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Luxottica Group, S.p.A. 6-K 2009

Documents found in this filing:

  1. 6-K
  2. Graphic
  3. Graphic

 

 

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

 

March 17, 2009

 

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 x 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 x

 

 

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with

 

Rule 12g3-2(b): 82-

 

 

 

 



 

 

Set forth below is the text of a press release issued on March 12, 2009.

 

For fiscal year 2008 for the first time Luxottica’s consolidated net sales top Euro 5 billion

 

In 2008 the Group further strengthened its equity structure and optimized costs to best position itself to take advantage of future opportunities

 

Milan, Italy, March 12, 2009 - The Board of Directors of Luxottica Group S.p.A. (MTA: LUX; NYSE: LUX), a global leader in the design, manufacturing and distribution of fashion, luxury and sports eyewear, approved today its consolidated financial results for the year ended December 31, 2008 in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and with International Financial Reporting Standards (IFRS), certain figures of which were already announced through a broadly disseminated press release issued on February 5, 2009.

 

Fiscal Year 2008(1), according to U.S. GAAP

 

(In millions of euros)

 

FY08

 

 

FY07

 

% Change

 

 

 

 

 

 

 

Net sales

 

5,201.6

 

4,966.1

 

+4.7%

(up 10.7% at constant

exchange rates)

 

 

 

 

 

 

 

EBITDA(2)

 

1,014.7

 

1,046.1(3)

 

-3.0%(3)

 

 

 

 

 

 

 

Operating income

 

749.8

 

813.3(3)

 

-7.8%(3)

 

 

 

 

 

 

 

Net income

 

395.0(4)

 

479.2(3)

 

-17.6%(3),(4)

 

 

 

 

 

 

 

Earnings per share (Euro)

 

0.87(4)

 

1.05(3)

 

-17.8%(3),(4)

 - Before trademark amortization(2)

 

0.96(4)

 

1.14(3)

 

-15.4%(3),(4)

 

 

 

 

 

 

 

Earnings per share (Dollars)

 

1.27(4)

 

1.44(3)

 

-11.8%(3),(4)

 - Before trademark amortization(2)

 

1.42(4)

 

1.56(3)

 

-9.2%(3),(4)

 

1



 

Fourth quarter of 2008(1), according to U.S. GAAP

 

(In millions of euros)

 

4Q08

 

 

4Q07

 

% Change

 

 

 

 

 

 

 

Net sales

 

1,236.5

 

1,188.5

 

+4.0%

(same at constant

exchange rates)

 

 

 

 

 

 

 

EBITDA(2)

 

186.1

 

215.7

 

-13.7%

 

 

 

 

 

 

 

Operating income

 

117.4

 

151.7

 

-22.6%

 

 

 

 

 

 

 

Net income

 

54.1(4)

 

96.9

 

-44.2%(4)

 

 

 

 

 

 

 

Earnings per share (Euro)

 

0.12(4)

 

0.21

 

-44.3%(4)

 - Before trademark amortization(2)

 

0.14(4)

 

0.24

 

-39.7%(4)

 

 

 

 

 

 

 

Earnings per share (Dollars)

 

0.16(4)

 

0.31

 

-49.3%(4)

 - Before trademark amortization(2)

 

0.19(4)

 

0.35

 

-45.1%(4)

 

“We closed 2008, a particularly challenging year, with all-time high consolidated sales of over €5 billion, net income of nearly Euro 400 million and free cash flow of Euro 300 million,” said Andrea Guerra, CEO of Luxottica Group. “We successfully completed the first full year of working with Oakley and laid the foundation for Luxottica’s long-term growth, even through a period as difficult as the one we are now facing,”.

 

For Luxottica, 2008 was characterized by three factors: the first year of integration with Oakley, the depreciation of the U.S. Dollar and other currencies used by the Group against the Euro, the drastic contraction first of the U.S. market and then of the European market.

 

Luxottica has reacted to this situation with all the flexibility and efficacy of its integrated business model, which enabled it to continue to generate significant free cash flow(2) generation (Euro 302 million for fiscal 2008). In particular, Luxottica benefited from the merger with Oakley, from ongoing investments (around Euro 300 million over the course of the year) and measures to boost sales and improve efficiency from which the Group expects to reap significant advantages in the coming quarters. Such measures will also allow Luxottica to further strengthen its equity structure and optimize costs to be in a position to take advantage of new opportunities.

 

“We have already implemented a series of measures that will enable us to rapidly and flexibly adapt to the new environment and that will both contribute to boosting sales and streamline our cost structure across all divisions and geographic regions,” continued Mr. Guerra. “We are working hard to optimize our working capital and balance sheet to

 

2



 

maintain our ability to generate excellent cash flow levels, even in the present situation, enabling us to take advantage of opportunities that may arise. We are also rapidly adapting our manufacturing, distribution and sales capacity to the new needs of the market.

 

Actions for 2009

 

The year 2009 promises to be a demanding one, especially in the first and second quarters. The comparison with 2008 will be challenging because of the structural adjustments that the market is undergoing. The first half of the year will see the completion of most of the measures that are enabling the Group to more effectively adapt to a changing market and to be best positioned for the future.

 

SALES

 

                After posting its sixth consecutive year of double-digit growth, in 2009 Ray-Ban will continue to be the world’s leading eyewear brand thanks to, among other things, the success of its many iconic models, an improvement in the sales mix, acceleration in the prescription segment and the launch of collections that are particularly innovative in both design and materials (for example, Ray-Ban Tech).

                In 2009, Luxottica benefits from the second full year of the integration with Oakley, further synergies between the two structures and the yet-to-be-fully-recognized potential of Oakley in Europe and emerging markets. The brand is expected to continue to grow significantly also in 2009, thanks to the launch of new models in the sports and high-performance segments, further development of optical and women’s collections and an exclusive sun lens technology, one of the best available in the market today, that has the potential to generate strong synergies at Group level. The innovative Jawbone model, to be launched in the next few weeks, is expected to contribute significantly to the brand’s continuing success.

                Regarding other projects, 2009 is an important year for REVO. This brand’s manufacturing and distribution in the sports channel are now managed by Oakley.

                On the premium and luxury front, the Group is rolling out numerous projects, collections and special editions to attract customers less inclined to make purchases at this time.

