||||||
Repayments |
(30,000 | ) | | (5,903 | ) | (38,144 | ) | (32,891 | ) | (106,938 | ) | ||||||||
Loans assumed in business combinations |
| | | | 32,835 | 32,835 | |||||||||||||
Amortization of fees and interests |
(228 | ) | (4,070 | ) | 110 | 233 | | 3,955 | |||||||||||
Foreign translation difference |
| (19,549 | ) | (6,962 | ) | (23,429 | ) | (1,298 | ) | 51,238 | |||||||||
Balance as of March 31, 2012 |
457,135 | 1,702,626 | 213,199 | 711,403 | 51,402 | 3,135,767 | |||||||||||||
(Amounts in thousands of Euro) |
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, 2013 |
367,743 | 1,723,225 | 45,664 | 174,922 | 50,624 | 2,362,178 | |||||||||||||
Proceeds from new and existing loans |
| | | | 2,900 | 2,900 | |||||||||||||
Repayments |
(30,000 | ) | | (45,767 | ) | | (18,693 | ) | (94,460 | ) | |||||||||
Loans assumed in business combinations |
| | | | 16,553 | 16,553 | |||||||||||||
Amortization of fees and interests |
343 | (11,491 | ) | 33 | 47 | 4,420 | (6,648 | ) | |||||||||||
Foreign translation difference |
| 18,623 | 69 | 5,315 | 1,600 | 25,607 | |||||||||||||
Balance as of March 31, 2013 |
338,086 | 1,730,357 | | 180,284 | 57,403 | 2,306,130 | |||||||||||||
The Group uses debt financing to raise financial resources for long-term business operations and to finance acquisitions. During 2004 the Group financed the Cole National Corporation acquisition and in 2007, the Oakley acquisition through debt financing. The Group continues to seek debt refinancing at favorable market rates and actively monitors the debt capital markets in order to take appropriate action to issue debt, when appropriate. Our debt agreements contain certain covenants, including covenants that limit our ability to incur additional indebtedness (for more details see note 3(f)Default risk: negative
39
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2013
(UNAUDITED)
21. LONG-TERM DEBT (Continued)
pledges and financial covenants to the 2012 Consolidated Financial Statements). As of March 31, 2013, we were in compliance with these financial covenants.
The table below summarizes the Group's long-term debt.
Type |
Series |
Issuer/Borrower |
Issue Date |
CCY |
Amount |
Outstanding amount at the reporting date |
Coupon / Pricing |
Interest rate as of March 31, 2013 |
Maturity |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Multicurrency EUR/USD |
Tranche C |
Luxottica Group S.p.A./ Luxottica US Holdings |
June 3, 2004 |
EUR |
725,000,000 |
|
Euribor + 0.20%/0.40% |
|
April 17, 2012 |
||||||||||||
|
|||||||||||||||||||||
2007 Oakley Term Loan |
Tranche E | Luxottica Group S.p.A./ Luxottica U.S Holdings |
November 14, 2007 |
USD |
500,000,000 |
|
Libor + 0.20%/0.40% |
|
October 15, 2012 |
||||||||||||
|
|||||||||||||||||||||
2004 USD Term Loan |
Tranche B | Luxottica US Holdings | June 3, 2004 | USD | 325,000,000 | | Libor + 0.20%/0.40% |