MILAN, July 26 /PRNewswire-FirstCall/ -- The Board of Directors of Luxottica Group S.p.A. (MTA: LUX; NYSE: LUX), a global leader in the design, manufacture and distribution of fashion, luxury and sports eyewear, met today and approved the consolidated results for the second quarter and first half of the year ended June 30, 2010 in accordance with IAS/IFRS.
Second quarter of 2010(1) - IAS/IFRS
(In millions of Euro) Q2 2010 Q2 2009 Change ------- ------- ------ +13.8% (+6.5% at constant Net sales 1,595.1 1,401.6 exchange rates(2)) Operating income 258.3 203.3 +27.1% Net income 150.1 115.3 +30.1% Earnings per share 0.33 0.25 +29.6% In US $0.42 0.34 +20.9%
First half of 2010(1) - IAS/IFRS
(In millions of Euro) H1 2010 H1 2009 Change ------- ------- ------ +10.1% (+6.7% at constant Net sales 2,986.8 2,714.0 exchange rates(2)) Operating income 429.6 357.5 +20.2% Net income 245.1 194.1 +26.3% Earnings per share 0.53 0.42 +25.9% In US $0.71 0.57 +25.4%
Operating performance for the second quarter of 2010
For Luxottica, the second quarter reflected the strongest results in the Group's history. For the first time ever, quarterly net sales approached euro 1.6 billion, with net income reaching euro 150 million. Both Divisions contributed to the achievement of this excellent result, successfully reaping the benefits of the extraordinary work carried out during recent quarters and confirming the strength of the Group's brands while strengthening our market position.
"We are particularly proud of the results achieved by Luxottica this quarter," commented Andrea Guerra, Chief Executive Officer of Luxottica. "We have successfully invested in the right markets and embarked on actions that are resulting in very positive results indeed. We have launched collections and special projects that have proven to be particularly well-received in the market and we have been able to achieve growth wherever we identified opportunities.
"Our brand portfolio has once again proven to be our strength: Ray-Ban and Oakley continued to record double-digit percentage growth and our premium and luxury brands also had positive improvement. We should also mention the performance recorded in North America, a key region for Luxottica: despite the fact that the US consumer is still cautious, our sales in US dollars were up by 8%, rewarding the efforts made by our Wholesale Division, Sunglass Hut and LensCrafters, as well as the growing synergies we are developing between our Divisions.
"These results provide an excellent basis for us to look with confidence to the second half of the year. Once again, we are aware that it will be important to remain determined and seize opportunities from wherever they come."
In the second quarter of the year, Luxottica achieved positive performances in most geographic regions where it is present. The Wholesale Division recorded its best sales performance in the Group's history. Emerging markets made a key contribution to this performance, boasting an increase in Wholesale sales by approximately 30% compared to the same period last year, along with the United States and Europe, which enjoyed a particularly positive 'sun' season.
The results posted by Sunglass Hut were also very solid, with net sales benefiting from the major store-opening plan within US department store Macy's, allowing record sales to be recorded in June. Strong results were also posted by the two recently-opened flagship stores.
Consolidated results
In the second quarter of 2010, net sales rose by 13.8% at current exchange rates and by +6.5% at constant exchange rates(2), to euro 1,595.1 million from euro 1,401.6 million. During the half-year period, net sales rose by 10.1% to euro 2,986.8 million (euro 2,714.0 million in the first half of 2009).
EBITDA(3) grew over the previous year by +22.2% to euro 335.4 million for the second quarter, from euro 274.5 million in the second quarter of 2009. For the first half of the year, EBITDA(3) grew to euro 578.0 million from the euro 501.5 million posted for the first half of 2009.
Operating income was euro 258.3 million for the second quarter (euro 203.3 million for the same period last year, +27.1%), while the Group's operating margin improved from 14.5% in the second quarter of 2009 to 16.2% in the second quarter of 2010. In the first half of the year, operating income amounted to euro 429.6 million, up 20.2% from the euro 357.5 million posted for the same period last year.
Net income for the second quarter of 2010 increased to euro 150.1 million (up by 30.1% from euro 115.3 million for 2009), resulting in earnings per share (EPS) of euro 0.33 (at an average Euro/Dollar exchange rate of 1.2708).
