FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
DATED MAY 23, 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|
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-______
[LOGO]
NOTICE OF CALL
NOTICE OF
ORDINARY MEETING
OF SHAREHOLDERS
JUNE 25, 2003
PROXY STATEMENT
[LOGO]
NOTICE OF CALL
NOTICE OF
ORDINARY MEETING
OF SHAREHOLDERS
JUNE 25, 2003
PROXY STATEMENT
Registered Offices in Milan, Via Cantu, 2
Paid in Capital Stock,
[EURO] 27,257,100.00
Authorized Capital [EURO] 28,337,918.57
Fiscal Code and Companies Register no. 00891030272 Vat No. 10182640150
R.E.A. no. 1348098
NOTICE OF CALL
ORDINARY MEETING OF SHAREHOLDERS
The shareholders of Luxottica Group S.p.A. (the "COMPANY") are hereby
convened for an ordinary shareholders' meeting to be held on June 25, 2003 at
11.00 a.m. at the registered office of the Company, Via C. Cantu 2, in Milan,
Italy on first call, and on June 27, 2003 at the same time and same place on
second call, to consider the following:
AGENDA
Consideration of resolutions relating to:
1. Submission of the Company's Statutory Financial Statement for the year ended
December 31, 2002 and of the reports thereon of the Board of Directors and
the Board of Statutory Auditors;
2. Resolution with respect to the distribution of dividends;
3. Submission of the Consolidated Financial Statements as of and for the year
ended December 31, 2002 and of the reports thereon of the Board of Directors
and the Board of Statutory Auditors;
4. Determination of the number of Directors to serve on the Board of Directors,
election of the Board of Directors and determination of the 2003
compensation for the Board of Directors and Executive Committee;
5. Appointment of the Board of Statutory Auditors and determination of their
compensation;
6. Appointment of the auditing company, pursuant to Art. 159 of Legislative
Decree no. 58/1998 for the financial years 2003, 2004 and 2005 and for the
interim balance sheet and determination of the relevant fees; and
7. Report on the Corporate Governance Code.
In order to be entitled to attend the meeting, shareholders must obtain from
authorized intermediaries of the Italian central depository system an
appropriate certification attesting to their right
to exercise shareholder rights as provided in Article 85 of Regulation 58/98 at
least five days prior to the meeting.
Documentation concerning the Agenda shall be filed at the Company's
registered offices and with Borsa Italiana S.p.A. Copies are available to
shareholders.
The holders of the Company's American Depositary Shares ("ADSS") listed on
the New York Stock Exchange, each representing the right to receive one Ordinary
Share, who wish to attend the shareholders' meeting personally, should contact
the Company at least ten days prior to the date of the meeting, in order to be
informed about the requirements to be fulfilled to attend and to vote at the
meeting.
Milan, May 5, 2003 LUXOTTICA GROUP S.P.A.
for the Board of Directors
Mr. Roberto Chemello
PROXY STATEMENT
Dear Holder of American Depositary Shares,
The Board of Directors of Luxottica Group S.p.A. (the "COMPANY") has
convened the shareholders for an ordinary meeting, to be held on June 25, 2003
on first call, or, failing the attendance of the required quorum, on June 27 on
second call, in either case at 11:00 a.m., at the registered office of the
Company, Via C. Cantu 2, in Milan, Italy. The Agenda of the meeting is the
following:
CONSIDERATION OF RESOLUTIONS RELATING TO: (i) submission of the Company's
Statutory Financial Statement as of December 31, 2002 and of the reports thereon
of the Board of Directors and the Board of Statutory Auditors; (ii) a resolution
with respect to the distribution of dividends; (iii) the submission of the
Consolidated Financial Statements as of and for the year ended December 31, 2002
and of the reports thereon of the Board of Directors and the Board of Statutory
Auditors; (iv) the determination of the number of Directors to serve on the
Board of Directors, election of the Board of Directors and determination of the
2003 compensation for the Board of Directors and Executive Committee; (v) the
appointment of the Board of Statutory Auditors and determination of their
compensation; (vi) the appointment of the auditing company, pursuant to Art. 159
of Legislative Decree no. 58/1998 for the financial years 2003, 2004 and 2005
and for the interim balance sheet and determination of the relevant fees; and
(vii) a report on the Corporate Governance Code.
By this proxy statement and the attached documentation, the Board of
Directors of the Company (the "BOARD") wishes to provide you with details of the
resolutions which the Board or Chairman of the meeting, as the case may be,
shall present on the above issues, in the order in which such resolutions will
be submitted to the meeting, with a view to enabling you to cast your vote on
these resolutions as described below.
On the matters to be considered at the ordinary meeting, each Ordinary Share
shall be entitled to one vote and all holders of Ordinary Shares shall vote
together as a single class. The presence, in person or by proxy, of at least 50%
of the voting power represented by outstanding Ordinary Shares as of the date of
the meeting will constitute a quorum for the approval of resolutions at the
meeting. The affirmative vote of the holders of a majority of the Ordinary
Shares entitled to vote at the meeting is required to approve the resolutions
relating to each item in the Agenda.
As of the close of business on the date hereof, Mr. Leonardo Del Vecchio,
the Chairman of the Company, has the power to vote 314,464,552 Ordinary Shares,
or approximately 69.2% of the outstanding Ordinary Shares. Such voting power
enables Mr. Del Vecchio, without any additional votes, to control the approval
of the resolutions to be submitted at the meeting, except for the resolution
concerning the appointment of the Board of Statutory Auditors which follows the
rules referred to below. Mr. Del Vecchio has advised the Company that he intends
to cast all of the votes controlled by him at the ordinary meeting:
FOR approval of the Company's Statutory Financial Statement and of the
Reports of the Board of Directors and of the Board of Statutory Auditors on the
Statutory Financial Statement;
FOR approval of the Company's payment of a cash gross dividend equal to Euro
0.21 per Ordinary Share (each American Depositary Share ("ADS") represents one
Ordinary Share);
FOR the determination of the number of Directors to serve on the Board of
Directors at nine (9), FOR appointment of Messrs. Leonardo Del Vecchio, Claudio
Del Vecchio, Luigi Francavilla, Roberto Chemello, Sabina Grossi, Enrico
Cavatorta, Lucio Rondelli, Tancredi Bianchi and Mario Cattaneo as members of the
Board and FOR the approval of the compensation for the Board of Directors of
Euro 66,020.00 in the aggregate per month, inclusive of the additional
compensation for the Executive Committee;
1
FOR the appointment of Messrs. Giancarlo Tomasin, Walter Pison and Mario
Medici as members of the Board of Statutory Auditors and of Messrs. Giuseppe
Luigi Tacca and Mario Bampo as alternate members of the Board of Statutory
Auditors and FOR the approval of the compensation set by the national schedules
of fees payable to the Board of Statutory Auditors.; and
FOR appointment of Deloitte & Touche as auditing company, pursuant to art.
159 of legislative decree no. 58/98 for the three year period of 2003 through
2005.
Set forth below is a description of the matters that will be submitted for
approval at the meeting:
1. SUBMISSION AND APPROVAL OF THE COMPANY'S STATUTORY FINANCIAL STATEMENT AS AT
DECEMBER 31, 2002
Under Italian law, a statement of the Company's assets and liabilities
prepared on an unconsolidated basis as of the last day of its most recently
completed fiscal year in accordance with certain statutory accounting
requirements (the "STATUTORY FINANCIAL STATEMENT") must be approved by
shareholders at the annual ordinary meeting of shareholders.
Under Italian law, the Statutory Financial Statement is submitted for
approval by the holders of Ordinary Shares together with the reports thereon by
the Company's Board of Directors and Board of Statutory Auditors. Once approved
by the holders of Ordinary Shares, the Statutory Financial Statement must be
filed with the Company's Register kept by the Chamber of Commerce in Milan.
The Company does not believe that the Statutory Financial Statement is as
meaningful a statement of the Company's overall financial condition as the
Consolidated Financial Statements of the Company referred to below. Accordingly,
the Statutory Financial Statement is not being distributed to the holders of
American Depositary Shares and such holders who will not attend the meeting
personally are not being asked to direct the vote of the deposited Ordinary
Shares, by mail, with respect to such Financial Statement. Nevertheless, the
holders of ADSs who will attend the meeting personally and, upon fulfillment of
the conditions described below, are granted the right to vote thereat, also
shall be entitled to direct their vote on the approval of the Statutory
Financial Statement. A copy of the Company's Statutory Financial Statement
together with the reports thereon by the Company's Board of Statutory Auditors
and Board of Directors, as filed with the Company's Register, shall be available
starting from June 10, 2003 and may be obtained without charge by any holder of
American Depositary Shares. Requests for copies of the Statutory Financial
Statement and such reports should be sent to, or requested by telephone from,
the Company's Legal Department Representative at the Company's offices, Via
Cantu 2, 20123 Milan, Italy, tel. n. 011 39 02 8633 4623 (attn. Marianna Nasce).
Copies of the Statutory Financial Statement and such reports also will be
available at the meeting.
