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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2003
COMMISSION FILE NO. 1 - 10421
LUXOTTICA GROUP S.P.A.
VIA CANTU 2, MILAN 20123 ITALY
(Address of principal executive offices)
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 / /
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): / /
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): / /
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 / / No /X/
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[LOGO]
F O R M 6 K
FOR THE THREE MONTHS
ENDED MARCH 31 OF
FISCAL YEAR 2003
LUXOTTICA GROUP S.p.A.
INDEX TO FORM 6--K
PAGE
----
Item 1 Financial Statements:
-Consolidated Balance Sheets (U.S. GAAP) at December 31,
2002 (audited) and March 31, 2003 (unaudited).............. 3
-Statements of Consolidated Income (U.S. GAAP) for the three
months ended March 31, 2002 and 2003 (unaudited)........... 4
-Statement of Consolidated Shareholders' Equity (U.S. GAAP)
for the three months ended March 31, 2003 (unaudited)...... 5
-Statements of Consolidated Cash Flows (U.S. GAAP) for the
three months ended March 31, 2002 and 2003 (unaudited)..... 6
-Condensed Notes to Consolidated Financial Statements
(unaudited)................................................ 7
Item 2 Management's discussion and analysis of financial condition
and results of operations for three months ended March 31,
2002 and 2003.............................................. 9
Item 3 Press Release for March 31, 2003............................ 17
2
CONSOLIDATED BALANCE SHEETS--US GAAP
DECEMBER 31, 2002 AND MARCH 31, 2003
-------------------------------------------------------------------------------------------------------------------
MARCH 31, 2003 MARCH 31, 2003
DECEMBER 31, 2002 (UNAUDITED) (UNAUDITED)
(Thousand of Euro) (Thousand of US dollars)(1)
-------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash 151,418 241,220 $ 262,930
Accounts receivable--net 370,234 420,161 457,976
Sales and income taxes receivable 10,956 7,043 7,677
Inventories 406,032 404,948 441,393
Prepaid expenses and other 53,385 55,661 60,671
Net deferred tax assets--current 148,088 146,031 159,174
--------- --------- ----------
TOTAL CURRENT ASSETS 1,140,113 1,275,065 1,389,821
--------- --------- ----------
PROPERTY, PLANT AND EQUIPMENT--NET 506,545 488,244 532,186
--------- --------- ----------
OTHER ASSETS:
Intangible assets--net 1,916,526 1,908,312 2,080,060
Investments 12,837 12,680 13,821
Other assets 10,311 13,165 14,349
--------- --------- ----------
TOTAL OTHER ASSETS 1,939,674 1,934,156 2,108,231
--------- --------- ----------
TOTAL 3,586,332 3,697,465 $4,030,237
-------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdrafts 371,729 504,584 $ 549,997
Current portion of long-term debt 178,335 200,391 218,426
Accounts payable 202,897 187,577 204,459
Accrued expenses and other 217,883 219,123 238,844
Accrual for customers' right of return 9,130 9,209 10,038
Income taxes payable 18,748 34,122 37,193
--------- --------- ----------
TOTAL CURRENT LIABILITIES 998,722 1,155,006 1,258,956
--------- --------- ----------
LONG TERM LIABILITIES
Long term debt 855,654 827,031 901,464
Liability for termination indemnities 48,945 44,637 48,654
Net deferred tax liabilities--non current 121,805 123,007 134,078
Other 133,605 142,432 155,250
--------- --------- ----------
TOTAL LONG TERM LIABILITIES 1,160,010 1,137,107 1,239,447
--------- --------- ----------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES 9,705 9,135 9,957
--------- --------- ----------
SHAREHOLDERS' EQUITY
Capital stock par value Euro 0.06--454,263,600
and 454,266,000 ordinary shares authorized and
issued at December 31, 2002 and March 31,
2003, respectively; 452,351,900 and
447,831,214 shares outstanding at December 31,
2002 and March 31, 2003, respectively. 27,256 27,256 29,709
Additional paid-in capital 34,799 34,822 37,956
Retained earnings 1,447,374 1,512,988 1,649,157
Accumulated other comprehensive income (loss) (66,987) (108,862) (118,660)
--------- --------- ----------
TOTAL 1,442,442 1,466,204 1,598,162
Less--Treasury shares at cost; 1,911,700 and
6,434,786 shares at December 31, 2002 and
March 31, 2003, respectively. 24,547 69,987 76,286
--------- --------- ----------
SHAREHOLDERS' EQUITY 1,417,895 1,396,217 1,521,876
--------- --------- ----------
TOTAL 3,586,332 3,697,465 $4,030,237
-------------------------------------------------------------------------------------------------------------------
(1) Translated at the Noon Buying Rate of Euro 1.00=US$1.0900 on March 31, 2003
(see Note 5).
3
STATEMENTS OF CONSOLIDATED INCOME--US GAAP
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2003 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
2002(3) 2003 2003
(Thousand of Euro)(1) (Thousand of US dollars)(1)(2)
----------------------------------------------------------------------------------------------------------------------
NET SALES 880,486 704,547 $767,956
COST OF SALES 258,246 208,016 226,738
--------- --------- --------
GROSS PROFIT 622,240 496,531 541,218
--------- --------- --------
OPERATING EXPENSES:
Selling and advertising 375,823 315,128 343,490
General and administrative 83,232 70,051 76,356
--------- --------- --------
TOTAL 459,055 385,179 419,845
--------- --------- --------
INCOME FROM OPERATIONS 163,185 111,351 121,373
--------- --------- --------
OTHER INCOME (EXPENSE):
Interest income 1,555 897 978
Interest expense (20,674) (11,808) (12,871)
Other--net 2,962 (4,587) (5,000)
--------- --------- --------
OTHER INCOME (EXPENSE) NET (16,157) (15,498) (16,893)
--------- --------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 147,028 95,853 104,480
--------- --------- --------
PROVISION FOR INCOME TAXES 44,108 28,761 31,349
--------- --------- --------
INCOME BEFORE MINORITY INTERESTS IN INCOME OF CONSOLIDATED
SUBSIDIARIES 102,920 67,092 73,130
--------- --------- --------
MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES 1,849 1,478 1,611
--------- --------- --------
NET INCOME 101,071 65,614 $ 71,519
========= ========= ========
EARNINGS PER SHARE:
Basic 0.22 0.15 $ 0.16
--------- --------- --------
Diluted 0.22 0.15 $ 0.16
========= ========= ========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING (thousands):
Basic 451,990.5 450,957.2
Diluted 454,925.4 452,104.3
--------------------------------------------------------------------------------
(1) Except for earnings per share which are stated in Euro and U.S. dollars.
(2) Translated at the Noon Buying Rate of Euro 1.00=US$1.0900 on March 31, 2003
(see Note 5).
(3) Certain amounts presented in the prior year financial statements have been
reclassified to conform with the current presentation. Among them was a
reclassification of certain revenue items of the retail segment which were
recorded in prior year as a reduction in the related costs and are now
reflected as gross revenues and gross costs. The effect of this
reclassification is an increase in sales for the three-month period ended
March 31, 2002 of U.S. Dollars 12.0 million, and an offsetting increase in
costs for the same amounts.
