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, 2014
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
Board of Directors
In office until the approval of the financial statements as of and for the year ending December 31, 2014.
Chairman | Leonardo Del Vecchio | |
Deputy Chairman | Luigi Francavilla | |
Chief Executive Officer | Andrea Guerra | |
Directors | Roger Abravanel* | |
Mario Cattaneo* | ||
Enrico Cavatorta** | ||
Claudio Costamagna* | ||
Claudio Del Vecchio | ||
Elisabetta Magistretti* | ||
Marco Mangiagalli* | ||
Anna Puccio* | ||
Marco Reboa* (Lead Independent Director) |
Human Resources Committee | Claudio Costamagna (Chairman) | |
Roger Abravanel | ||
Anna Puccio | ||
Control and Risk Committee |
Mario Cattaneo (Chairman) |
|
Elisabetta Magistretti | ||
Marco Mangiagalli | ||
Marco Reboa |
Board of Statutory Auditors
In office until the approval of the financial statements as of and for the year ending December 31, 2014
Regular Auditors |
Francesco Vella (Chairman) | |
|
Alberto Giussani | |
|
Barbara Tadolini | |
Alternate Auditors |
Giorgio Silva |
|
|
Fabrizio Riccardo di Giusto | |
Officer Responsible for Preparing the Company's Financial Reports |
Enrico Cavatorta |
Auditing Firm
Until approval of the financial statements as of and for the year ending December 31, 2020.
PricewaterhouseCoopers SpA
Luxottica Group S.p.A.
Headquarters and registered office Via C. Cantù 2, 20123 Milan, Italy
Capital Stock € 28,676,710.38
authorized and issued
ITEM 1. MANAGEMENT REPORT ON THE INTERIM
FINANCIAL RESULTS AS OF MARCH 31, 2014
(UNAUDITED)
The following should be read in connection with the disclosure contained in the consolidated financial statements as of December 31, 2013, which includes a discussion of risks and uncertainties that can influence the Group's operational results or financial position. During the first three months of 2014, there were no changes to the risks reported as of December 31, 2013.
1. OPERATING PERFORMANCE FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2014
The Group's growth in the first quarter of 2014 was significantly affected by the weakening of certain currencies in which it operates. At constant exchange rates(1), the Group confirmed solid growth in the main markets in which it conducts business.
Net sales decreased from Euro 1,864.1 million in the first three months of 2013 to Euro 1,842.3 million in the first three months of 2014 (-1.2 percent at current exchange rates and +4.2 percent at constant exchange rates(1)).
Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")(2) in the first three months of 2014 decreased by 1.5 percent to Euro 359.9 million from Euro 365.3 million in the same period of 2013.
Operating income for the first three months of 2014 decreased by 1.7 percent to Euro 270.2 million from Euro 274.8 million during the same period of the previous year. The Group's operating margin in the first three months of 2014 was 14.7 percent in line with last year.
In the first three months of 2014 net income attributable to Luxottica Stockholders decreased by 1.2 percent to Euro 157.3 million from Euro 159.2 million in the same period of 2013. Earnings per share ("EPS") was Euro 0.33 and EPS expressed in USD was 0.45 (at an average rate of Euro/USD of 1.3696).
By carefully controlling working capital, the Group generated positive free cash flow(3) in the first three months of 2014 equal to Euro 60 million. Net debt as of March 31, 2014 was Euro 1,429 million (Euro 1,461 million at the end of 2013), with a ratio of net debt to adjusted EBITDA(4) of 1.0x (1.0x as of December 31, 2013).
2. SIGNIFICANT EVENTS DURING THE THREE MONTHS ENDED MARCH 31, 2014
January
Luxottica Group S.p.A. announced that Standard & Poor's raised its long-term credit rating to A- from BBB+. The outlook is stable. Standard & Poor's disclosed that Luxottica improved its credit metrics since its long-term rating outlook was increased to positive on March 27, 2013.
1
On January 31, 2014 the Group closed the acquisition of glasses.com from WellPoint Inc. The transaction was previously announced on January 7, 2014.
March
On March 24, 2014, the Group and Google Inc. announced they are joining forces to design, develop and distribute a new breed of eyewear for Glass products. Luxottica's two major proprietary brands, Ray-Ban and Oakley, will be a part of the collaboration with Glass. In particular, the two companies will establish a team of experts devoted to working on the design, development, tooling and engineering of Glass products that straddle the line between high-fashion, lifestyle and innovative technology.
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 7.3 billion in 2013, over 73,400 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, 2014 (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, Oakley "O" Stores and Vaults, David Clulow, GMO 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 various 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. $1.3696 in the first three months of 2014 from Euro 1.00 = U.S. $1.3200 in the same period of 2013. With the acquisition of OPSM, 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 our consolidated profitability. 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 2013 Consolidated Financial Statements.
2
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)
|
Three months ended March 31, |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands of Euro) |
2014 |
% of net sales |
2013 |
% of net sales |
|||||||||
Net sales |
1,842,334 | 100.0 | % | 1,864,119 | 100.0 | % | |||||||
Cost of sales |
664,142 | 36.0 | % | 660,595 | 35.4 | % | |||||||
| | | | | | | | | | | | | |
Gross profit |
1,178,192 | 64.0 | % | 1,203,524 | 64.6 | % | |||||||
| | | | | | | | | | | | | |
Selling |
547,667 | 29.7 | % | 562,020 | 30.1 | % | |||||||
Royalties |
36,003 | 2.0 | % | 36,170 | 1.9 | % | |||||||
Advertising |
108,504 | 5.9 | % | 111,553 | 6.0 | % | |||||||
General and administrative |
215,804 | 11.7 | % | 218,964 | 11.7 | % | |||||||
Total operating expenses |
907,978 | 49.3 | % | 928,706 | 49.8 | % | |||||||
| | | | | | | | | | | | | |
Income from operations |
270,214 | 14.7 | % | 274,817 | 14.7 | % | |||||||
| | | | | | | | | | | | | |
Other income/(expense) |
|||||||||||||
Interest income |
2,831 | 0.2 | % | 2,548 | 0.1 | % | |||||||
Interest expense |
(26,029 | ) | (1.4 | )% | (26,555 | ) | (1.4 | )% | |||||
Othernet |
1,345 | 0.0 | % | 177 | 0.0 | % | |||||||
| | | | | | | | | | | | | |
Income before provision for income taxes |
248,360 | 13.5 | % | 250,987 | 13.5 | % | |||||||
| | | | | | | | | | | | | |
Provision for income taxes |
(89,382 | ) | (4.9 | )% | (90,366 | ) | (4.8 | )% | |||||
| | | | | | | | | | | | | |
Net income |
158,978 | 8.6 | % | 160,621 | 8.6 | % | |||||||
| | | | | | | | | | | | | |
Attributable to |
|||||||||||||
Luxottica Group stockholders |
157,327 | 8.5 | % | 159,234 | 8.5 | % | |||||||
non-controlling interests |
1,651 | 0.1 | % | 1,387 | 0.1 | % | |||||||
| | | | | | | | | | | | | |
NET INCOME |
158,978 | 8.6 | % | 160,621 | 8.6 | % | |||||||
| | | | | | | | | | | | | |
Net Sales. Net sales decreased by Euro 21.8 million, or 1.2% percent, to Euro 1,842.3 million in the first three months of 2014 from Euro 1,864.1 million in the same period of 2013. This decrease was attributable to the fluctuation of various currencies in which we conduct business. Net sales in the manufacturing and wholesale distribution segment in the first three months of 2014 as compared to the same period in 2013 increased by Euro 23.6 million, whereas net sales in the retail distribution segment decreased by Euro 45.4 million for the same period.