2. RESOLUTION WITH RESPECT TO DISTRIBUTION OF DIVIDENDS
The holders of Ordinary Shares shall be requested to approve the proposed
dividend distribution. Italian law provides that the payment of annual dividends
is subject to approval of the holders of Ordinary Shares at the annual ordinary
meeting. Under Italian law, before dividends may be paid with respect to the
results of any year, an amount equal to 5% of the net income of the Company on
an unconsolidated basis for such year must be set aside to the Company's legal
reserve. Amounts so set aside are not available to fund dividends. The reserve
requirement remains in existence until such legal reserve, including the amounts
set aside during prior years, equals at least one-fifth of the nominal value of
the Company's issued share capital. The Company has more than sufficient funds
legally available for the payment of the proposed dividend.
The Company is permitted to distribute dividends out of net income earned by
its subsidiaries to holders of Ordinary Shares only to the extent such net
income has been conveyed to the Company by its subsidiaries. Accordingly, based
on the net income available to the Company, your Board will propose that the
holders of Ordinary Shares approve the distribution of dividends in the gross
amount of Euro
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0.21 per Ordinary Share. Last year, the Company distributed a dividend equal to
Euro 0.17 per Ordinary Share. If approved, the aggregate amount payable by the
Company in connection with such dividend will be approximately Euro
95.4 million. Please note that this amount could be subject to increase due to
the issuance of additional Ordinary Shares as a consequence of the exercise of
stock options by employees. In this case, assuming that all stock option
beneficiaries exercised all their vested options by the date of the ordinary
shareholders' meeting, the aggregate amount payable by the Company in connection
with the dividend would increase from Euro 95.4 million to Euro 96.6 million.
The funds available for the payment of the dividends would be paid out of the
Company's current net income. The consolidated net income of the Company and its
subsidiaries for 2002 computed in accordance with U.S. generally accepted
accounting principles ("U.S. GAAP") was Euro 372.1 million. At the meeting, your
Board will seek approval of the foregoing proposal.
With a view to enabling all of the ADS holders to provide the documentation
required to achieve the application of reduced tax, pursuant to the applicable
tax treaties between Italy and other countries, the Board will propose to set
July 3, 2003 as the date for payment of dividends to all holders of Ordinary
Shares of record on June 27, 2003, including The Bank of New York, as depositary
on behalf of the ADS holders.
The Bank of New York, acting as depositary of the American Depositary
Shares, has advised the Company that the dividend amount for each ADS holder
will be paid commencing on July 10, 2003 to all such holders of record on
July 2, 2003. The Bank of New York has advised the Company that after the close
of business on June 27, 2003 through and including July 2, 2003 it will close
its books and will not accept deposits or cancellations of Ordinary Shares or
ADSs, as applicable. The Bank of New York shall pay such dividends in U.S.
dollars by converting the Euro amount of the dividend, net of the applicable
tax, at the market Euro/U.S. dollar exchange rate in effect on July 3, 2003.
Attached to this Proxy Statement as Annex A, you will find a letter from the
Company providing information as to the procedure to be used by ADS holders who
are U.S. residents, Italian residents or residents of countries having
anti-double taxation treaties with the Republic of Italy for the purposes of
obtaining reduced tax on dividends provided for by the applicable tax treaties.
3. SUBMISSION OF THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2002 AND OF THE REPORTS THEREON OF THE BOARD
OF DIRECTORS AND THE BOARD OF STATUTORY AUDITORS
The Consolidated Financial Statements reflect the activity of the Company
and of the group of companies owned, directly or indirectly, by the Company. The
Consolidated Financial Statements for the fiscal year ending December 31, 2002
were prepared in accordance with U.S. GAAP and were audited by Deloitte &
Touche, independent public accountants, as stated in their report therein. An
English translation of the Consolidated Financial Statements for the year ending
December 31, 2002, together with a copy of the Consolidated Financial Statements
for the fiscal years ending December 31, 2001 and December 31, 2000, are
attached hereto.
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However, no resolution of the shareholders approving said Consolidated
Financial Statements is required and, accordingly, the Board will not ask the
shareholders to express their vote on this item of the agenda.
4. DETERMINATION OF THE NUMBER OF DIRECTORS TO SERVE ON THE BOARD OF DIRECTORS,
ELECTION OF THE BOARD OF DIRECTORS AND DETERMINATION OF THE YEAR 2003
COMPENSATION FOR THE BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE.
(i) DETERMINATION OF THE NUMBER OF DIRECTORS
Italian law provides that the term of the office of members of the Board of
Directors of any company may not exceed three years and the Company's By-laws
provides that the Board may be composed of a minimum of three (3) and of a
maximum of eleven (11) members. The current Board of Directors will terminate
its office on the date of the meeting and therefore it will be necessary to fix
the total number of Directors who will serve on the Board for the next three
years and to elect a new Board of Directors for such period. At the shareholders
meeting, it will be proposed to the holders of Ordinary Shares to fix the total
number of Directors who will serve on the Board at nine (9).
(ii) ELECTION OF THE BOARD OF DIRECTORS
At the shareholders meeting, it will be proposed to the holders of Ordinary
Shares to elect as directors for the subsequent three-year period
Messrs. Leonardo Del Vecchio, Claudio Del Vecchio, Luigi Francavilla, Roberto
Chemello, Sabina Grossi, Enrico Cavatorta, Lucio Rondelli, Tancredi Bianchi and
Mario Cattaneo.
Information regarding the proposed nominees for the Board of Directors is
set forth below.
LEONARDO DEL VECCHIO is the founder of our operations and has been Chairman
of the Board since the Group was formed in 1961. Mr. Del Vecchio also serves as
Chairman of the Board of several of our subsidiaries. In 1986 the President of
the Republic of Italy conferred on Mr. Del Vecchio the honor of Cavaliere
dell'Ordine al "Merito del Lavoro" (Knight of the Order for Labor Merit). In
May 1995 he received an honorary degree in Business Administration from the
Venice Ca' Foscari University. In 1999 he received a Master "honoris causa" in
International Business from MIB- Management School in Trieste and in 2002 he
received an honorary degree in Managerial Engineering from the University of
Udine.
LUIGI FRANCAVILLA joined the Group in 1968 and has been Deputy Chairman
since 1981 and a Managing Director of Luxottica S.r.l., our principal operating
subsidiary, since 1977. He also serves as a Director of several of our
subsidiaries. From 1972 to 1977, Mr. Francavilla was General Manager of
Luxottica S.r.l. and, from 1969 to 1971, he served as Technical General Manager
of Luxottica S.r.l. In April 2000, he received an honorary degree in Business
Administration from Constantinian University.
CLAUDIO DEL VECCHIO, son of Leonardo Del Vecchio, joined the Group in 1978
and has been a Director since 1981. From 1979 to 1982, he managed our Italian
and German distribution operations. He also serves as a Director of several of
our subsidiaries. Claudio Del Vecchio is Chairman and Chief Executive Officer of
Retail Brand Alliance, the owner of Brooks Brothers Inc. and other clothing
apparel companies.
ROBERTO CHEMELLO, joined the Group in 1979 and has been Co-Chief Executive
Officer since 1985 also serving as Chairman or as Director of several of our
subsidiaries. Prior to 1985, Mr. Chemello was our Chief Financial Officer.
Mr. Chemello graduated with a degree in Business Administration and Economics
from the Ca' Foscari University in Venice.
SABINA GROSSI joined the Group in 1996 and is currently Director of Investor
Relations. Prior to joining the Group, she was a financial analyst with Caboto
Sim S.p.A., an Italian brokerage house, focusing on domestic equities and
corporates. From 1991 to 1993, Ms. Grossi was an associate professor in the
school of engineering of the La Sapienza University in Rome, where she taught
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undergraduate courses as well as published papers on mathematics and statistics.
Ms. Grossi, who is a C.P.A. in Italy, graduated with the highest honors from the
LUISS University in Rome with a bachelor's degree in Business Administration and
Economics.
ENRICO CAVATORTA has been Chief Financial Officer since he joined the Group
in 1999. Prior to joining Luxottica Mr. Cavatorta was with Piaggio S.p.A., most
recently as Group Controller, Director, responsible for planning and control.
From 1993 to 1996, Mr. Cavatorta was a consultant with McKinsey & Co., having
joined the firm from Procter & Gamble Italy, where he worked from 1985 to 1993,
most recently as Controller. Mr. Cavatorta, who is a C.P.A. in Italy, graduated
with the highest honors from the LUISS University in Rome with a bachelor's
degree in Business Administration.
LUCIO RONDELLI has been a Director since 1990. Mr. Rondelli was the Chairman
of UniCredito Italiano S.p.A. until 2001, having held various positions with the
bank continuously from 1947. Mr. Rondelli is currently a member of the Board of
Directors of the Italian company RAS (Riunione Adriatica di Sicurta S.p.A.) and
of IVECO International N.V. In 1976 he received the honor of Cavaliere di Gran
Croce dell'Ordine (Knight of the Great Cross Order) for merit to the Republic of
Italy and in 1988 the President of the Republic of Italy conferred on him the
honor of Cavaliere dell'Ordine al "Merito del Lavoro" (Knight of the Order for
Labor Merit).
