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

Item 1    Management report on the interim consolidated financial results as of March 31, 2014 (unaudited)

    1  


Item 2    Financial Statements:


 

 


 

 



 


–Consolidated Statement of Financial Position for the periods ended March 31, 2014 (unaudited) and December 31, 2013 (audited)


 

 


15

 



 


–Consolidated Statement of Income for the periods ended March 31, 2014 and 2013 (unaudited)


 

 


16

 



 


–Consolidated Statement of Comprehensive Income for the periods ended March 31, 2014 and 2013 (unaudited)


 

 


17

 



 


–Consolidated Statement of Changes in Equity for the periods March 31, 2014 and 2013 (unaudited)


 

 


18

 



 


–Consolidated Statement of Cash Flows for the periods ended March 31, 2014 and 2013 (unaudited)


 

 


19

 



 


–Notes to the Condensed Consolidated Financial Statements as of March 31, 2014 (unaudited)


 

 


21

 


Attachment 1


 


  Exchange rates used to translate financial statements prepared in currencies other than the Euro


 

 


43

 

Table of Contents


Corporate Management

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)

*
Independent director

**
General Manager—Central Corporate Functions

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


Table of Contents

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)
We calculate constant exchange rates by applying to the current period the average exchange rates between the Euro and the relevant currencies of the various markets in which we operated during the three-month period ended March 31, 2013. Please refer to Attachment 1 for further details on exchange rates.
(2)
For a further discussion of EBITDA and adjusted EBITDA, see page 9—"Non-IFRS Measures."
(3)
For a further discussion of free cash flow, see page 9—"Non-IFRS Measures."
(4)
For a further discussion of net debt and net debt to adjusted EBITDA, see page 9—"Non-IFRS Measures."

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        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.

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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 )%

Other—net

    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.

   


(5)
Comparable store sales reflects the change in sales from one period to another that, for comparison purposes, includes in the calculation only stores open in the more recent period that also were open during the comparable prior period in the same geographic area, and applies to both periods the average exchange rate for the prior period.

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        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.

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        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.

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        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.

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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 receivable—net

    844,198     680,296  

Inventories—net

    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 equipment—net

    1,181,955     1,183,236  

Goodwill

    3,063,790     3,045,216  

Intangible assets—net

    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,

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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.

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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.

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        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 MEASURES—Adjusted 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:

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        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:

(1)
(a)            non-recurring tax expense for the tax audit relating to Luxottica S.r.l. (fiscal year 2007) of approximately Euro 27 million;

(b)
non-recurring tax expense for the tax audit relating to Luxottica S.r.l. (fiscal year subsequent to 2007) of approximately Euro 40 million; and

(c)
non-recurring Alain Mikli restructuring costs with an approximately Euro 9 million impact on operating income and an approximately Euro 6 million adjustment to net income.

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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 MEASURES—Adjusted 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 )

Other—net

    1  
       

Free cash flow

    60  
   
(1)
EBITDA is not an IFRS measure; please see reconciliation of EBITDA to net income provided above.

(2)
Equals interest income minus interest expense.

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

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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 MEASURES—Adjusted 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
   
(1)
Net debt figures are calculated using the average exchange rates used to calculate the EBITDA figures.

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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
   
(1)
Net debt figures are calculated using the average exchange rates used to calculate EBITDA figures.

(2)
(a)            The adjusted figures exclude non-recurring Alain Mikli restructuring costs with an approximately Euro 9 million impact on operating income and an approximately Euro 6 million adjustment to net income;

(b)
The adjusted figures exclude non-recurring tax expense for the tax audit relating to Luxottica S.r.l. (fiscal year 2007) of approximately Euro 27 million;

(c)
The adjusted figures exclude non-recurring tax expense for the tax audit relating to Luxottica S.r.l. (fiscal years subsequent to 2007) of approximately Euro 40 million;

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.

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ITEM 2.    FINANCIAL STATEMENTS

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  
   

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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 )    

Other—net

    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        

(1)
Except per share data

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Table of Contents

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 hedge—net 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 plans—net 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 income—net 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  
           
           
   

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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  
                                           
                                           
   

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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 businesses—net 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 )
   
(*)
Purchases of businesses—net of cash acquired in the first three months of 2014 included the purchase of glasses.com for Euro (29.2) million. In the same period of 2013 purchases of businesses—net of cash acquired included the purchase of Alain Mikli International for Euro (72.1) million and other minor acquisitions for Euro (0.8) million.

(**)
Increase in investment refers to the acquisition of 36.33 percent of the share capital of Salmoiraghi & Viganò in 2013.

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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  
   

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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

        


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") 34—Interim 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.

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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 3—Business 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 8—Operating 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

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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  
   
(a)
Net sales of both the Manufacturing and Wholesale Distribution segment and the Retail Distribution segment include sales to third-party customers only.

(b)
Income from operations of the Manufacturing and Wholesale Distribution segment is related to net sales to third-party customers only, excluding the "manufacturing profit" generated on the inter-company sales to the Retail Distribution segment. Income from operations of the Retail Distribution segment is related to retail sales, considering the cost of goods acquired from the Manufacturing and Wholesale Distribution segment at manufacturing cost, thus including the relevant "manufacturing profit" attributable to those sales.

(c)
Inter-segment transactions and corporate adjustments include corporate costs not allocated to a specific segment and amortization of acquired intangible assets.

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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


Table of Contents


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


Table of Contents


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  

 

 

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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


Table of Contents


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 )