SAFILO-LUXOTTICA

FINANCIAL STATEMENTS ANALYSIS – PART A

Angelo Ditillo
Susj Castenetti

Copyright © SDA Bocconi, Milan, Italy

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SDA Bocconi School of Management Safilo-Luxottica – Financial Statements Analysis

Angelo Ditillo
Susj Castenetti

Safilo-Luxottica
Financial Statements Analysis

Safilo
<<Safilo […] is the fully integrated Italian eyewear creator and worldwide distributor of quality and trust,
leader in the premium sector for sunglasses, optical frames and sports eyewear. Design inspired and brand
driven, Safilo translates extraordinary design into excellent products created thanks to a superior
craftsmanship expertise dating back to 1878. […]
The Group has 7 directly owned plants, four in Italy and three abroad (Slovenia, US and China). With an
extensive wholly owned global distribution network in 40 countries – in North and Latin America, Europe,
Middle East and Africa, and Asia Pacific and China – Safilo is committed to quality distribution of its
products in nearly 100.000 selected stores all around the world.
Safilo is focused on creative abilities, quality product development and wholesale. The distribution model
allows for full appreciation of the best quality product, together with a neutral distribution policy tailored
to the needs of the brand>>. 1

Luxottica
<<Luxottica Group is a leader in the design, manufacture and distribution of fashion, luxury, sports and
performance eyewear. […]
Luxottica's international expansion has developed its geographic footprint worldwide. The Group’s global
wholesale distribution network covers more than 150 countries and is complemented by an extensive retail
network of approximately 9,000 stores, with LensCrafters and Pearle Vision in North America, OPSM and
Laubman & Pank in Australia and New Zealand, GMO and Óticas Carol in Latin America,
Salmoiraghi&Viganò in Italy and Sunglass Hut worldwide.
One of the Group’s competitive advantages is the vertically integrated business model built over the years,
covering the entire value chain: design, product development, manufacturing, logistics and distribution.
Product design, development and manufacturing take place in Luxottica’s six manufacturing facilities
located in Italy, three facilities in China, one in Brazil and one facility in the United States devoted to
sports and performance eyewear. Luxottica also has a small plant in India serving the local market.
Luxottica also has produced sun and ophthalmic lenses for more than 20 years. The Company has
increased its manufacturing capacity with the recent addition of three new laboratories in Europe, North
America and Asia-Pacific which are completely integrated with its logistics hubs>>. 2

1 From Safilo website.

2 From Luxottica website.

Copyright © SDA Bocconi, Milano, Italy 2

SDA Bocconi School of Management Safilo-Luxottica – Financial Statements Analysis

PART A – Safilo’s Financial Statement Formats

On December 31st 2016 and 2017, Safilo exhibited the following items on its unformatted balance sheets
and income statements:

Copyright © SDA Bocconi, Milano, Italy 3

SDA Bocconi School of Management Safilo-Luxottica – Financial Statements Analysis

SAFILO GROUP
CONSOLIDATED BALANCE SHEET (thousands of Euro) 2016 2017
AS S ETS
Tangible assets 199,081 189,562
Deferred tax assets 96,785 69,104
Cash and cash equivalents 109,038 76,251
Trade receivables 237,407 178,745
Long-term guarantiee deposit 3,475 2,812
Inventory 272,815 257,717
Intangible assets 64,108 64,569
Short-term derivative financial instruments 1,997 142
Other current assets 6,085 36,231
VAT receivables 21,410 26,635
Prepayments and accrued income 14,644 9,070
Receivables from agents 684 655
Other non current assets 33,225 9,410
Tax credits and payments on account 18,005 19,168
Goodwill 448,302 220,416
Long-term derivative financial instruments 0 0