4
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY--US GAAP
FOR THE THREE MONTHS ENDED MARCH 31, 2003
(UNAUDITED)
------------------------------------------------------------------------------------------------------------
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) INCOME (LOSS)
(Thousand of Euro)
------------------------------------------------------------------------------------------------------------
BALANCES, January 1,
2003 454,263,600 27,256 34,799 1,447,374 (66,987)
Exercise of stock
options 2,400 0 23
Translation adjustment (40,465) (40,465)
Purchases of treasury
shares
Other (1,410) (1,410)
Net income 65,614 65,614
--------
Compehensive income 23,739
------------ ------- ------- ---------- ======== ---------
BALANCES, March 31,
2003 454,266,000 27,256 34,822 1,512,988 (108,862)
============ ======= ======= ========== =========
Comprehensive income $ 25,876
========
(Thousand of US
dollars)(1)
BALANCES, March 31,
2003 454,266,000 $29,709 $37,956 $1,649,157 $(118,660)
============ ======= ======= ========== =========
------------------------------------------------------------------------------------------------------------
----------------------- -------------------------
CONSOLIDATED
TREASURY SHAREHOLDERS'
SHARES EQUITY
(Thousand of Euro)
----------------------- -------------------------
BALANCES, January 1,
2003 (24,547) 1,417,895
Exercise of stock
options 23
Translation adjustment (40,465)
Purchases of treasury
shares (45,440) (45,440)
Other (1,410)
Net income 65,614
Compehensive income
-------- ----------
BALANCES, March 31,
2003 (69,987) 1,396,217
======== ==========
Comprehensive income
(Thousand of US
dollars)(1)
BALANCES, March 31,
2003 $(76,286) $1,521,876
======== ==========
-----------------------
(1) Translated at the Noon Buying Rate of Euro 1.00=US$1.0900 on March 31, 2003
(see Note 5).
5
STATEMENTS OF CONSOLIDATED CASH FLOWS--US GAAP
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2003 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
2002 2003 2002
(Thousand of Euro) (Thousand of US dollars)(1)
----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before minority interests 102,920 67,092 $ 73,130
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by/(used in) operating activities:
Depreciation and amortization 39,134 33,073 36,050
Benefit for deferred income taxes 1,962 (269) (293)
Losses (Gains) on disposal of fixed assets--net (2,511) 32 35
Termination indemnities matured during the period 1,451 514 560
Changes in assets and liabilities:
Accounts receivable (89,995) (36,810) (40,123)
Prepaid expenses and other (14,794) 593 646
Inventories 12,754 1,057 1,153
Accounts payable 14,731 (23,966) (26,123)
Accrued expenses and other 150,866 4,693 5,115
Accrual for customers right of return 1,851 417 455
Income taxes payable 39,518 14,992 16,342
--------- --------- ---------
TOTAL ADJUSTMENTS 154,967 (5,674) (6,185)
--------- --------- ---------
Cash provided by operating activities 257,887 61,418 $ 66,945
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Additions (53,251) (10,409) $ (11,346)
Disposals 4,888 (1,718) (1,873)
Acquisitions of business (net of cash acquired) -- (23,708) (25,842)
Increase (Decrease) in intangible assets (143,133) (28,852) (31,448)
--------- --------- ---------
Cash used in investing activities (191,496) (64,688) (70,508)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long term debt:
Proceeds -- 50,000 54,500
Repayments (219,909) (43,348) (47,249)
(Investment in)/use of restricted cash deposit 121,877 -- --
Sales of treasury shares and additional paid-in capital 8,784 -- --
Purchase of treasury shares -- (45,440) (49,530)
Exercise of stock options 5,925 23 25
--------- --------- ---------
Net cash provided by (used in) financing activities (83,323) (38,765) (42,255)
--------- --------- ---------
EFFECT OF TRANSLATION ADJUSTMENTS AND OTHER 741 -- --
INCREASE (DECREASE) IN CASH (16,191) (42,033) (45,816)
CASH, BEGINNING OF THE PERIOD (211,991) (220,311) (240,139)
EFFECT OF TRANSLATION ADJUSTMENTS ON CASH 339 (1,019) (1,111)
--------- --------- ---------
CASH, END OF THE PERIOD (227,843) (263,363) $(287,066)
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest 13,776 6,344 $ 6,915
Cash paid during the period for taxes 10,091 9,518 $ 10,375
----------------------------------------------------------------------------------------------------------------------
(1) Translated at the Noon Buying Rate of Euro 1.00=US$1.0900 on March 31, 2003
(see Note 5).
6
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated balance sheet as of March 31, 2003 and the
related statements of consolidated income and cash flows for the three months
ended March 31, 2002 and 2003 and the statement of consolidated shareholders'
equity for the three months ended March 31, 2003 have been prepared by Luxottica
Group S.p.A. (the "Company") in accordance with accounting principles generally
accepted in the United States of America. The consolidated balance sheet at
March 31, 2003, the statements of consolidated income and cash flows for the
three months ended March 31, 2002 and 2003, and the statement of consolidated
shareholders' equity for the three months ended March 31, 2003 are derived from
unaudited financial statements. In the opinion of Management, all adjustments
(which include only normal recurring adjustments) necessary to fairly present
the financial position, results of operations and cash flows as of and for the
three months ended March 31, 2002 and 2003 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
in the United States of America have been omitted. The consolidated financial
statements as of and for the three month period ended March 31, 2003 should be
read in conjunction with the Company's audited financial statements for the year
ended December 31, 2002. The results of operations for the three months ended
March 31, 2003 are not necessarily indicative of the operating results for the
full year.
2. INVENTORIES
Inventories consisted of the following (Thousand of Euro):
------------------------------------------------------------------------------------
DECEMBER MARCH
31, 31,
2002 2003
------------------------------------------------------------------------------------
Raw materials 64,581 63,263
Work in process 22,624 21,738
Finished goods 318,827 319,947
------- -------
Total 406,032 404,948
======= =======
3. EARNINGS PER SHARE
Earnings per share are computed by dividing net income by the number of
weighted-average shares outstanding during the period. Basic earnings per share
are based on the weighted average number of shares of common stock outstanding
during the period. Diluted earnings per share are based on the weighted average
number of shares of common stock and common stock equivalents (options)
outstanding during the period.
4. STOCK OPTION AND INCENTIVE PLANS
Options to purchase an aggregate of 11,445,033 Ordinary Shares of the
Company were outstanding at March 31, 2003. Outstanding options granted under
the Company's Stock Option Plan (10,475,033 shares) become exercisable in three
equal annual installments and expire on or before January 31, 2011. During the
first three months of 2003, 2,400 options were exercised. Options granted under
the Company's Incentive Plans (970,000 shares) vest and become exercisable only
if certain financial performance measures are met over a three year period
ending December 2004. As the Company has elected to apply Accounting Principle
Board Opinion No. 25, "Accounting for Stock Issued to Employees", no
compensation expense was recognized for shares issued under the Stock
7
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. STOCK OPTION AND INCENTIVE PLANS (CONTINUED)
Option Plans because each option's exercise price was equal to the fair market
value of the underlying stock on each date of the grant. Compensation expense
will be recognized for the options issued under the Incentive Plans based on the
market value of the underlying Ordinary Shares when the number of shares to be
issued is known.
5. CONVERSION OF FINANCIAL STATEMENTS INTO U.S. DOLLARS
The consolidated financial statements presented in Euro as of and for the
three months ended March 31, 2003, are also translated into U.S. Dollars, solely
for the convenience of the readers of these financial statements, at the noon
buying rate of Euro 1.00 = U.S. Dollar 1.0900, as certified for customs purposes
by the Federal Reserve Bank of New York (the "Noon Buying Rate") at March 31,
2003. Such translations should not be construed as representations that Euro
amounts could be converted into U.S. Dollars at that or any other rate.