For the second quarter of 2010, once again the Group generated excellent positive free cash flow(3) (euro 160 million): however, because of the exchange rate effect after having paid dividends during the quarter of more than euro 160 million and having acquired the remaining 35.16% of our Turkish subsidiary for approximately euro 60 million, consolidated net debt as of June 30, 2010 amounted to euro 2,646 million (euro 2,337 million at the end of 2009), with a ratio of net debt to EBITDA(3) of 2.8X, compared with 2.7X at the end of 2009 (net of the exchange rate effect, the ratio of net debt to EBITDA(3) as of June 30, 2010 would have been 2.6X, down from 2.8X as of December 31, 2009).
Overview of performance at the Wholesale Division
The excellent trend of all Group brands, with Ray-Ban and Oakley having stable double-digit growth, the positive performance of our luxury brands (also up by double digits), the continuous success of our commercial policies and the STARS program made it possible for the Wholesale Division to achieve positive quarterly results.
The Division's sales rose to euro 651.2 million in the second quarter from euro 575.4 million in the second quarter of 2009 (+13.2% at current exchange rates and +7.8% at constant exchange rates(2)). For the half-year, net sales were euro 1,204.7 million, up 11.9% from the euro 1,077.0 million recorded for the first half of 2009 (+8.4% at constant exchange rates(2)). In terms of sales performance in the main geographic areas, Luxottica saw positive results in emerging markets, particularly in Brazil, China, India, Korea and Eastern Europe.
Operating income for the Wholesale Division in the second quarter amounted to euro 157.2 million, up by 21.5% compared with euro 129.3 million for the second quarter of 2009. The operating margin rose to 24.1%, from 22.5% for the second quarter of 2009, confirming the effectiveness of the measures taken to recover margins. In the first half of the year, the operating margin was 23.0% (compared to 21.8% in the first half of 2009).
Overview of performance at the Retail Division
Net sales for the Retail Division rose to euro 944.0 million in the second quarter from euro 826.2 million in the second quarter of 2009 (+14.3% at current exchange rates, +5.6% at constant exchange rates(2)). During the half-year period, net sales were euro 1,782.1 million, rising by 8.9% from euro 1,637.0 million for the first half of 2009 (+5.6 at constant exchange rates(2)).
In terms of comparable store sales(4), the "prescription" business in North America made good progress (+4.1%), with LensCrafters posting solid growth in comparable store sales despite less focus on promotions when compared to the same period last year and continuing to benefit from the measures initiated over the last few months. Positive comparable store sales were also achieved by Sears Optical and Target Optical.
In contrast, comparable sales trends in Australia were negative, in a market where the effects of the structural adjustment of the global economy are being felt in 2010. However, this has not caused Luxottica to slow investments in the area, as confirmed by the recent opening of the first OPSM eye hub, an innovative concept store that marks a new era in the retail field.
Sunglass Hut, the Group's sun specialty chain that operates in a number of geographic areas, also posted positive results in terms of margins, with overall comparable store sales(4) up 4.6%, due mainly to positive results achieved in the United States (+5.5%) and the UK.
The Division's operating income grew by +19.4% to euro 136.6 million in the second quarter from euro 114.4 million in the second quarter of 2009. The operating margin rose to 14.5% from 13.8%. On a half-yearly basis, the operating margin was 12.6% (compared to 12.0% in the first half of 2009).
The results for the second quarter and first half of 2010 will be discussed today at 6:30 PM CET (12:30 PM US ET), during a conference call with the financial community. The presentation will be available via webcast directly from the website www.luxottica.com.
In accordance with subsection 2 of Article 154-bis of the Italian Consolidated Finance Law, the Director appointed to prepare the company's accounts, Enrico Cavatorta, hereby declares that the accounting disclosure contained in this release complies with the results of the accounting records, books and registers of the Group.
(1) All comparisons, including percentage changes, are between the three and six-month periods ended June 30, 2010 and June 30, 2009, as indicated, in accordance with IAS/IFRS.
(2) Figures given at constant exchange rates have been calculated using the average exchange rate of the respective comparative period in the previous year. For further information, please refer to the attached tables.
(3) EBITDA, free cash flow, net debt and the ratio of net debt to EBITDA are not measures in accordance with IAS/IFRS. For further information on such non-IAS/IFRS measures, please see the attached tables.
(4) 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 prior period, and applies to both periods the average exchange rate for the prior period and the same geographic area.
Luxottica Group S.p.A.
