DER DE Rigo Spa

De Rigo Reports Results for Full Year 2004 LONGARONE (BL), Italy, April 15 /PRNewswire-FirstCall/ -- On April 14th, the board of directors of De Rigo S.p.A. (NYSE:DER) approved the unaudited consolidated results for full year 2004, which evidenced strong growth in the Group's operating profitability. Highlights of the Group's unaudited consolidated results for 2004 include: - Net sales amounted to EUR 514.4 m(1), an increase of 1.9% from the EUR 504.8 m posted last year. The sales results confirmed the positive trends in the Group's current businesses, as comparisons with the prior year were affected by De Rigo's sale during July 2003 of the controlling interest in Eyewear International Distribution ("EID"), a joint venture with the Prada Group. Excluding EID's sales(2) from the Group's results for 2003, the year on year increase in consolidated net sales was 6.1%. - Income from operations before depreciation and amortization(3) increased by 7.5% to EUR 55.7 m from the EUR 51.8 m posted in 2003, and represented 10.8% of net sales, as compared with 10.3% last year. - Income from operations grew by 15.7% to EUR 28.8 m from the EUR 24.9 m recorded in 2003, and represented 5.6% of net sales, as compared with 4.9% last year. - Net income amounted to EUR 14.5 m, a decrease of 21.6% from the EUR 18.5 m recorded in 2003, when earnings were positively affected by the Group's gain on the disposal of its controlling interest in EID, which contributed EUR 11.8 m to other income, net (including EUR 3.7 m attributable to other investors, which was deducted from the Group's consolidated results as part of minority interests). Net income represented 2.8% of net sales, as compared with 3.7% last year. - At 31st December 2004, the net financial position(4) of the De Rigo Group was positive and amounted to EUR 6.2 m, as compared with the net debt of EUR 3.6 m recorded at 31st December 2003, primarily as a result of 2004 net earnings and improvements in working capital, that were reflected in an increase in cash and cash equivalents and a decrease in borrowings. The results posted by the Group in 2004 reflected the contribution of each of the Company's business segments. The following table summarizes the principal unaudited results of each of the Group's business segments for the periods indicated in millions of EUR: ----------------- ---------------------- --------------------- Income from operations before depreciation Group's % and % Business Segments Sales Change amortization Change ----------------- ---------------------- --------------------- 2004 2003 2004 2003 Wholesale & 134.5 136.2 -1.2% 21.3 18.4 +15.8% Manufacturing Retail 389.8 361.5 +7.8% 34.4 31.2 +10.3% - D&A 248.9 230.8 +7.8% 10.9 10.1 +7.9% - GO 140.9 130.7 +7.8% 23.5 21.1 +11.4% EID - 19.8 -100.0% - 2.2 -100.0% Intercompany -9.9 -12.7 -22.0% - - Eliminations ----------------- ---------------------- --------------------- Total 514.4 504.8 +1.9% 55.7 51.8 +7.5% ----------------- ---------------------- --------------------- ----------------- ---------------------- Group's Income from % Business Segments operations Change ----------------- ---------------------- 2004 2003 Wholesale & Manufacturing 16.2 13.6 +19.1% Retail 12.6 9.6 +31.3% - D&A 1.9 1.2 +58.3% - GO 10.7 8.4 +27.4% EID - 1.7 -100.0% Intercompany - - Eliminations ----------------- ---------------------- Total 28.8 24.9 +15.7% ----------------- ---------------------- Wholesale & Manufacturing Sales of the wholesale & manufacturing segment amounted to EUR 134.5 m, a decrease of 1.2% as compared with EUR 136.2 m posted in 2003. Excluding from the 2003 results sales made by the wholesale & manufacturing business segment to EID prior to its disposal, the segment's sales increased by 0.7%, reflecting strong sales results in certain Far Eastern markets, particularly Japan and Hong Kong, as well as in certain European markets, including Greece and Spain Gross margins at the wholesale & manufacturing segment also increased, reflecting both a reduction in the cost of goods sold resulting from improved efficiencies in the manufacturing process and a more favourable sales mix, as the 2003 results had also included relatively lower margin sales to EID. The increase in gross margin was reflected in strong growth in both income from operations before depreciation and amortization and income from operations: income from operations before depreciation and amortization increased by 15.8% to EUR 21.3 m from the EUR 18.4 m recorded in 2003 and represented 15.8% of sales, as compared with 13.5% last year; income from operations increased by 19.1% to EUR 16.2 m from the EUR 13.6 m posted in 2003, and represented 12.0% of sales, as compared with 10.0% last year. Retail Sales of the retail segment increased by 7.8% to EUR 389.8 m, as compared with the EUR 361.5 m posted in 2003. The increase in sales