MILAN, Italy, April 24 /PRNewswire-FirstCall/ -- The Board of Directors of Luxottica Group S.p.A. (NYSE: LUX; MTA: LUX), a global leader in the design, manufacturing and distribution of premium fashion and luxury eyewear, convened today in Milan by chairman Leonardo Del Vecchio, approved results as of and for the three-month period ended March 31, 2008(1).
Financial highlights for the period in accordance with U.S. GAAP are set forth below. A detailed balance sheet, income statements and other financial tables are attached to this press release.
First quarter of 2008(1)
millions of euro Change at Change at
current constant
exchange exchange
1Q08 rates rates
Consolidated sales
Group 1,398.7 +7.6% +16.6%
Wholesale third parties 619.6 +32.9% +37.6%
Retail 779.1 -6.5% +4.8%
Comp. Sales Retail(2) - - -3.0%
Change vs.
Operating margin Pro forma(4)
Group 14.8% -80 bps -
Wholesale 24.3% +100 bps -
Retail 8.6% -320 bps -
EBITDA(3) 19.7% -70 bps -
Change at
current
exchange Change
rates in US$
EPS (in Euro) 0.23 -19.6% -8.1%
- Before trademark
amortization(3) 0.26 -15.3% -3.2%
Andrea Guerra, chief executive officer of Luxottica Group, commented: "We are pleased with our overall performance for the first three months of the current year. The Group grew significantly: +17% at constant exchange rates, due to the first effects of the integration of Oakley's business and to the organic growth of the Group all across the world. In the U.S., we posted a positive quarter also including Oakley's results for the first quarter on a pro forma basis, which is an encouraging indicator for the remainder of the year.
"This quarter was characterized by a continued weakness of the U.S. currency, by the slowdown of the North American market and by the activities necessary to obtain great synergies from the new journey with Oakley. In these circumstances and despite these factors, Group profitability performed well. Earnings per share before trademark amortization in US dollars was just 3% lower than the first quarter of 2007, a great quarter. That confirms an outstanding resilience of the Group to face more complicated macroeconomic trends.
"We expect that for the remainder of the year, especially in the second half, our business will have an opportunity to reap to an even greater degree the benefits of its leadership in the market, exploiting Oakley's seasonality and the new wholesale/retail mix resulting from the integration. We have already implemented several business-specific as well as Group-wide initiatives to further improve our ability to capture and maximize opportunities for growth while further increasing cost controls, confirming a 5% of net sales investment plan for our future.
"In the first quarter of 2008, the Group also grew in North America. Net sales for the retail and wholesale segments combined, including Oakley pro forma, grew in US$ by 3% compared to the first quarter of 2007, due to a diversified strategy and a balanced brand portfolio for the retail and wholesale segments. While there is clearly a market slowdown, the severe market fluctuations appear to have been stabilized. We have been able to plan and react to these new conditions. We have been engaged in an important cost-control plan, the purpose of which is to enhance efficiency. This plan allows us to view our prospects for future quarters positively.
"Our manufacturing and wholesale segment's best brands performed very well across all regions. The different positioning of our brand portfolio, the strengths of each brand and our deeply rooted global presence allowed us to post a strong overall growth: +36% at constant exchange rates.
"Integration projects with Oakley are moving very quickly, exceeding our expectations. Europe and emerging markets are the regions where we have done the most integration work so far and where we are already reaping the initial results of such work.
"These results allow us to confirm our previously announced guidance for FY 2008."
In the first quarter of 2008, our two most important house brands, Ray-Ban and Oakley, posted strong results, as did the first collection of our licensed brand, Tiffany, which was successfully launched first in North America and then in other markets. The launch of 30 new colors of Wayfarer completed the restyling campaign, started last year, for this iconic Ray-Ban model and was well-received by the market. This quarter, Oakley posted double digit sales growth in the U.S. and in other markets. This is the year of the Olympic games and great product launches which are being well-received by male and female audiences.