TOTAL AS S ETS 1,527,061 1,160,487

LIABILITIES AND S HAREHOLDERS ' EQUITY

Short-term borrowings 20,013 65,409

Long-term derivative financial instruments 484 0
Tax payables 18,627 17,218
Short-term derivative financial instruments 1,624 2,056
Deferred tax liabilities 16,241 13,283
Payables to personnel and social security institutions 38,047 37,590
Agent fee payables 1,280 836
Payables to pension funds 1,294 1,430
Accrued advertising and sponsorship costs 581 1,720
Accrued interests on long-term loans 204 241
Short-terms provisions for risks and charges 27,640 35,415
Long-term borrowings 137,393 142,491
Other current liabilities 1,936 2,100
Other accruals and deferred income 48,625 51,576
Employees l/t benefits liability 31,395 28,399
Provisions for risks and charges 14,798 16,779
Trade payables 248,492 204,897
Other non-current liabilities 45,583 5,842

Total liabilities 654,257 627,282

Share capital 313,300 313,300

Share premium reserve 484,862 484,862
Retained earnings and other reserves 216,743 -13,355
Cash flow reserve 0 -35
Income (Loss) attributable to the Group -142,101 -251,567
Non-controlling interests 0 0

Total shareholder's equity 872,804 533,205

TOTAL LIABLITIES AND S HAREHOLDER'S EQUITY 1,527,061 1,160,487

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SDA Bocconi School of Management Safilo-Luxottica – Financial Statements Analysis

SAFILO GROUP
CONSOLIDATED INCOME STATEMENT (thousands of Euro) 2016 2017
Net sales 1,252,931 1,046,955
Gains on disposals of assets 1,999 21
Other operating income 11,962 49,349
Interest income 564 208
Positive exchange rate differences 37,069 22,895
Fair value gains on Equity-linked Bond incorporated derivative 3,129 484
Other financial income 1,632 4,312
Deferred taxes 0 0
Ending inventory of raw materials, work in process and finished goods 272,815 257,717

TOTAL INCOME 1,582,101 1,381,941

Purchase of raw materials and finished goods 380,203 349,191

Capitalisation of costs for increase in tangible assets (-) -8,215 -7,769
Beginning inventory of raw materials, work in process and finished goods 254,261 256,431
Sales consultants fees 1,082 1,647
Industrial wages and social security contributions 118,070 127,457
Subcontracting costs 23,716 17,173
Other sales and marketing expenses 30,872 20,247
Administrative payroll and social security contributions 80,632 68,522
Industrial depreciation 23,910 20,597
Sales utilities 1,020 1,144
Industrial rental and operating leases 955 1,603
Administrative amortization and depreciation 15,257 17,061
Other industrial costs 17,220 20,440
Sales payroll and social security contributions 126,554 121,766
Losses on disposals of assets 395 505
Sales commissions 70,601 50,308
Royalty expenses 107,686 67,969
Financial discounts 0 0
Advertising and promotional costs 129,438 107,768
Sales amortization and depreciation 6,129 4,417
Insurance costs 2,140 2,686
Sales logistic costs 21,193 22,622
Sales rental and operating leases 16,829 17,006
Provision for risks 1,413 597
Interest expenses on loans 826 725
Allowance and write off of doubtful accounts 2,324 4,111
Administrative consultants fees 18,355 17,098
Administrative rental and operating leases 11,415 10,783
EDP costs 10,506 12,905
Utilities, security and cleaning 6,759 6,201
Taxes (other than on income) 5,094 4,999
Other general and administrative expenses 15,277 9,020
Other operating expenses 12,971 15,712
Write downs of tangible assets 1,913 0
Interest expenses and charges on Bonds 6,744 6,973
Bank commissions 7,204 6,589
Negative exchange rate differences 33,254 26,549
Other financial charges 720 1,059
Current taxes 15,679 8,004
Deferred taxes 3,800 21,392
Impairment loss on goodwill 150,000 192,000

TOTAL COS TS 1,724,202 1,633,508

PROFIT OF THE PERIOD -142,101 -251,567

Prepare liquidity format of the balance sheet at December 31st 2016 and 2017 and cost of goods sold
format of income statement at 2016/2017 year-end.

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