Net sales for the retail distribution segment decreased by Euro 45.4 million, or 4.2 percent, to Euro 1,037.7 million in the first three months of 2014 from Euro 1,083.1 million in the same period in 2013. Although there was an overall decrease, the retail segment recorded a 1.9 percent improvement in comparable store sales(5). In particular, comparable store sales for the North American retail operations increased slightly in the first three months of 2014 as compared ot the same period of last year (+0.1 percent). During the same periods the Australian/New Zealand retail operations increased 3.6 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 62.4 million during the period.
3
Net sales to third parties in the manufacturing and wholesale distribution segment increased by Euro 23.6 million, or 3.0 percent, to Euro 804.6 million in the first three months of 2014 from Euro 781.0 million in the same period in 2013. This growth was mainly attributable to increased sales of most of our proprietary brands, in particular Ray-Ban, and of certain licensed brands such as Armani and Tiffany. Almost all of the primary geographic 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 the Brazilian Real, which decreased net sales to third parties in the manufacturing and wholesale distribution segment by Euro 38.2 million.
In the first three months of 2014, net sales in the retail distribution segment accounted for approximately 56.3 percent of total net sales, as compared to approximately 58.1 percent of total net sales for the same period in 2013.
In the first three months of 2014, net sales in our retail distribution segment in the United States and Canada comprised 77.8 percent of our total net sales in this segment as compared to 78.1 percent of our total net sales in the same period of 2013. In U.S. dollars, retail net sales in the United States and Canada slightly decreased by 1.0 percent to USD 1,106.1 million in the first three months of 2014 from USD 1,116.9 million for the same period in 2013. This slight decrease was mainly caused by bad weather conditions occurring in this geographic region during the period. During the first three months of 2014, net sales in the retail distribution segment in the rest of the world (excluding the United States and Canada) comprised 22.2 percent of our total net sales in the retail distribution segment and decreased by 2.9 percent to Euro 230.1 million in the first three months of 2014 from Euro 236.9 million, or 21.9 percent of our total net sales in the retail distribution segment for the same period in 2012. This decrease was primarily due to the negative effect from the fluctuation of certain currencies in which we operate.
In the first three months of 2014, net sales to third parties in our manufacturing and wholesale distribution segment in Europe increased by Euro 19.2 million to Euro 353.8 million, comprising 44.0 percent of our total net sales in this segment, compared to Euro 334.6 million, or 42.8 percent of total net sales in the segment, for the same period in 2013. Net sales to third parties in our manufacturing and wholesale distribution segment in the United States and Canada were USD 285.8 million and comprised 25.9 percent of our total net sales in this segment for the first three months of 2014, compared to USD 270.1 million, or 26.2 percent of total net sales in the segment, for the same period of 2013. 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 2014, net sales to third parties in our manufacturing and wholesale distribution segment in the rest of the world slightly increased by Euro 0.3 million or 0.1 percent to Euro 242.1 million, comprising 30.1 percent of our total net sales in this segment, compared to Euro 241.8 million, or 31.0 percent of our net sales in this segment, in the same period of 2013.
Cost of Sales. Cost of sales increased by Euro 3.5 million, or 0.5 percent, to Euro 664.1 million in the first three months of 2014 from Euro 660.6 million in the same period of 2013. As a percentage of net sales, cost of sales increased to 36.0 percent in the first three months of 2014 as compared to 35.4 percent in the same period of 2013. In the first three months of 2014, the average number of frames produced daily in our facilities was approximately 290,900 as compared to approximately 302,700 in the same period of 2013.
Gross Profit. Our gross profit decreased by Euro 25.3 million, or 2.1 percent, to Euro 1,178.2 million in the first three months of 2014 from Euro 1,203.5 million for the same period of 2013. As a percentage of net sales, gross profit decreased to 64.0 percent in the first three months of 2014 as compared to 64.6 percent for the same period of 2013, due to the factors noted above.
Operating Expenses. Total operating expenses decreased by Euro 20.7 million, or 2.2 percent, to Euro 908.0 million in the first three months of 2014 from Euro 928.7 million in the same period of 2013. As a percentage of net sales, operating expenses decreased to 49.3 percent in the first three months of 2014, from 49.8 percent in the same period of 2013.
4
Selling and advertising expenses (including royalty expenses) decreased by Euro 17.6 million, or 2.5 percent, to Euro 692.2 million in the first three months of 2014 from Euro 709.7 million in the same period of 2013. Selling expenses decreased by Euro 14.4 million, or 2.6 percent. Advertising expenses decreased by Euro 3.1 million, or 2.7 percent. Royalties decreased by Euro 0.2 million, 0.5 percent. As a percentage of net sales, selling and advertising expenses (including royalty expenses) were 37.6 percent in the first three months of 2014 and 38.1 percent in the same period of 2013.
General and administrative expenses, including intangible asset amortization decreased by Euro 3.2 million, or 1.4 percent, to Euro 215.8 million in the first three months of 2014 as compared to Euro 219.0 million in the same period of 2013. As a percentage of net sales, general and administrative expenses were 11.7 percent in the first three months of 2014 and 2013.
Income from Operations. For the reasons described above, income from operations decreased by Euro 4.6 million, or 1.7 percent, to Euro 270.2 million in the first three months of 2014 from Euro 274.8 million in the same period of 2013. As a percentage of net sales, income from operations was 14.7 percent in the first three months of 2014 and 2013.
Other Income (Expense)Net. Other income (expense)net was Euro (21.9) million in the first three months of 2014 as compared to Euro (23.8) million in the same period of 2013. Net interest expense was Euro 23.2 million in the first three months of 2014 as compared to Euro 24.0 million in the same period of 2013.
Net Income. Income before taxes decreased by Euro 2.6 million, or 1.0 percent, to Euro 248.4 million in the first three months of 2014 from Euro 251.0 million in the same period of 2013, for the reasons described above. As a percentage of net sales, income before taxes was 13.5 percent in the first three months of 2014 and 2013.
Net income attributable to non-controlling interests in the first three months of 2014, increased to Euro 1.7 million from Euro 1.4 million in the first three months of 2013.
Net income attributable to Luxottica Group stockholders decreased by Euro 1.9 million, or 1.2 percent, to Euro 157.3 million in the first three months of 2014 from Euro 159.2 million in the same period of 2013. Net income attributable to Luxottica Group stockholders as a percentage of net sales was 8.5 percent in the first three months of 2014 and 2013.