Luxottica Group's consolidated net outstanding debt on March 31, 2008, was euro 2,729 million, reflecting a consolidated net debt to pro forma EBITDA ratio(3) of 2.38x.
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.
Luxottica Group S.p.A.
Luxottica Group is a global leader in eyewear, with over 6,000 optical and sun retail stores in North America, Asia-Pacific, China, South Africa and Europe and a strong brand portfolio that includes our key house brand, Ray-Ban, the best selling sun and prescription eyewear brand in the world, as well as, among others, license brands Bvlgari, Burberry, Chanel, Dolce & Gabbana, Donna Karan, Polo Ralph Lauren, Prada, Salvatore Ferragamo, Tiffany and Versace, and other key house brands Oakley, Oliver Peoples, Vogue, Persol, Arnette and REVO. In addition to a global wholesale network that touches 130 countries, the Group manages leading retail brands such as LensCrafters and Pearle Vision in North America, OPSM and Laubman & Pank in Asia-Pacific, and Sunglass Hut globally. The Group's products are designed and manufactured in six Italy-based high-quality manufacturing plants, in the only two China-based plants wholly-owned by a premium eyewear manufacturer, and in manufacturing facilities in the United States acquired as part of the Oakley acquisition. For fiscal year 2007, Luxottica Group (NYSE: LUX; MTA: LUX) posted consolidated net sales of euro 5 billion. Additional information on the Group is available at http://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, 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 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.
(1) All comparisons, including percentage changes, are between the
three-month periods ended March 31, 2008 and 2007.
(2) 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, and applies to both periods the average
exchange rate for the prior period and the same geographic area.
(3) EBITDA, pro forma EBITDA, the ratio of net debt to pro forma EBITDA
and EPS before trademark amortization are non-U.S. GAAP measures. For
additional disclosure regarding such measures, please refer to the
tables attached or to the tables accompanying the 1Q08 results
conference call that the Group's management will hold this afternoon
(presentation available on http://www.luxottica.com/)
(4) Pro forma data reflects the inclusion of Oakley, Inc., a subsidiary
that was acquired in November 2007, as if it was acquired on
January 1, 2007.
APPENDIX
Non-U.S. GAAP Measures
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 to 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 these measures are fully understood in light of how the
Company evaluates its operating results;
-- properly define the metrics used and confirm their calculation; and
-- share these measures 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, these non-GAAP measures should be used as a supplement to U.S. GAAP results to assist the reader in better understanding 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 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 an 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 table on the following page for a reconciliation of EPS before
trademark amortization to EPS for the quarters ending March 31, 2007
and March 31, 2008, respectively which are the most directly comparable
U.S. GAAP financial measure for 1Q07 and 1Q08.
Non-U.S. GAAP Measures: EPS before Trademark Amortization
(Millions of Euro, unless otherwise noted)
1Q07 1Q08
Trademark amortization and other similar
intangible assets
(+) 15 21
Taxes on trademark amortization and other
similar intangible assets
(-) (6) (8)
Trademark amortization and other similar
intangible assets, net of taxes
(=) 9 13
Average number of shares outstanding
as of March 31 (in thousands)
(/) 453,990 456,361
Trademark amortization and other similar
intangible assets, net of taxes, per share
(=) 0.02 0.03
EPS
(+) 0.28 0.23
EPS before trademark amortization and other
similar intangible assets, net of taxes
(=) 0.30 0.26
TABLES TO FOLLOW -
LUXOTTICA GROUP
CONSOLIDATED FINANCIAL HIGHLIGHTS
FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 2008 AND MARCH 31, 2007
KEY FIGURES IN THOUSANDS OF EURO (3)
2008 2007 % Change
NET SALES 1,398,703 1,299,825 7.6%
NET INCOME 103,705 128,257 -19.1%
BASIC EARNINGS PER SHARE (ADS)(2): 0.23 0.28 -19.6%
EPS BEFORE TRADEMARK AMORTIZATION(4): 0.26 0.30 -15.3%
KEY FIGURES IN THOUSANDS OF U.S.
