De Rigo Announces a Strong Increase of 74.5% in Net Income
LONGARONE (BL), Italy, March 31 /PRNewswire-FirstCall/ -- On March
30, the board of directors of De Rigo S.p.A. approved the
consolidated results for 2003, which evidenced a strong improvement
in the Group's profitability, as demonstrated by net income growth
of 74.5%, as well as a substantial reduction of net financial debt.
Highlights of the Group's unaudited consolidated results for 2003
include: - Net sales amounted to EUR 504.8 m(1), a decrease of 1.5%
from the EUR 512.5 m posted last year. The decrease in net sales
was primarily due to the appreciation of the Euro against other
currencies in which De Rigo makes sales. When calculated on a
constant exchange rate basis, De Rigo's consolidated net sales
increased by 3.5%(2). - EBITDA(3) increased by 16.9% to EUR 51.8 m
from the EUR 44.3 m posted in 2002, and represented 10.3% of net
sales, as compared with 8.6% last year. - Income from Operations
grew by 49.1% to EUR 24.9 m from the EUR 16.7 m recorded in 2002,
and represented 4.9% of net sales, as compared with 3.3% last year.
- Net Income amounted to EUR 18.5 m, an increase of 74.5% from the
EUR 10.6 m recorded in 2002 and represented 3.7% of net sales, as
compared with 2.1% last year. - At 31st December 2003, the net
financial position(4) of the De Rigo Group was a debt of only EUR
3.6 m, as compared with the debt of EUR 63.2 m recorded at 31st
December 2002. This very significant improvement in the Group's net
financial position was primarily attributable to the cash generated
by De Rigo's retail and wholesale businesses, as well as to the
proceeds from the Group's sale of its interest in Eyewear
International Distribution ("EID"), which together allowed De Rigo
to sharply reduce its outstanding bank debt. The results posted by
the Group in 2003 reflected the contribution of each of the
Company's three business segments (Wholesale & Manufacturing,
Retail and EID(5)) during all or a portion of the periods under
review The following table summarizes the principal unaudited
results of each of the Group's business segments for the periods
indicated in millions of EUR: Group's SALES % EBITDA % INCOME %
Change Change FROM Change Business OPERATIONS Segments 20032002
2003 2002 2003 2002 Wholesale & 136.2 141.1 -3.5% 18.4 11.5
+60.0% 13.6 7.2 +88.9% Manufacturing Retail 361.5 359.6 +0.5% 31.2
32.2 -3.1% 9.6 10.4 -7.7% - D&A 230.8 236.2 -2.3% 10.1 11.0
-8.2% 1.2 1.5 -20.0% - GO 130.7 123.4 +5.9% 21.1 21.2 -0.5% 8.4 8.9
-5.6% EID 19.8 31.2 -36.5% 2.2 0.6 +266.7% 1.7 -0.9 +288.9%
Intercompany -12.7 -19.4 -34.5% - - - - Eliminations Total 504.8
512.5 -1.5% 51.8 44.3 +16.9% 24.9 16.7 +49.1% Wholesale &
Manufacturing Sales of the wholesale & manufacturing segment
amounted to EUR 136.2 m, a decrease of 3.5% as compared with EUR
141.1 m in 2002. When calculated on a constant exchange rate basis,
the business segment's sales decreased by 1.9%. The decrease in
wholesale & manufacturing sales was primarily due to lower unit
sales in certain European markets, primarily in Italy, as well as
to a decline in the segment's sales to EID. Other markets,
particularly in the Far East, evidenced some signs of growth. Gross
margins at the wholesale & manufacturing segment increased,
reflecting improved efficiencies in the manufacturing process and a
more favourable sales mix, as the segment's sales of premium priced
brands in geographical areas offering higher margins increased,
while lower margin sales to EID decreased. Primarily as a result of
the higher gross margin, both EBITDA and Income from Operations
grew sharply: EBITDA increased by 60.0% to EUR 18.4 m from the EUR
11.5 m recorded in 2002 and represented 13.5% of net sales, as
compared with 8.2% last year; Income from Operations increased by
88.9% to EUR 13.6 m from EUR 7.2 m in 2002, andrepresented 10.0% of
net sales, as compared with 5.1% last year. Retail Sales of the
retail segment increased by 0.5% to EUR 361.5 m, as compared with
the EUR 359.6 m posted in 2002. The increase in net sales reflected
same store sales growth of 4.3%at General Optica ("GO"), the
Group's Spanish retail chain, and same store sales growth of 7.6%
at Dollond & Aitchison ("D&A"), the Group's British retail
chain, as well as GO's expansion of its network of company-owned
and franchised stores. These factors more than offset the negative
effects of the appreciation of the Euro against the Pound Sterling,
which depressed D&A's sales in Euro terms. When calculated on a
constant exchange rate basis, net sales through the retail
companies increased by 7.0%. GO grew sales by 5.9% to EUR 130.7 m,
on top of the 11.6% sales increase posted in 2002. EBITDA amounted
to EUR 21.1 m, essentially unchanged from the EUR 21.2 m posted in
2002, representing 16.1% of sales as compared with 17.2% last year.