Basic earnings per share were Euro 0.33 and 0.34 in the first three months of 2014 and 2013.
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, 2014 |
As of March 31, 2013 |
|||||||
---|---|---|---|---|---|---|---|---|---|
|
|
(unaudited) |
|||||||
A) |
Cash and cash equivalents at the beginning of the period |
617,995 | 790,093 | ||||||
B) |
Net cash provided by operating activities |
127,432 | 23,761 | ||||||
C) |
Cash used in investing activities |
(110,584 | ) | (187,615 | ) | ||||
D) |
Cash provided by/(used in) financing activities |
514,435 | (51,976 | ) | |||||
E) |
Effect of exchange rate changes on cash and cash equivalents |
114 | 7,831 | ||||||
F) |
Net change in cash and cash equivalents |
531,397 | (208,000 | ) | |||||
| | | | | | | | | |
G) |
Cash and cash equivalents at the end of the period |
1,149,393 | 582,096 | ||||||
| | | | | | | | | |
| | | | | | | | | |
Operating activities. Cash provided by operating activities was Euro 127.4 million and Euro 23.8 million for the first three months of 2014 and 2013, respectively.
5
Depreciation and amortization were Euro 89.6 million in the first three months of 2014 as compared to Euro 90.5 million in the same period of 2013.
Cash used in accounts receivable was Euro (160.7) million in the first three months of 2014, compared to Euro (215.6) million in the same period of 2013. This change was primarily due to the improved timing of accounts receivable collections in the first three months of 2014 as compared to the same period of 2013. Cash generated/(used) in inventory was Euro 21.6 million in the first three months of 2014 as compared to Euro (9.8) million in the same period of 2013. The change in inventory in the first three months of 2013 was mainly due to the launch of the Armani collection which occurred in the second quarter of 2013. The change in inventory in the first three months of 2014 was mainly due to the better management of the Group's inventory and warehouses. Cash used in accounts payable was Euro (62.8) million in the first three months of 2014 compared to Euro (48.4) million in the same period of 2013. The decrease in cash used for accounts payable in 2014 as compared to 2013 is due to better payment terms negotiated by the Group beginning in 2012. Cash generated/(used) in other assets and liabilities, risk funds and employee benefits was Euro 1.9 million and Euro (29.8) million in the first three months of 2014 and 2013, respectively. The cash used in the first three months of 2013 was mainly due to the payments made for advances on royalties. Income taxes paid were Euro (15.1) million in the first three months of 2014 as compared to Euro (14.2) million in the same period of 2013. Interest paid was Euro (34.3) million and Euro (37.3) million in the first three months of 2014 and 2013, respectively.
Investing activities. Our cash used in investing activities was Euro (110.6) million for the first three months of 2014 as compared to Euro (187.6) million for the same period in 2013. The cash used in investing activities in the first three months of 2014 primarily consisted of (i) Euro (50.2) million in capital expenditures, (ii) Euro (31.0) million for the acquisition of intangible assets related to the creation of a new IT platform, (iii) Euro (29.3) million (net of cash acquired), mainly related to the acquisition of glasses.com. 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, (iii) Euro (72.1) million, mainly related to the acquisition of Alain Mikli, and (iv) Euro (45.0) million, related to the acquisition of 36.33 percent stake in Salmoiraghi & Viganò.
Financing activities. Our cash provided by/(used) in financing activities for the first three months of 2014 and 2013 was Euro 514.4 million and Euro (52.0) million, respectively. Cash provided by/(used in) financing activities for the first three months of 2014 consisted primarily of the issuance of a new bond of Euro 500 million. Cash provided by/(used in) financing activities for the first three months of 2013 consisted primarily of Euro (94.5) million in cash used to repay short and long-term debt expiring during the first three months of 2013, partially offset by the proceeds from the exercise of stock options for Euro 44.1 million.
6
OUR CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS (Amounts in thousands of Euro) |
March 31, 2014 (unaudited) |
December 31, 2013 (audited) |
|||||
---|---|---|---|---|---|---|---|
CURRENT ASSETS: |
|||||||
Cash and cash equivalents |
1,149,393 | 617,995 | |||||
Accounts receivablenet |
844,198 | 680,296 | |||||
Inventoriesnet |
681,284 | 698,950 | |||||
Other assets |
263,855 | 238,761 | |||||
| | | | | | | |
Total current assets |
2,938,729 | 2,236,002 | |||||
NON-CURRENT ASSETS: |
|||||||
Property, plant and equipmentnet |
1,181,955 | 1,183,236 | |||||
Goodwill |
3,063,790 | 3,045,216 | |||||
Intangible assetsnet |
1,267,965 | 1,261,137 | |||||
Investments |
58,177 | 58,108 | |||||
Other assets |
122,625 | 126,583 | |||||
Deferred tax assets |
180,213 | 172,623 | |||||
| | | | | | | |
Total non-current assets |
5,874,725 | 5,846,903 | |||||
| | | | | | | |
TOTAL ASSETS |
8,813,454 | 8,082,905 | |||||
| | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY |
March 31, 2014 (unaudited) |
December 31, 2013 (audited) |
|||||
---|---|---|---|---|---|---|---|
CURRENT LIABILITIES: |
|||||||
Short term borrowings |
65,182 | 44,921 | |||||
Current portion of long-term debt |
312,220 | 318,100 | |||||
Accounts payable |
617,599 | 681,151 | |||||
Income taxes payable |
101,961 | 9,477 | |||||
Short term provisions for risks and other charges |
132,465 | 123,688 | |||||
Other liabilities |
528,823 | 523,050 | |||||
| | | | | | | |
Total current liabilities |
1,758,251 | 1,700,386 | |||||
NON-CURRENT LIABILITIES: |
|||||||
Long-term debt |
2,201,206 | 1,716,410 | |||||
Employee benefits |
100,198 | 76,399 | |||||
Deferred tax liabilities |
252,578 | 268,078 | |||||
Long term provisions for risks and other charges |
98,241 | 97,544 | |||||
Other liabilities |
75,371 | 74,151 | |||||
| | | | | | | |
Total non-current liabilities |
2,727,594 | 2,232,583 | |||||
STOCKHOLDERS' EQUITY: |
|||||||
Luxottica Group stockholders' equity |
4,319,599 | 4,142,828 | |||||
Non-controlling interests |
8,009 | 7,107 | |||||
| | | | | | | |
Total stockholders' equity |
4,327,609 | 4,149,936 | |||||
| | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
8,813,454 | 8,082,905 | |||||
| | | | | | | |
As of March 31, 2014, total assets increased by Euro 730.6 million to Euro 8,813.5 million, compared to Euro 8,082.9 million as of December 31, 2013.
In the first three months of 2014, non-current assets increased by Euro 27.8 million, due to increases in intangible assets (including goodwill) of Euro 25.4 million and deferred tax assets of Euro 7.6 million,
7
partially offset by decreases in other assets of Euro 4.0 million and in property, plant and equipment of Euro 1.3 million.