6. INCOME TAXES
The 2002 and 2003 effective tax rates are less than the statutory tax rate
due to permanent differences between the Company's income for financial
reporting and tax purposes which reflect the net loss carryforward caused by the
prior funding of subsidiary losses through capital contributions that are
deductible for income tax purposes under Italian law, and the reduction in
certain investments in subsidiaries. Such subsidiary losses were primarily
attributable to the amortization of certain intangible assets associated with
the Company's acquisitions.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 2001 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangibles Assets ("SFAS No. 142")". The pronouncement is effective for fiscal
years beginning after December 15, 2001 and applies to all goodwill and other
intangible assets recognized in financial statements after that date. As a
result of this statement, goodwill and intangibles deemed to have an indefinite
life will no longer be amortized in the same manner as under the previous
standards. However, they will be reviewed periodically for impairment and thus
there may be more volatility in reported income.
After an evaluation, the Company has concluded that the carrying value of
goodwill and other intangible assets included in the Consolidated Balance Sheet
as of January 1, 2002, did not exceed their fair market value, and as a result,
has not recorded an asset impairment charge for the adoption of SFAS No. 142.
The Company has determined that the useful life of its trade names ranges from
20 to 25 years and, therefore, their value is amortized on a straight-line basis
over their useful life. Amortization expense relating to intangible assets for
the three months ended March 31, 2003 were Euro 9.0 million, compared to Euro
9.4 million for the same period of 2002.
8. RECLASSIFICATION OF 2002 INCOME STATEMENT
Certain amounts presented in the prior year financial statements have been
reclassified to conform with the current year presentation. Among them was a
reclassification of certain revenue items of the retail segment which were
recorded in prior years as a reduction in the related costs and are now
reflected as gross revenues and gross costs. The effect of this reclassification
was an increase in sales for the three-month period ended March 31, 2002 of U.S.
Dollars 12.0 million, and an offsetting increase in costs for the same amounts.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2003
The following discussion should be read in conjunction with the disclosure
contained in the Company's Annual Report on Form 20-F for the year ended
December 31, 2002, which contains, among other things, a discussion of the
Company's significant accounting policies and risks and uncertainties that could
affect the Company's future operating results or financial condition.
OVERVIEW
The Company operates in two industry segments: manufacturing and wholesale
distribution, and retail distribution. Through its manufacturing and wholesale
distribution operations, the Company is engaged in the design, manufacture,
wholesale distribution and marketing of house brand and designer lines of mid-
to premium- priced prescription frames and sunglasses. The Company operates in
the retail segment through its Retail Division, consisting of
LensCrafters, Inc. and other affiliated companies ("LensCrafters") and, since
April 2001, Sunglass Hut International, Inc. and its subsidiaries ("Sunglass
Hut"). As of March 31, 2003 LensCrafters operated 876 stores throughout the
United States of America, Canada and Puerto Rico and Sunglass Hut operated 1,890
stores and kiosks located internationally in North America, Europe and
Australia.
Our net sales consist of direct sales of finished products that we
manufacture to opticians and other independent retailers through our wholesale
distribution channel and sales directly to consumers through our Retail
Division. Our average retail unit selling price is significantly higher than our
average wholesale unit selling price, as our retail sales typically include
lenses as well as frames.
Demand for our products, particularly our higher-end designer lines, is
largely dependent on the discretionary spending power of the consumers in the
markets in which we operate. We have historically experienced sales volume
fluctuations by quarter due to seasonality associated with the sale of
sunglasses. With the acquisition of Sunglass Hut in April 2001, we believe that
this seasonality effect has increased. As a result, net sales are typically
higher in the second quarter and lower in the fourth quarter.
As a result of the acquisition of LensCrafters in May 1995 and the Company's
subsequent expansion of its business activities in the United States through the
acquisition of the Ray-Ban sunglass business in 1999 and Sunglass Hut in 2001,
the Company's results of operations, which are reported in Euro, have been
rendered more susceptible to currency fluctuations between the Euro and the U.S.
Dollar. The U.S. Dollar/Euro exchange rate has fluctuated from an average
exchange rate in the three months ended March 31, 2002 of Euro 1.00 = U.S.
Dollar 0.8766 to Euro 1.00 = U.S. Dollar 1.0730 in the three months ended
March 31, 2003. Although the Company engages in certain foreign currency hedging
activities to mitigate the impact of these fluctuations, they have impacted the
Company's reported revenues and expenses during the periods discussed herein.
Fluctuations in currency exchange rates could significantly impact the Company's
reported financial results in the future.
On June 26, 1999, the Company acquired the Ray-Ban business for a purchase
price of approximately U.S. $655 million (Euro 635 million based on the exchange
rate in effect at such time), subject to post-closing adjustments. The
acquisition was accounted for under the purchase method. As such, the results of
the Ray-Ban business have been accounted for in our consolidated results since
the date of acquisition. Since the acquisition, the Company has closed Ray-Ban's
frame manufacturing facilities outside Italy and integrated these operations
into its own. This integration was substantially completed by the second quarter
of 2000. In January 2002, the Company settled a purchase price dispute with
Bausch & Lomb Incorporated, along with certain other litigation between us. The
settlement resulted in a reduction in the purchase price of approximately U.S.
$42 million and, accordingly, goodwill and a liability to Bausch & Lomb
previously recorded were reduced at December 31, 2001. A receivable was recorded
at December 31, 2001 for the final settlement amount. The Company received a
payment of U.S. $23 million in January 2002 as the final settlement payment.
9
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2003
The following table sets forth for the periods indicated the amount and
percentage of net sales represented by certain items included in the Company's
statements of consolidated income.
Three months ended March 31,
-----------------------------------------------------------------------------------------------------
2002 2003
(Thousand (Thousand
of of
Euro) % Euro) %
-----------------------------------------------------------------------------------------------------
Net sales 880,486 100.0 704,547 100.0
Cost of sales 258,246 29.3 208,016 29.5
------- ----- ------- -----
Gross profit 622,240 70.7 496,531 70.5
Selling, general and administrative expense 459,055 52.1 385,179 54.7
------- ----- ------- -----
Income from operations 163,185 18.5 111,351 15.8
Other expense (income)--net 16,157 1.8 15,498 2.2
Provision for income taxes 44,108 5.0 28,761 4.1
Minority interests 1,849 0.2 1,478 0.2
------- ----- ------- -----
Net income 101,070 11.5 65,614 9.3
======= ===== ======= =====
-----------------------------------------------------------------------------------------------------
NON-GAAP FINANCIAL MEASURES
The Company uses certain measures of financial performance that exclude the
impact of fluctuations in currency exchange rates in the translation of
operating results into Euro. The Company believes that these adjusted financial
measures provide useful information to both management and investors by allowing
a comparison of operating performance on a consistent basis. In addition, since
the Company has historically reported such adjusted financial measures to the
investment community, the Company believes that their inclusion provides
consistency in its financial reporting. Further, these adjusted financial
measures are one of the primary indicators management uses for planning and
forecasting in future periods. Operating measures that assume constant exchange
rates between the first quarter of 2003 and the first quarter of 2002 are
calculated using for each currency the average exchange rate for the three-month
period ended March 31, 2002.
Operating measures that exclude the impact of fluctuations in currency
exchange rates are not measures of performance under accounting principles
generally accepted in the United States (U.S. GAAP). These non-GAAP measures are
not meant to be considered in isolation or as a substitute for results prepared
in accordance with U.S. GAAP. In addition, Luxottica Group's method of
calculating operating performance excluding the impact of changes in exchange
rates may differ from methods used by other companies. See the table below for a
reconciliation of the operating measures excluding the impact of fluctuations in
currency exchange rates to their most directly comparable U.S.GAAP
10
financial measures. The adjusted financial 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.