                Increased priority is being given to the more resilient prescription business, where Luxottica is looking to grow in terms of market penetration, client service and breadth of offering. Here the launch of the Prada Linea Rossa Vista collection will be an important contributor.

                Particular care is going into the selection of the product offerings by geographic region and type of customer, so that commercial strategies are even more aligned with  local needs. The approach to key clients will be made more effective to capitalize on the entire brand portfolio, with activities planned over increasingly longer periods and with investments in the potential of individual clients.

                Building on the past three years of success, the STARS program will be continued. Its goal is to reach over 1,000 clients and to establish even stronger relationships of trust with an important category of clients.

                In the retail division, after the entry into Thailand and India, the Group will consider new opportunities in emerging markets as well as premium locations that might become available even in the mature markets. In North America, the Group will continue to pursue a strategy of segmentation and differentiation in the approach to consumers by retail brand, to optimize the potential of each brand and attract new

 

3



 

consumers. Particularly relevant in this context will be LensCrafters, which is working to further strengthen its status of America’s leading optical brand by leveraging its values of excellence in service and breadth of offering.

 

MEASURES TO BOOST EFFICIENCY AND OPTIMIZE EQUITY STRUCTURE

 

                After having rapidly completed the complex process of adjusting manufacturing capacity, in 2009 the Group will continue to drive the optimization of its working capital and balance sheet. In particular, the goal is to reduce inventories by approximately 10% to 15%, to see a significant improvement in the entire supply chain and to revise commercial terms with around 80% of suppliers.

                New investments, which in 2009 will be just under Euro 200 million, will be carefully selected and focus on high value-added IT and supply chain projects.

                There will be a strong focus on containing all expenses, at both the operating level and in the commercial areas. The brand portfolio and the international sales structure will be further optimized. Additionally. advertising spending will be cut in order to strengthen product promotion in the field.

                The Group plans to optimize its global retail network, resulting in a 2% to 3% reduction in store numbers worldwide.

 

Luxottica expects to benefit from changing euro/dollar exchange rates in 2009 but is also looking intently at other currencies which have different impacts on sales performance and profitability.

 

The performance of the Group in 2008

 

In 2008, consolidated net sales rose at sustained rates, increasing by 10.7% at constant exchange rates (by 4.7% at current exchange rates), thus passing the Euro 5 billion mark for the first time in the history of the Group (Euro 5,201.6 million, compared with Euro 4,966.1 million for fiscal year 2007). This was mainly due to the contribution made by Oakley sales. Pro forma consolidated net sales(5) at constant exchange rates, on the other hand, were substantially unchanged (down 0.8%).

 

In the fourth quarter of 2008, overall demand contracted significantly, resulting in a reduction in margins for both the retail and wholesale divisions: sharp and sudden declines in sales have an immediate impact on operating margins, especially for the Retail division. At the same time, during the fourth quarter the Group took a number of significant steps within its manufacturing and logistics operations, which are contributing to returning the Group’s balance sheet to its optimal status. The Group’s net sales for the fourth quarter were Euro 1,236.5 million, compared with Euro 1,188.5 million for the fourth quarter of 2007 (unchanged at constant exchange rates, up by 4% at current exchange rates), while pro forma net sales(5) were down by 5.5% at constant exchange rates.

 

Regarding operating performance, EBITDA(2) for the year decreased slightly (by 3%(3) to Euro 1,014.7 million for 2008, from Euro 1,046.1(3) million for the previous year). On a pro forma basis(5), EBITDA margin(2) declined by 120 bps(3) to 19.5%, from 20.7%(3) for fiscal 2007. In the fourth quarter, EBITDA(2) declined by 13.7% to Euro 186.1 million, from Euro 215.7 million for the same period the previous year.

 

4



 

Operating income for the year was Euro 749.8 million, compared with Euro 813.3(3) million for the previous year (reflecting a decline by 7.8%(3)). On a pro forma basis(5), the Group’s operating margin for the full year was 14.4%, compared with 15.5%(3) for 2007 (down by 110 bps(3)). For the fourth quarter, operating income was Euro 117.4 million, reflecting a 22.6% decline from Euro 151.7 million for the same period the previous year.

 

Net income for fiscal year 2008 was Euro 395.0(4) million (Euro 479.2(3) million in 2007, reflecting a 17.6%(3),(4) decline from the previous year), with earnings per share (EPS) of Euro 0.87(4) (at an average Euro/U.S. Dollar exchange rate of 1.47). On a comparable basis, i.e. considering EPS in U.S. Dollars before trademark amortization(2), the decrease would have been limited to 9.2%(3),(4). The change was almost entirely due to greater financial charges than in the previous year in connection with the Oakley transaction and to exchange rate fluctuations.

 

The EPS figure does not include an extraordinary capital loss of Euro 15 million net of taxes (equivalent to approximately Euro 0.03 per share) due to the write-off of debt related to the sale of the Things Remembered retail chain in September 2006.

 

Strong cash flow generation enabled the Group to reduce its net debt(2). Due to the impact of exchange rate fluctuations, however, the Group’s net debt(2) at December 31, 2008 stood at Euro 2,949.5 million (compared with Euro 2,871.8 million at December 31, 2007). Thanks to tight controls on working capital, the net debt/EBITDA ratio(2) was 2.9 (2.8 net of the effect of exchange rate fluctuations, in line with the previous year’s level).

 

§

 

Luxottica Group’s Board of Directors today voted to call the Ordinary Meeting of Shareholders for April 29, 2009 (on first call) and April 30, 2009 (on second call) to approve the Group’s financial statements for fiscal year 2008. To further strengthen the Group’s equity structure and have sufficient resources to be able to capitalize on new opportunities that arise, the Board deemed it not appropriate to propose to shareholders, for the time being, the payment of a dividend for fiscal year 2008, while deciding to defer the matter to a possible shareholders’ meeting to be called in the second half of 2009.

 

§

 

Results for fiscal year 2008 will be discussed tomorrow, Friday, March 13, during the course of a presentation to the financial community starting at 9:30 AM GMT in London. The presentation will be available to all via live webcast at www.luxottica.com.

 

The officer responsible for preparing the company’s financial reports, Enrico Cavatorta, declares, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books and accounting records.