TANCREDI BIANCHI has been a Director since 1990 and has been Professor of
Credit and Banking at the Bocconi University in Milan since 1978. In 1959, he
qualified for University teaching and began teaching Banking Technique at the
Venice University, as well as the Pisa and Rome Universities. In recent years,
he joined the Board of Directors of Montedison and until 1989 was a member of
the Board of Directors of Credito Bergamasco. Until 1998 Mr. Bianchi was
Chairman of the Italian Banking Association. He is currently Chairman of
Centrobanca and of Fondo Immobiliare Polis and a member of the Board of
Directors of Credito Emiliano.
MARIO CATTANEO is professor of Corporate Finance at the Catholic University
of Milan. From 1991 to 1999 he was Statutory Auditor of the Bank of Italy. He is
a member of the Board of Directors of Eni S.p.A., Unicredito Italiano S.p.A. and
Banca Lombarda e Piemontese S.p.A.
(iii) DETERMINATION OF THE YEAR 2003 COMPENSATION FOR THE BOARD OF DIRECTORS AND
EXECUTIVE COMMITTEE
The Board will submit to the holders of Ordinary Shares the proposal to
determine the aggregate compensation for the entire Board of Directors in the
gross amount of Euro 66,020.00 per month. Such amount includes additional
compensation for the members of the Executive Committee. The Executive Committee
is appointed by the Board of Directors and is composed of not less than three
(3) members of the Board. The Executive Committee is responsible for the
management of the Company on a day-to-day basis. The Executive Committee
presently is composed of Messrs. Leonardo Del Vecchio, Luigi Francavilla,
Roberto Chemello and Lucio Rondelli.
* * *
The resolutions with respect to (i) the determination of the number of
Directors to serve on the Board for the ensuing three years, (ii) the election
of members of the Board of Directors and (iii) the compensation for the Board of
Directors, requires the affirmative vote of the holders of a majority of
Ordinary Shares entitled to vote at the meeting.
5. APPOINTMENT OF THE COMPANY'S BOARD OF STATUTORY AUDITORS AND DETERMINATION OF
THE COMPENSATION FOR THE BOARD OF STATUTORY AUDITORS
(i) APPOINTMENT OF THE BOARD OF STATUTORY AUDITORS
Italian Law and the By-laws of the Company provide that the term of the
office of the Board of Statutory Auditors is three years. The current Board of
Statutory Auditors will terminate its office on the
5
date of the meeting. Therefore it will be necessary to appoint the members of
the Company's Board of Statutory Auditors. Shareholders who alone, or together
with other shareholders, represent at least 3% (three percent) of the shares
with the right to vote at the meeting, may submit a list for the appointment of
the Board of Statutory Auditors within five days prior to the date of the
meeting. The majority shareholder of the Company, Leonardo Del Vecchio, has
proposed the appointment of all the members of the current Board of Statutory
Auditors, i.e., Messrs. Giancarlo Tomasin (first nominee), Walter Pison (second
nominee) and Mario Medici (third nominee) as effective members and Giuseppe
Luigi Tacca (first nominee) and Mario Bampo (second nominee) as alternate
members. The proposed nominees' personal and professional background is set
forth below:
As effective members of the Board of Statutory Auditors:
1) GIANCARLO TOMASIN, is a certified public accountant. He was formerly a
member of the Ministerial Committee for Fiscal Reform (1968-1973), member of
the Board of Consiglio Nazionale dei Dottori Commercialisti for nine years
and Vice President of the same for six years. He represented Italy in the
Constitution of IFAC, International Federation of Accountants and served as
a member of the Board of IASC- International Accounting Standards Committee
from 1980 to 1993. He is currently a member of the Board of Statutory
Auditors of several corporations, public and private, including Unicredito
Italiano, CIGA, Danieli & C. and Glaxo Finanziaria.
2) WALTER PISON, is a certified public accountant. He has been a trustee in
bankruptcy and expert witness of the Court of Justice in Italy. He is
currently President or member of the Board of Statutory Auditors of some of
the Company's subsidiaries and of several other private corporations. He has
been Director, Secretary and President of the local Register of professional
accountants for the past twelve years.
3) MARIO MEDICI, is a certified public accountant. He is currently Vice
President of the Board of Directors of Cassa di Risparmio di Trento e
Rovereto and member of the Board of Directors of Foundation Cassa di
Risparmio di Trento e Rovereto. Furthermore, he is President of the Board of
Statutory Auditors of Credito Fondiario Trentino Alto Adige S.p.A. and of
Caritro Financial Services. He is also member of the Board of Statutory
Auditors of some of the Company's subsidiaries and of several other private
corporations.
As alternate members of the Board of Statutory Auditors:
1) GIUSEPPE LUIGI TACCA, is a certified public accountant and graduated from
the Bocconi University in Milan, with a bachelor's degree in Company Law.
After his graduation, Mr. Tacca was with I.B.M. Italia S.p.A., Arthur
Andersen & Co and Memorex Europe where he worked as Chief Financial Officer
for Italy. Mr. Tacca is technical adviser and surveyor of the Court in
Treviso. Prior to 1990, Mr. Tacca was a business consultant in Milan and
thereafter in Conegliano. He is currently a member of the Board of Statutory
Auditors of some of the Company's subsidiaries and of several other Italian
and foreign private companies.
2) MARIO BAMPO, is a certified public accountant and graduated from the Ca
Foscari University in Venice. Mr. Bampo is currently President of the Board
of Directors of the Professional Accountants Association. Prior to 2001, he
served as member of the Board of Directors of the Professional Accountants
Association since its formation in 1985. Mr. Bampo is a member of the Board
of Statutory Auditors of several Italian private companies, such as Guarnier
S.p.A, Gruppo Fedon and Gruppo Clivet, and of some of the Company's
subsidiaries.
(ii) DETERMINATION OF THE COMPENSATION FOR THE BOARD OF STATUTORY AUDITORS
The Board will further submit to the holders of Ordinary Shares the proposal
to determine the compensation of the Board of Statutory Auditors for their
three year period of service in accordance with the national schedules of
fees payable to statutory auditors for companies of comparable size. For
2003, based on the above-mentioned schedules, the aggregate compensation for
the Board of
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Statutory Auditors will be the gross amount of Euro 153,283 plus
compensation payable to each member of the Board of Statutory Auditors for
each meeting attended.
* * *
The appointment of the members of the Board of Statutory Auditors and the
determination of their compensation requires the affirmative vote of the holders
of a majority of Ordinary Shares entitled to vote at the meeting. However, in
the event that two or more lists are submitted at the meeting, the first two
candidates in the list concerning effective members which have obtained the most
votes and the first candidate in such list which has obtained the second most
votes shall be appointed as effective members of the Board of Statutory
Auditors, and the first candidate in the list concerning alternate members which
has obtained the most votes and the first candidate in such list which has
obtained the second most votes shall be appointed as alternate members of the
Board of Statutory Auditors.
6. APPOINTMENT OF AN AUDITING COMPANY PURSUANT TO ART. 159 OF LEGISLATIVE DECREE
NO. 58/1998
According to Article 159 of Legislative Decree No. 58/1998 (also known as
"DECRETO DRAGHI"), the auditing of the Annual Financial Statements and of the
Annual Consolidated Financial Statements of a listed company shall be conducted
by one of the auditing companies registered in a special list set forth in
Article 161 of Decreto Draghi. The Decreto Draghi requires that the appointment
of the auditing company be approved by a listed company's shareholders, upon
previous advice of the Board of Statutory Auditors. The auditing company shall
serve for a period of three years. The appointment may not be renewed more than
two times.
The Board of Directors has proposed to reappoint the Company's current
auditing company, Deloitte & Touche.
The auditing of the Annual Financial Statements and the Annual Consolidated
Financial Statements shall cover the three year period between 2003 and 2005 and
the audits shall be conducted in compliance with CONSOB (the Italian securities
regulatory authority) accepted practice. The appointment shall also cover a
review of the interim statements for the same period of time. A summary of
Deloitte & Touche's proposed audit fees is attached hereto as Annex B.
The appointment of Delolitte & Touche as auditing company requires the
affirmative vote of the holders of a majority of Ordinary Shares entitled to
vote at the meeting.
7. REPORT ON THE CORPORATE GOVERNANCE CODE
In 1999, a committee of Italian securities industry professionals and
academics was formed to evaluate and prepare a model code for the corporate
governance of publicly traded companies in Italy. The Committee for the
Corporate Governance of Listed Companies, as it is called, issued a report
setting forth its recommendations for a model code of conduct for Italian listed
companies (the "MODEL CODE"). Following the issuance of such report, Borsa
Italiana S.p.A. ("BORSA ITALIANA"), the principal Italian stock exchange and the
exchange on which the Company's Ordinary Shares are listed, recommended that
listed companies provide shareholders with appropriate information concerning
their corporate governance model. The adoption of all or any portion of the
Model Code is voluntary, and not mandated by Italian law or Borsa Italiana.
Accordingly, no shareholder vote is being requested on this item of the Agenda.