------------------------------------------------------------------------------------------------
ADJUSTMENT
1Q02 1Q03 FOR CONSTANT 1Q03
U.S. GAAP U.S. GAAP EXCHANGE ADJUSTED
RESULTS RESULTS RATES RESULTS
(in millions of Euro)
------------------------------------------------------------------------------------------------
Consolidated net sales 880.5 704.5 118.3 822.8
Manufacturing/Wholesale net sales 324.8 275.7 24.6 300.3
Less: intercompany sales -26.6 -40.3 -9.0 -49.3
Wholesale sales to third parties 298.2 235.4 16.1 251.5
Retail net sales 582.3 469.2 101.8 571.0
===== ===== ===== =====
------------------------------------------------------------------------------------------------
NET SALES--Net sales decreased 20.0 percent to Euro 704.5 million during the
first three months of 2003, as compared to Euro 880.5 million for the same
period of 2002. This net decrease was mostly due to the weakening of the U.S.
dollar against the Euro. At constant exchange rates between the periods, net
sales would have decreased by 6.6 percent during the first three months of 2003,
compared to the same period of 2002, mainly due to the reduction of Armani and
retail sales.
During the first three months of 2003, net sales in the retail segment
accounted for approximately 66.6 percent of total net sales, as compared to
66.1 percent of total net sales in the same period of 2002.
Net sales in the retail segment, through LensCrafters and Sunglass Hut,
decreased 19.4 percent to Euro 469.2 million for the first three months of 2003
from Euro 582.3 million for the same period of 2002. This decrease was primarily
due to the weakening of the U.S. dollar against the Euro. Using constant
exchange rates between the periods, net retail sales would have decreased by
1.9 percent as compared to the same period of 2002. Comparable store sales in
constant U.S. Dollars for the first three months of 2003 decreased 3.0 percent.
Net sales to third parties in the manufacturing and wholesale segment
decreased 21.1 percent to Euro 235.4 million for the first three months of 2003
as compared to Euro 298.2 million in the same period of 2002. Assuming constant
exchange rates, wholesale sales to third parties for the first three months of
2003 would have decreased by 15.7 percent as compared to the same period of
2002. This decline was mostly due to the reduction by approximately 50% of
Armani sales during the period, following the termination of the license
agreement.
On a geographic basis, the United States and Canada operations had net sales
of Euro 486.1 million in the first three months of 2003, comprising
69.0 percent of total net sales, a decrease of Euro 147.3 million from the same
period of 2002. This decrease was substantially due to the weakening of the U.S.
dollar against the Euro (in U.S. dollars, the United States and Canada
operations had a decrease of U.S. dollars 33.6 million as compared to the same
period of 2002). Net sales for the rest of the world accounted for the remaining
Euro 218.4 million of net sales during the first three months of 2003, which
represented an 11.6 percent decrease as compared to the same period of 2002.
This decrease was largely due to the reduction of Armani sales.
COST OF SALES--Cost of sales decreased 19.5 percent to Euro 208.0 million in
the first three months of 2003, from Euro 258.2 million in the same period of
2002, and increased as a percentage of net sales to 29.5 percent from
29.3 percent, respectively. Manufacturing labor costs decreased 6.1 percent to
Euro 65.4 million in the first three months of 2003, from Euro 69.6 million in
the same period of 2002. As a percentage of net sales, cost of labor increased
to 9.3 percent in the first three months of 2003 from 7.9 percent in the same
period of 2002. The increase in cost of sales, including manufacturing labor
costs, as a percentage of net sales, was mainly attributable to lower net sales
in the current period, resulting primarily from the weakening of the U.S. Dollar
against the Euro. For each of 2002 and 2003, the
11
average number of frames produced daily in Luxottica's facilities (including
Tristar) was approximately 130,000.
GROSS PROFIT--For the reasons outlined above, gross profit decreased
20.2 percent to Euro 496.5 million in the first three months of 2003, from Euro
622.2 million in the same period of 2002. As a percentage of net sales, gross
profit decreased to 70.5 percent in the first three months of 2003 from
70.7 percent in the same period of 2002.
OPERATING EXPENSES--Total operating expenses decreased 16.1 percent to Euro
385.2 million in the first three months of 2003, from Euro 459.1 million in the
same period of 2002. As a percentage of net sales, operating expenses increased
to 54.7 percent in the first three months of 2003 from 52.1 percent in the same
period of 2002.
Selling, royalty and advertising expenses decreased 16.2 percent to Euro
315.1 million during the first three months of 2003, from Euro 375.8 million in
the same period of 2002. As a percentage of net sales, these expenses increased
to 44.7 percent from 42.7 percent. While the reduction in absolute amounts is
largely due to the weakening of the U.S. Dollar against the Euro, the increase
as a percentage of net sales is mainly due to the less efficient leverage of our
fixed costs in the Retail Division, due to the reduction in sales.
General and administrative expenses, including intangible asset
amortization, decreased 15.8 percent to Euro 70.1 million in the first three
months of 2003 from Euro 83.2 million in the same period of 2002. As a
percentage of net sales, general and administrative expenses increased to
9.9 percent from 9.5 percent. While the reduction in absolute amount is largely
due to the weakening of the U.S. Dollar against the Euro, the increase as a
percentage of net sales is mainly due to the less efficient leverage of our
fixed costs in the wholesale division, due to the reduction in sales.
INCOME FROM OPERATIONS--Income from operations for the first three months of
2003 decreased 31.8 percent to Euro 111.4 million, from Euro 163.2 million in
the same period of 2002. As a percentage of net sales, income from operations
decreased to 15.8 percent from 18.5 percent.
Operating margin in the manufacturing and wholesale distribution segment
decreased to 23.4 percent in the first three months of 2003, from 27.4 percent
in the same period of 2002.
Operating margin in the retail segment decreased to 11.6 percent in the
first three months of 2003 from 13.3 percent in the same period of 2002.
INTEREST AND OTHER EXPENSES--Net interest and other expense was Euro
15.5 million in the first three months of 2003 compared to Euro 16.2 million in
the same period of 2002. This decrease was attributable primarily to lower
interest expense in the current period due to the reduction of debt balances and
interest rates partially offset by realized and unrealized foreign exchange
transaction and remeasurement losses, net of Euro 4.6 million recognized in the
first three months of 2003, as compared to a net gain of Euro 3.0 million on
similar items in the same period of 2002.
NET INCOME--Income before taxes decreased 34.8 percent to Euro 95.9 million
in the first three months of 2003, from Euro 147.0 million in the same period of
2002. As a percentage of net sales, income before taxes decreased to
13.6 percent from 16.7 percent. Minority interest of Euro (1.5) million in the
first three months of 2003 decreased from Euro (1.8) million in the same period
of 2002. The Company's effective tax rate in the first three months of 2003 and
2002 remained constant at 30.0 percent. Net income decreased 35.1 percent to
Euro 65.6 million in the first three months of 2003 from Euro 101.1 million in
the same period of 2002. Net income as a percentage of net sales decreased to
9.3 percent from 11.5 percent in the first three months of 2002.
Basic and diluted earnings per share for the first three months of 2003 was
Euro 0.15 decreasing from Euro 0.22 for the same period of 2002.
12
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2003, the Company's consolidated net financial position
(defined as financial debt less cash balances) was Euro (1,290.8) million as
compared to Euro (1,254.3) million as of December 31, 2002. This increase in net
debt was mainly related to the repurchase of shares and the financial outflow
related to the acquisition of the Versace license.