The increase in intangible assets was due to capitalized software and other intangible asset additions of Euro 30.9 million, acquisitions that occurred in the first three months of 2014 of Euro 22.3 million, effects of foreign currency fluctuations from December 2013 to March 2014 of Euro 9.1 million, all of which were partially offset by amortization of assets in the period of Euro 36.9 million.
The decrease in property, plant and equipment was due to the depreciation for the period of Euro 52.7 million, to the negative impact of foreign currency fluctuations from December 2013 to March 2014 of Euro 1.5 million, to the disposals for the period of Euro 2.0 million all of which were partially offset by capital additions in the period of Euro 50.2 million.
As of March 31, 2014 as compared to December 31, 2013:
Our net financial position as of March 31, 2014 and December 31, 2013 was as follows:
(Amounts in thousands of Euro) |
March 31, 2014 (unaudited) |
December 31, 2013 (audited) |
|||||
---|---|---|---|---|---|---|---|
Cash and cash equivalents |
1,149,393 | 617,995 | |||||
Bank overdrafts |
(65,182 | ) | (44,920 | ) | |||
Current portion of long-term debt |
(312,220 | ) | (318,100 | ) | |||
Long-term debt |
(2,201,206 | ) | (1,716,410 | ) | |||
| | | | | | | |
Total |
(1,429,215 | ) | (1,461,435 | ) | |||
Bank overdrafts consist of the utilized portion of short-term uncommitted revolving credit lines borrowed by various subsidiaries of the Group.
As of March 31, 2014, Luxottica together with our wholly-owned Italian subsidiaries, had credit lines aggregating Euro 797.9 million. The interest rate is a floating rate of EURIBOR plus a margin on average of approximately 0.9 percent. At March 31, 2014, Euro 59.7 million was utilized under these credit lines.
As of March 31, 2014, our wholly-owned subsidiary Luxottica U.S. Holdings Corp. maintained unsecured lines of credit with an aggregate maximum availability of Euro 99.9 million (USD 137.7 million converted at applicable exchange rate for the three-month period ended March 31, 2014). The interest is at a floating rate of approximately LIBOR plus 50 basis points. At March 31, 2014, Euro 4.7 million was utilized under these credit lines.
8
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, 2014 (unaudited).
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.
5. SUBSEQUENT EVENTS
For further details regarding subsequent events, please refer to Note 33 to the Condensed Consolidated Financial Statements as of March 31, 2014 (unaudited).
6. 2014 OUTLOOK
The financial results reported for the first three months of 2014 lead management to an optimistic outlook for the full fiscal year primarily driven by the strong performance of the Group's brand portfolio.
NON-IFRS MEASURES
Adjusted measures
In this Management Report we refer to 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.
In 2013, we made such adjustments to the following measures: operating income, operating margin, EBITDA and EBITDA margin. We have also adjusted net income, earnings per share, operating expenses, selling expenses and general and administrative expenses. We adjusted the above items by excluding non-recurring costs related to (i) the reorganization of the acquired Alain Mikli business for Euro 9.0 million (Euro 5.9 million net of the tax effect), (ii) the tax audit of Luxottica S.r.l. (fiscal year 2007) for Euro 26.7 million and (iii) the tax audit of Luxottica S.r.l. (fiscal years subsequent to 2007) for Euro 40.0 million.
The adjusted measures referenced above are not measures of performance in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board and endorsed by the European Union. 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 in order to provide a supplemental view of operations that exclude items that are unusual, infrequent or unrelated to our ongoing operations.
9
Non-IFRS measures such as EBITDA, EBITDA margin, free cash flows and the ratio of net debt to EBITDA are included in this Management Report in order to:
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 to 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. For additional information on Group's non-IFRS measures used in this report, see "NON-IFRS MEASURESAdjusted Measures" set forth above.
EBITDA and EBITDA margin are not meant to be considered in isolation or as a substitute for items appearing on our financial statements prepared in accordance with IFRS. Rather, these non-IFRS measures should be used as a supplement to IFRS results to assist the reader in better understanding the operational performance of the Group.
The Group cautions that these measures are not defined terms under IFRS and their definitions should be carefully reviewed and understood by investors.
Investors should be aware that our method of calculating EBITDA may differ from methods used by other companies. We recognize that the usefulness of EBITDA has certain limitations, including:
10
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-IAS/IFRS Measure: EBITDA and EBITDA margin
Millions of Euro |
1Q 2013 |
1Q 2014 |
FY 2013 |
LTM March 2014 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net income/(loss) |
159.2 | 157.3 | 544.7 | 542.8 | |||||||||
(+) |
|||||||||||||
Net income attributable to non-controlling interest |
1.4 |
1.7 |
4.2 |
4.4 |
|||||||||
(+) |
|||||||||||||
Provision for income taxes |
90.4 |
89.4 |
407.5 |
406.5 |
|||||||||
(+) |
|||||||||||||
Other (income)/expense |
23.8 |
21.9 |
99.3 |
97.3 |
|||||||||
(+) |
|||||||||||||
Depreciation and amortization |
90.5 |
89.6 |
366.6 |
365.7 |
|||||||||
| | | | | | | | | | | | | |
(+) |
|||||||||||||
EBITDA |
365.3 |
359.9 |
1,422.3 |
1,416.8 |
|||||||||
(=) |
|||||||||||||
Net sales |
1,864.1 |
1,842.3 |
7,312.6 |
7,290.8 |
|||||||||
(/) |
|||||||||||||
EBITDA margin |
19.6 |
% |
19.5 |
% |
19.5 |
% |
19.4 |
% |
|||||
(=) |
|||||||||||||
Non-IAS/IFRS Measure: Adjusted EBITDA and Adjusted EBITDA margin
Millions of Euro |
1Q 2013 |
1Q 2014 |
FY 2013(1) |
LTM March 2014(1) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Adjusted net income/(loss) |
159.2 | 157.3 | 617.3 | 615.4 | |||||||||
(+) |
|||||||||||||
Net income attributable to non-controlling interest |
1.4 |
1.7 |
4.2 |
4.4 |
|||||||||
(+) |
|||||||||||||
Adjusted provision for income taxes |
90.4 |
89.4 |
343.9 |
342.9 |
|||||||||
(+) |
|||||||||||||
Other (income)/expense |
23.8 |
21.9 |
99.3 |
97.3 |
|||||||||
(+) |
|||||||||||||
Depreciation and amortization |
90.5 |
89.6 |
366.6 |
365.7 |
|||||||||
(+) |
|||||||||||||
| | | | | | | | | | | | | |
Adjusted EBITDA |
365.3 |
359.9 |
1,431.3 |
1,425.8 |
|||||||||
(=) |
|||||||||||||
Net sales |
1,864.1 |
1,842.3 |
7,312.6 |
7,290.8 |
|||||||||
(/) |
|||||||||||||
Adjusted EBITDA margin |
19.6 |
% |
19.5 |
% |
19.6 |
% |
19.6 |
% |
|||||
(=) |
|||||||||||||
The adjusted figures exclude the following:
11
Free Cash Flow
Free cash flow represents EBITDA, as defined above, 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. 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 meant to be considered in isolation or as a substitute for items appearing on our financial statements prepared in accordance with IFRS. Rather, this non-IFRS measure should be used as a supplement to IFRS results to assist the reader in better understanding the operational performance of the Group. For additional information on Group's non-IFRS measures used in this report, see "NON-IFRS MEASURESAdjusted Measures" set forth above.