reflected same store sales per working day growth of 6.0% at General Optica ("GO"), the Group's Spanish retail chain, and 6.2% in Pound Sterling terms at Dollond & Aitchison ("D&A"), the Group's British retail chain, as well as GO's opening of 6 owned shops and 4 franchised shops during 2004. Income from operations before depreciation and amortization for the retail segment as a whole increased by 10.3% to EUR 34.4 m, as compared with the EUR 31.2 m posted in 2003 and represented 8.8% of sales, as compared with 8.6% last year. Income from operations for the segment as a whole increased by 31.3% to 12.6 m from the EUR 9.6 m posted in 2003 and represented 3.2% of sales, as compared with 2.7% last year. The segment's results reflect the contribution of each of the Group's two retail chains: GO grew sales by 7.8% to EUR 140.9 m, while its income from operations before depreciation and amortization increased by 11.4% to EUR 23.5 m from the EUR 21.1 m posted in 2003, representing 16.7% of sales as compared with 16.1% last year. The increase in income from operations before depreciation and amortization reflected both the growth in sales due to increase in same store sales and the opening of both owned and franchised stores, as well as a higher gross margin, notwithstanding an increase in advertising expenses. Income from operations increased by 27.4% to EUR 10.7 m from the EUR 8.4 m posted in 2003, representing 7.6% of sales, as compared with 6.4% last year. Income from operations increased at a higher rate than income before depreciation and amortization, as depreciation and amortization remained substantially stable, amounting to EUR 12.8 m in 2004, as compared to EUR 12.7 m last year. D&A's sales grew by 7.8% to EUR 248.9 m from the EUR 230.8 m posted in 2003. Sales grew by 5.8% in Pound Sterling terms, reflecting the increase in its value against the Euro, while same store sales per working day in Pound Sterling terms increased by 6.2%. The increase in D&A's sales was primarily attributable to the Company's aggressive marketing campaigns, which drove increased sales of higher quality products. As a result of the increase in sales, income from operations before depreciation and amortization increased by 7.9% to EUR 10.9 m from the EUR 10.1 m posted in 2003, representing 4.4% of sales, the same percentage as last year. Income from operations increased by 58.3% to EUR 1.9 m from the EUR 1.2 m posted in 2003, and represented 0.8% of sales, having represented 0.5% last year. As at GO, income from operations increased at a higher rate than income before depreciation and amortization, as depreciation and amortization remained substantially stable, amounting to EUR 9.0 m in 2004, as compared to EUR 8.9 m last year. Additional information - Basic earnings per share amounted to EUR 0.33 as compared with EUR 0.41 posted in 2003 and diluted earnings per share amounted to EUR 0.33 as compared with EUR 0.41 last year. The stock options plan for the Group's management was terminated on December, 31st 2004. - Income taxes amounted to EUR 12.7 m, as compared with EUR 14.9 m in 2003. The Group's income was taxed at an effective rate of 46.1%, as compared with an effective tax rate of 39.5% last year. The increase in the effective tax rate primarily reflected the fact that the portion of the Group's 2003 income attributable to its gross gain on the sale of the controlling interest in EID was taxed at a favourable tax rate. - Additions to property, plant and equipment amounted to EUR 17.6 m in 2004, as compared with EUR 11.5 m last year. The increase was primarily attributable to higher investments in the refitting of existing stores and the opening of new stores in the retail segment. - The Company is currently authorized to repurchase up to 4,400,000 of its ADSs (representing an equivalent number of ordinary shares), through November 2005. At the date of this announcement, the Company had repurchased a total of 2,448,000 ADSs (representing an equivalent number of ordinary shares), at an average price of 6.08 USD per ADS. Ennio De Rigo, Chairman of the De Rigo Group, commented on 2004's results: "The Group's strong commitment to recoup the sales lost as a result of the disposal of EID was reflected in a slight overall increase in sales, while improvements in our gross margin also contributed to our strong operating results. We are working to capitalize on the opportunities for sales growth afforded by all of the license agreements we have recently entered into, as well as looking to develop additional new business with Ermenegildo Zegna and Jean Paul Gaultier. Looking into the future, we must recognize that general economic conditions are strongly influencing the optical sector in certain markets in which we operate. These challenges will requires us to devote additional effort and to develop new strategies in order to achieve the desired results." De Rigo is one of the world's largest manufacturers and distributors of premium eyewear, the leading optical retailer in Spain through General Optica, one of the leading retailers in the British optical market through Dollond & Aitchison and a partner of the LVMH Fashion Group for the manufacture and distribution of Celine, Givenchy and Loewe eyewear. De Rigo also manufactures and distributes the licensed brands Chopard, Escada, Ermenegildo Zegna, Etro, Fila, Furla, Jean Paul Gaultier, La Perla and Mini and its own brands Police, Sting and Lozza. DE RIGO S.p.A. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In thousands of Euro) For the twelve months ended December 31, --------- --------- 2004 2003 --------- --------- NET SALES 514,384 504,801 COST OF SALES 198,900 202,040 --------- --------- GROSS PROFIT 315,484 302,761 --------- --------- COSTS AND EXPENSES Commissions 11,869 13,432 Advertising and promotion expenses 34,393 32,644 Other selling expenses 204,442 195,532 General and administrative expenses 35,955 36,299 --------- --------- 286,659 277,907 --------- --------- INCOME FROM OPERATIONS 28,825 24,854 --------- --------- OTHER (INCOME) EXPENSES Interest expense 1,126 2,217 Interest income (675) (718) Other (income) expenses, net 725 (14,483) --------- --------- 1,176 (12,984) --------- --------- INCOME BEFORE INCOME TAXES 27,649 37,838 --------- --------- INCOME TAXES 12,737 14,935 --------- --------- INCOME BEFORE MINORITY INTEREST 14,912 22,903 MINORITY INTEREST 434 4,425 --------- --------- NET INCOME 14,478 18,478 --------- --------- --------- --------- DE RIGO S.p.A. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands of Euro) ------------ ------------ December 31, December 31, 2004 2003 ------------ ------------ ASSETS Current assets: Cash and cash equivalents 27,146 19,634 Accounts receivable, trade, net of allowances for doubtful accounts 61,271 61,938 Inventories 51,232 49,366 Deferred income taxes 5,443 13,018 Prepaid expenses and other current assets 14,391 12,393 ------------ ------------ Total current assets 159,483 156,349 Property, plant and equipment: Land 16,874 16,848 Buildings 54,658 54,587 Machinery and equipment 24,475 25,491 Office furniture and equipment 94,955 82,800 Construction in progress 19 - ------------ ------------ 190,981 179,726 Less: accumulated depreciation (82,805) (70,643) ------------ ------------ Property, plant and equipment, net 108,176 109,083 Goodwill and intangible assets 97,574 103,891 Deferred income taxes 11,927 1,407 Other non current assets 17,404 6,157 ------------ ------------ TOTAL ASSETS 394,564 376,887 ------------ ------------ ------------ ------------ DE RIGO S.p.A. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands of Euro) ------------ ------------ December 31, December 31, 2004 2003 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank borrowings 20,410 22,569 Current portion of long-term debt 184 166 Accounts payable, trade 70,875 66,141 Commissions payable 212 895 Income taxes payable 4,219 5,452 Deferred income taxes 767 1,392 Accrued expenses and other current liabilities 28,970 27,223 ------------ ------------ Total current liabilities 125,637 123,838 Termination indemnities and other employee benefits 10,142 9,755 Deferred income taxes 9,835 8,670 Long-term debt, less current portion 341 497 Other non current liabilities 7,200 7,243 Shareholder's equity: Capital stock 11,683 11,626 Additional paid-in capital 54,599 54,490 Retained earnings 175,891 161,413 Foreign currency translation (5,801) (5,682) Revaluation surplus 5,037 5,037 ------------ ------------ Total shareholders' equity 241,409 226,884 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 394,564 376,887 ------------ ------------ ------------ ------------ Reconciliation of income from operations before depreciation and amortization with most directly comparable Italian GAAP measure (In millions of Euro) ---------------------- De Rigo Group 2004 2003 % Change ---------------------- Income from operations 28.8 24.9 15.7% Amortization of goodwill 6.3 6.8 -7.4% Amortization of other intangibles 2.2 2.4 -8.3% Depreciation 18.4 17.7 4.0% ----------- Income from operations before depreciation and amortization 55.7 51.8 7.5% ---------------------- Wholesale & Manufacturing 2004 2003 % Change ---------------------- Income from operations 16.2 13.6 19.1% Amortization of goodwill 0.3 0.8 -62.5% Amortization of other intangibles 1.0 1.0 0.0% Depreciation 3.8 3.0 26.7% ----------- Income from operations before depreciation and amortization 21.3 18.4 15.8% ---------------------- Retail 2004 2003 % Change ---------------------- Income from operations 12.6 9.6 31.3% Amortization of goodwill 6.0 6.0 0.0% Amortization of other intangibles 1.2 1.3 -7.7% Depreciation 14.6 14.3 2.1% ----------- Income from operations before depreciation and