Set forth below is certain information regarding our net financial position
as of December 31, 2002 and March 31, 2003:
-------------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31,
2002 2003
(million of (million of
Euro) Euro)
-------------------------------------------------------------------------------------------
Cash 151.5 241.2
Bank overdrafts (371.7) (504.6)
Current portion of long-term debt (178.4) (200.4)
Long-term debt (855.7) (827.0)
-------- --------
Net Financial Position (1,254.3) (1,290.8)
======== ========
-------------------------------------------------------------------------------------------
"Net financial position" is not a financial measure in accordance with U.S.
GAAP and is presented for informational purposes only. We believe that this
measure is useful to investors as a measure of credit availability, leverage
capacity and liquidity. The term "net financial position" is not, and should not
be considered as, a substitute for our total long-term debt, total liability or
any other financial measures presented in accordance with U.S. GAAP. The term,
"net financial position," as the Company defines it, may differ from similarly
titled financial measures used by other companies.
The Company has relied primarily upon internally generated funds, trade
credit and bank borrowings to finance its operations and expansion. In
June 1999, the Company received the proceeds of a Euro 350 million eurobond
offering by a wholly-owned subsidiary of the Company, which was used to repay
indebtedness under a prior credit agreement. Luxottica Group S.p.A. had
guaranteed the subsidiary's obligations under the eurobonds, which were repaid
in full in June 2002. To refinance the eurobonds, in June 2002, Luxottica U.S.
Holdings Corp. ("U.S. Holdings"), a U.S. subsidiary, entered into a U.S.
$350 million credit facility with a group of four Italian banks led by
UniCredito Italiano S.p.A. The new credit facility is guaranteed by Luxottica
Group S.p.A. and matures in June 2005. The term loan portion of the credit
facility provides US$ 200 million of borrowing and requires equal quarterly
principal installments beginning in March 2003. The revolving loan portion of
the credit facility allows for maximum borrowings of US$ 150 million; the
revolving loan was fully drawn as of March 31, 2003. Interest accrues under the
credit facility at LIBOR (as defined in the agreement) plus 0.5 percent
(1.8400 percent on March 31, 2003) and the credit facility allows the Company to
select interest periods of one, two, or three months. The credit facility
contains certain financial and operating covenants. Under this credit facility,
US$ 330 million was outstanding as of March 31, 2003.
In July 2002, U.S. Holdings entered into a Convertible Swap Step-Up ("2002
Swap"). 2002 Swap beginning and maximum notional amount is U.S. $ 275 million,
which will decrease by U.S.$ 20 million quarterly starting with the quarter
beginning March 17, 2003. This Swap will expire on June 17, 2005. 2002 Swap was
entered into to convert the floating rate credit agreement referred to in the
preceding paragraph to a mixed position rate agreement. 2002 Swap allows U.S.
Holdings to pay a fixed rate of interest if LIBOR remains under certain defined
thresholds and for U.S. Holdings to receive an interest payment of the three
month LIBOR rate as defined in the agreement. These amounts are settled net
every three months. This derivative does not qualify for hedge accounting under
Statement of Financial Accounting Standards No. 133, and as such is marked to
market with the gains or losses from the change in value reflected in current
operations.
13
In June 1999, the Company acquired the Ray-Ban business from Bausch & Lomb
Incorporated for a purchase price of U.S. $655 million (Euro 635 million based
on exchange rates in effect at such time), subject to post-closing adjustments.
The purchase price was paid with the proceeds of a U.S. $650 million (Euro
630 million based on exchange rates in effect at such time) credit facility with
UniCredito Italiano S.p.A. The interest rate applicable to amounts provided to
the Company under the credit facility was Euribor plus 0.5 percent. In
June 2000, the Company refinanced this short-term credit facility with a new
credit facility with several financial institutions which provides for total
maximum borrowings of Euro 500 million. The new credit facility was unsecured,
expired in June 2003, and allowed the Company to select interest periods of one,
two, three or six months. The facility included a term loan in the amount of
Euro 300 million and required equal quarterly installments of principal (Euro
25 million). Interest accrued on the term loan at Euribor (as defined in the
agreement) plus 0.4 percent (2.980 percent on March 31, 2003). The revolving
loan portion allowed for maximum borrowings of Euro 200 million; amounts
borrowed under the revolving loan facility could be repaid and re-borrowed until
the expiration of the agreement. The Company could select interest periods of
one, two, three or six months until the agreement terminated in June 2003 and
interest accrued at Euribor plus 0.375 percent (3.093 percent on March 31,
2003). Under this credit facility, Euro 125 million was outstanding as of
March 31, 2003. All amounts outstanding under this credit facility were repaid,
and the credit facility was terminated, in June 2003.
In December 2000, the Company entered into a new credit facility providing
for maximum borrowing of Euro 256 million from San Paolo IMI S.p.A. Bank. This
credit facility matured in June 2002, and the amount outstanding at that time
was repaid in full.
In March 2001, the Company entered into a new credit facility with Banca
Intesa S.p.A. to finance the acquisition of Sunglass Hut. The credit facility
was unsecured and scheduled to expire in September 2002. In September 2002, the
Company agreed with Banca Intesa S.p.A. to extend the credit facility until
December 2002, on the same terms and conditions. On December 27, 2002 the amount
outstanding at that time of Euro 500 million was repaid in full.
In December 2002, the Company entered into a new unsecured credit facility
with Banca Intesa S.p.A. The new unsecured credit facility provides borrowing
availability up to Euro 650 million. The facility includes a Euro 500 million
term loan, which will require a balloon payment of Euro 200 million in
June 2004 and equal quarterly installments of principal of Euro 50 million
subsequent to that date. Interest accrues on the term loan at Euribor (as
defined in the agreement) plus 0.45 percent (3.317 percent on March 31, 2003).
The revolving loan portion provides borrowing availability of up to Euro
150 million; amounts borrowed under the revolver portion can be borrowed and
repaid until final maturity. Interest accrues on the revolving loan at Euribor
(as defined in the agreement) plus 0.45 percent (3.021 percent on March 31,
2003). The final maturity of the credit facility is December 27, 2005. The
Company can select interest periods of one, two, three or six months. The credit
facility contains certain financial and operating covenants. Under this credit
facility, Euro 575 million was outstanding as of March 31, 2003.
In December 2002, the Company entered into two interest rate swap
transactions ("Intesa Swaps") beginning with an aggregate maximum notional
amount of Euro 250 million which will decrease by Euro 100 million on June 27,
2004 and Euro 25 million each subsequent 3-month period. These Intesa Swaps will
expire on December 27, 2005. Intesa Swaps were entered into as a cash flow hedge
on a portion of the Banca Intesa Euro 650 million unsecured credit facility
discussed above. The Intesa Swaps exchange the floating rate based on Euribor to
a fixed rate of 2.985% per annum.
Capital expenditures for the first three months of 2003 were Euro
10.4 million. It is the Company's expectation that 2003 annual capital
expenditures will be less than Euro 100 million.
14
RECENT DEVELOPMENTS AND OTHER EVENTS
On November 21, 2002, the Company announced that its license agreements for
the manufacturing and distribution of the Giorgio Armani and Emporio Armani
eyewear collections expired on December 31, 2002 and will terminate in the first
half of 2003. Armani eyewear collections represented approximately 7.2 percent
of the Company's consolidated net sales for 2002. Copies of the press releases
relating to the Armani license agreement terminations were filed with the
Securities and Exchange Commission under the cover of Form 6-K on November 21,
2002.
On January 15, 2003, the Company announced the signing of a worldwide
license agreement for the design, production and distribution of Versace, Versus
and Versace Sport sunglasses and prescription frames. The initial ten-year
agreement is renewable, at the Company's discretion, for an additional ten year
period. The new collections were launched in March 2003.