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) |
Q1 2014 |
|||
---|---|---|---|---|
EBITDA(1) |
360 | |||
D working capital |
(182 | ) | ||
Capex |
(81 | ) | ||
| | | | |
Operating cash flow |
97 | |||
Financial charges(2) |
(23 | ) | ||
Taxes |
(15 | ) | ||
Othernet |
1 | |||
| | | | |
Free cash flow |
60 | |||
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. The ratio of net debt to EBITDA is a measure used by management to assess the Group's
12
level of leverage, which affects our ability to refinance our debt as it matures and incur additional indebtedness to invest in new business opportunities. The ratio also allows management to assess the cost of existing debt since it affects the interest rates charged by the Company's lenders.
EBITDA, as defined above, and the 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. For additional information on Group's non-IFRS measures used in this report, see "NON-IFRS MEASURESAdjusted Measures" set forth above.
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 the ratio of net debt to EBITDA as evaluative tool may have certain limitations, including that the ratio of net debt to EBITDA is net of cash and cash equivalents, restricted cash and short-term investments, thereby reducing our debt position.
Because we may not be able to use our cash to reduce our debt on a dollar-for-dollar basis, this measure may have material limitations. We compensate for the foregoing limitations by using EBITDA and the ratio of net debt to EBITDA as two of several comparative tools, together with IFRS measurements, to assist in the evaluation of our operating performance and leverage.
See the table below for a reconciliation of net debt to long-term debt, which is the most directly comparable IFRS financial measure, as well as the calculation of the ratio of net debt to EBITDA. For a reconciliation of EBITDA to its most directly comparable IFRS measure, see the table on the earlier page.
Non-IFRS Measure: Net debt and Net debt/EBITDA
(Amounts in millions of Euro) |
March 31, 2014 |
FY 2013 |
|||||
---|---|---|---|---|---|---|---|
Long-term debt |
2,201.2 | 1,716.4 | |||||
(+) |
|||||||
Current portion of long-term debt |
312.2 |
318.1 |
|||||
(+) |
|||||||
Bank overdrafts |
65.2 |
44.9 |
|||||
(+) |
|||||||
Cash |
(1,149.4 |
) |
(618.0 |
) |
|||
(-) |
|||||||
Net debt |
1,429.2 |
1,461.4 |
|||||
(=) |
|||||||
LTM EBITDA |
1,416.8 |
1,422.3 |
|||||
Net debt/EBITDA |
1.0 |
x |
1.0 |
x |
|||
Net debt @ avg. exchange rates(1) |
1,441.5 |
1,475.9 |
|||||
Net debt @ avg. exchange rates(1)/EBITDA |
1.0 |
x |
1.0 |
x |
|||
13
Non-IFRS Measure: Net debt and Net debt/Adjusted EBITDA
(Amounts in millions of Euro) |
March 31, 2014 |
FY 2013(2) |
|||||
---|---|---|---|---|---|---|---|
Long-term debt |
2,201.2 | 1,716.4 | |||||
(+) |
|||||||
Current portion of long-term debt |
312.2 |
318.1 |
|||||
(+) |
|||||||
Bank overdrafts |
65.2 |
44.9 |
|||||
(+) |
|||||||
Cash |
(1,149.4 |
) |
(618.0 |
) |
|||
(-) |
|||||||
Net debt |
1,429.2 |
1,461.4 |
|||||
(=) |
|||||||
LTM Adjusted EBITDA |
1,425.8 |
1,431.3 |
|||||
Net debt/LTM Adjusted EBITDA |
1.0 |
x |
1.0 |
x |
|||
Net debt @ avg. exchange rates(1) |
1,441.5 |
1,475.9 |
|||||
Net debt @ avg. exchange rates(1)/LTM EBITDA |
1.0 |
x |
1.0 |
x |
|||
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.
14
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Amounts in thousands of Euro) |
Note reference |
March 31, 2014 (unaudited) |
Of which related parties (note 29) |
December 31, 2013 (audited) |
Of which related parties (note 29) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS |
||||||||||||||||
CURRENT ASSETS: |
||||||||||||||||
Cash and cash equivalents |
6 | 1,149,393 | 617,995 | | ||||||||||||
Accounts receivable |
7 | 844,198 | 11,508 | 680,296 | 11,616 | |||||||||||
Inventories |
8 | 681,284 | 698,950 | | ||||||||||||
Other assets |
9 | 263,855 | 652 | 238,761 | 931 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current assets |
2,938,729 | 12,160 | 2,236,002 | 12,547 | ||||||||||||
NON-CURRENT ASSETS: |
||||||||||||||||
Property, plant and equipment |
10 | 1,181,955 | 1,183,236 | | ||||||||||||
Goodwill |
11 | 3,063,790 | 3,045,216 | | ||||||||||||
Intangible assets |
11 | 1,267,965 | 1,261,137 | | ||||||||||||
Investments |
12 | 58,177 | 48,928 | 58,108 | 49,097 | |||||||||||
Other assets |
13 | 122,625 | 803 | 126,583 | 778 | |||||||||||
Deferred tax assets |
14 | 180,213 | 172,623 | | ||||||||||||
| | | | | | | | | | | | | | | | |
Total non-current assets |
5,874,725 | 49,731 | 5,846,903 | 49,875 | ||||||||||||
TOTAL ASSETS |
8,813,454 | 61,891 | 8,082,905 | 62,422 | ||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||||||
CURRENT LIABILITIES: |
||||||||||||||||
Short-term borrowings |
15 | 65,182 | | 44,921 | | |||||||||||
Current portion of long-term debt |
16 | 312,220 | | 318,100 | | |||||||||||
Accounts payable |
17 | 617,599 | 10,709 | 681,151 | 10,067 | |||||||||||
Income taxes payable |
18 | 101,961 | | 9,477 | | |||||||||||
Short term provisions for risks and other charges |
19 | 132,465 | | 123,688 | | |||||||||||
Other liabilities |
20 | 528,823 | 22 | 523,050 | 72 | |||||||||||
| | | | | | | | | | | | | | | | |
Total current liabilities |
1,758,251 | 10,730 | 1,700,386 | 10,095 | ||||||||||||
NON-CURRENT LIABILITIES: |
||||||||||||||||
Long-term debt |
21 | 2,201,206 | | 1,716,410 | | |||||||||||
Employee benefits |
22 | 100,198 | | 76,399 | | |||||||||||
Deferred tax liabilities |
14 | 252,578 | | 268,078 | | |||||||||||
Long term provisions for risks and other charges |
23 | 98,241 | | 97,544 | | |||||||||||
Other liabilities |
24 | 75,371 | | 74,151 | | |||||||||||
| | | | | | | | | | | | | | | | |
Total non-current liabilities |
2,727,594 | | 2,232,583 | | ||||||||||||
STOCKHOLDERS' EQUITY: |
||||||||||||||||
Capital stock |
25 | 28,912 | | 28,653 | | |||||||||||
Legal reserve |
25 | 5,711 | | 5,711 | | |||||||||||
Reserves |
25 | 4,201,525 | | 3,646,830 | | |||||||||||
Treasury shares |
25 | (73,875 | ) | | (83,060 | ) | | |||||||||
Net income |
25 | 157,327 | | 544,696 | | |||||||||||
| | | | | | | | | | | | | | | | |
Luxottica Group stockholders' equity |
25 | 4,319,599 | | 4,142,828 | | |||||||||||
Non-controlling interests |
26 | 8,009 | | 7,107 | | |||||||||||
| | | | | | | | | | | | | | | | |
Total stockholders' equity |
4,327,609 | | 4,149,936 | | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
8,813,454 | 10,730 | 8,082,905 | 10,095 | ||||||||||||
15
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands of Euro)(1) |
Note reference |
Three Months ended March 31, 2014 (unaudited) |
Of which related parties (note 29) |
Three Months ended March 31, 2013 (unaudited) |
Of which related parties (note 29) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales |
27 | 1,842,334 | 4,241 | 1,864,119 | 1,237 | |||||||||||
Cost of sales |
27 | 664,142 | 12,922 | 660,595 | 12,866 | |||||||||||