 

 

Ivan Dompé

Group Corporate Communications Director

Tel.: +39 (02) 8633 4726

Email: ivan.dompe@luxottica.com

Alessandra Senici

Group Investor Relations Director

Tel.: +39 (02) 8633 4718

Email: InvestorRelations@Luxottica.com

 

5



 

Luca Biondolillo

Group Director of International Communications

Tel.: +39 (02) 8633 4668

Email: LucaBiondolillo@Luxottica.com

 

 

www.luxottica.com

 


 

(1)         All comparisons, including percentage changes, are between the three-month and twelve-month periods ended December 31, 2008 and 2007, in accordance with U.S. GAAP.

(2)         EBITDA, pro forma EBITDA, EBITDA margin, free cash flow, net debt, the ratio of net debt to pro forma EBITDA and EPS before trademark amortization are all non-U.S. GAAP measures. For additional disclosure regarding such measures, please refer to the tables attached.

(3)         This excludes an extraordinary item arising from the transfer of real estate in 2Q07 (approximately €20 million pre-tax and €13 million after tax).

(4)         This excludes an extraordinary capital loss of €15 million net of tax (approximately €0.03 per share) due to the write-off of a credit related to the sale of the Things Remembered retail chain in September 2006.

(5)         Pro forma data reflects the inclusion of results by Oakley, Inc., a subsidiary that was acquired in November 2007, as if it had been acquired on January 1, 2007.

(6)         Comparable store sales reflect 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 period in the same geographic area, and applies to both periods the average exchange rate for the prior period.

 

 

Luxottica Group is a global leader in premium fashion, luxury and sports eyewear, with over 6,250 optical and sun retail stores in North America, Asia-Pacific, China, South Africa and Europe and a strong and well balanced brand portfolio. Luxottica’s key house brands include Ray-Ban, the best known sun eyewear brand in the world, Oakley, Vogue, Persol, Oliver Peoples, Arnette and REVO, while license brands include Bvlgari, Burberry, Chanel, Dolce & Gabbana, Donna Karan, Polo Ralph Lauren, Prada, Salvatore Ferragamo, Tiffany and Versace. In addition to a global wholesale network covering 130 countries, the Group manages leading retail brands such as LensCrafters and Pearle Vision in North America, OPSM and Laubman & Pank in Australasia, LensCrafters in Greater China and Sunglass Hut globally. The Group’s products are designed and manufactured in six Italy-based manufacturing plants and in two wholly-owned plants in China. In 2008, Luxottica Group posted consolidated net sales of €5.2 billion. Additional information on the Group is available at www.luxottica.com.

 

 

Certain statements in this press release may constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties and other factors that could cause actual results to differ materially

 

6



 

from those which are anticipated. Such risks and uncertainties include, but are not limited to, the ability to successfully integrate Oakley’s operations, the ability to realize expected synergies from the merger with Oakley, the ability to successfully introduce and market new products, the ability to maintain an efficient distribution network, the ability to manage the effect of the poor current global economic conditions on our business and predict future economic conditions and changes in consumer preferences, the ability to achieve and manage growth, the ability to negotiate and maintain favorable license arrangements, the availability of correction alternatives to prescription eyeglasses, fluctuations in exchange rates, the ability to effectively integrate other recently acquired businesses, as well as other political, economic 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.

 

 - TABLES AND APPENDIX TO FOLLOW -

 

7



 

LUXOTTICA GROUP

 

CONSOLIDATED FINANCIAL HIGHLIGHTS

FOR THE THREE-MONTH PERIODS ENDED

DECEMBER 31, 2008 AND DECEMBER 31, 2007

 

KEY FIGURES IN THOUSANDS OF EURO (3)

 

 

 

2008

 

2007

 

% Change

 

 

 

 

 

 

 

 

NET SALES

 

1,236,476

 

1,188,500

 

4.0

%

 

 

 

 

 

 

 

 

NET INCOME

 

38,825

 

96,926

 

-59.9

%

 

 

 

 

 

 

 

 

NET INCOME w/o extr. Loss

 

54,106

 

96,926

 

-44.2

%

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE (ADS) w/o extr. loss (2) (4):

 

0.12

 

0.21

 

-44.3

%

 

 

 

 

 

 

 

 

EPS PRE-TRADEMARK AMORTIZATION w/o extr. Loss (2) (4) (5):

 

0.14

 

0.24

 

-39.7

%

 

 

KEY FIGURES IN THOUSANDS OF U.S. DOLLARS (1) (3)

 

 

 

2008

 

2007

 

% Change

 

 

 

 

 

 

 

 

NET SALES

 

1,629,675

 

1,721,662

 

-5.3

%

 

 

 

 

 

 

 

 

NET INCOME

 

51,171

 

140,407

 

-63.6

%

 

 

 

 

 

 

 

 

NET INCOME w/o extr. Loss

 

71,312

 

140,407

 

-49.2

%

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE (ADS) w/o extr. loss (2) (4):

 

0.16

 

0.31

 

-49.3

%

 

 

 

 

 

 

 

 

EPS PRE-TRADEMARK AMORTIZATION w/o extr. Loss (2) (4) (5):

 

0.19

 

0.35

 

-45.1

%

 


Notes :

 

2008

 

2007

 

 

 

(1)

Average exchange rate (in U.S. Dollars per Euro)

 

1.3180

 

1.4486

 

 

 

(2)

Weighted average number of outstanding shares

 

456,816,446

 

456,047,831

 

 

 

(3)

Except earnings per share (ADS), which are expressed in Euro and U.S. Dollars, respectively

(4)

Excluding the non-recurring loss on the write-off of credit related to the sale of Things Remembered. The impact of such write-off is a loss of approximately € 15 million after tax or € 0.03 per share.

(5)

EPS before trademark amortization is not a US-GAAP measure. For additional disclosure regarding non-US GAAP measures and a reconciliation to US GAAP measures, see the tables attached.