Luxottica Group is a global leader in premium fashion, luxury and sports eyewear with more than 6,300 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 different countries, the Group manages leading retail brands such as LensCrafters, Pearle Vision and ILORI in North America, OPSM and Laubman & Pank in Asia-Pacific, LensCrafters in China and Sunglass Hut globally. The Group's products are designed and manufactured at its six manufacturing plants in Italy, two wholly-owned plants in China and a sport sunglass production facility in the US. In 2009, Luxottica Group posted consolidated net sales of euro 5.1 billion. Additional information about the Group is available at www.luxottica.com.
Safe Harbor Statement
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 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 Luxottica Group's filings with the U.S. Securities and Exchange Commission. These forward-looking statements are made as of the date hereof and Luxottica Group does not assume any obligation to update them.
- TABLES TO FOLLOW -
LUXOTTICA GROUP CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2010 AND JUNE 30, 2009 In accordance with IAS/IFRS
KEY FIGURES IN THOUSANDS OF EURO (1) ------------------------------------- 2010 2009 % Change NET SALES 1,595,124 1,401,626 13.8% NET INCOME 150,052 115,336 30.1% BASIC EARNINGS PER SHARE (ADS)(2): 0.33 0.25 29.6% ---------------------------------- ---- ---- ---- KEY FIGURES IN THOUSANDS OF U.S. DOLLARS (1) (3) --------------------------------------------- 2010 2009 % Change NET SALES 2,027,084 1,909,295 6.2% NET INCOME 190,686 157,111 21.4% BASIC EARNINGS PER SHARE (ADS) (2): 0.42 0.34 20.9% ----------------------------------- ---- ---- ---- Notes : 2010 2009 (1) Except earnings per share (ADS), which are expressed in Euro and U.S. Dollars, respectively (2) Weighted average number of outstanding shares 458,696,583 457,076,280 (3) Average exchange rate (in U.S. Dollars per Euro) 1.2708 1.3622
LUXOTTICA GROUP CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2010 AND JUNE 30, 2009 In accordance with IAS/IFRS
KEY FIGURES IN THOUSANDS OF EURO (1) -------------------------------- 2010 2009 % Change NET SALES 2,986,811 2,713,960 10.1% NET INCOME 245,143 194,085 26.3% BASIC EARNINGS PER SHARE (ADS) (2) 0.53 0.42 25.9% ---------------------------------- ---- ---- ---- KEY FIGURES IN THOUSANDS OF U.S. DOLLARS (1) (3) -------------------------------- 2010 2009 % Change NET SALES 3,962,901 3,614,995 9.6% NET INCOME 325,256 258,521 25.8% BASIC EARNINGS PER SHARE (ADS)(2) 0.71 0.57 25.4% --------------------------------- ---- ---- ---- Notes : 2010 2009 (1) Except earnings per share (ADS), which are expressed in Euro and U.S. Dollars, respectively (2) Weighted average number of outstanding shares 458,551,310 457,054,182 (3) Average exchange rate (in U.S. Dollars per Euro) 1.3268 1.3320
LUXOTTICA GROUP CONSOLIDATED INCOME STATEMENT FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2010 AND JUNE 30, 2009 In accordance with IAS/IFRS