amortization 34.4 31.2 10.3% ---------------------- Dollond & Aitchison 2004 2003 % Change ---------------------- Income from operations 1.9 1.2 58.3% Amortization of goodwill 1.6 1.6 0.0% Amortization of other intangibles 0.3 0.5 -40.0% Depreciation 7.1 6.8 4.4% ----------- Income from operations before depreciation and amortization 10.9 10.1 7.9% ---------------------- General Optica 2004 2003 % Change ---------------------- Income from operations 10.7 8.4 27.4% Amortization of goodwill 4.4 4.4 0.0% Amortization of other intangibles 0.9 0.8 12.5% Depreciation 7.5 7.5 0.0% ----------- Income from operations before depreciation and amortization 23.5 21.1 11.4% ----------- EID 2004 2003 ----------- Income from operations 0.0 1.7 Amortization of goodwill 0.0 0.0 Amortization of other intangibles 0.0 0.1 Depreciation 0.0 0.4 ----------- Income from operations before depreciation and amortization 0.0 2.2 Reconciliation of Net Financial Position with most directly comparable Italian GAAP measure (In millions of Euro) --------------------------- December 31, December 31, 2004 2003 --------------------------- Cash and cash equivalents 27.1 19.6 Bank Borrowings -20.4 -22.5 Current portion of long term debt -0.2 -0.2 Long term debt, less current portion -0.3 -0.5 --------------------------- Net Financial Position 6.2 -3.6 Reconciliation of consolidated Italian GAAP sales results with consolidated sales excluding sales made by EID (In millions of Euro) ----------------------- 2003 2004 Net Net % change Sales Sales ----------------------- Wholesale & Manufacturing 136.2 134.5 -1.2% Retail 361.5 389.8 +7.8% - D&A 230.8 248.9 +7.8% - GO 130.7 140.9 +7.8% Elimination of Intercompany Sales -12.7 -9.9 -22.0% ----------------------- Consolidated net sales excluding sales by EID 485.0 514.4 +6.1% ----------------------- EID 19.8 0.0 ----------------------- Consolidated net sales 504.8 514.4 +1.9% ----------------------- Reconciliation of sales of wholesale & manufacturing business segment with the segment's sales excluding sales made to EID (In millions of Euro) ----------------------- 2003 2004 Net Net % change Sales Sales ----------------------- Wholesale & Manufacturing sales 136.2 134.5 -1.2% - of which sales to EID -2.6 0.0 ----------------------- Wholesale & Manufacturing sales excluding sales to EID 133.6 134.5 +0.7% ----------------------- --------------------------------- (1) The Group reports its results in Euro. On April 13th, 2005, the official Euro/U.S. Dollar exchange rate, as reported by the European Central Bank, was EUR 1 = USD 1.2922. The financial results reported in this press release have not yet been audited by the Group's independent registered public accountants and are presented on the basis of accounting principles generally accepted in Italy ("Italian GAAP"). (2) Reconciliations detailing the Group's consolidated Italian GAAP sales results and those of its wholesale & manufacturing business segment excluding sales made by or to EID are provided on the tables accompanying this release. (3) The Group believes that the income from operations before depreciation and amortization and the other non-Italian GAAP data included in this release, when considered in conjunction with (but not in lieu of) other measures that are computed in accordance with Italian GAAP, enhance an understanding of the Group's results of operations. The Group's management uses income from operations before depreciation and amortization as one of the bases on which it analyses the performance of the Group and its segments, as management generally does not have control over the amortization periods for goodwill and other intangibles or the related depreciation amounts. Income from operations before depreciation and amortization should not, however, be considered in isolation as a substitute for net income, operating income, cash flow provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. The Group calculates income from operations before depreciation and amortization as being equal to income from operations plus depreciation and amortization, as detailed in the table accompanying this release, which also includes a detailed reconciliation between income from operations before depreciation and amortization and the other non-Italian GAAP measures used in this release and the most directly comparable Italian GAAP measures. (4) In accordance with Italian practice, management uses net financial position as the primary measure of the Group's debt position. A detailed reconciliation between the net financial position and the most directly comparable Italian GAAP measure is provided in the accompanying table. DATASOURCE: De Rigo S.p.A. CONTACT: For further information, please contact: Maurizio Dessolis, Chief Financial Officer, Tel. +39-0437-7777, Fax +39-0437-770727, e-mail:

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