 

8



 

LUXOTTICA GROUP

 

CONSOLIDATED FINANCIAL HIGHLIGHTS

FOR THE YEAR ENDED

DECEMBER 31, 2008 AND DECEMBER 31, 2007

 

KEY FIGURES IN THOUSANDS OF EURO (3)

 

 

 

2008

 

2007

 

% Change

 

 

 

 

 

 

 

 

NET SALES

 

5,201,611

 

4,966,054

 

4.7

%

 

 

 

 

 

 

 

 

NET INCOME

 

379,722

 

492,204

 

-22.9

%

 

 

 

 

 

 

 

 

NET INCOME w/o extr. gain/loss (4) (5)

 

395,003

 

479,191

 

-17.6

%

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE (ADS) w/o extr. loss (2) (4) (5):

 

0.87

 

1.05

 

-17.8

%

 

 

 

 

 

 

 

 

EPS PRE-TRADEMARK AMORTIZATION w/o extr. Loss (2) (4) (5) (6):

 

0.96

 

1.14

 

-15.4

%

 

 

KEY FIGURES IN THOUSANDS OF U.S. DOLLARS (1) (3)

 

 

 

2008

 

2007

 

% Change

 

 

 

 

 

 

 

 

NET SALES

 

7,650,009

 

6,805,977

 

12.4

%

 

 

 

 

 

 

 

 

NET INCOME

 

558,457

 

674,566

 

-17.2

%

 

 

 

 

 

 

 

 

NET INCOME w/o extr. gain/loss (4) (5)

 

580,931

 

656,732

 

-11.5

%

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE (ADS) w/o extr. loss (2) (4) (5):

 

1.27

 

1.44

 

-11.8

%

 

 

 

 

 

 

 

 

EPS PRE-TRADEMARK AMORTIZATION w/o extr. Loss (2) (4) (5) (6):

 

1.42

 

1.56

 

-9.2

%

 


Notes :

 

2008

 

2007

 

 

 

(1)

Average exchange rate (in U.S. Dollars per Euro)

 

1.4707

 

1.3705

 

 

 

(2)

Weighted average number of outstanding shares

 

456,563,502

 

455,184,797

 

 

 

(3)

Except earnings per share (ADS), which are expressed in Euro and U.S. Dollars, respectively

(4)

Excluding non-recurring gain related to the sale of a real estate property in 2Q 2007. The impact of the sale was a gain of approximately € 20 million before taxes and approximately €13 million after taxes

(5)

Excluding the non-recurring loss on the write-off of credit related to the sale of Things Remembered. The impact of such write-off is a loss of approximately € 15 million after tax or € 0.03 per share.

(6)

EPS before trademark amortization is not a US-GAAP measure. For additional disclosure regarding non-US GAAP measures and a reconciliation to US GAAP measures, see the tables attached.

 

9



 

LUXOTTICA GROUP

 

CONSOLIDATED INCOME STATEMENT

FOR THE THREE-MONTH PERIODS ENDED

DECEMBER 31, 2008 AND DECEMBER 31, 2007

 

In thousands of Euro (1)

 

4Q08 (2)

 

% of sales

 

4Q07

 

% of sales

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

1,236,476

 

100.0

%

1,188,500

 

100.0

%

4.0

%

COST OF SALES

 

(436,458

)

 

 

(423,605

)

 

 

 

 

GROSS PROFIT

 

800,018

 

64.7

%

764,895

 

64.4

%

4.6

%

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

SELLING EXPENSES

 

(448,566

)

 

 

(391,988

)

 

 

 

 

ROYALTIES

 

(24,346

)

 

 

(33,009

)

 

 

 

 

ADVERTISING EXPENSES

 

(69,154

)

 

 

(81,600

)

 

 

 

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

(121,470

)

 

 

(86,154

)

 

 

 

 

TRADEMARK AMORTIZATION

 

(19,034

)

 

 

(20,463

)

 

 

 

 

TOTAL

 

(682,570

)

 

 

(613,214

)

 

 

 

 

OPERATING INCOME

 

117,448

 

9.5

%

151,681

 

12.8

%

-22.6

%

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSES

 

(35,252

)

 

 

(30,313

)

 

 

 

 

INTEREST INCOME

 

3,384

 

 

 

6,019

 

 

 

 

 

OTHER - NET

 

(33,780

)

 

 

16,109

 

 

 

 

 

OTHER INCOME (EXPENSES)-NET

 

(65,648

)

 

 

(8,185

)

 

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

51,800

 

4.2

%

143,496

 

12.1

%

-63.9

%

PROVISION FOR INCOME TAXES

 

(10,368

)

 

 

(44,114

)

 

 

 

 

INCOME BEFORE MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES

 

41,432

 

 

 

99,382

 

 

 

 

 

MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES

 

(2,607

)

 

 

(2,455

)

 

 

 

 

NET INCOME

 

38,825

 

3.1

%

96,926

 

8.2

%

-59.9

%

BASIC EARNINGS PER SHARE (ADS):

 

0.08

 

 

 

0.21

 

 

 

 

 

FULLY DILUTED EARNINGS PER SHARE (ADS):

 

0.08

 

 

 

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES

 

456,816,446

 

 

 

456,047,831

 

 

 

 

 

FULLY DILUTED AVERAGE NUMBER OF SHARES

 

457,405,862

 

 

 

458,478,516

 

 

 

 

 

 


Notes :

(1)

Except earnings per share (ADS), which are expressed in Euro

(2)

Including the non-recurring loss on the write-off of credit related to the sale of Things Remembered. The impact of such write-off is a loss of approximately € 15 million after tax or € 0.03 per share.