COMPOSITION AND ROLE OF THE BOARD OF DIRECTORS
The By-Laws of the Company provide that the Company be governed by a Board
of Directors made up of not less than three nor more than eleven members who
need not be shareholders, with the exact number to be determined by a resolution
approved at a shareholders' meeting.
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The present Board of Directors is made up of seven members, appointed by the
shareholders on May 19, 2000, who will serve until the approval of the Company's
financial statements for the year ended December 31, 2002.
Three of the seven members of the Board of Directors have delegated powers
and perform management functions within the Company: the Chairman (Leonardo Del
Vecchio), the Deputy Chairman (Luigi Francavilla) and the Chief Executive
Officer (Roberto Chemello). The Board of Directors has delegated to the Chairman
power to represent and to manage the Company.
The current Board of Directors has four non-executive directors (Claudio Del
Vecchio, Lucio Rondelli, Tancredi Bianchi and Giorgio Armani), two of whom,
namely Lucio Rondelli and Tancredi Bianchi, are independent directors in the
sense that they do not maintain any business relationships with the Company of a
significance that would influence their autonomous judgment and do not own a
quantity of shares enabling them to control the Company.
The Board of Directors has evaluated the degree of independence of
Mr. Lucio Rondelli and Tancredi Bianchi finding it adequate.
The Board of Directors has all the powers that the law does not specifically
reserve to the shareholders.
Among other matters, the Board of Directors:
i) examines and approves the strategic, industrial and financial plans of the
Company and its subsidiaries;
ii) grants and revokes powers of attorney to the members of the Board of
Directors and to the Executive Committee and provides that such persons
report to the Board of Directors quarterly;
iii) examines and approves the Company's most significant and unusual
transactions, those which have a significant impact on the operations of
the subsidiaries and those involving related parties. To this end, the
Board of Directors has adopted guidelines which set internal procedures
for the approval of significant transactions and those involving related
parties.
iv) supervises the management of the Company on the basis of reports furnished
by the executive officers;
v) periodically assesses the adequacy of the organizational structure of the
Company and its subsidiaries; and
vi) reports to the shareholders of the Company.
The Board of Directors meets frequently: during 2002 it met eleven times. In
2003, the Board of Directors met five times through May 5, 2003 and it expects
to have at least three additional meetings. The Company's By-laws do not set a
minimum number of meetings to be held annually.
In advance of the date of any Board of Directors meeting, the members of the
Board of Directors are provided with the documentation and information needed
for them to express an informed view on the matters they are required to examine
and approve.
The Executive Committee of the Board of Directors is composed of four
members, the Chairman (Leonardo Del Vecchio), the Deputy Chairman (Luigi
Francavilla), the Chief Executive Officer (Roberto Chemello) and a non-executive
and independent director (Lucio Rondelli). The Executive Committee has delegated
management powers. It also examines the compensation of the Board of Directors
and of the officers of the Company.
ELECTION AND REMUNERATION OF DIRECTORS
The directors are elected by the shareholders upon the nomination of the
Board of Directors which provides personal backgrounds and professional
qualifications of the candidates. The Company has not
8
considered it necessary to appoint a committee to propose candidates as all
executive and non-executive directors have the ability to nominate candidates to
the Board of Directors for consideration. Detailed information on the personal
backgrounds and professional qualifications of the candidates are usually
provided to the shareholders before the meeting.
The Company's By-Laws do not provide for the appointment of the Board on the
basis of lists submitted by shareholders.
The Executive Committee periodically examines the compensation of the Board
of Directors and of the officers of the Company. The Executive Committee members
do not vote on the resolution concerning their compensation. The remuneration of
some directors is linked to the achievement of specific objectives. The
remuneration of the officers of the Company is substantially linked to the
Company's operating results.
The award of bonuses to officers is linked to the achievement of specific
objectives set by the Executive Committee according to the management positions
of the officers. The Executive Committee examines and proposes to the Board of
Directors the implementation of yearly stock option grants according to the
guidelines set by the shareholders. Please refer to the Financial Statements
enclosed with this Proxy Statement for further information on the Company's
stock option plans.
INTERNAL CONTROL
The Company has established a system of procedures which are designed to
ensure a correct and efficient management of the Company and to identify,
forestall and limit financial and operational risks. Following the recent
enactment of the U. S. Sarbanes-Oxley Act of 2002, the Company began a
comprehensive review of its internal control system.
The Company's internal control system is made up of a series of internal
procedures, tailored to each sector of the Company, which have been codified and
applied through the corporate organization.
The Chief Executive Officer, through a delegate, ensures that the Manual of
Internal Control, which sets forth all the internal procedures, is periodically
updated. He reports periodically to the Internal Control Committee referred to
below.
The Internal Control Committee consists of three members: an independent and
non-executive director (Lucio Rondelli) who serves as Chairman of the Committee,
the Chairman of the Board of Directors (Leonardo Del Vecchio) and the President
of the Board of Statutory Auditors (Giancarlo Tomasin). However, following the
recent changes made by Borsa Italiana S.p.A. to the Model Code concerning the
composition and the role of the Internal Control Committee, the Board of
Directors has determined that it would be appropriate to review the composition
of the Committee so as to include only non-executive directors, a majority of
whom will be independent. To this end, following the ordinary shareholders
meeting, at which one additional independent director is expected to be elected,
the Board intends to revise the composition of the Internal Control Committee.
The Internal Control Committee is charged with giving advice and making
proposals on the adequacy of the Company's internal control system and ensuring
that it is properly applied by, among other things, working with the Company's
internal administrative bodies, the Board of Statutory Auditors and the
accounting firms which certify the Company's financial statements. The Internal
Control Committee meets at least twice a year and reports to the Board of
Directors.
CONFIDENTIAL INFORMATION
The handling of confidential information is overseen by the Chairman, the
Chief Executive Officer, the Chief Financial Officer and the Investor Relations
Manager, who are the only representatives of the Company authorized to disclose
confidential information.
9
The handling of confidential information has been extensively reviewed by
the Board of Directors who have taken the following actions:
i) The adoption of "Rules for internal management and disclosure of
confidential and price sensitive information" (the "Rules") which have been
distributed to all directors, members of the Board of Statutory Auditors and
employees who may become aware of non-public, confidential and price
sensitive information. The Rules are designed to regulate the use and
management of confidential information within the Company and to impose
requirements on persons who for professional reasons or reasons linked to
his/her function become aware of non-public, confidential and price
sensitive information.
(ii) The adoption of a "Code of Conduct", which imposes internal reporting
obligations and limitations on transactions in Luxottica securities by
persons that, because of their position and/or the function carried out by
them, have access to confidential information ("Significant Persons"). The
Code of Conduct enables the Company to give timely information to the
market of transactions in Luxottica securities made by the Significant
Persons.
RELATIONS WITH INSTITUTIONAL INVESTORS AND OTHER SHAREHOLDERS
The Investor Relations Department handles the relationships with analysts,
institutional investors and other shareholders, Italian and foreign.
The disclosure required by law is handled by the Legal Department of
Luxottica Group.
The Company has not adopted a special set of rules for the conduct of the
shareholders' meetings as they have always been properly and efficiently
conducted.
MEMBERS OF THE BOARD OF AUDITORS
According to the By-Laws of the Company, the Board of Auditors is appointed
based on the lists presented by the shareholders who, either alone or together
with other shareholders, represent at least 3% of the shares with the right to
vote at the Ordinary Shareholders meeting.
The lists must be accompanied by detailed information concerning the
candidates' personal and professional background.
VOTING PROCEDURES
You may cast your vote on the resolutions referred to above either by
completing the enclosed Voting Instruction Card and mailing it pursuant to the
instructions included therein or by attending the ordinary shareholders' meeting
personally. Should you elect to cast your vote personally at the ordinary
shareholders' meeting, you will be required to follow the procedure established
by the Company in agreement with The Bank of New York, as depositary. According
to such procedure, you will be required to provide The Bank of New York not
later than 12:00 p.m. (noon) on June 16, 2003 evidence that (i) you will be an
ADS holder as of the date of the annual meeting and (ii) you have not already
exercised the voting rights pertaining to the ADSs held by you by mailing the
attached Voting Instruction Card. Details on how to fulfill such requirements
are contained in the letters attached hereto as Annex C and Annex D.
The Company believes that the foregoing information and the attached
documents will be sufficient to enable you to cast your vote in connection with
each of the resolutions described above which are being submitted for your
approval.
Many thanks and best regards.
LUXOTTICA GROUP S.P.A.
Milan, May 5, 2003
10
ANNEX A
WARNING ABOUT TAXATION OF DIVIDENDS
PAYABLE BY LUXOTTICA GROUP S.P.A.
May 2003
Dear Holder of American Depositary Shares,
As noted in the enclosed Proxy Statement, at the ordinary shareholders'
meeting of Luxottica Group S.p.A. (the "COMPANY") which will be held on
June 25, 2003 on first call (or on June 27, 2003 on second call), the Board of
Directors of the Company will submit to shareholders a proposal to adopt a
resolution for the distribution of a cash dividend in the amount of Euro 0.21
per American Depositary Share (each American Depositary Share represents one
Ordinary Share).