DOLLARS (1) (3)
2008 2007 % Change
NET SALES 2,094,698 1,703,551 23.0%
NET INCOME 155,309 168,094 -7.6%
BASIC EARNINGS PER SHARE (ADS)(2): 0.34 0.37 -8.1%
EPS BEFORE TRADEMARK AMORTIZATION(4): 0.38 0.40 -3.2%
Notes: 2008 2007
(1) Average exchange rate (in
U.S. Dollars per Euro) 1.4976 1.3106
(2) Weighted average number of
outstanding shares 456,360,623 453,990,312
(3) Except earnings per share
(ADS), which are expressed in Euro and U.S. Dollars, respectively
(4) EPS before trademark amortization is a non U.S. GAAP measure. For
additional disclosure regarding EPS before trademark amortization
please refer to Appendix.
LUXOTTICA GROUP
CONSOLIDATED INCOME STATEMENT
FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 2008 AND MARCH 31, 2007
% of % of
In thousands of Euro (1) 1Q08 sales 1Q07 sales % Change
NET SALES 1,398,703 100.0% 1,299,825 100.0% 7.6%
COST OF SALES (470,910) (416,894)
GROSS PROFIT 927,794 66.3% 882,931 67.9% 5.1%
OPERATING EXPENSES:
SELLING EXPENSES (437,582) (404,906)
ROYALTIES (34,973) (34,491)
ADVERTISING EXPENSES (92,000) (85,463)
GENERAL AND
ADMINISTRATIVE EXPENSES (134,980) (118,928)
TRADEMARK AMORTIZATION (21,201) (15,017)
TOTAL (720,736) (658,806)
OPERATING INCOME 207,057 14.8% 224,125 17.2% -7.6%
OTHER INCOME (EXPENSE):
INTEREST EXPENSES (34,356) (17,837)
INTEREST INCOME 2,941 3,008
OTHER - NET (5,173) (378)
OTHER INCOME (EXPENSES)-
NET (36,589) (15,207)
INCOME BEFORE PROVISION
FOR INCOME TAXES 170,469 12.2% 208,918 16.1% -18.4%
PROVISION FOR INCOME
TAXES (59,664) (75,211)
INCOME BEFORE MINORITY
INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES 110,805 133,708
MINORITY INTEREST IN
INCOME OF CONSOLIDATED
SUBSIDIARIES (7,099) (5,451)
NET INCOME 103,705 7.4% 128,257 9.9% -19.1%
BASIC EARNINGS PER SHARE
(ADS): 0.23 0.28
FULLY DILUTED EARNINGS
PER SHARE (ADS): 0.23 0.28
WEIGHTED AVERAGE NUMBER
OF OUTSTANDING SHARES 456,360,623 453,990,312
FULLY DILUTED AVERAGE
NUMBER OF SHARES 459,711,568 457,341,257
Notes:
(1) Except earnings per share (ADS), which are expressed in Euro
LUXOTTICA GROUP
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2008 AND DECEMBER 31, 2007
In thousands of Euro March 31, 2008 December 31, 2007
CURRENT ASSETS:
CASH 219,410 302,894
MARKETABLE SECURITIES 3,742 21,345
ACCOUNTS RECEIVABLE 776,808 665,184
SALES AND INCOME TAXES RECEIVABLE 63,081 89,000
INVENTORIES 541,525 575,016
PREPAID EXPENSES AND OTHER 157,675 139,305
DEFERRED TAX ASSETS - CURRENT 121,787 117,853
TOTAL CURRENT ASSETS 1,884,029 1,910,597
PROPERTY, PLANT AND EQUIPMENT - NET 1,014,337 1,057,782
OTHER ASSETS
INTANGIBLE ASSETS - NET 3,660,958 3,907,957