 

10



 

LUXOTTICA GROUP

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED

DECEMBER 31, 2008 AND DECEMBER 31, 2007

 

In thousands of Euro (1)

 

2008 (3)

 

% of sales

 

2007 (2)

 

% of sales

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

5,201,611

 

100.0

%

4,966,054

 

100.0

%

4.7

%

COST OF SALES

 

(1,744,907

)

 

 

(1,575,618

)

 

 

 

 

GROSS PROFIT

 

3,456,705

 

66.5

%

3,390,436

 

68.3

%

2.0

%

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

SELLING EXPENSES

 

(1,706,474

)

 

 

(1,591,438

)

 

 

 

 

ROYALTIES

 

(115,639

)

 

 

(129,644

)

 

 

 

 

ADVERTISING EXPENSES

 

(339,258

)

 

 

(348,198

)

 

 

 

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

(473,829

)

 

 

(423,878

)

 

 

 

 

TRADEMARK AMORTIZATION

 

(71,742

)

 

 

(63,965

)

 

 

 

 

TOTAL

 

(2,706,942

)

 

 

(2,557,123

)

 

 

 

 

OPERATING INCOME

 

749,763

 

14.4

%

833,313

 

16.8

%

-10.0

%

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSES

 

(135,267

)

 

 

(89,498

)

 

 

 

 

INTEREST INCOME

 

13,265

 

 

 

17,087

 

 

 

 

 

OTHER - NET

 

(37,890

)

 

 

19,780

 

 

 

 

 

OTHER INCOME (EXPENSES)-NET

 

(159,892

)

 

 

(52,631

)

 

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

589,870

 

11.3

%

780,681

 

15.7

%

-24.4

%

PROVISION FOR INCOME TAXES

 

(194,657

)

 

 

(273,501

)

 

 

 

 

INCOME BEFORE MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES

 

395,213

 

 

 

507,180

 

 

 

 

 

MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES

 

(15,492

)

 

 

(14,976

)

 

 

 

 

NET INCOME

 

379,722

 

7.3

%

492,204

 

9.9

%

-22.9

%

BASIC EARNINGS PER SHARE (ADS):

 

0.83

 

 

 

1.08

 

 

 

 

 

FULLY DILUTED EARNINGS PER SHARE (ADS):

 

0.83

 

 

 

1.07

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES

 

456,563,502

 

 

 

455,184,797

 

 

 

 

 

FULLY DILUTED AVERAGE NUMBER OF SHARES

 

457,717,044

 

 

 

458,530,609

 

 

 

 

 

 


Notes :

(1)

Except earnings per share (ADS), which are expressed in Euro

(2)

Including non-recurring gain related to the sale of a real estate property in 2Q 2007. The impact of the sale was a gain of approximately € 20 million before taxes and approximately €13 million after taxes

(3)

Including the non-recurring loss on the write-off of credit related to the sale of Things Remembered. The impact of such write-off is a loss of approximately € 15 million after tax or € 0.03 per share.

 

11



 

LUXOTTICA GROUP

 

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2008 AND DECEMBER 31, 2007

 

In thousands of Euro

 

December 31, 2008

 

December 31, 2007

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

CASH

 

288,450

 

302,894

 

MARKETABLE SECURITIES

 

23,550

 

21,345

 

ACCOUNTS RECEIVABLE

 

630,018

 

665,184

 

SALES AND INCOME TAXES RECEIVABLE

 

151,609

 

89,000

 

INVENTORIES

 

570,987

 

575,016

 

PREPAID EXPENSES AND OTHER

 

144,054

 

139,305

 

DEFERRED TAX ASSETS - CURRENT

 

131,907

 

117,853

 

TOTAL CURRENT ASSETS

 

1,940,575

 

1,910,597

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT - NET

 

1,170,698

 

1,057,782

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

INTANGIBLE ASSETS - NET

 

3,928,804

 

3,907,957

 

INVESTMENTS

 

5,503

 

17,668

 

OTHER ASSETS

 

175,234

 

194,329

 

SALES AND INCOME TAXES RECEIVABLE

 

965

 

1,042

 

DEFERRED TAX ASSETS - NON-CURRENT

 

83,447

 

67,891

 

TOTAL OTHER ASSETS

 

4,193,952

 

4,188,887

 

 

 

 

 

 

 

TOTAL

 

7,305,225

 

7,157,266

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

BANK OVERDRAFTS

 

432,465

 

455,588

 

CURRENT PORTION OF LONG-TERM DEBT

 

286,213

 

792,617

 

ACCOUNTS PAYABLE

 

398,080

 

423,432

 

ACCRUED EXPENSES AND OTHER

 

390,783

 

441,721

 

ACCRUAL FOR CUSTOMERS’ RIGHT OF RETURN

 

31,363

 

26,557

 

INCOME TAXES PAYABLE

 

18,353

 

19,314

 

TOTAL CURRENT LIABILITIES

 

1,557,255

 

2,159,229

 

 

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

LONG-TERM DEBT

 

2,519,289

 

1,926,523

 

LIABILITY FOR TERMINATION INDEMNITIES

 

55,522

 

56,911

 

DEFERRED TAX LIABILITIES - NON-CURRENT

 

233,551

 

248,377

 

OTHER

 

385,687

 

229,972

 

TOTAL LONG-TERM LIABILITIES

 

3,194,049

 

2,461,782

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES:

 

 

 

 

 

MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES

 

47,328

 

41,097

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

463,368,233 ORDINARY SHARES AUTHORIZED AND ISSUED - 456,933,447 SHARES OUTSTANDING

 

27,802

 

27,757

 

NET INCOME

 

379,722

 

492,204

 

RETAINED EARNINGS

 

2,099,068

 

1,975,196

 

TOTAL SHAREHOLDERS’ EQUITY

 

2,506,592

 

2,495,158

 

 

 

 

 

 

 

TOTAL

 

7,305,225

 

7,157,266

 

 

12



 

LUXOTTICA GROUP

 

CONSOLIDATED FINANCIAL HIGHLIGHTS

FOR THE YEAR ENDED

DECEMBER 31, 2008 AND DECEMBER 31, 2007

- SEGMENTAL INFORMATION -

 

In thousands of Euro

 

Manufacturing
and
Wholesale

 

Retail

 

Oakley

 

Inter-Segment
Transactions and
Corporate Adj.