On September 25, 2002, the Company announced that its subsidiary, Luxottica
U.S. Holdings Corp., had authorized the purchase of up to 11,500,000 of the
Company's ADRs (one ADR represents one Ordinary Share), representing
2.5 percent of the authorized and issued capital of the Company, over the
18 month period commencing on September 25, 2002. On March 20, 2003, the Company
announced that U.S. Holdings had resolved to purchase up to an additional
10,000,000 of the Company's ADRs, representing 2.2 percent of the authorized and
issued share capital of Luxottica Group S.p.A., over the 18 month period
commencing on March 20, 2003. The actual amount and timing of ADR purchases will
depend on market conditions and other factors. Through March 31, 2003, Luxottica
U.S. Holdings Corp. had repurchased 6,434,786 ADRs at an aggregate purchase
price of approximately Euro 70.0 million.
The Company and its subsidiaries become involved in legal and regulatory
proceedings from time to time, some of which are significant. The timing and
outcome of these proceedings are inherently uncertain and, the outcomes could
have a material adverse effect on the Company's business, financial position or
operating results. See Item 3 -"Key Items--Risk Factors" in the Company's annual
report on Form 20-F for its fiscal year ended December 31, 2002.
On June 16, 2003, our wholly-owned subsidiary, Luxottica South Pacific Pty
Limited ("Luxottica South Pacific") commenced a cash offer to acquire all of the
outstanding shares, performance rights and options of OPSM Group Ltd ("OPSM"),
the largest eyewear retailer in Australia. The cash offer is subject to certain
conditions, including, but not limited to, approval by relevant governmental
authorities and the acquisition by Luxottica South Pacific, either alone or
together with one or more affiliates, of the full beneficial interest in at
least 90 percent by value of all of the outstanding shares and securities
convertible into shares of OPSM. The Board of Directors of OPSM has unanimously
recommended that OPSM shareholders and holders of performance rights and options
accept our offer, in the absence of a superior offer. In addition, all OPSM
directors and OPSM's Managing Director have stated that they intend to accept
our offer in respect of their personal holdings of OPSM shares, options and
performance rights, in the absence of a superior offer. If the offer is
successful, the acquisition of OPSM is expected to close in July 2003. We intend
to finance the aggregate purchase price of approximately A$ 536 million (Euro
312 million as of June 26, 2003) with proceeds from certain credit arrangements
that we expect will be available to us from commercial banks. However, there can
be no assurance that the transaction will be consummated on the terms or within
the time period contemplated or at all.
FORWARD LOOKING INFORMATION
Certain statements in this Form 6-K may constitute forward-looking
statements which are based on management's current expectations and beliefs and
are subject to a number of risks and uncertainties that could cause actual
results to differ materially, including risks that may not be subject to the
Company's control. These risks and uncertainties include, but are not limited
to, fluctuations in exchange rates, economic and weather factors affecting
consumer spending, our ability to successfully
15
introduce new products, our ability to maintain an efficient distribution
network, our ability to effectively integrate newly acquired businesses, our
ability to negotiate and maintain favorable license agreements, liabilities
arising from legal or regulatory proceedings to which we are or may become a
party, the availability of correction alternatives to prescription eyeglasses,
our ability to adequately protect our intellectual property and other
proprietary rights, the consummation of the pending transaction to acquire OPSM
Group Ltd and other risks and uncertainties referred to in the Company's annual
report on Form 20-F for its fiscal year ended December 31, 2002 (including under
Item 3--"Key Items--Risk Factors") and its other filings with the Securities and
Exchange Commission.
LUXOTTICA GROUP S.P.A.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 1, 2003 LUXOTTICA GROUP S.P.A.
By: /s/ ROBERTO CHEMELLO
------------------------------------------------
ROBERTO CHEMELLO
CHIEF EXECUTIVE OFFICER
16
[LOGO]
SET FORTH BELOW IS THE TEXT OF A PRESS RELEASE ISSUED BY THE COMPANY FOR THE
THREE MONTH PERIOD ENDED MARCH 31, 2003. THE PRESS RELEASE SPEAKS AS OF THE DATE
IT WAS FIRST ISSUED, AND THE COMPANY DOES NOT INTEND TO UPDATE OR REVISE ANY
FORWARD LOOKING STATEMENTS CONTAINED IN THE PRESS RELEASE BASED ON NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
Luxottica Group Announces 1Q03 Results
Group highlights for the first quarter of 2003:
- NET SALES TO EUR 704.5 (US$756.0 MILLION)
- OPERATING INCOME TO EUR 111.4 MILLION
- EARNINGS PER ADS TO EUR 0.15 (US$0.16)
MILAN, ITALY, APRIL 24, 2003--LUXOTTICA GROUP S.P.A. (NYSE: LUX; MTA: LUX),
worldwide leader in the eyewear sector, today announced results for the
three-month period ended March 31, 2003(1). Results for the first quarter were
negatively affected by the 18 percent year-over-year devaluation of the U.S.
Dollar against the Euro.
Consolidated Results:
- FIRST QUARTER
Consolidated net sales for the quarter declined year-over-year by
20.0 percent to EUR 704.5 million. Assuming constant exchange rates,
consolidated net sales for the quarter would have declined by 6.6 percent.
Consolidated operating income for the quarter was EUR 111.4 million.
Consequently, consolidated operating margin for the quarter was 15.8 percent.
Consolidated net income for the quarter was EUR 65.6 million. Consequently,
consolidated net margin for the quarter was 9.3 percent.
Earnings per American Depositary Share (ADS) (one ADS represents one
ordinary share) for the quarter were EUR 0.15. In U.S. Dollars, earnings per ADS
(EPADS) for the quarter were US$0.16.
Breakdown of Manufacturing/ Wholesale and Retail Results:
- MANUFACTURING/WHOLESALE DIVISION
The Group's manufacturing/wholesale sales for the first quarter declined
year-over-year by 15.1 percent to EUR 275.7 million. Assuming constant exchange
rates manufacturing/wholesale sales for the quarter would have declined by
7.5 percent.
17
Manufacturing/wholesale operating income for the quarter was EUR
64.4 million, reflecting an operating margin of 23.4 percent.
Leonardo Del Vecchio, Chairman of Luxottica Group, commented on the results
of the manufacturing/wholesale division: "In January, we added two new designer
brands to our portfolio, Versace and Versus, and in March we launched new
Luxottica-designed and -made collections for both. We also concurrently
introduced the first prescription eyewear collection for Ray-Ban, further
leveraging what is historically the world's leading sun brand by broadening the
assortment of products offered under this name. Based on the more than positive
feedback from opticians so far, I am fairly confident that over the coming
months sales of the new lines should offset sales lost as a result of the
non-renewal of the Armani licenses. At the same time, certain brands of our
portfolio are gaining market share as the creative resources and manufacturing
investments previously dedicated to the Armani brands were reallocated across
our entire portfolio. This demonstrates our Group's ability to quickly and
seamlessly adapt to changes in the market and competitive scenario."
- RETAIL DIVISION
Retail sales declined year-over-year by 19.4 percent to EUR 469.2 million.
Assuming constant exchange rates, retail sales for the quarter would have
declined by 1.9 percent. Same store sales in U.S. Dollar for the quarter
declined year-over-year by 3.0 percent.
Retail operating income for the first quarter was EUR 54.3 million,
resulting in an operating margin of 11.6 percent.
Mr. Del Vecchio continued: "The results of our retail division for the
quarter were affected by unusually bad weather in the U.S. in February, as well
as overall uncertainty due to the war in Iraq. However, U.S. consumers' data
since the beginning of the hostilities show that consumption levels did not
decline further. In fact, this month we are already seeing signs of a reversal
of the negative trend: retail sales are up by three percent, compared with a
1.9 percent decline for the first quarter. As a result, we are hopeful to see a
recovery in coming quarters. At the same time, management continues to be
focused on all aspects of the business, seeking to achieve improvements both in
efficiency and profitability."