INVESTMENTS 17,689 17,668
OTHER ASSETS 184,989 194,329
SALES AND INCOME TAXES RECEIVABLE 1,042 1,042
DEFERRED TAX ASSETS - NON-CURRENT 80,056 67,891
TOTAL OTHER ASSETS 3,944,734 4,188,887
TOTAL 6,843,101 7,157,266
CURRENT LIABILITIES:
BANK OVERDRAFTS 483,346 455,588
CURRENT PORTION OF LONG-TERM DEBT 730,652 792,617
ACCOUNTS PAYABLE 336,249 423,432
ACCRUED EXPENSES AND OTHER 399,106 441,721
ACCRUAL FOR CUSTOMERS' RIGHT OF RETURN 27,636 26,557
INCOME TAXES PAYABLE 61,232 19,314
TOTAL CURRENT LIABILITIES 2,038,220 2,159,229
LONG-TERM LIABILITIES:
LONG-TERM DEBT 1,734,229 1,926,523
LIABILITY FOR TERMINATION INDEMNITIES 56,874 56,911
DEFERRED TAX LIABILITIES - NON-CURRENT 227,587 248,377
OTHER 255,870 229,972
TOTAL LONG-TERM LIABILITIES 2,274,561 2,461,782
COMMITMENTS AND CONTINGENCIES:
MINORITY INTERESTS IN
CONSOLIDATED SUBSIDIARIES 42,635 41,097
SHAREHOLDERS' EQUITY:
462,872,820 ORDINARY SHARES
AUTHORIZED AND ISSUED -
456,438,034 SHARES OUTSTANDING 27,824 27,757
NET INCOME 103,705 492,204
RETAINED EARNINGS 2,356,155 1,975,196
TOTAL SHAREHOLDERS' EQUITY 2,487,685 2,495,158
TOTAL 6,843,101 7,157,266
LUXOTTICA GROUP
CONSOLIDATED FINANCIAL HIGHLIGHTS
FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 2008 AND MARCH 31, 2007
- SEGMENTAL INFORMATION -
Inter-Segment
Transactions
Manufacturing and Corporate
In thousands of Euro and Wholesale Retail Adj. Consolidated
2008
Net Sales 712,264 779,142 (92,702) 1,398,703
Operating Income 172,765 67,305 (33,013) 207,057
% of sales 24.3% 8.6% 14.8%
Capital Expenditures 20,675 29,011 49,686
Depreciation & Amortization 22,480 29,728 16,055 68,263
Assets 2,819,504 1,617,373 2,406,224 6,843,101
2007
Net Sales 548,498 833,562 (82,235) 1,299,825
Operating Income 151,010 101,383 (28,268) 224,125
% of sales 27.5% 12.2% 17.2%
Capital Expenditures 19,193 34,292 53,485
Depreciation & Amortization 15,319 29,479 9,954 54,751
Assets 2,132,553 1,411,723 1,772,349 5,316,625
2007 Pro-forma (1)
Net Sales 675,418 868,410 (98,925) 1,444,904
Operating income 157,399 102,421 (34,944) 224,875
% of sales 23.3% 11.8% 15.6%
Depreciation & Amortization 21,792 31,599 16,630 70,021
Notes :
(1) These consolidated pro-forma amounts reflect the consolidation of
Oakley Inc. results, a subsidiary that was acquired in November 14, 2007,
for the first three months of 2007 (as it is in 2008) and assuming the
same trademark amortization as in 2008, to give comparative information
for the two periods discussed. This information does not purport to be
indicative of the actual results that would have been achieved had the
Oakley acquisition been completed as of January 1, 2007.