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

2,472,330

 

3,109,146

 

 

 

(379,864

)

5,201,611

 

Operating Income

 

545,507

 

291,469

 

 

 

(87,214

)

749,763

 

% of sales

 

22.1

%

9.4

%

 

 

 

 

14.4

%

Capital Expenditures

 

125,489

 

170,946

 

 

 

 

 

296,436

 

Depreciation & Amortization

 

85,987

 

123,129

 

 

 

55,821

 

264,937

 

Assets

 

2,750,630

 

1,509,658

 

 

 

3,044,937

 

7,305,225

 

 

 

 

 

 

 

 

 

 

 

 

 

2007 (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

1,992,740

 

3,233,802

 

86,964

 

(347,452

)

4,966,054

 

Operating Income

 

527,991

 

361,809

 

3,717

 

(80,224

)

813,293

 

% of sales

 

26.5

%

11.2

%

4.3

%

 

 

16.4

%

Capital Expenditures

 

112,973

 

213,293

 

8,503

 

 

 

334,769

 

Depreciation & Amortization

 

68,981

 

118,100

 

7,682

 

38,050

 

232,813

 

Assets

 

2,321,204

 

1,405,299

 

1,937,292

 

1,493,471

 

7,157,266

 

 

 

 

 

 

 

 

 

 

 

 

 

2007 Pro-forma (1) (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

2,577,786

 

3,407,907

 

 

 

(446,693

)

5,539,000

 

Operating income

 

593,898

 

376,660

 

 

 

(112,453

)

858,105

 

% of sales

 

23.0

%

11.1

%

 

 

 

 

15.5

%

Depreciation & Amortization

 

97,012

 

126,473

 

 

 

64,681

 

288,166

 

 


Notes :

 

(1)

These consolidated adjusted amounts are a non-GAAP measurement. The company has included this measurement to give comparative information for the two periods discussed, aligning the consolidation periods of Oakley for both years 2007 and 2008. They reflect the consolidation of Oakley results for the twelve months of 2007 (as it is in 2008) and same trademark amortization as in 2008. This information does not purport to be indicative of the actual result that would have been achieved had the Oakley acquisition been completed as of January 1, 2007.

(2)

Excluding non-recurring gain related to the sale of a real estate property in 2Q 2007. The impact of the sale was a gain of approximately € 20 million before taxes and approximately €13 million after taxes

 

13



 

LUXOTTICA GROUP

 

RECONCILIATION OF THE CONSOLIDATED INCOME STATEMENT

PREPARED IN ACCORDANCE WITH US GAAP AND IAS / IFRS FOR THE YEAR ENDED DECEMBER 31, 2008

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2008

 

In thousands of Euro (2)

 

US GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IAS / IFRS

 

 

 

2008

 

IFRS 2

 

IAS 2

 

IFRS 3

 

IAS 12

 

IAS 19

 

IAS 36

 

IAS 38

 

IAS 39

 

Total

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option

 

Inventories

 

Business
combination

 

Income Taxes

 

Employee
benefit

 

Impairment
of Assets

 

Intangible
Depreciation

 

Derivatives /
Amortized cost

 

adj. IAS-IFRS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

5,201,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,201,611

 

COST OF SALES

 

(1,744,907

)

 

 

3,490

 

(868

)

 

 

 

 

 

 

 

 

 

 

2,622

 

(1,742,284

)

GROSS PROFIT

 

3,456,705

 

 

 

3,490

 

(868

)

 

 

 

 

 

 

 

 

 

 

2,622

 

3,459,327

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SELLING EXPENSES

 

(1,706,474

)

 

 

(5,177

)

(16,776

)

 

 

 

 

(354

)

 

 

 

 

(22,307

)

(1,728,780

)

ROYALTIES

 

(115,639

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115,639

)

ADVERTISING EXPENSES

 

(339,258

)

 

 

 

 

 

 

 

 

 

 

 

 

1,747

 

 

 

1,747

 

(337,511

)

GENERAL AND ADMINISTRATIVE EXPENSES

 

(473,829

)

31,885

 

 

 

(32,337

)

 

 

265

 

 

 

 

 

 

 

(187

)

(474,016

)

TRADEMARK AMORTIZATION

 

(71,742

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(71,742

)

TOTAL

 

(2,706,942

)

31,885

 

(5,177

)

(49,113

)

 

 

265

 

(354

)

1,747

 

 

 

(20,746

)

(2,727,688

)

OPERATING INCOME

 

749,763

 

31,885

 

(1,687

)

(49,981

)

 

 

265

 

(354

)

1,747

 

 

 

(18,124

)

731,639

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSES

 

(135,267

)

 

 

 

 

(3,223

)

(1,321

)

 

 

 

 

 

 

16,808

 

12,264

 

(123,002

)

INTEREST INCOME

 

13,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,265

 

OTHER - NET

 

(37,890

)

4,247

 

 

 

 

 

90

 

 

 

 

 

 

 

23

 

4,360

 

(33,530

)

OTHER INCOME (EXPENSES)-NET

 

(159,892

)

4,247

 

 

 

(3,223

)

(1,231

)

 

 

 

 

 

 

16,831

 

16,625

 

(143,268

)

INCOME BEFORE PROVISION FOR INCOME TAXES

 

589,870

 

36,132

 

(1,687

)

(53,204

)

(1,231

)

265

 

(354

)

1,747

 

16,831

 

(1,499

)

588,371

 

PROVISION FOR INCOME TAXES

 

(194,657

)

(2,594

)

665

 

18,388

 

(5,607

)

(339

)

140

 

(670

)

(5,824

)

4,158

 

(190,499

)

INCOME BEFORE MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES

 

395,213

 

33,538

 

(1,022

)

(34,815

)

(6,838

)

(74

)

(214

)

1,077

 

11,007

 

2,659

 

397,872

 

MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES

 

(15,492

)

 

 

 

 

7,787

 

 

 

 

 

 

 

 

 

 

 

7,787

 

(7,705

)

NET INCOME

 

379,722

 

33,538

 

(1,022

)

(27,029

)

(6,838

)

(74

)

(214

)

1,077

 

11,007

 

10,446

 

390,167

 

BASIC EARNINGS PER SHARE (ADS) (1)

 

0.83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.85

 

FULLY DILUTED EARNINGS PER SHARE (ADS) (1)

 

0.83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES

 

456,563,502

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

456,563,502

 

FULLY DILUTED AVERAGE NUMBER OF SHARES

 

457,717,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

457,844,280

 

 


Notes :

(1)  Except earnings per share (ADS), which are expressed in Euro

(2)  Including the non-recurring loss on the write-off of credit related to the sale of Things Remembered. The impact of such write-off is a loss of approximately € 15 million after tax or € 0.03 per share

 

14



 

Non-U.S. GAAP Measure: EBITDA and EBITDA margin

 

EBITDA represents operating income before depreciation and amortization. EBITDA margin means EBITDA divided by net sales.