Income from Operations amounted to EUR 8.4 m, a decrease of 5.6%
from the EUR 8.9 m posted in 2002, representing 6.4% of sales, as
compared with 7.2% last year. The reduction in the GO's operating
results was primarily due to the negative impact of start-up
costsat the stores opened in the last two years, reflecting the
fact that GO's new stores generally only reach break-even during
their third year of activity, as well as to costs associated with
the incorporation of the new franchising department, which is
guiding the expansion of GO's franchised stores network. D&A
increased sales by 7.5% in Pound Sterling terms, reflecting the
success of an aggressive marketing campaign focussed on improving
customers' perception of D&A's services in order to increase
sales volumes and gain market share. The impact of these increased
promotional activities was reflected in a lower gross margin, and
the effect on operating results in D&A's home currency was only
partially offset by greater operating efficiencies. As aresult,
EBITDA increased by 1.0% in Pound Sterling terms, while Income from
Operations in Pound Sterling terms decreased by 12.0%. The decline
in the value of the Pound Sterling against the Euro had a negative
effect on D&A's results when expressed in the Group's reporting
currency. Sales amounted to EUR 230.8 m, a decrease of 2.3% as
compared with 2002, EBITDA amounted to EUR 10.1 m, a decrease of
8.2% as compared with 2002, and represented 4.4% of sales, having
represented 4.7% last year, while Income from Operations amounted
to EUR 1.2 m, a decrease of 20.0% as compared with 2002, and
represented 0.5% of sales, having represented 0.6% last year.
EBITDA for the retail segment as a whole amounted to EUR 31.2 m, a
decrease of 3.1% from EUR 32.2 m posted in 2002 and represented
8.6% of sales, as compared with 9.0% last year. Income from
Operations for the segment as a whole amounted to EUR 9.6 m, a
decrease of 7.7% from EUR 10.4 m in 2002 and represented 2.7% of
sales, as compared with 2.9% last year. Additional Information and
Board of Directors' resolutions - Income taxes amounted to EUR 14.9
m, as compared with EUR 0.0 m in 2002. The Group's income was taxed
at an effective rate of 39.4%, as compared with an effective tax
rate of 0.0% last year. The significant increase in the effective
tax rate was primarily due to a higher tax rate in the Wholesale
& Manufacturing business segment, reflecting the expiration of
certain Italian tax incentives from which the segmenthad benefited
in the past - Basic earnings per share were EUR 0.41, an increase
of 70.8% as compared with EUR 0.24 in 2002. Diluted earnings per
share were EUR 0.41, an increase of 78.3% as compared with EUR 0.23
in 2002. - Additions to property, plant and equipment amounted to
EUR 11.5 m in 2003, as compared with EUR 16.1 m last year. The
decrease was primarily attributable to lower investments in the
refitting of GO and D&A stores, as well as to lower investments
in EID as a result of the sale of the Group's interest. - Other net
income amounted to EUR 14.5 m, as compared to an other net loss of
EUR 3.6 m posted last year. This notable increase was primarily due
to the sale of the controlling interest in EID, which contributed
EUR 11.8 m to other net income (including EUR 3.7 m attributable to
other investors, which was deducted from the Group's consolidated
results as part of minority interests). - De Rigo's shareholders
have authorized the company to buy back up to 4.4 million of its
ADSs in market transactions on the NYSE. As of the date of this
release, the Company has bought back 223,000 ADSs, representing an
equivalent number of ordinary shares at an average price of USD
3.87 per ADS. The board of directors has resolved to ask the
shareholders to approve an extension of the buy back plan for a
further 18 months during the annual general meeting. - The
shareholders will also be asked to modify certain provisions of the
articles of association in order to reflect recent changes in
Italian law and to increase the number of the members of the Board
of Directors from six to seven. Ennio De Rigo, Chairman of the De
Rigo Group, commented on 2003's results: "We successfully closed a
year that had started with difficulty as a result of the negative
effect on consumption of the SARS outbreak and the Iraqi war. The
decline in our sales results caused by the appreciation of the Euro
was largely offset by the impact of good customer response to our
licensed brands collections and by the positive results of the
strategy of supporting our owned brands collections. The successful
implementation of marketing strategies at D&A and store network
expansion at GO helped us to continue to gain market share in our
retail business: this will continue to be our main focus for 2004.