LUXOTTICA GROUP
RECONCILIATION OF THE CONSOLIDATED INCOME STATEMENT
PREPARED IN ACCORDANCE WITH US GAAP AND IAS / IFRS FOR THE THREE-MONTH
PERIOD ENDED MARCH 31, 2008,
PURSUANT TO CONSOB REGULATION N. 27021 OF APRIL 7, 2000 AND IN
ACCORDANCE WITH CONSOB
COMMUNICATION DME/5015175 DATED MARCH 10, 2005
CONSOLIDATED INCOME STATEMENT
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2008
In thousands of Euro (1) US GAAP
2008 IFRS 3 IAS 12 IAS 19
Business Income Employee
combination Taxes benefit
NET SALES 1,398,703
COST OF SALES (470,910) (1,050)
GROSS PROFIT 927,794 (1,050)
OPERATING EXPENSES:
SELLING EXPENSES (437,582) (1,298)
ROYALTIES (34,973)
ADVERTISING EXPENSES (92,000)
GENERAL AND ADMINISTRATIVE EXPENSES (134,980) (884) 120
TRADEMARK AMORTIZATION (21,201)
TOTAL (720,736) (2,182) 120
OPERATING INCOME 207,057 (3,232) 120
OTHER INCOME (EXPENSE):
INTEREST EXPENSES (34,356) (806)
INTEREST INCOME 2,941
OTHER - NET (5,173)
OTHER INCOME (EXPENSES)-NET (36,589) (806)
INCOME BEFORE PROVISION FOR
INCOME TAXES 170,469 (4,038) 120
PROVISION FOR INCOME TAXES (59,664) 1,263 6,337 (46)
INCOME BEFORE MINORITY INTEREST
IN INCOME OF CONSOLIDATED
SUBSIDIARIES 110,805 (2,775) 6,337 74
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES (7,099) 3,678
NET INCOME 103,705 904 6,337 74
BASIC EARNINGS PER SHARE
(ADS) (1) 0.23
FULLY DILUTED EARNINGS PER SHARE
(ADS) (1) 0.23
WEIGHTED AVERAGE NUMBER
OF OUTSTANDING SHARES 456,360,623
FULLY DILUTED AVERAGE NUMBER
OF SHARES 459,711,568
In thousands of Euro (1) IAS / IFRS
IAS 38 IAS 39 Total 2008
Intangible adj.
Depreciation Derivatives IAS-IFRS
NET SALES 1,398,703
COST OF SALES (1,050) (471,960)
GROSS PROFIT (1,050) 926,743
OPERATING EXPENSES:
SELLING EXPENSES (1,298) (438,880)
ROYALTIES (34,973)
ADVERTISING EXPENSES 113 113 (91,887)
GENERAL AND ADMINISTRATIVE
EXPENSES (764) (135,744)
TRADEMARK AMORTIZATION (21,201)
TOTAL 113 (1,949) (722,685)
OPERATING INCOME 113 (2,999) 204,058
OTHER INCOME (EXPENSE):
INTEREST EXPENSES 5,012 4,206 (30,152)
INTEREST INCOME 2,941
OTHER - NET 70 70 (5,103)
OTHER INCOME (EXPENSES)-NET 5,082 4,276 (32,314)
INCOME BEFORE PROVISION FOR
INCOME TAXES 113 5,082 1,277 171,746
PROVISION FOR INCOME TAXES (46) (1,202) 6,306 (53,358)
INCOME BEFORE MINORITY
INTEREST IN INCOME OF
CONSOLIDATED
SUBSIDIARIES 67 3,880 7,583 118,388
MINORITY INTEREST IN INCOME
OF CONSOLIDATED SUBSIDIARIES 3,678 (3,421)
NET INCOME 67 3,880 11,261 114,967
BASIC EARNINGS PER SHARE
(ADS) (1) 0.25
FULLY DILUTED EARNINGS PER
SHARE (ADS) (1) 0.25
WEIGHTED AVERAGE NUMBER
OF OUTSTANDING SHARES 456,360,623
FULLY DILUTED AVERAGE NUMBER
OF SHARES 459,711,568
Notes:
(1) Except earnings per share (ADS), which are expressed in Euro
NON-GAAP MEASURE:
EBITDA, PRO FORMA EBITDA AND NET DEBT TO PRO FORMA EBITDA RATIO
Net debt means the sum of bank overdrafts, current portion of long-term debt and long-term debt, less cash and cash equivalents. EBITDA represents income from operations before depreciation and amortization. Pro forma EBITDA reflects the consolidated EBITDA of the Company as adjusted to include the results of operations of Oakley, Inc., which was acquired by the Company on November 14, 2007, as if it had been acquired on January 1, 2007. The Company believes that pro forma EBITDA is useful to both management and investors in evaluating the Company's operating performance compared to that of other companies in its industry. Our calculation of pro forma 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 net debt to pro forma EBITDA ratio allows management to assess the cost of existing debt since it affects the interest rates charged by the Company's lenders.