Gross profit |
1,178,192 | (8,861 | ) | 1,203,524 | (11,628 | ) | ||||||||||
| | | | | | | | | | | | | | | | |
Selling |
27 | 547,667 | | 562,020 | 1 | |||||||||||
Royalties |
27 | 36,003 | 255 | 36,170 | 308 | |||||||||||
Advertising |
27 | 108,504 | 24 | 111,553 | 99 | |||||||||||
General and administrative |
27 | 215,804 | 221 | 218,964 | | |||||||||||
Total operating expenses |
907,978 | 500 | 928,707 | 407 | ||||||||||||
| | | | | | | | | | | | | | | | |
Income from operations |
270,214 | (9,182 | ) | 274,817 | (12,036 | ) | ||||||||||
| | | | | | | | | | | | | | | | |
Other income/(expense) |
||||||||||||||||
Interest income |
27 | 2,831 | | 2,548 | | |||||||||||
Interest expense |
27 | (26,029 | ) | | (26,555 | ) | | |||||||||
Othernet |
27 | 1,345 | 1 | 177 | 1 | |||||||||||
| | | | | | | | | | | | | | | | |
Income before provision for income taxes |
248,360 | (9,180 | ) | 250,987 | (12,035 | ) | ||||||||||
| | | | | | | | | | | | | | | | |
Provision for income taxes |
27 | (89,382 | ) | | (90,366 | ) | | |||||||||
Net income |
158,978 | | 160,621 | | ||||||||||||
| | | | | | | | | | | | | | | | |
Of which attributable to: |
||||||||||||||||
Luxottica Group stockholders |
157,327 | | 159,233 | | ||||||||||||
Non-controlling interests |
1,651 | | 1,387 | | ||||||||||||
| | | | | | | | | | | | | | | | |
NET INCOME |
158,978 | 160,621 | ||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Weighted average number of shares outstanding: |
||||||||||||||||
Basic |
473,699,357 | 469,697,345 | ||||||||||||||
Diluted |
477,383,188 | 472,742,228 | ||||||||||||||
EPS: |
||||||||||||||||
Basic |
0.33 | 0.34 | ||||||||||||||
Diluted |
0.33 | 0.34 |
16
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Amounts in thousands of Euro) |
Three Months ended March 31, 2014 (unaudited) |
Three Months ended March 31, 2013 (unaudited) |
|||||
---|---|---|---|---|---|---|---|
Net income |
158,978 | 160,621 | |||||
Other comprehensive income: |
|||||||
Items that may be reclassified subsequently to profit or loss: |
|||||||
Cash flow hedgenet of tax of Euro 0.0 million and 0.2 million as of March 31, 2014 and March 31, 2013, respectively |
| 150 | |||||
Currency translation differences |
16,158 | 99,813 | |||||
| | | | | | | |
Total items that may be reclassified subsequently to profit or loss: |
16,158 | 99,963 | |||||
| | | | | | | |
Items that will not be reclassified to profit or loss: |
|||||||
Actuarial gain on defined benefit plansnet of tax of Euro 11.1 million and Euro 14.1 million as of March 31, 2014 and March 31, 2013, respectively |
(15,632 | ) | 26,959 | ||||
| | | | | | | |
Total items that will not be reclassified to profit or loss |
(15,632 | ) | 26,959 | ||||
| | | | | | | |
Total other comprehensive incomenet of tax |
526 | 126,922 | |||||
| | | | | | | |
Total comprehensive income for the period |
159,505 | 287,543 | |||||
| | | | | | | |
Attributable to: |
|||||||
Luxottica Group stockholders' equity |
157,549 | 286,029 | |||||
Non-controlling interests |
1,956 | 1,514 | |||||
| | | | | | | |
Total comprehensive income for the period |
159,505 | 287,543 | |||||
| | | | | | | |
| | | | | | | |
17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODS ENDED MARCH 31, 2014 AND 2013 (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, 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 | | |||||||||||||||||||||
Tax benefit on stock options |
| | | 6,192 | | | | | 6,192 | | |||||||||||||||||||||
Granting of treasury shares to employees |
| | | | (8,869 | ) | | | 8,869 | | | ||||||||||||||||||||
Change in the consolidation perimeter |
| | | | | | | | | | |||||||||||||||||||||
Dividends |
| | | | | | | | | (1,020 | ) | ||||||||||||||||||||
Balance as of March 31, 2013 |
475,710,833 | 28,542 | 5,623 | 378,924 | 3,810,955 | 247,133 | (64,538 | ) | (83,060 | ) | 4,323,579 | 12,363 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance as of January 1, 2014 |
477,560,673 | 28,653 | 5,711 | 412,063 | 3,958,076 | 268,833 | (447,447 | ) | (83,060 | ) | 4,142,828 | 7,107 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Comprehensive Income as of March 31, 2014 |
| | | | 141,695 | | 15,854 | | 157,549 | 1,956 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options |
4,322,476 | 259 | | 5,895 | | | | | 6,154 | | |||||||||||||||||||||
Non-cash stock based compensation |
| | | | | 10,631 | | | 10,631 | | |||||||||||||||||||||
Excess tax benefit on stock options |
| | | 2,437 | | | | | 2,437 | | |||||||||||||||||||||
Granting of treasury shares to employees |
| | | | (9,185 | ) | | | 9,185 | | | ||||||||||||||||||||
Dividends |
| | | | | | | | | (1,054 | ) | ||||||||||||||||||||
Balance as of March 31, 2014 |
481,883,149 | 28,912 | 5,711 | 420,395 | 4,090,586 | 279,464 | (431,593 | ) | (73,875 | ) | 4,319,599 | 8,009 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
18
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of Euro) |
Note reference |
March 31, 2014 (unaudited) |
March 31, 2013 (unaudited) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Income before provision for income taxes |
248,360 | 250,987 | ||||||||
| | | | | | | | | | |
Stock-based compensation |
10,631 | 6,666 | ||||||||
Depreciation and amortization |
10/11 | 89,637 | 90,529 | |||||||
Net loss fixed assets and other |
10 | 2,097 | 4,207 | |||||||
Financial charges |
26,029 | 26,555 | ||||||||
Changes in accounts receivable |
(160,690 | ) | (215,641 | ) | ||||||
Changes in inventories |
21,613 | (9,848 | ) | |||||||
Changes in accounts payable |
(62,765 | ) | (48,398 | ) | ||||||
Changes in other assets/liabilities |
1,864 | (29,793 | ) | |||||||
| | | | | | | | | | |
Total adjustments |
(71,584 | ) | (175,723 | ) | ||||||
| | | | | | | | | | |
Cash provided by operating activities |
176,776 | 75,264 | ||||||||
Interest paid |
(34,258 | ) | (37,340 | ) | ||||||
Tax paid |
(15,086 | ) | (14,164 | ) | ||||||
| | | | | | | | | | |
Net cash provided by operating activities |
127,432 | 23,761 | ||||||||
| | | | | | | | | | |
Additions of property, plant and equipment |
10 | (50,208 | ) | (42,648 | ) | |||||
Purchases of businessesnet of cash acquired(*) |
4 | (29,329 | ) | (72,921 | ) | |||||
Increase in investment(**) |
12 | | (45,000 | ) | ||||||
Additions to intangible assets |
11 | (31,047 | ) | (27,046 | ) | |||||
| | | | | | | | | | |
Cash used in investing activities |
(110,584 | ) | (187,615 | ) | ||||||
19
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of Euro) |
Note reference |
March 31, 2014 (unaudited) |
March 31, 2013 (unaudited) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Long-term debt: |
||||||||||
Proceeds |
21 | 495,276 | 2,900 | |||||||
Repayments |
21 | (7,072 | ) | (94,460 | ) | |||||
Short-term debt: |
||||||||||
Proceeds |
21,132 | | ||||||||
Repayments |
| (3,534 | ) | |||||||
Exercise of stock options |
25 | 6,153 | 44,138 | |||||||
Dividends |