Our continuous research for greater efficiencies in our
manufacturing and distribution processes, strong control of
alloperating costs and high attention to customer needs, well
balanced with a targeted expansion strategy, have been the right
choice to achieve a strong enhancement of our earnings results in a
period in which our industry is suffering in terms of both sales
and margins." The De Rigo board of directors would like to take
this opportunity to commemorate the enormous contribution of
director Professor Claudio Dematté to the development and
realization of the Group's strategic vision through his service on
the board since 1995. Professor Dematté's tragic death earlier this
month has deprived De Rigo and corporate Italy of one of its most
thoughtful leaders. De Rigo is one of the world's largest
manufacturers and distributors of premium eyewear, the major
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 Fendi, Givenchy, Loewe andCeline
eyewear. De Rigo also manufactures and distributes the licensed
brands Etro, Fila, Furla, La Perla, Mini and Onyx 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, 2003 2002 NET SALES
504,801 512,459 COST OF SALES 202,040 203,208 GROSS PROFIT 302,761
309,251 COSTS AND EXPENSES Commissions 13,432 16,381 Advertising
and promotion expenses 32,644 34,854 Other selling expenses 195,532
203,011 General and administrative expenses 36,299 38,278 277,907
292,524 INCOME FROM OPERATIONS 24,854 16,727 OTHER (INCOME)
EXPENSES Interest expense 2,217 4,025 Interest income (718) (633)
Other (income) expenses, net (14,483) 3,566 (12,984) 6,958 INCOME
BEFORE INCOME TAXES 37,838 9,769 INCOME TAXES 14,935 46 INCOME
BEFORE MINORITY INTEREST 22,903 9,723 MINORITY INTEREST 4,425 (922)
NET INCOME 18,478 10,645 DE RIGO S.p.A. AND SUBSIDIARIES UNAUDITED
CONSOLIDATED BALANCE SHEETS (In thousands of Euro) December
December 31, 2003 31, 2002 ASSETS Current assets: Cash and cash
equivalents 19,634 21,028 Investment in debt securities 0 1,907
Accounts receivable, trade, net of allowances for doubtful accounts
61,938 80,414 Inventories 49,366 59,338 Deferred income taxes
13,018 12,332 Prepaid expenses and other current assets 12,393
20,464 Total current assets 156,349 195,483 Property, plant and
equipment: Land 16,848 17,877 Buildings 54,587 56,513 Machinery and
equipment 25,491 24,739 Office furniture and equipment 82,800
84,442 Construction in progress - 280 179,726 183,851 Less:
accumulated depreciation (70,643) (62,946) Property, plant and
equipment, net 109,083 120,905 Goodwill and intangible assets
103,891 114,707 Other non current assets 7,564 8,806 TOTAL ASSETS
376,887 439,901 DE RIGO S.p.A. AND SUBSIDIARIES UNAUDITED
CONSOLIDATED BALANCE SHEETS (In thousands of Euro) December
December 31, 31, 2003 2002 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Bank borrowings 22,569 85,180 Current portion
of long-term debt 166 218 Accounts payable, trade 66,141 76,323 Due
to related party - - Commissions payable 895 1,553 Income taxes
payable 5,452 3,334 Deferred income taxes 1,392 1,005 Accrued
expenses and other current liabilities 27,223 31,973 Total current
liabilities 123,838 199,586 Termination indemnities and other
employee benefits 9,755 8,926 Deferred income taxes 8,670 10,068
Long -term debt, less current portion 497 696 Other non current
liabilities 7,243 8,508 Shareholder's equity: Capital stock 11,626
11,626 Additional paid-in capital 54,490 54,490 Retained earnings
161,413 142,935 Foreign currency translation (5,682) (1,971)
Revaluation surplus 5,037 5,037 Total shareholders' equity 226,884
212,117 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 376,887 439,901
Reconciliation of EBITDA with most directly comparable GAAP measure
(in millions of Euro) De Rigo Group 2003 2002 % Change Income from
operations 24.9 16.7 +49.1% Amortization of goodwill 6.8 6.4 +6.2%
Amortization of other intangibles 2.4 2.8 -14.3% Depreciation 17.7
18.4 -3.8% EBITDA 51.8 44.3 +16.9% Wholesale & Manufacturing
2003 2002 % Change Income from operations 13.6 7.2 +88.9%
Amortization of goodwill 0.8 0.3 +166.7% Amortization of other