The Company will pay the dividend to all holders of ADSs of record on
July 2, 2003. In order to be a holder of record on July 2, 2003 and thus be
entitled to such dividend, you must purchase the ADSs on or before June 27,
2003.
The dividend will be paid on July 3, 2003 in Euro, by Monte Titoli S.p.A.,
authorized intermediary, to all depository banks of the shareholders. For the
holders of ADSs, the dividend will be paid to The Bank of New York, as
depositary of the Ordinary Shares and the issuer of the ADSs, through UniCredito
Italiano S.p.A., as custodian under the Deposit Agreement. The Bank of New York
anticipates that dividends will be payable to all the ADS holders commencing
from and after July 10, 2003 upon satisfaction of the documentation requirements
referred to below, at the U.S. Dollar/Euro exchange rate in effect on July 3,
2003.
The ADSs listed on the New York Stock Exchange will be traded ex-dividend on
June 30, 2003.
Dividends paid to beneficial owners who are not Italian residents and do not
have a permanent establishment in Italy to which the shares are effectively
connected, are subject to a 27.0 percent substitute tax rate. Accordingly, the
amount of the dividend paid to The Bank of New York, as depositary of the
Ordinary Shares and the issuer of the ADSs, through UniCredito Italiano S.p.A.,
as custodian under the Deposit Agreement, will be subject to such Italian
substitute tax. Therefore, the amount of the dividends that the holders of ADS
will initially receive will be net of such substitute tax.
All owners of ADSs will be given the opportunity to submit to The Bank of
New York, in accordance with the procedure set forth by it, the documentation
attesting their residence for tax purposes in Italy or in countries which have
entered into tax treaties with Italy, pursuant to which reduced tax rates might
become directly applicable. Please find attached to this Annex a document and
necessary forms setting forth the detailed procedure to be used by ADS holders
for the purpose of obtaining the direct application of the reduced tax rate.
All ADS holders who are Italian residents for tax purposes should deliver by
July 18, 2003 to The Bank of New York the documentation, dated before July 3,
2003, selecting the option for the application of the 12.5 percent substitute
tax at source or the option to include the dividends it receives in the
beneficial owner's annual tax return. For Italian resident ADS holders please
complete Forms A to G "Dichiarazione Percettore Dividendo" depending on the
beneficial owner status (attached to this Annex).
Also ADS holders who are not Italian residents for tax purposes should
deliver by July 18, 2003 to The Bank of New York the documentation, signed
before July 3, 2003, attesting to their residence for tax purposes in countries
which have entered into tax treaties with Italy, pursuant to which reduced tax
rates might become directly applicable. For US resident ADS holders, please
complete Form US (attached to this Annex). For ADS holders who are residents of
other countries having anti-double taxation treaties with the Republic of Italy,
please obtain a certification from your appropriate tax authority by completing
the applicable Form A-4 "Tax Relief Form for Dividends for non-U.S. resident
holders" depending on
11
whether you are an individual or a company (attached to this Annex A). Please
note that Forms US and A-4 need to be signed by the relevant tax authority
before July 3, 2003.
As soon as the required documentation is delivered by the Bank of New York
to UniCredito Italiano, such bank shall endeavor to effect, in the shortest
possible time, repayment of the balance between the 27.0 percent withheld at the
time of payment and the rate actually applicable to the ADS holder. By way of
example, Italy and United States (as well as many other countries) are parties
to a tax treaty pursuant to which the rate of the tax applicable to dividends
paid by an Italian resident company to a U.S. resident entitled to the benefits
under the treaty may be reduced to 15.0 percent. Therefore, U.S. resident ADS
holders have the opportunity of being repaid a further 12.0 percent of the gross
dividend, that is the difference between the 27.0 percent withheld at the time
of payment of the dividend and the 15.0 percent substitute tax provided for by
the Italy--U.S. tax treaty.
IN THE PAST MANY ADS HOLDERS HAVE BEEN UNABLE TO PROVIDE THE REQUIRED
CERTIFICATES WITHIN THE DEADLINE, BECAUSE THE TAX AUTHORITIES CAN TAKE TWO
MONTHS OR MORE IN RELEASING SUCH DOCUMENTS. THEREFORE, THE COMPANY ADVISES YOU,
IN CASE YOU EXPECT TO BE A HOLDER OF ADSS OF RECORD ON JULY 2, 2003 AND ARE
INTERESTED IN IMPLEMENTING THE PROCEDURE TO OBTAIN THE APPLICATION OF THE
REDUCED SUBSTITUTE TAX RATE, TO START WELL IN ADVANCE OF JULY 3, 2003 SUCH
PROCEDURE BY COMPLETING THE APPROPRIATE FORM ATTACHED TO THIS ANNEX (FORM A TO G
FOR ITALIAN RESIDENTS, FORM US FOR U.S. RESIDENTS, FORM A-4 FOR RESIDENTS OF
OTHER COUNTRIES), WHICH NEEDS TO BE SIGNED, FOR NON-ITALIAN RESIDENTS ONLY, BY
THE RELEVANT TAX AUTHORITY. THE PROCEDURE ESTABLISHED BY THE BANK OF NEW YORK
AND UNICREDITO ITALIANO CONTEMPLATES THAT, ONCE THE ADS HOLDER HAS DELIVERED THE
PROPER DOCUMENTATION TO THE BANK OF NEW YORK, THE LATTER WILL MAKE IT AVAILABLE
TO UNICREDITO ITALIANO AND CONSEQUENTLY THE ADDITIONAL DIVIDEND AMOUNT WILL BE
PAYABLE TO THE ADS HOLDERS.
PLEASE NOTE THAT IN ORDER FOR ADS HOLDERS TO TAKE ADVANTAGE OF THE
ACCELERATED TAX REFUND (QUICK REFUND), THE CERTIFICATION BY THE RESPECTIVE TAX
AUTHORITY MUST BE DATED BEFORE JULY 3, 2003 (THE DIVIDEND PAYMENT DATE IN EURO)
AND THE BANK OF NEW YORK SHOULD RECEIVE THE CERTIFICATION ON OR BEFORE JULY 18,
2003.
The Company recommends to all ADS holders who are interested in taking
advantage of such an opportunity to request more detailed information as to the
exact procedure to be followed from The Bank of New York (ADR Department,
telephone +1-212-815-8365; fax +1-212-571-3050, attn. Vinu Kurian) or directly
from the Company's headquarters in Italy (Investor Relations Department,
telephone +39.0437.644256; fax +39.0437.63840).
ADS holders are further advised that, once the amounts withheld are paid to
the Italian tax authorities, the ADS holders who are entitled to a reduced tax
rate may only apply to the Italian tax authorities to receive the reimbursement
of the excess tax applied to the dividends received from the Company. Such
procedure customarily takes years before the reimbursement is actually made.
Therefore, the above-mentioned procedure for direct application of the reduced
withholding rate was established by Luxottica Group in the best interest of its
shareholders.
Best regards,
LUXOTTICA GROUP S.P.A.
12
ANNEX A
FORM A
DICHIARAZIONE PERCETTORE DIVIDENDO: PERSONE FISICHE
A: UNICREDITO ITALIANO
Via Prati, 12
20145 MILANO
C.A. dr. Vittorio Marangione
OGGETTO: DIVIDENDO 2002 ADS DI LUXOTTICA GROUP S.p.A.
Egregi Signori,
il sottoscritto ___________ nato a ____________ il ____________ residente
a ___________ in Via ______________ CAP _________________ Codice
Fiscale ______________ titolare beneficiario di N _________________ American
Depositary Share ("ADS") rappresentativi del diritto di ricevere una azione
ordinaria di Luxottica Group S.p.A. depositati sul conto titoli intestato al
sottoscritto presso la Banca _____________ filiale di ______________;
Pertanto, in base all' art. 27ter del D.P.R. 600/73
CHIEDE
(APPORRE UNA "X" SU UNA DELLE SEGUENTI OPZIONI)
/ / che il dividendo relativo all'esercizio 2002 gli sia corrisposto senza
applicazione di alcuna imposta;
OPPURE
/ / che il dividendo relativo all'esercizio 2002 gli sia corrisposto al netto
dell'imposta sostitutiva del 12,5%. A tal fine, dichiaro che gli strumenti
finanziari immessi nel suddetto deposito titoli non sono relativi ad
attivita di impresa e non costituiscono partecipazioni qualificate ai sensi
dell'art. 81, comma 1 lettera C) del T.u.i.r. Mi impegno inoltre a
comunicare tempestivamente a codesta Banca qualunque circostanza in grado di
modificare l'attuale condizione.
La sottoscritta si impegna a manlevare e tenere indenne l'UniCredito Italiano, i
suoi rappresentanti, funzionari, agenti, direttori, mandatari e dipendenti, da
qualsiasi responsabilita, danno, perdita o passivita che gli stessi potessero
subire in conseguenza di iniziative intraprese fidando sulle dichiarazioni ed
informazioni contenute nella presente dichiarazione.