In thousands of % of % of Euro (1) 2Q 10 sales 2Q 09 sales % Change NET SALES 1,595,124 100.0% 1,401,626 100.0% 13.8% COST OF SALES (529,756) (480,708) GROSS PROFIT 1,065,367 66.8% 920,918 65.7% 15.7% OPERATING EXPENSES: SELLING EXPENSES (484,763) (428,354) ROYALTIES (27,632) (28,354) ADVERTISING EXPENSES (115,345) (92,887) GENERAL AND ADMINISTRATIVE EXPENSES (157,875) (147,831) TRADEMARK AMORTIZATION (21,422) (20,179) TOTAL (807,037) (717,604) OPERATING INCOME 258,330 16.2% 203,314 14.5% 27.1% OTHER INCOME (EXPENSE): INTEREST EXPENSES (26,932) (19,824) INTEREST INCOME 1,245 1,364 OTHER - NET (3,934) (2,388) OTHER INCOME (EXPENSES)-NET (29,622) (20,848) INCOME BEFORE PROVISION FOR 228,708 14.3% 182,467 13.0% 25.3% INCOME TAXES PROVISION FOR INCOME TAXES (77,813) (65,751) NET INCOME 150,896 116,716 LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST (843) (1,381) NET INCOME ATTRIBUTABLE TO 150,052 9.4% 115,336 8.2% 30.1% LUXOTTICA GROUP SHAREHOLDERS BASIC EARNINGS PER SHARE (ADS): 0.33 0.25 FULLY DILUTED EARNINGS PER SHARE (ADS): 0.33 0.25 WEIGHTED AVERAGE NUMBER OF 458,696,583 457,076,280 OUTSTANDING SHARES FULLY DILUTED AVERAGE NUMBER OF SHARES 460,715,012 457,776,190
Notes : (1) Except earnings per share (ADS), which are expressed in Euro
LUXOTTICA GROUP CONSOLIDATED INCOME STATEMENT FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2010 AND JUNE 30, 2009 In accordance with IAS/IFRS
In thousands of % of % of Euro (1) 2010 sales 2009 sales % Change NET SALES 2,986,811 100.0% 2,713,960 100.0% 10.1% COST OF SALES (1,029,545) (931,696) GROSS PROFIT 1,957,265 65.5% 1,782,264 65.7% 9.8% OPERATING EXPENSES: SELLING EXPENSES (937,529) (869,242) ROYALTIES (52,500) (54,166) ADVERTISING EXPENSES (196,488) (172,164) GENERAL AND ADMINISTRATIVE EXPENSES (299,640) (288,010) TRADEMARK AMORTIZATION (41,533) (41,195) TOTAL (1,527,690) (1,424,777) OPERATING INCOME 429,576 14.4% 357,487 13.2% 20.2% OTHER INCOME (EXPENSE): INTEREST EXPENSES (51,571) (49,644) INTEREST INCOME 3,282 3,368 OTHER - NET (4,752) (3,992) OTHER INCOME (EXPENSES)-NET (53,041) (50,269) INCOME BEFORE PROVISION FOR 376,535 12.6% 307,218 11.3% 22.6% INCOME TAXES PROVISION FOR INCOME TAXES (127,973) (109,166) NET INCOME 248,561 198,052 LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST (3,419) (3,967) NET INCOME ATTRIBUTABLE TO 245,143 8.2% 194,085 7.2% 26.3% LUXOTTICA GROUP SHAREHOLDERS BASIC EARNINGS PER SHARE (ADS): 0.53 0.42 FULLY DILUTED EARNINGS PER SHARE (ADS): 0.53 0.42 WEIGHTED AVERAGE NUMBER OF 458,551,310 457,054,182 OUTSTANDING SHARES FULLY DILUTED AVERAGE NUMBER OF SHARES 460,301,289 457,283,843
Notes : (1) Except earnings per share (ADS), which are expressed in Euro
LUXOTTICA GROUP CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2010 AND DECEMBER 31, 2009 In accordance with IAS/IFRS
June 30, December 31, In thousands of Euro 2010 2009 CURRENT ASSETS: CASH AND CASH EQUIVALENTS 337,649 380,081 MARKETABLE SECURITIES 25,915 ACCOUNTS RECEIVABLE - NET 834,556 618,884 SALES AND INCOME TAXES RECEIVABLE 42,928 59,516 INVENTORIES - NET 570,536 524,663 PREPAID EXPENSES AND OTHER 172,161 138,849 DEFERRED TAX ASSETS - CURRENT TOTAL CURRENT ASSETS 1,983,755 1,721,993 PROPERTY, PLANT AND EQUIPMENT - NET 1,235,247 1,149,972 OTHER ASSETS INTANGIBLE ASSETS - NET 4,324,197 3,838,715 INVESTMENTS 53,425 46,317 OTHER ASSETS 151,888 146,626 SALES AND INCOME TAXES RECEIVABLE 1,192 965 DEFERRED TAX ASSETS - NON-CURRENT 408,041 356,706 TOTAL OTHER ASSETS 4,938,742 4,389,329 TOTAL 8,157,744 7,261,294 CURRENT LIABILITIES: BANK OVERDRAFTS 176,215 148,951 CURRENT PORTION OF LONG-TERM DEBT 219,616 166,279 ACCOUNTS PAYABLE 480,306 434,604 ACCRUED EXPENSES AND OTHER 521,110 526,801 ACCRUAL FOR CUSTOMERS' RIGHT OF RETURN 32,137 27,334 INCOME TAXES PAYABLE 42,812 11,204 TOTAL CURRENT LIABILITIES 1,472,196 1,315,174 LONG-TERM LIABILITIES: LONG-TERM DEBT 2,587,402 2,401,796 LIABILITY FOR TERMINATION INDEMNITIES 46,358 44,633 DEFERRED TAX LIABILITIES - NON-CURRENT 434,375 396,048 OTHER LONG-TERM LIABILITIES 412,436 350,028 TOTAL LIABILITIES 4,952,767 4,507,679 EQUITY: 465,076,283 ORDINARY SHARES AUTHORIZED AND ISSUED - 458,471,539 SHARES OUTSTANDING 27,905 27,863 NET INCOME ATTRIBUTABLE TO LUXOTTICA GROUP SHAREHOLDERS 245,143 299,122 RETAINED EARNINGS 2,919,896 2,410,253 TOTAL LUXOTTICA GROUP SHAREHOLDERS' EQUITY 3,192,943 2,737,239 NONCONTROLLING INTEREST 12,034 16,376 TOTAL EQUITY 3,204,977 2,753,615 TOTAL 8,157,744 7,261,294 ----- --------- ---------