 

The Company believes that EBITDA is useful to both management and investors in evaluating the Company’s operating performance compared with that of other companies in its industry.

 

Our calculation of EBITDA allows us to compare our operating results with those of other companies without giving effect to financing, income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to the overall operating performance of a company’s business.

 

EBITDA and EBITDA margin are not measures of performance under accounting principles generally accepted in the United States (U.S. GAAP).  We include them in this presentation in order to:

 

·             improve transparency for investors;

·             assist investors in their assessment of the Company’s operating performance and its ability to refinance its debt as it matures and incur additional indebtedness to invest in new business opportunities;

·             assist investors in their assessment of the Company’s cost of debt;

·             ensure that these measures are fully understood in light of how the Company evaluates its operating results and leverage;

·             properly define the metrics used and confirm their calculation; and

·             share these measures with all investors at the same time.

 

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 U.S. GAAP.

 

Rather, these non-GAAP measures should be used as a supplement to U.S. GAAP results to assist the reader in better understanding the operational performance of the Company.

 

The Company cautions that these measures are not defined terms under U.S. GAAP and their definitions should be carefully reviewed and understood by investors.

 

Investors should be aware that Luxottica Group’s method of calculating EBITDA may differ from methods used by other companies.  The Company recognizes that the usefulness of EBITDA has certain limitations, including:

 

·             EBITDA does not include interest expense.  Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and ability to generate profits and cash flows.

 

Therefore, any measure that excludes interest expense may have material limitations;

 

·             EBITDA does not include depreciation and amortization expense.  Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate profits.

 

Therefore, any measure that excludes depreciation and expense may have material limitations;

 

·             EBITDA does not include provision for income taxes.  Because the payment of income taxes is a necessary element of our costs, any measure that excludes tax expense may have material limitations;

·             EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractual commitments;

·             EBITDA does not reflect changes in, or cash requirements for, working capital needs;

·             EBITDA does not allow us to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss.

 

We compensate for the foregoing limitations by using EBITDA as a comparative tool, together with U.S. GAAP measurements, to assist in the evaluation of our operating performance and leverage.

 

See the tables on the following pages for a reconciliation of EBITDA to operating income, which is the most directly comparable U.S. GAAP financial measure, as well as the calculation of EBITDA margin on net sales.

 

15



 

Non-U.S. GAAP Measure: EBITDA and EBITDA margin

 

Millions of Euro

 

4Q08

 

4Q07

 

4Q07 pro forma(1)

 

 

 

 

 

 

 

 

 

 

Operating income (+)

 

117.4

 

151.7

 

150.6

 

 

 

 

 

 

 

 

 

Depreciation & amortization (+)

 

68.6

 

64.0

 

73.2

 

(+)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

186.1

 

215.7

 

223.8

 

(=)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

1,236.5

 

1,188.5

 

1,257.9

 

(/)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

15.0

%

18.1

%

17.8

%

(=)

 

 

 

 

 

 

 

 


(1) These pro forma figures reflect the inclusion of the consolidated results of Oakley, Inc., a subsidiary that was acquired in November 2007, as if it was acquired on January 1, 2007.

 

16



 

Non-U.S. GAAP Measure: EBITDA and EBITDA margin

 

Millions of Euro

 

FY08

 

FY07(2)

 

FY07 pro forma(1)(2)

 

 

 

 

 

 

 

 

 

 

Operating income (+)

 

749.8

 

813.3

 

858.1

 

 

 

 

 

 

 

 

 

Depreciation & amortization (+)

 

264.9

 

232.8

 

288.2

 

(+)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

1,014.7

 

1,046.1

 

1,146.3

 

(=)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

5,201.6

 

4,966.1

 

5,539.0

 

(/)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin

 

19.5

%

21.1

%

20.7

%

(=)

 

 

 

 

 

 

 

 


(1) These pro forma figures reflect the inclusion of the consolidated results of Oakley, Inc., a subsidiary that was acquired in November 2007, as if it was acquired on January 1, 2007.

(2) Excluding non-recurring gain related to the sale of a  real estate property in 2Q 2007. The impact of the sale was a gain of approximately €20 million before taxes and approximately €13 million after taxes.

 

17



 

Non-U.S. GAAP Measure: Net Debt to EBITDA ratio

 

Net debt to EBITDA ratio:  Net debt means the sum of bank overdrafts, current portion of long-term debt and long-term debt, less cash.  EBITDA represents operating income before depreciation and amortization.

 

The Company believes that EBITDA is useful to both management and investors in evaluating the Company’s operating performance compared with that of other companies in its industry.

 

Our calculation of EBITDA allows us to compare our operating results with those of other companies without giving effect to financing, income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to the overall operating performance of a company’s business.  The ratio of net debt to EBITDA is a measure used by management to assess the Company’s level of leverage, which affects our ability to refinance our debt as it matures and incur additional indebtedness to invest in new business opportunities.

 

The ratio also allows management to assess the cost of existing debt since it affects the interest rates charged by the Company’s lenders.

 

EBITDA and ratio of net debt to EBITDA are not measures of performance under accounting principles generally accepted in the United States (U.S. GAAP).  We include them in this presentation in order to:

 

·      improve transparency for investors;

·                  assist investors in their assessment of the Company’s operating performance and its ability to refinance its debt as it matures and incur additional indebtedness to invest in new business opportunities;

·      assist investors in their assessment of the Company’s cost of debt;

·      ensure that these measures are fully understood in light of how the Company evaluates its operating results and leverage;

·      properly define the metrics used and confirm their calculation; and

·      share these measures with all investors at the same time.

 

EBITDA and ratio of net debt to EBITDA are not meant to be considered in isolation or as a substitute for items appearing on our financial statements prepared in accordance with U.S. GAAP.

 

Rather, these non-GAAP measures should be used as a supplement to U.S. GAAP results to assist the reader in better understanding the operational performance of the Company.

 

The Company cautions that these measures are not defined terms under U.S. GAAP 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 Company recognizes that the usefulness of EBITDA and the ratio of net debt to EBITDA as evaluative tools may have certain limitations, including:

 

·                  EBITDA does not include interest expense.  Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and ability to generate profits and cash flows.

 

Therefore, any measure that excludes interest expense may have material limitations;

 

·                  EBITDA does not include depreciation and amortization expense.  Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate profits.