In fede,
Data______________ Firma _______________
13
ANNEX A
FORM B
DICHIARAZIONE PERCETTORE DIVIDENDI: PERSONE GIURIDICHE
A: UNICREDITO ITALIANO
Via Prati, 12
20145 MILANO
C.A. dr. Vittorio Marangione
OGGETTO: DIVIDENDO 2002 ADS DI LUXOTTICA GROUP S.p.A.
Egregi Signori,
la sottoscritta Soc _______________ con sede sociale a __________ in Via
__________________, CAP _____________ Codice Fiscale _____________ in
persona del proprio legale rappresentante Sig _____________ dichiara:
/ / di essere titolare beneficiario di N _____________________
American Depositary Share ("ADS") rappresentativi
del diritto di ricevere una azione ordinaria di Luxottica Group S.p.A.
depositati sul conto intestato alla sottoscritta presso la Banca
_____________________ Filiale di ______________________
/ / che il dividendo percepito concorre alla determinazione del proprio reddito
imponibile;
Pertanto, in base all' art. 27ter del D.P.R. 600/73
CHIEDE
che il dividendo relativo all'esercizio 2002 sia corrisposto al lordo
dell'imposta sostitutiva
La sottoscritta si impegna a manlevare e tenere indenne l'UniCredito Italiano, i
suoi rappresentanti, funzionari, agenti, direttori, mandatari e dipendenti, da
qualsiasi responsabilita, danno, perdita o passivita che gli stessi potessero
subire in conseguenza di iniziative intraprese fidando sulle dichiarazioni ed
informazioni contenute nella presente dichiarazione.
In fede,
Data_________________ Timbro e Firma ________________
14
ANNEX A
FORM C
DICHIARAZIONE PERCETTORE DIVIDENDI: FONDI DI INVESTIMENTO MOBILIARE, SICAV,
FONDI COMUNI LUSSEMBURGHESE "STORICI" E FONDI MOBILIARI CHIUSI
A: UNICREDITO ITALIANO
Via Prati, 12
20145 MILANO
C.A. dr. Vittorio Marangione
OGGETTO: DIVIDENDO 2002 ADS DI LUXOTTICA GROUP S.p.A.
Egregi Signori,
la sottoscritta Soc________________ con sede sociale a ______________ in Via
_____________________, CAP _______________ Codice Fiscale _______________
in persona del proprio legale rappresentante Sig ____________________
DICHIARA CHE
il seguente O.I.C.V.M. di diritto nazionale ___________________
gestito dalla sottoscritta societa e:
/ / titolare beneficiario di N _______________________
American Depositary Share ("ADS ") rappresentativi
del diritto di ricevere una azione ordinaria di Luxottica Group S.p.A.
depositati sul conto intestato al sottoscritto presso la Banca
________________________ filiale di ___________________;
istituito quale:
(APPORRE UNA X SU UNA DELLE SEGUENTI OPZIONI):
/ / FONDO COMUNE DI INVESTIMENTO MOBILIARE AI SENSI DELLA LEGGE 23 MARZO 1983,
N. 77;
/ / SOCIETA D'INVESTIMENTO A CAPITALE VARIABILE AI SENSI DEL D. LGS. 25 GENNAIO
1992, N. 84;
/ / FONDO COMUNE DI DIRITTO ESTERO AUTORIZZATO AL COLLOCAMENTO IN ITALIA
EX-D.L. 6 GIUGNO 1956, N. 476, AI SENSI DELL'ART. 11-BIS DEL D.L. 30
SETTEMBRE 1983, N. 512;
/ / FONDO MOBILIARE CHIUSO AI SENSI DELLA LEGGE 14 AGOSTO 1993, N. 344;
pertanto, in base all'art. 27-ter del D.p.r. 600/73
CHIEDE
che il dividendo relativo all'esercizio 2002 sia corrisposto senza alcuna
imposta sostitutiva
La sottoscritta si impegna a manlevare e tenere indenne l'UniCredito Italiano, i
suoi rappresentanti, funzionari, agenti, direttori, mandatari e dipendenti, in
relazione a qualsiasi responsabilita, danno, perdita o passivita che ciascuno di
essi possa subire in conseguenza di iniziative intraprese fidando sulla
esattezza, verita e completezza delle dichiarazioni od informazioni contenute
nella presente dichiarazione.
In fede,
Data ________________ Timbro e Firma _______________
15
ANNEX A
FORM D
DICHIARAZIONE PERCETTORE DIVIDENDI: FONDO PENSIONE
A: UNICREDITO ITALIANO
Via Prati, 12
20145 MILANO
C.A. dr. Vittorio Marangione
Oggetto: Dividendo 2002 ADS di Luxottica Group S.p.A.
Egregi Signori,
la sottoscritta Soc ____________________ con sede sociale a _____________
in Via ____________________, CAP _________________ Codice Fiscale
_________________ in persona del proprio legale rappresentante Sig
____________________
DICHIARA CHE
il seguente fondo pensione ____________________ gestito dalla sottoscritta
societa e:
/ / titolare beneficiario di N ____________________
American Depositary Share ("ADS") rappresentativi
del diritto di ricevere una azione ordinaria di Luxottica Group S.p.A.
depositati sul conto intestato al sottoscritto presso la Banca
_________________________ Filiale di ____________________;
/ / istituito quale fondo pensione AI SENSI DEL DECRETO LEGISLATIVO 21 APRILE
1993, N.124;
pertanto, in base all'art. 27-ter del D.p.r. 600/73
CHIEDE
che il dividendo relativo all'esercizio 2002 sia corrisposto senza alcuna
imposta sostitutiva.
La sottoscritta si impegna a manlevare e tenere indenne l'UniCredito Italiano, i
suoi rappresentanti, funzionari, agenti, direttori, mandatari e dipendenti, in
relazione a qualsiasi responsabilita, danno, perdita o passivita che ciascuno di
essi possa subire in conseguenza di iniziative intraprese fidando sulla
esattezza, verita e completezza delle dichiarazioni od informazioni contenute
nella presente dichiarazione.
In fede,
Data _______________ Timbro e Firma _______________
16
ANNEX A
FORM E
DICHIARAZIONE PERCETTORE DIVIDENDI: GESTIONI PATRIMONIALI
A: UNICREDITO ITALIANO
Via Prati, 12
20145 MILANO
C.A. dr. Vittorio Marangione
Oggetto: Dividendo 2002 ADS di Luxottica Group S.p.A.
Egregi Signori,
la sottoscritta Soc _______________ con sede sociale a ________________
in Via ___________________, CAP ________________ Codice Fiscale
___________________ in persona del proprio legale rappresentante
Sig_______________________
DICHIARA CHE
/ / con riferimento a N _______________________
American Depositary Share ("ADS") rappresentativi del
diritto di ricevere una azione ordinaria di Luxottica Group S.p.A.,
depositati presso la Banca__________________ Filiale di
________________i dividendi distribuiti da Luxottica Group S.p.A.
su questi ADS relativi all'esercizio 2002 sono di pertinenza di patrimoni
conferiti dalla nostra clientela in gestioni patrimoniali per le quali la
clientela ha optato per il regime del risparmio gestito di cui all'art. 7,
D. Lgs. 21 novembre 1997, N. 461;
/ / che, ai sensi dell'art. 7 del Decreto Legislativo del 21 novembre 1997 N.
461/97, su detti dividendi non si applica alcuna imposta sostitutiva;
e pertanto
CHIEDE
che il dividendo relativo all'esercizio 2002 sia corrisposto senza alcuna
imposta sostitutiva.
Il sottoscritto si impegna a manlevare e tenere indenne l'UniCredito Italiano, i
suoi rappresentanti, funzionari, agenti, direttori, mandatari e dipendenti, da
qualsiasi responsabilita, danno, perdita o passivita che gli stessi potessero
subire in conseguenza di iniziative intraprese fidando sulla esattezza, verita e
completezza delle dichiarazioni od informazioni contenute nella presente
dichiarazione.
In fede,
Data ___________ Timbro e Firma ______________
17
ANNEX A
FORM F
DICHIARAZIONE PERCETTORE DIVIDENDI: SOCIETA' FIDUCIARIA
A: UNICREDITO ITALIANO
Via Prati, 12
20145 MILANO
C.A. dr. Vittorio Marangione
Oggetto: Dividendo 2002 ADS di Luxottica Group S.p.A.