LUXOTTICA GROUP CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2010 AND JUNE 30, 2009 - SEGMENTAL INFORMATION - In accordance with IAS/IFRS In thousands of Euro Manufacturing Retail Inter-Segment Consolidated and Transactions and Wholesale Corporate Adj. 2010 Net Sales 1,204,678 1,782,133 2,986,811 Operating Income 277,325 224,584 (72,333) 429,576 % of sales 23.0% 12.6% 14.4% Capital Expenditures 37,496 45,393 82,889 Depreciation & Amortization 38,223 68,666 41,533 148,421 2009 Net Sales 1,076,977 1,636,984 2,713,960 Operating income 234,367 196,802 (73,682) 357,487 % of sales 21.8% 12.0% 13.2% Capital Expenditure 37,223 52,279 89,502 Depreciation & Amortization 37,310 65,769 40,933 144,012 -------------- ------ ------ ------ -------
Non-IAS/IFRS Measure: EBITDA and EBITDA margin
EBITDA represents net income before non-controlling interest, taxes, other income/expense, 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 International Financial Reporting Standards as issued by the International Accounting Standards Board (IAS/IFRS). 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 IAS/IFRS. Rather, these non-IAS/IFRS measures should be used as a supplement to IAS/IFRS 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 IAS/IFRS 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 IAS/IFRS 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 net income, which is the most directly comparable IAS/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 LTM June 30, 2Q 2010 2Q 2009 H1 2010 H1 2009 FY09 2010 ------- ------- ------- ------- ---- ------------- Net income/ (loss) 150.1 115.3 245.1 194.1 299.1 350.2 (+) --- Net income attributable to non- controlling interest 0.8 1.4 3.4 4.0 5.8 5.2 (+) --- Provision for income taxes 77.8 65.8 128.0 109.2 159.9 178.7 (+) --- Other (income)/expense 29.6 20.8 53.0 50.3 106.3 109.1 (+) --- Depreciation & amortization 77.0 71.2 148.4 144.0 285.4 289.9 (+) === EBITDA 335.4 274.5 578.0 501.5 856.5 933.0 (=) --- Net sales 1,595.1 1,401.6 2,986.8 2,714.0 5,094.3 5,367.2 (/) --- EBITDA margin 21.0% 19.6% 19.4% 18.5% 16.8% 17.7% (=)
Non-IAS/IFRS 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 net income before non-controlling interest, taxes, other income/expense, 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 International Financial Reporting Standards as issued by the International Accounting Standards Board (IAS/IFRS). 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 IAS/IFRS. Rather, these non-IAS/IFRS measures should be used as a supplement to IAS/IFRS 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 IAS/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 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 IAS/IFRS 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 IAS/IFRS financial measure, as well as the calculation of the ratio of net debt to EBITDA. For a reconciliation of EBITDA to net income, which is the most directly comparable IAS/IFRS financial measure, see the tables on the preceding pages.