Statement from the Chairman:
Mr. Del Vecchio concluded: "The Group's consolidated results for the first
quarter of this year mainly reflected the impact of three factors. Firstly,
results were negatively affected by the 18 percent year-over-year devaluation of
the U.S. Dollar against the Euro in the quarter. Additionally, in line with
management's expectations, sales of Giorgio Armani and Emporio Armani eyewear
nearly halved during the quarter. Finally, the continued weakness of the economy
in the U.S., which as a market represents approximately 70 percent of the
Group's consolidated sales, affected retail sales. We expect that the impact of
these factors will progressively lessen during the course of the year. In
particular, the loss of sales due to the non-renewal of the Armani licenses
should be offset by sales from the new lines launched in March. Additionally, in
light of the evolution of the Euro/U.S. Dollar exchange rate during 2002 (the
average exchange rates for last year were: EUR 1.00 = US$0,8766 for the first
quarter, EUR 1.00 = US$0,9198 for the second quarter, EUR 1.00 = US$0,9838 for
the third quarter and EUR 1.00 = US$0,9982 for the fourth quarter) and assuming
that Euro/U.S. Dollar exchange rate stabilizes at current levels, or EUR 1.00 =
US$1.10, for the balance of the year, the impact from the devaluation of the
U.S. Dollar against the Euro should progressively decline to nine percent by the
final quarter of this year, down from 18 percent for the quarter just ended."
"The results for the first quarter confirm that 2003 will be a year of
transition for us, as well as for the global economy, and that we should expect
to return to growth in sales and earnings only in 2004. We
18
confirm our previously announced expectations of earnings per share (EPS) for
fiscal year 2003 of Euro 0.69, or EPADS of US$0.76, with an exchange rate of EUR
1.00 = US$1.10."
About Luxottica Group S.p.A.:
Luxottica Group is the world leader in the design, manufacturing, marketing
and distribution of prescription frames and sunglasses in mid- and
premium-priced categories. The Group's products, which are designed and
manufactured in six facilities in Italy and one in the People's Republic of
China, include over 2,250 styles in a wide array of colors and sizes and are
sold through 21 wholly-owned subsidiaries in the United States, Canada, Italy,
France, Spain, Portugal, Sweden, Germany, the United Kingdom, Brazil,
Switzerland, Mexico, Belgium, Argentina, South Africa, Finland, Austria, Norway,
Japan, Hong Kong and Australia; two 75%-owned subsidiaries in Israel and Poland;
a 70%-owned subsidiary in Greece; three 51%-owned subsidiaries in the
Netherlands, Turkey and Singapore, one 49%-owned subsidiary in the Arab Emirates
and one 44%-owned subsidiary in India. In March 2001, Luxottica Group acquired
Sunglass Hut International, a leading sunglass retailer with approximately 1,900
stores worldwide. This followed the acquisitions of Bausch & Lomb sunglass
business, which includes the prestigious Ray-Ban-Registered Trademark-,
Revo-Registered Trademark-, ArnetteTM and Killer Loop-Registered Trademark-
brands, in June 1999, and LensCrafters, the largest optical retail chain in
North America, in May 1995. For fiscal 2002, Group net sales improved
year-over-year by 2.2 percent to EUR 3,132.2 million and net income by
17.6 percent to EUR 372.1 million. Additional information on the company is
available on the web at www.luxottica.com.
Non-GAAP Financial Measures:
Luxottica Group uses certain measures of financial performance that exclude
the impact of fluctuations in currency exchange rates in the translation of
operating results into Euro. The Company believes that these adjusted financial
measures provide useful information to both management and investors by allowing
a comparison of operating performance on a consistent basis. In addition, since
the Luxottica Group has historically reported such adjusted financial measures
to the investment community, the Company believes that their inclusion provides
consistency in its financial reporting. Further, these adjusted financial
measures are one of the primary indicators management uses for planning and
forecasting in future periods. Operating measures that assume constant exchange
rates between the first quarter of 2003 and the first quarter of 2002 are
calculated using for each currency the average exchange rate for the three-month
period ended March 31, 2002. Operating measures that exclude the impact of
fluctuations in currency exchange rates are not measures of performance under
accounting principles generally accepted in the United States (U.S. GAAP). These
non-GAAP measures are not meant to be considered in isolation or as a substitute
for results prepared in accordance with U.S. GAAP. In addition, Luxottica
Group's method of calculating operating performance excluding the impact of
changes in exchange rates may differ from methods used by other companies. See
Table below for a reconciliation of the operating measures excluding the impact
of fluctuations in currency exchange rates to their most directly comparable
U.S. GAAP financial measures. The adjusted financial 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.
-------------------------------------------------------------------------------------------------
ADJUSTMENT
1Q02 1Q03 FOR CONSTANT 1Q03
U.S. GAAP U.S. GAAP EXCHANGE ADJUSTED
RESULTS RESULTS RATES RESULTS
(in millions of Euro)
-------------------------------------------------------------------------------------------------
Consolidated net sales 880.5 704.5 118.3 822.8
Manufacturing/wholesale net sales 324.8 275.7 24.6 300.3
Retail net sales 582.3 469.2 101.8 571.0
-------------------------------------------------------------------------------------------------
19
Safe Harbor Statement:
CERTAIN STATEMENTS IN THIS PRESS RELEASE MAY CONSTITUTE FORWARD LOOKING
STATEMENTS WHICH ARE BASED ON MANAGEMENT'S CURRENT EXPECTATIONS AND BELIEFS AND
ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY, INCLUDING RISKS THAT MAY NOT BE SUBJECT TO THE
COMPANY'S CONTROL. THESE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED
TO, FLUCTUATIONS IN EXCHANGE RATES, ECONOMIC AND WEATHER FACTORS AFFECTING
CONSUMER SPENDING, THE COMPANY'S ABILITY TO SUCCESSFULLY INTRODUCE AND MARKET
NEW PRODUCTS, THE COMPANY'S ABILITY TO EFFECTIVELY INTEGRATE RECENTLY ACQUIRED
BUSINESSES, THE COMPANY'S ABILITY TO SUCCESSFULLY LAUNCH INITIATIVES TO INCREASE
SALES AND REDUCE COSTS, THE AVAILABILITY OF CORRECTION ALTERNATIVES TO
PRESCRIPTION EYEGLASSES, AS WELL AS OTHER POLITICAL, ECONOMIC AND TECHNOLOGICAL
FACTORS AND OTHER RISKS REFERRED TO IN THE COMPANY'S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION. THESE FORWARD-LOOKING STATEMENTS ARE MADE AS OF THE
DATE HEREOF, AND THE COMPANY DOES NOT ASSUME ANY OBLIGATION TO UPDATE THEM.