(1,054 | ) | (1,020 | ) | ||||||
| | | | | | | | | | |
Cash (used in)/provided financing activities |
514,435 | (51,976 | ) | |||||||
| | | | | | | | | | |
Increase (decrease) in cash and cash equivalents |
531,283 | (215,831 | ) | |||||||
| | | | | | | | | | |
Cash and cash equivalents, beginning of the period |
617,995 | 790,093 | ||||||||
| | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents |
114 | 7,831 | ||||||||
| | | | | | | | | | |
Cash and cash equivalents, end of the period |
1,149,393 | 582,096 | ||||||||
20
Luxottica Group S.p.A.
Headquarters and registered office Via C. Cantù 220123 Milan, Italy
Capital Stock: € 28,676,710.38
authorized and issued
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of MARCH 31, 2014
(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, 2014, approved the Group's interim condensed consolidated financial statements as of March 31, 2014 (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.
IFRS are all the international accounting standards ("IAS") and all the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), previously named "Standing Interpretation Committee" (SIC).
This unaudited Financial Report should be read in connection with the consolidated financial statements as of December 31, 2013, which were prepared in accordance with IFRS, as endorsed by the European Union.
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, 2014.
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, 2013, 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.
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, in particular, over the next twelve months.
21
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2014
(UNAUDITED)
2. BASIS OF PREPARATION (Continued)
This Financial Report is 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 Notes to the Condensed Consolidated Financial Statements as of March 31, 2014.
The financial statements were prepared using the historical cost convention, with the exception of certain financial assets and liabilities for which measurement at fair value is required.
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 this report required management to use estimates and assumptions that affected 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
There are no new accounting principles issued or modified during the first three months of 2014. For the new accounting principles applicable starting from January 1, 2014, please refer to Note 2 of Notes to the Audited Consolidated Financial Statements as of December 31, 2013.
4. BUSINESS COMBINATIONS
On January 31, 2014, the Company completed the acquisition of glasses.com. The consideration for the acquisition was USD 40 million (approximately Euro 29 million). The difference between the consideration paid and the net assets acquired was provisionally recorded as goodwill and intangible assets. In accordance with IFRS 3Business combinations, the value of assets acquired and liabilities assumed will be definitively determined within 12 months after the acquisition date.
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 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. Total assets for each reporting
22
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2014
(UNAUDITED)
5. SEGMENT REPORTING (Continued)
segment are no longer disclosed as they are not key indicators which are monitored in order to assess the Group's financial 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, 2014 (unaudited) |
|||||||||||||
Net sales(a) |
804,615 | 1,037,719 | | 1,842,334 | |||||||||
Income from operations(b) |
193,944 | 124,421 | (48,151 | ) | 270,214 | ||||||||
Interest income |
2,831 | ||||||||||||
Interest expense |
(26,029 | ) | |||||||||||
Other-net |
1,345 | ||||||||||||
Income before provision for income taxes |
248,360 | ||||||||||||
Provision for income taxes |
(89,382 | ) | |||||||||||
Net income |
158,978 | ||||||||||||
Of which attributable to: |
|||||||||||||
Luxottica stockholders |
157,327 | ||||||||||||
Non-controlling interests |
1,651 | ||||||||||||
Capital expenditures |
33,672 | 47,302 | | 80,974 | |||||||||
Depreciation and amortization |
27,800 | 42,554 | 19,284 | 89,638 | |||||||||
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 |
160,621 | ||||||||||||
Of which attributable to: |
|||||||||||||
Luxottica Stockholders |
159,233 | ||||||||||||
Non-controlling Interests |
1,387 | ||||||||||||
Capital expenditures |
28,393 | 40,437 | | 68,830 | |||||||||
Depreciation and amortization |
25,333 | 43,535 | 21,661 | 90,529 | |||||||||
23
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2014
(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, 2014 (unaudited) |
As of December 31, 2013 (audited) |
|||||
---|---|---|---|---|---|---|---|
Cash at bank |
1,141,304 | 607,499 | |||||
Checks |
5,279 | 7,821 | |||||
Cash and cash equivalents on hand |
2,810 | 2,626 | |||||
| | | | | | | |
Total |
1,149,393 | 617,995 | |||||
| | | | | | | |
| | | | | | | |
7. ACCOUNTS RECEIVABLE
(Amounts in thousands of Euro) |
As of March 31, 2014 (unaudited) |
As of December 31, 2013 (audited) |
|||||
---|---|---|---|---|---|---|---|
Accounts receivable |
883,676 | 715,527 | |||||
Allowance for doubtful accounts |
(39,478 | ) | (35,231 | ) | |||
| | | | | | | |
Total |
844,198 | 680,296 | |||||
| | | | | | | |
| | | | | | | |
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, 2014 (unaudited) |
As of December 31, 2013 (audited) |
|||||
---|---|---|---|---|---|---|---|
Raw materials |
162,899 | 163,809 | |||||
Work in process |
37,816 | 36,462 | |||||
Finished goods |
600,743 | 612,814 | |||||
Less: inventory obsolescence reserves |
(120,173 | ) | (114,135 | ) | |||
| | | | | | | |
Total |
681,284 | 698,950 | |||||
| | | | | | | |
| | | | | | | |
24
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2014
(UNAUDITED)
9. OTHER ASSETS
(Amounts in thousands of Euro) |
As of March 31, 2014 (unaudited) |
As of December 31, 2013 (audited) |
|||||
---|---|---|---|---|---|---|---|
Sales taxes receivable |
48,200 | 47,105 | |||||
Short-term borrowings |
1,450 | 770 | |||||
Accrued income |
1,726 | 1,418 | |||||
Other financial assets |
32,716 | 41,293 | |||||
| | | | | | | |
Total financial assets |
84,092 | 90,586 | |||||
| | | | | | | |
Income tax receivable |
52,727 | 46,554 | |||||
Advances to suppliers |
25,865 | 19,546 | |||||
Prepaid expenses |
70,456 | 51,469 | |||||
Other assets |
30,714 | 30,606 | |||||
| | | | | | | |
Total other assets |
179,762 | 148,175 | |||||
| | | | | | | |
Total other current assets |
263,855 | 238,761 | |||||
| | | | | | | |
| | | | | | | |
Other financial assets included amounts (i) recorded in the North American Retail Division totaling Euro 8.9 million as of March 31, 2014 (Euro 12.1 million as of December 31, 2013) and (ii) derivative financial assets of Euro 2.8 million as of March 31, 2014 (Euro 6.0 million as of December 31, 2013).