 

Therefore, any measure that excludes depreciation and expense may have material limitations;

 

·                  EBITDA does not include provision for income taxes.  Because the payment of income taxes is a necessary element of our costs, any measure that excludes tax expense may have material limitations;

·      EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractual commitments;

·      EBITDA does not reflect changes in, or cash requirements for, working capital needs;

·                  EBITDA does not allow us to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss; and

·                  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 U.S. GAAP measurements, to assist in the evaluation of our operating performance and leverage.

 

See the tables on the following pages for a reconciliation of net debt to long-term debt, which is the most directly comparable U.S. GAAP financial measure, as well as the calculation of the ratio of net debt to EBITDA.

 

For a reconciliation of EBITDA to operating income, which is the most directly comparable U.S. GAAP financial measure, see the tables on the preceding pages.

 

18



 

Non-U.S. GAAP Measure: Net debt and Net debt / EBITDA

 

Millions of Euro

 

Dec 31, 2007

 

Dec 31, 2008

 

 

 

 

 

 

 

Long-term debt

 

1,926.5

 

2,519.3

 

(+)

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt (+)

 

792.6

 

286.2

 

(+)

 

 

 

 

 

 

 

 

 

 

 

Bank overdrafts (+)

 

455.6

 

432.5

 

 

 

 

 

 

 

Cash (-)

 

-302.9

 

-288.5

 

 

 

 

 

 

 

Net debt (=)

 

2,871.8

 

2,949.5

 

 

 

 

 

 

 

EBITDA

 

1,066.1

 

1,014.7

 

 

 

 

 

 

 

Net debt/EBITDA

 

2.7x

 

2.9x

 

 

 

 

 

 

 

Net debt @ avg exchange rate (1) for the period

 

3,010.3

 

2,821.2

 

 

 

 

 

 

 

Net debt / EBITDA @ avg. exchange rates (1)

 

2.8x

 

2.8x

 

 


(1)  Calculated using the 12-month average exchange rate as of December 31, 2007 and December 31, 2008, respectively

 

19



 

Non-U.S. GAAP Measures: EPS before Trademark Amortization

 

Earnings per share before trademark amortization:  Earnings per share (EPS) before trademark amortization means earnings per share before trademark and other similar intangible asset amortization expense, net of taxes, per share.

 

The Company believes that EPS before trademark amortization is useful to both management and investors in evaluating the Company’s operating performance and prospects compared with that of other companies in its industry. Our calculation of EPS before trademark amortization allows us to compare our earnings per share with those of other companies without giving effect to the accounting effects of the amortization of the Company’s trademarks and other similar intangible assets, which may vary for different companies for reasons unrelated to the overall operating performance of a company’s business.

 

EPS before trademark amortization is not a measure of performance under accounting principles generally accepted in the United States (U.S. GAAP).  We include it in this presentation in order to:

 

·      improve transparency for investors;

·      assist investors in their assessment of the Company’s operating performance;

·      ensure that this measure is fully understood in light of how the Company evaluates its operating results;

·      properly define the metrics used and confirm their calculation; and

·      share this measure with all investors at the same time.

 

EPS before trademark amortization is not meant to be considered in isolation or as a substitute for items appearing on our financial statements prepared in accordance with U.S. GAAP.

 

Rather, this non-GAAP measure should be used as a supplement to U.S. GAAP results to assist the reader in better understanding the operational performance of the Company.

 

The Company cautions that this measure is not a defined term under U.S. GAAP and its definition should be carefully reviewed and understood by investors.

 

Investors should be aware that Luxottica Group’s method of calculating EPS before trademark amortization may differ from methods used by other companies.

 

The Company recognizes that the usefulness of EPS before trademark amortization as an evaluative tool may have certain limitations, including:

 

·                  EPS before trademark amortization does not include the effects of amortization of the Company’s trademarks and other intangible assets.  Because trademarks and other intangible assets are important to our business and to our ability to generate sales, we consider trademark amortization expense as a necessary element of our costs.

 

Therefore, any measure that excludes trademark amortization expense may have material limitations.

 

We compensate for these limitations by using EPS before trademark amortization as one of several comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of our operating performance.

 

See the tables on the following pages for a reconciliation of EPS before trademark amortization to EPS, which is the most directly comparable U.S. GAAP financial measure.

 

20



 

Non-U.S. GAAP Measure: EPS before Trademark Amortization

 

Millions of Euro, unless otherwise noted

 

FY08 (2)

 

FY07 (1)

 

r

 

 

 

 

 

 

 

 

 

Trademark amortization and other similar intangible assets

 

72

 

64

 

 

 

(+)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxes on trademark amortization and other similar intangible assets

 

(26)

 

(24)

 

 

 

(-)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademark amortization and other similar intangible assets, net of taxes

 

45

 

40

 

 

 

(=)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of shares outstanding as of FY December 31 (in thousands) (/)

 

456,564

 

455,185

 

 

 

 

 

 

 

 

 

 

 

Trademark amortization and other similar intangible assets, net of taxes, per share (=)

 

0.10

 

0.09

 

 

 

 

 

 

 

 

 

 

 

EPS (+)

 

0.87

 

1.05

 

-17.8

%

 

 

 

 

 

 

 

 

EPS before trademark amortization and other similar intangible assets, net of taxes (=)

 

0.96

 

1.14

 

-15.4

%

 

 

 

 

 

 

 

 

US$ / € average exchange rate

 

1.4707

 

1.3705

 

 

 

 

 

 

 

 

 

 

 

EPS before trademark amortization and other similar intangible assets, net of taxes in US$ 

 

1.42

 

1.56

 

-9.2

%

 


(1)

Excluding non-recurring gain related to the sale of a real estate property in 2Q 2007. The impact of the sale was a gain of approximately €20 million before taxes and approximately €13 million after taxes, equivalent to €0.03 at EPS level.

(2)

Excluding the write-off of credit related to the sale of the Things Remembered business. The impact of such write-off is a loss of approximately € 15 million after tax or € 0.03 per share.

 

 

21



 

Non-U.S. GAAP Measure: EPS before Trademark Amortization

 

Millions of Euro, unless otherwise noted

 

4Q08 (1)

 

4Q07

 

r