Egregi Signori,
il sottoscritto _________, nella propria qualita di rappresentante legale della
(NOME DELLA SOCIETA' FIDUCIARIA)_______________________ intestataria
fiduciariamente degli ADS di cui piu' in dettaglio nel prosieguo, con la
presente in nome e per conto della societa
ATTESTA CHE
con riferimento a N ___________________ American Depositary Share ("ADS")
rappresentativi del diritto di ricevere una azione ordinaria di Luxottica
Group S.p.A., detti ADS sono depositati sul conto intestato al sottoscritto
presso la Banca ___________________ Filiale di_________________ e
che l'effettivo beneficiario dei dividendi distribuiti da Luxottica Group
S.p.A. su tali ADS relativi all'esercizio 2002, e una persona fisica
residente in Italia a fini fiscali e pertanto
CHIEDE
(APPORRE UNA "X" SU UNA DELLE SEGUENTI OPZIONI)
/ / che il dividendo relativo all'esercizio 2002 sia corrisposto senza
applicazione di alcuna imposta sostitutiva;
/ / che il dividendo relativo all'esercizio 2002 gli sia corrisposto al netto
dell'imposta sostitutiva del 12,5%. A tal fine, dichiaro che gli strumenti
finanziari immessi nel suddetto deposito titoli non sono relativi ad
attivita di impresa e non costituiscono partecipazioni qualificate ai sensi
dell'art. 81, comma 1 lettera C) del T.u.i.r. Mi impegno inoltre a
comunicare tempestivamente a codesta Banca qualunque circostanza in grado di
modificare l'attuale condizione.
Il sottoscritto si impegna a manlevare e tenere indenne l'UniCredito Italiano, i
suoi rappresentanti, funzionari, agenti, direttori, mandatari e dipendenti, da
qualsiasi responsabilita, danno, perdita o passivita che gli stessi potessero
subire in conseguenza di iniziative intraprese fidando sulla esattezza, verita e
completezza delle dichiarazioni od informazioni contenute nella presente
dichiarazione.
In fede,
Data __________________ Timbro e Firma ________________
18
ANNEX A
FORM G
DICHIARAZIONE PERCETTORE DIVIDENDI: FONDI DI INVESTIMENTO IMMOBILIARE CHIUSI
A: UNICREDITO ITALIANO
Via Prati, 12
20145 MILANO
C.A. dr. Vittorio Marangione
Oggetto: Dividendo 2002 ADS di Luxottica Group S.p.A.
Egregi Signori,
la sottoscritta Soc __________________ con sede sociale a _______________
in Via ____________________, CAP ____________________ Codice Fiscale
____________________ in persona del proprio legale rappresentante Sig
________________________
DICHIARA CHE
il fondo d'investimento immobiliare _____________________ gestito dalla
sottoscritta societa:
/ / e titolare beneficiario di N ________________________
American Depositary Share ("ADS") rappresentativi del
diritto di ricevere una azione ordinaria di Luxottica Group S.p.A.
depositati sul conto intestato al sottoscritto presso la Banca
___________________ Filiale di ____________________;
CHIEDE
QUALE FONDO DI INVESTIMENTO IMMOBILIARE CHIUSO AI SENSI DELLA LEGGE 25
GENNAIO 1994, N. 86 di essere assoggettato sui suddetti dividendi
all'imposta sostitutiva del 12,5% a titolo definitivo prevista dall'art.
27ter, del D.P.R. 600/73;
La sottoscritta si impegna a manlevare e tenere indenne l'UniCredito Italiano, i
suoi rappresentanti, funzionari, agenti, direttori, mandatari e dipendenti, in
relazione a qualsiasi responsabilita, danno, perdita o passivita che ciascuno di
essi possa subire in conseguenza di iniziative intraprese fidando sulla
esattezza, verita e completezza delle dichiarazioni od informazioni contenute
nella presente dichiarazione.
In fede,
Data ___________________ Timbro e Firma _________________
19
ANNEX A
FOR U.S. RESIDENT ADS HOLDERS
FORM US (FOR U.S. RESIDENT ADS HOLDERS)
IRS-PHILADELPHIA SERVICE CENTER
FOREIGN CERTIFICATION REQUEST
P.O. BOX 16347
PHILADELPHIA, PA 19114-0447
ATTN: U.S. RESIDENCY CERTIFICATION UNIT,
DROP POINT 8121
Dear Sir or Madam:
The undersigned individual or organization hereby requests a "Certification for
Reduced Tax Rate" for Italy (Form 6166), pursuant to Internal Revenue Service
Publication 686 (Rev. December, 2001) to be sent to the address provided below.
I hereby declare the following:
1) The name of the undersigned taxpayer is ________________________.
2) The undersigned is a U.S. resident individual/corporation.
3) The undersigned does not have a permanent establishment in Italy.
4) The permanent street address and telephone number of the undersigned is:
Address:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Telephone:
------------------------------------
5) (For corporations only) The state of incorporation of the undersigned
is: ________________.
6) The Social Security Number (individuals) or Employer Identification
Number (corporations) of the undersigned is: ________________________.
Please send the "Certification for Reduced Tax Rate" for Italy to:
------------------------------------
(holder's name)
------------------------------------
(address)
------------------------------------
(city/state)
20
Under penalties of perjury, I declare that the above information is true,
correct and complete.
Thank you.
------------------------------------
(Name of Taxpayer)
------------------------------------
(Signature of Taxpayer or
Taxpayer's Representative)
------------------------------------
(Title for corporate officers)
------------------------------------
(Date)
(It is not necessary to have this request form notarized)
21
ANNEX A
FORM A4 TAX RELIEF FORM FOR DIVIDENDS FOR NON-U.S. RESIDENT HOLDERS (PERSONE
FISICHE/INDIVIDUALS)
RICHIESTA DI ATTESTAZIONE PER L'APPLICAZIONE DELLA RITENUTA
RIDOTTA SU DIVIDENDI DISTRIBUITI DA SOCIETA' ITALIANE
REQUEST FOR THE APPLICATION OF THE REDUCED WITHHOLDING TAX ON
DIVIDENDS DISTRIBUTED BY ITALIAN COMPANIES
DICHIARAZIONE PRESENTATA DA IN VIRTU' DEL TRATTATO CONTRO LE DOPPIE
Declaration in force by according to the Convention for the
IMPOSIZIONI IN VIGORE TRA LA REPUBBLICA ITALIANA E
avoidance of Double Taxation between Italy and____________
------------------------------------------------------------------------------
SEZIONE 1/ SECTION I
DICHIARAZIONE DEL BENEFICIARIO OVVERO DEL RAPPRESENTANTE LEGALE
STATEMENT OF THE RECIPIENT OR HIS LEGAL REPRESENTATIVE
------------------------------------------------------------------------------
beneficiario/recipient_____________________________________________
Cognome _______________________ Nome __________________________ Sesso __________________
SURNAME________________________ NAME___________________________ SEX____________________
DATA DI NASCITA(GG/MM/AA) __________________ CITTA DI NASCITA _________________ SATO DI NASCITA ___________________
DATE OF BIRTH (DD/MM/YY) ___________________ CITY OF BIRTH ____________________ COUNTRY OF BIRTH __________________
--------------------------------------------------------------------------------------------
CODICE IDENTIFICATIVO RILASCIATO DA
Identification number Issued by
DOMICILIO FISCALE (INDIRIZZO COMPLETO) CITTA STATO
Fiscal domicile (full address) City Country
DICHIARA:
declares:
--------------------------------------------------------------------------------------------
di essere residente in in virtu del Trattato contro le doppie
imposizioni in vigore tra la Repubblica Italiana e
to be resident in according to the Convention for the avoidance of
Double Taxation between Italy and
------------------------------------------------------------------------------
DI NON SVOLGERE ATTIVITA INDUSTRIALE O COMMERCIALE IN ITALIA PER MEZZO DI UNA
STABILE ORGANIZZAZIONE;
not to carry out any industrial or commercial activity in Italy by means of a
permanent establishment;
CHE COMUNICHERA IMMEDIATAMENTE OGNI NUOVA CIRCOSTANZA CHE OSTI ALL'APPLICAZIONE
DEL TRATTATO CONTRO LE DOPPIE IMPOSIZIONI;
------------------------------------------------------------------------------
THAT ANY NEW CIRCUMSTANCE THAT MAY AFFECT THE APPLICATION OF THE CONVENTION FOR
THE AVOIDANCE OF THE DOUBLE TAXATION WILL BE IMMEDIATELY COMMUNICATED;
------------------------------------------------------------------------------
CHE LE INFORMAZIONI SOPRA INDICATE SONO VERITIERE E CORRETTE
that the above-mentioned information are true and correct
SI AUTORIZZA UNICREDITO ITALIANO A CONSERVARE L'ORIGINALE DI QUESTO DOCUMENTO
PRESSO I PROPRI UFFICI A DISPOSIZIONE DELLE COMPETENTI AUTORITA FISCALI
------------------------------------------------------------------------------
22
WE HEREBY AUTHORIZE UNICREDITO ITALIANO TO KEEP THE ORIGINAL DOCUMENTS IN THEIR
RECORDS AT THE DISPOSAL OF THE COMPETENT TAX AUTHORITIES
LUOGO E DATA/PLACE AND DATE _____________________________________________
TIMBRO E FIRMA DEL BENEFICIARIO O DEL RAPPRESENTANTE LEGALE
STAMP AND SIGNATURE OF THE BENEFICIARY OR LEGAL REPRESENTATIVE
_______________________________________________________________________________
TIMBRO E FIRMA DEL DELEGATO
STAMP AND SIGNATURE OF THE QUALIFIED PROXYHOLDER
_______________________________________________________________________________
NOME E COGNOME DEL RAPPRESENTANTE DEL DELEGATO
NAME AND SURNAME OF THE SIGNATORY FOR THE QUALIFIED PROXYHOLDER
_______________________________________________________________________________
-------------------------------------------------------------------------------
SEZIONE II/SECTION II
AD USO ESCLUSIVO DELL'AUTORITA' FISCALE ESTERA
FOREIGN TAX AUTHORITIES' USE ONLY
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SI ATTESTA CHE IL BENEFICIARIO INDICATO NELLA SEZIONE I DEL PRESENTE MODELLO E
RESIDENTE IN
We hereby declare that the beneficiary stated in Section I of this form is
resident in
SI ATTESTA, INOLTRE, CHE LE DICHIARAZIONI CONTENUTE NEL PRESENTE MODELLO SONO
ESATTE PER QUANTO RISULTA A QUESTA AMMINISTRAZIONE.