Company contacts:
Sabina Grossi, Director, Investor Relations
Alessandra Senici, Investor Relations
Silvia Cestelli Guidi, Investor Relations
Luxottica Group
Tel.: +39-02-8633-4665
E-mail:AlessandraSenici@Luxottica.com
SilviaCestelli@Luxottica.com
FINANCIAL TABLES TO FOLLOW
------------------------
(1) UNLESS OTHERWISE NOTED, ALL COMPARISONS MADE IN THIS ANNOUNCEMENT ARE
BETWEEN THE THREE-MONTH PERIOD ENDED MARCH 31, 2003, AND THE EQUIVALENT
THREE-MONTH PERIOD ENDED MARCH 31, 2002. THE COMPANY'S RESULTS ARE DISCUSSED
IN THIS ANNOUNCEMENT IN ACCORDANCE WITH U.S. GAAP AND ARE BROKEN OUT FOR
ADDITIONAL PERSPECTIVE INTO CONSOLIDATED, MANUFACTURING/WHOLESALE, INCLUDING
RAY-BAN AND RETAIL COMPONENTS, WHICH INCLUDE SUNGLASS HUT INTERNATIONAL AND
LENSCRAFTERS. AS THERE ARE INTERCOMPANY ITEMS, IT IS IMPORTANT TO NOTE THE
FULL RECONCILIATION DETAILED IN THE SEGMENTAL INFORMATION TABLE PROVIDED
WITH THIS ANNOUNCEMENT. ADDITIONALLY, LUXOTTICA GROUP CONSIDERS THE
FINANCIAL RESULTS DENOMINATED IN EURO (EUR), THE GROUP'S REPORTING CURRENCY,
TO BE A MORE ACCURATE GAUGE OF ITS OPERATING PERFORMANCE. THE RESULTS
DENOMINATED IN U.S. DOLLARS WERE CONVERTED AT THE AVERAGE EXCHANGE RATE FOR
THE THREE-MONTH PERIOD ENDED MARCH 31, 2003, OF EUR 1.00 = US$1.0730,
COMPARED WITH EUR 1.00 = US$0.8766 FOR THE FIRST QUARTER OF 2002. RESULTS OF
THE SUNGLASS HUT INTERNATIONAL OPERATIONS WERE CONSOLIDATED INTO THE GROUP'S
RESULTS AS OF MARCH 31, 2001.
# # #
20
[LOGO]
LUXOTTICA HEADQUARTERS AND REGISTERED OFFICES-Via Cantu 2, 20123 Milan, Italy -
Tel. + 39.02.863341 - Fax + 39.02.86996550
THE BANK OF NEW YORK (ADR DEPOSITARY BANK)-101 Barclay Street West, New York, NY
10286 USA
Tel. + 1.212.815.8365 - Fax + 1.212.571.3050
LUXOTTICA S.R.L.
LOC. VALCOZZENA - 32021 AGORDO
(BELLUNO) - ITALY
KILLER LOOP EYEWEAR S.R.L.
LOC. VALCOZZENA - 32021 AGORDO
(BELLUNO) - ITALY
SUNGLASS HUT INTERNATIONAL, INC.
255 ALHAMBRA CIRCLE
CORAL GABLES - FLORIDA 33134 - USA
LUXOTTICA FASHION BRILLEN VER TRIEBS GMBH
HANS-PINSEL STR. 10A - 85540
MUNCHEN - DEUTSCHLAND
LUXOTTICA PORTUGAL SA
R. JOAO DE FREITAS BRANCO, 32-C - 1500-351
LISBOA - PORTUGAL
LUXOTTICA FRANCE S.A.
LES ESPACES DE SOPHIA - BAT. B 80,
ROUTE DES LUCIOLES - VALBONNE
06902 SOPHIA ANTIPOLIS CEDEX
FRANCE
LUXOTTICA IBERICA SA
C/SILICI, 79-81
08940 CORNELLA DE LLOBREGAT
BARCELONA - ESPANA
LUXOTTICA U.K. LTD
IRON BRIDGE CLOSE - GREAT CENTRAL WAY
LONDON NW 10 0NW
UNITED KINGDOM
LUXOTTICA BELGIUM N.V.
AIRPORT BUSINESS CENTER - LUCHTHAVENLEI FI7
2100 DEURNE - BELGIUM
LUXOTTICA HELLAS AE
ANTHOUSAS AVE, 3-153 51 PALLINI - GREECE
LUXOTTICA SWEDEN A.B.
TRALOSVAGEN, 14 - VASTRA FROLUNDA
GOTEBORG - SVERIGE
LUXOTTICA (SWITZERLAND) AG
WIESENSTRASSE, 1 - 4900 LANGENTHAL - SCHWEIZ
LUXOTTICA POLAND SP.Z.O.O
UL.ZACHODNIA 5/73
30-350 KRAKOW, POLAND
LUXOTTICA NEDERLAND B.V.
POSTBUS 506 - VAN DEN EIJNDEKADE, 2
2100 AM HEEMSTEDE - NEDERLAND
OY LUXOTTICA FINLAND AB
SINIKALLIONTIE 12 - 02630 ESPOO - SUOMI
LUXOTTICA VERTRIEBS GMBH
INKUSTRASSE, 1 - 7-A-3400
KLOSTERNEUBURG - OSTERREICH
LUXOTTICA NORGE AS
STORGT, 23
3611 KONGSBERG - NORWAY
LUXOTTICA GOZLUK TIC. A.S.
SEHITLER CAD. 1519 - SOKAK N. 5
UMURBEY IZMIR - TURKEY
AVANT-GARDE OPTICS LLC
44 HARBOR PARK DRIVE - PORT WASHINGTON
NEW YORK 11050 - USA
LENSCRAFTERS INC.
4000 LUXOTTICA PLACE
MASON - OHIO 45040 - USA
LUXOTTICA CANADA INC.
947, VERBENA ROAD - MISSISSAUGA
TORONTO - ONTARIO L5T 1T5 - CANADA
LUXOTTICA DO BRASIL LTDA
AVENIDA TAMBORE,
1180-MODULO B03-CEP 06460-000 BARUERI
SAO PAULO - BRASIL
LUXOTTICA MEXICO S.A. DE C.V.
MONTE ELBRUZ 132 - 9 DEG. PISO
ENTRE MOLIERE Y BLVD. M. AVILA CAMACHO
COL. LOMAS DE CHAPULTEPEC
11000 MEXICO D.F. - MEXICO
LUXOTTICA ARGENTINA S.R.L.
AVENIDA ALICIA MOREAU DE JUSTO, 550
PISO 1, OF. 20 Y 23 - 1107 BUENOS AIRES
ARGENTINA
MIRARI JAPAN LTD
AOBADAI BUILDING, 8F
10-9 AOBADAI 3 - CHOME
MEGURO-KU, TOKYO 153-0042 - JAPAN
LUXOTTICA SOUTH AFRICA (PTY) LTD
UNIT 5, 778 RICHARDS DRIVE - MIDRAND,
1685-PRIVATE BAG X213,
HALFWAY HOUSE 1685 - SOUTH AFRICA
LUXOTTICA AUSTRALIA PTY LTD
UNIT 8/26 JAMES STREET - P.O. BOX 47
LIDCOMBE NSW 2141 SYDNEY - AUSTRALIA
LUXOTTICA OPTICS LTD.
32 MASKIT ST. - HERZELIA-PITUAH -
P.O.B. 2038 HERZELIA 46120 - ISRAEL
LUXOTTICA GULF L.L.C.
OFFICE N. 2B LEVEL 10 - PLOT N.
ONE TRADE CENTRE SHEIKH ZAYED ROAD
DUBAI - U.A.E.
MIRARIAN MARKETING PTE LTD
315 OUTRAM ROAD, 13-04 TAN BOON
LIAT BUILDING, 169074 SINGAPORE
RAY BAN SUN OPTICS INDIA LTD
FLAT 802, TOWER-A SIGNATURE TOWERS, SOUTH CITY
GURGAON 122 02-INDIA
LUXOTTICA (DONG GUAN) TRISTAR
OPTICAL CO. LTD.
OU DENG CUN
DONG GUAN CITY
GUAN DONG PROVINCE
THE PEOPLES REPUBLIC OF CHINA
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