Other assets include the short-term portion of advance payments made to certain designers for future contracted minimum royalties of Euro 30.7 million as of March 31, 2014 (Euro 30.6 million as of December 31, 2013).
Prepaid expenses mainly relate to the payments of monthly rental expenses incurred by the Group's North America and Asia-Pacific retail divisions.
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.
25
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2014
(UNAUDITED)
NON-CURRENT ASSETS
10. PROPERTY, PLANT AND EQUIPMENT
Changes in items of property, plant and equipment during the first three months of 2013 and 2014 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, 2013 |
||||||||||||||||
Historical cost |
913,679 | 1,074,258 | 38,087 | 615,957 | 2,641,981 | |||||||||||
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 | |||||||||||
(Amounts in thousands of Euro) |
Land and buildings, including leasehold improvements |
Machinery and equipment |
Aircraft |
Other equipment |
Total |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2014 |
||||||||||||||||
Historical cost |
910,968 | 1,107,816 | 38,145 | 612,555 | 2,669,485 | |||||||||||
Accumulated depreciation |
(454,957 | ) | (681,918 | ) | (11,894 | ) | (337,480 | ) | (1,486,249 | ) | ||||||
| | | | | | | | | | | | | | | | |
Balance as of January 1, 2014 |
456,011 | 425,898 | 26,252 | 275,075 | 1,183,236 | |||||||||||
| | | | | | | | | | | | | | | | |
Increases |
7,251 | 12,334 | | 30,623 | 50,208 | |||||||||||
Decreases |
(288 | ) | (1,319 | ) | | (413 | ) | (2,020 | ) | |||||||
Business combinations |
4 | 4,100 | | 488 | 4,592 | |||||||||||
Translation differences and other |
1,180 | 10,418 | | (12,970 | ) | (1,372 | ) | |||||||||
Depreciation expense |
(14,686 | ) | (23,828 | ) | (385 | ) | (13,790 | ) | (52,688 | ) | ||||||
| | | | | | | | | | | | | | | | |
Balance as of March 31, 2014 |
449,471 | 427,604 | 25,867 | 279,013 | 1,181,955 | |||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Historical cost |
913,626 | 1,128,201 | 38,145 | 626,782 | 2,706,754 | |||||||||||
Accumulated depreciation |
(464,155 | ) | (700,597 | ) | (12,278 | ) | (347,769 | ) | (1,524,799 | ) | ||||||
| | | | | | | | | | | | | | | | |
Balance as of March 31, 2014 |
449,471 | 427,604 | 25,867 | 279,013 | 1,181,955 | |||||||||||
26
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2014
(UNAUDITED)
10. PROPERTY, PLANT AND EQUIPMENT (Continued)
The increase in property, plant and equipment from business combinations is mainly due to the acquisition of glasses.com. For further details abount the effects of the acquisition of glasses.com please refer to Note 4"Business combinations."
Of the total depreciation expense of Euro 52.7 million for the first three months of 2014 (Euro 53.1 million in the same period of 2013), Euro 19.3 million (Euro 17.4 million in the same period of 2013) is included in cost of sales, Euro 26.2 million (Euro 28.5 million in the same period of 2013) in selling expenses, Euro 1.6 million (Euro 1.1 million in the same period of 2013) in advertising expenses and Euro 5.5 million (Euro 6.1 million in the same period of 2013) in general and administrative expenses.
Capital expenditures in the first three months of 2014 and 2013 mainly relate to routine technology upgrades to the manufacturing infrastructure, opening of new stores and the remodeling of older stores with leases that were extended during their respective periods.
Other equipment includes Euro 74.8 million for assets under construction at March 31, 2014 (Euro 70.9 million at December 31, 2013).
Leasehold improvements totaled Euro 143.8 million and Euro 149.5 million at March 31, 2014 and December 31, 2013, respectively.
11. GOODWILL AND INTANGIBLE ASSETS
Changes in intangible assets in the first three months of 2013 and 2014 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, 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 | 21,446 | 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 | |||||||||||||
27
Notes to the
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of MARCH 31, 2014
(UNAUDITED)
11. GOODWILL AND INTANGIBLE ASSETS (Continued)
(Amounts in thousands of Euro) |
Goodwill |
Trade names and Trademarks |
Customer relations, contracts and lists |
Franchise agreements |
Other |
Total |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of January 1, 2014 |
|||||||||||||||||||
Historical cost |
3,045,216 | 1,490,809 | 231,621 | 20,811 | 624,468 | 5,412,925 | |||||||||||||
Accumulated amortization |
| (729,915 | ) | (93,148 | ) | (9,109 | ) | (274,400 | ) | (1,106,572 | ) | ||||||||
| | | | | | | | | | | | | | | | | | | |
Balance as of January 1, 2014 |
3,045,216 | 760,894 | 138,473 | 11,702 | 350,068 | 4,306,353 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Increases |
| 6 | | | 30,917 | 30,923 | |||||||||||||
Decreases |
| | | | (43 | ) | (43 | ) | |||||||||||
Intangible assets from business acquisitions |
12,720 | 876 | | | 8,733 | 22,329 | |||||||||||||
Translation differences and other |
5,854 | 3,246 | 642 | 4 | (604 | ) | 9,143 | ||||||||||||
Amortization expense |
| (15,753 | ) | (3,390 | ) | (262 | ) | (17,543 | ) | (36,949 | ) | ||||||||