Non-IAS/IFRS Measure: Net debt and Net debt / EBITDA
Millions of Euro June 30, 2010 Dec 31, 2009 ------------- ------------ Long-term debt 2,587.4 2,401.8 (+) --- Current portion of long-term debt (+) 219.6 166.3 (+) --- Bank overdrafts (+) 176.2 149.0 ------------------- ----- ----- Cash (-) (337.6) (380.1) ======== ====== ====== Net debt (=) 2,645.6 2,336.9 LTM EBITDA 933.0 856.5 Net debt/LTM EBITDA 2.8x 2.7x =================== ==== ==== Net debt @ avg. exchange rates (1) -2,447.6 2,381.7 Net debt @ avg. exchange rates (1)/LTM EBITDA 2.6x 2.8x ---- ----
1. Net debt figures are calculated using the average exchange rates used to calculate the EBITDA figures
Non-IAS/IFRS Measures: Free Cash Flow
Free cash flow net represents net income before non-controlling interest, taxes, other income/expense, depreciation and amortization (i.e. EBITDA - see table on the earlier page) plus or minus the decrease/(increase) in working capital over the prior period, less capital expenditures, plus or minus interest income/(expense) and extraordinary items, minus taxes paid. The Company believes that free cash flow is useful to both management and investors in evaluating the Company's operating performance compared with other companies in its industry. In particular, our calculation of free cash flow provides a clearer picture of the Company's ability to generate net cash from operations, which is used for mandatory debt service requirements, to fund discretionary investments, pay dividends or pursue other strategic opportunities.
Free cash flow is not a measure of performance under International Financial Reporting Standards as issued by the International Accounting Standards Board (IAS/IFRS). We include it 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 generate cash from operations in excess of its cash expenses; -- 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.
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 IAS/IFRS. Rather, this non-IAS/IFRS measure should be used as a supplement to IAS/IFRS 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 IAS/IFRS and its definition should be carefully reviewed and understood by investors. Investors should be aware that Luxottica Group's method of calculation of free cash flow may differ from methods used by other companies. The Company recognizes that the usefulness of free cash flow as an evaluative tool may have certain limitations, including:
-- The manner in which the Company calculates free cash flow may differ from that of other companies, which limits its usefulness as a comparative measure; -- Free cash flow does not represent the total increase or decrease in the net debt balance for the period since it excludes, among other things, cash used for funding discretionary investments and to pursue strategic opportunities during the period and any impact of the exchange rate changes; and -- Free cash flow can be subject to adjustment at the Company's discretion if the Company takes steps or adopts policies that increase or diminish its current liabilities and/or changes to working capital.
We compensate for the foregoing limitations by using free cash flow as one of several comparative tools, together with IAS/IFRS measurements, to assist in the evaluation of our operating performance.
See the table on the following page for a reconciliation of free cash flow to EBITDA and the table on the earlier page for a reconciliation of EBITDA to net income, which is the most directly comparable IAS/IFRS financial measure.
Non-IAS/IFRS Measure: Free cash flow
Millions of Euro 2Q 2010 ------- EBITDA (1) 335.4 Change in working capital (29.5) Capex (51.2) ===== ===== Operating cash flow 254.7 Financial charges (2) (25.7) Taxes (64.8) Extraordinary charges (3) (4.0) Free cash flow 160.2
1. EBITDA is not an IAS/IFRS measure; please see table on the earlier page for a reconciliation of EBITDA to net income 2. Equals interest income minus interest expense 3. Equals extraordinary income minus extraordinary expense
Major currencies Three months Six Months Twelve months ended ended ended December 31, June 30, 2009 June 30, 2009 2009 ------------- ------------- ------------- Average exchange rates per Euro 1 US $1.36220 1.33205 1.39467 --- -------- ------- ------- AUD 1.79251 1.88006 1.77281 --- ------- ------- ------- GBP 0.87906 0.89416 0.89104 --- ------- ------- ------- CNY 9.30389 9.10204 9.52693 --- ------- ------- ------- JPY 132.53066 127.20274 130.31404 --- --------- --------- --------- Three months Six months ended ended June 30, 2010 June 30, 2010 ------------- ------------- Average exchange rates per Euro 1 US $1.27075 1.32683 --- -------- ------- AUD 1.44025 1.48477 --- ------- ------- GBP 0.85239 0.86999 --- ------- ------- CNY 8.67171 9.05673 --- ------- ------- JPY 117.15460 121.31968 --- --------- ---------
SOURCE Luxottica Group S.p.A.