intangibles 1.0 1.0 +0.0% Depreciation 3.0 3.0 +0.0% EBITDA 18.4
11.5 +60.0% Retail 2003 2002 % Change Income from operations 9.6
10.4 -7.7% Amortization of goodwill 6.0 6.1 -1.6% Amortization of
other intangibles 1.3 1.5 -13.3% Depreciation 14.3 14.2 +0.7%
EBITDA31.2 32.2 -3.1% Dollond & Aitchison 2003 2002 % Change
Income from operations 1.2 1.5 -20.0% Amortization of goodwill 1.6
1.7 -5.9% Amortization of other intangibles 0.5 0.7 -28.6%
Depreciation 6.8 7.1 -4.2% EBITDA 10.1 11.0 -8.2% General Optica
2003 2002 % Change Income from operations 8.4 8.9 -5.6%
Amortization of goodwill 4.4 4.4 +0.0% Amortization of other
intangibles 0.8 0.8 +0.0% Depreciation 7.5 7.1 +5.6% EBITDA 21.1
21.2 -0.5% EID 2003 2002 % Change Income from operations 1.7 -0.9
+288.9% Amortization of goodwill 0.0 0.0 - Amortization of other
intangibles 0.1 0.3 -66.7% Depreciation 0.4 1.2 -66.7% EBITDA 2.2
0.6 +266.7% Reconciliation of Net Financial Position with most
directly comparable GAAP measure (in millions of Euro) December 31,
December 2003 31, 2002 Cash and cash equivalents 19.6 21.0
Marketable securities 0.0 1.9 Bank Borrowings-22.5 -85.2 Current
portion of long term debt -0.2 -0.2 Long term debt, less current
portion -0.5 -0.7 Net Financial Position -3.6 -63.2 Reconciliation
of Net Sales at constant exchange rates with most directly
comparable GAAP measure (in millions of Euro) 2002 2003 2003 2003
Reported Reported % Effect of Sales at % sales sales change
application constant change of constant exchange exchange rates
rates (Non-GAAP) Wholesale & 141.1 136.2 -3.5% 2.2 138.4 -1.9%
Manufacturing Retail 359.6 361.5 +0.5% 23.2 384.7 +7.0% - D&A
236.2 230.8 -2.3% 23.2 254.0 +7.5% - GO 123.4 130.7 +5.9% 0.0 130.7
+5.9% EID 31.2 19.8 -36.5% 0.0 19.8 -36.5% Elimination of -19.4
-12.7 -34.5% 0.0 -12.7 -34.5% Intercompany Sales Consolidated net
512.5 504.8 -1.5% 25.4 530.2 +3.5% sales (1) The Group reports its
results in Euro. On March 30th, 2004, the official Euro/U.S. Dollar
exchange rate, as reported by the European Central Bank, was EUR 1
= USD 1.2187. The financial results reported in this press release
have not been audited by the Group's independent public accountants
and are presented on the basis of accounting principles generally
accepted in Italy ("Italian GAAP"). (2) In addition to reporting
its Italian GAAP results, the De Rigo Group uses certain measures
of financial performance that exclude the impact of fluctuations in
currency exchange rates in the translation of its operating results
into Euro. In doing so, the Group has calculated its sales for 2003
on the basis of the same average exchange rates used to calculate
sales for 2002. The Company believes that these non-GAAP
financialmeasures provide useful information to both management and
investors by allowing a comparison of sales performance on an
exchange rate neutral basis. The De Rigo Group's method of
calculating sales performance excluding the impact of changes in
exchange rates may differ from methods used by other companies. (3)
The Group believes that the EBITDA 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 EBITDA 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. EBITDA should not, however, be
considered in isolation asa substitute for net 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 EBITDA 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 EBITDA 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 net
financial position and the most directly comparable Italian GAAP
measure is provided in the accompanying table. (5) As previously
announced, on July 23, 2003, De Rigo sold its 51% interest in EID,
the former joint venture for the marketing and distribution of
Prada eyewear, to the Prada Group. As a consequence of this
transaction, EID is no longer one of De Rigo's business segments.
Accordingly the results reported forthe former segment in 2003 only
reflects EID's results prior to the Group's sale of its interest
and no narrative comparison of the segment's results is being
presented in this release. 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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