Management also believes that the net debt to pro forma EBITDA is useful to investors because it allows investors to assess the impact of cash flows on the Company's level of leverage. EBITDA, Pro forma EBITDA and the ratio of net debt to pro forma EBITDA are not measures of performance under accounting principles generally accepted in the United States (U.S. GAAP). We include them in this press release 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, Pro forma EBITDA and the ratio of net debt to pro forma 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 pro forma EBITDA and the ratio of net debt to pro forma EBITDA may differ from methods used by other companies. The Company recognizes that the usefulness of EBITDA, pro forma EBITDA and the ratio of net debt to pro forma EBITDA as evaluative tools may have certain limitations, including the following:
-- EBITDA and Pro forma EBITDA do 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 and Pro forma EBITDA do 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 and Pro forma EBITDA do 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 and Pro forma EBITDA do not reflect cash expenditures or future
requirements for capital expenditures or contractual commitments.
-- EBITDA and Pro forma EBITDA do not reflect changes in, or cash
requirements for, working capital needs.
-- EBITDA and Pro forma EBITDA do not allow us to analyze the effect of
certain recurring and non-recurring items that materially affect our
net income or loss.
-- The ratio of net debt to pro forma 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, pro forma EBITDA and the ratio of net debt to pro forma EBITDA as two of several comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of our future operating performance and leverage.
See the tables on the following page for (1) a reconciliation of net debt as of March 31, 2008 and December 31, 2007 to long-term debt as of March 31, 2008 and December 31, 2007, which is the most directly comparable U.S. GAAP financial measure, (2) a reconciliation of EBITDA to income from operations for March 31, 2008 and pro forma EBITDA to income from operations for March 31, 2007 and December 31, 2007, which is the most directly comparable U.S. GAAP financial measure, and (3) the calculation of the ratio of net debt to pro forma EBITDA.
NON-U.S. GAAP MEASURE: NET DEBT
Dec. 31, 2007 March. 31, 2008
Millions of euro
Long-term debt 1,926.5 1,734.2
(+)
Current portion of long-term debt 792.6 730.7
(+)
Bank overdrafts 455.6 483.3
(+)
Cash (302.9) (219.4)
(-)
Net debt 2,871.8 2,728.8
(=)
Non-U.S. GAAP Measure:
EBITDA, proforma EBITDA and ratio of net debt to proforma EBITDA
EBITDA LTM
as of
March 31,
Millions of Euro 1Q07 FY07 1Q08 2008
Proforma(1) Proforma(1) Proforma(1)
(-) (+) (+) (=)
Income from operations(1) (224.9) 878.1 207.1 860.3
(+)
Depreciation & amortization (70.0) 288.2 68.3 286.4
(+)
EBITDA (294.9) 1,166.3 275.3 1,146.7
(=)
Net debt / EBITDA 2.46x 2.38x
(1) These consolidated pro-forma amounts reflect the consolidation of
Oakley Inc. results, a subsidiary that was acquired in November 2007,
for the first three months of 2007 (as it is in 2008) and assume the
same trademark amortization as in 2008, to give comparative
information for the two periods discussed. This information does not
purport to be indicative of the actual results that would have been
achieved had the Oakley acquisition been completed as of January 1,
2007.
Luxottica Group S.p.A.