We hereby confirm that the statements supplied in this form are true as to this
Administration' s knowledge.
-------------------------------------------------------------------------------
------------------------------------------------------------------------------------
UFFICIO FISCALE COMPETENTE INDIRIZZO/FULL ADDRESS
NAME OF TAX AUTHORITY'S OFFICE
------------------------------------------------------------------------------------
CITTA/CITY STATO/COUNTRY
------------------------------------------------------------------------------------
23
ANNEX A
FORM A4 TAX RELIEF FORM FOR DIVIDENDS FOR NON-US RESIDENT ADS HOLDERS
(SOCIETA/COMPANIES)
RICHIESTA DI ATTESTAZIONE PER L'APPLICAZIONE DELLA RITENUTA
RIDOTTA SU DIVIDENDI DISTRIBUITI DA SOCIETA' ITALIANE
REQUEST FOR THE APPLICATION OF THE REDUCED WITHHOLDING TAX ON
DIVIDENDS DISTRIBUTED BY ITALIAN COMPANIES
DICHIARAZIONE PRESENTATA DA IN VIRTU' DEL TRATTATO CONTRO LE DOPPIE
Declaration in force by according to the Convention for the
IMPOSIZIONI IN VIGORE TRA LA REPUBBLICA ITALIANA E
avoidance of Double Taxation between Italy and _____________
-------------------------------------------------------------------------------
SEZIONE 1/ SECTION I
DICHIARAZIONE DEL BENEFICIARIO OVVERO DEL RAPPRESENTANTE LEGALE
STATEMENT OF THE RECIPIENT OR HIS LEGAL REPRESENTATIVE
-------------------------------------------------------------------------------
beneficiario/recipient _______________________________________________
----------------------------------------------------------------------------------------------------
Il sottoscritto
THE UNDERSIGNED
Rappresentante legale di (ragione sociale)
LEGAL REPRESENTATIVE (FULL COMPANY NAME)
Con sede a Codice
----------------------------------------------------------------------------------------------------
Established on __________________________ Code (1) _________________________
-------------------------------------------------------------------------------
Codice fiscale (se assegnato)
TAX IDENTIFICATION NUMBER (IF APPLICABLE)
DICHIARA:
declares:
di essere residente in in virtu del Trattato contro le doppie
imposizioni in vigore tra la Repubblica Italiana e
to be resident in according to the Convention for the avoidance of
Double Taxation between Italy and
DI NON SVOLGERE ATTIVITA INDUSTRIALE O COMMERCIALE IN ITALIA PER MEZZO DI UNA
STABILE ORGANIZZAZIONE;
not to carry out any industrial or commercial activity in Italy by means of a
permanent establishment;
CHE COMUNICHERA IMMEDIATAMENTE OGNI NUOVA CIRCOSTANZA CHE OSTI ALL'APPLICAZIONE
DEL TRATTATO CONTRO LE DOPPIE IMPOSIZIONI;
THAT ANY NEW CIRCUMSTANCE THAT MAY AFFECT THE APPLICATION OF THE CONVENTION FOR
THE AVOIDANCE OF THE DOUBLE TAXATION WILL BE IMMEDIATELY COMMUNICATED;
CHE LE INFORMAZIONI SOPRA INDICATE SONO VERITIERE E CORRETTE
that the above-mentioned information are true and correct
SI AUTORIZZA UNICREDITO ITALIANO A CONSERVARE L'ORIGINALE DI QUESTO DOCUMENTO
PRESSO I PROPRI UFFICI A DISPOSIZIONE DELLE COMPETENTI AUTORITA FISCALI
WE HEREBY AUTHORIZE UNICREDITO ITALIANO TO KEEP THE ORIGINAL DOCUMENTS IN THEIR
RECORDS AT THE DISPOSAL OF THE COMPETENT TAX AUTHORITIES
-------------------------------------------------------------------------------
24
LUOGO E DATA/PLACE AND DATE _____________________________________________
TIMBRO E FIRMA DEL BENEFICIARIO O DEL RAPPRESENTANTE LEGALE
STAMP AND SIGNATURE OF THE BENEFICIARY OR LEGAL REPRESENTATIVE
_______________________________________________________________________________
TIMBRO E FIRMA DEL DELEGATO
STAMP AND SIGNATURE OF THE QUALIFIED PROXYHOLDER
_______________________________________________________________________________
NOME E COGNOME DEL RAPPRESENTANTE DEL DELEGATO
NAME AND SURNAME OF THE SIGNATORY FOR THE QUALIFIED PROXYHOLDER
_______________________________________________________________________________
-------------------------------------------------------------------------------
SEZIONE II/SECTION II
AD USO ESCLUSIVO DELL'AUTORITA' FISCALE ESTERA
FOREIGN TAX AUTHORITIES' USE ONLY
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SI ATTESTA CHE IL BENEFICIARIO INDICATO NELLA SEZIONE I DEL PRESENTE MODELLO E
RESIDENTE IN
We hereby declare that the beneficiary stated in Section I of this form is
resident in
SI ATTESTA, INOLTRE, CHE LE DICHIARAZIONI CONTENUTE NEL PRESENTE MODELLO SONO
ESATTE PER QUANTO RISULTA A QUESTA AMMINISTRAZIONE.
We hereby confirm that the statements supplied in this form are true as to this
Administration' s knowledge.
-------------------------------------------------------------------------------
------------------------------------------------------------------------------------
UFFICIO FISCALE COMPETENTE INDIRIZZO/FULL ADDRESS
NAME OF TAX AUTHORITY'S OFFICE
------------------------------------------------------------------------------------
CITTA/CITY STATO/COUNTRY
------------------------------------------------------------------------------------
25
ANNEX B
The Luxottica Board of Directors has examined the proposal submitted by
Deloitte & Touche S.p.A., found it adequate to the circumstances and decided to
propose to the shareholders' meeting the appointment of Deloitte & Touche S.p.A.
as auditors for the Annual Financial Statements and Annual Consolidated
Financial Statements of the Company for the years 2003, 2004 and 2005.
The Board of Statutory Auditors also approved the Deloitte & Touche S.p.A.
proposal.
Hours and fees proposed by Deloitte & Touche S.p.A. are the following:
FEES
HOURS (EURO)
-------- --------
Annual audit of single statutory financial statements of
Luxottica Group S.p.A..................................... 250 20,500
Annual audit of consolidated financial statements of
Luxottica Group S.p.A..................................... 380 27,500
Half-year limited review of statutory financial statements
of Luxottica Group S.p.A.................................. 500 45,200
TOTAL....................................................... 1,130 93,200
26
FORM FOR BENEFICIAL OWNERS
ANNEX C
WARNING
ORDINARY SHAREHOLDERS' MEETING
OF LUXOTTICA GROUP S.P.A.
TO BE HELD ON JUNE 25, 2003 ON FIRST CALL,
ON JUNE 27, 2003 ON SECOND CALL
HOW TO ATTEND IT
Dear Beneficial Holder of American Depositary Shares,
As indicated in the enclosed Notice of Call and in the Proxy Statement, the
ordinary shareholders' meeting (the "MEETING") of the shareholders of Luxottica
Group S.p.A. (the "COMPANY") will be held on June 25, 2003 on first call, or,
failing the attendance of the required quorum, on June 27, 2003 on second call,
in either case at the registered office of the Company, Via C. Cantu 2, in
Milan, Italy at 11.00 a.m.
The beneficial owners of American Depositary Shares of the Company
("BENEFICIAL OWNERS") are entitled either:
A. to instruct The Bank of New York, as depositary of the Ordinary Shares of
the Company, as to the exercise of the voting rights pertaining to the Ordinary
Shares represented by their respective American Depositary Shares by marking,
signing, dating and returning to The Bank of New York, the enclosed Voting
Instruction Card; or
B. to attend the Meeting personally and cast thereat the vote pertaining to
the Ordinary Shares represented by the American Depositary Shares held by them.
By this letter the Company wishes to provide the Beneficial Owners with
instructions as to the requirements to be fulfilled by those Beneficial Owners
who wish to attend the Meeting and cast their vote personally.
PURSUANT TO ITALIAN LAW GOVERNING THE MEETING, MERELY HOLDING AMERICAN
DEPOSITARY SHARES DOES NOT AUTOMATICALLY PERMIT THE BENEFICIAL OWNERS TO ATTEND
THE MEETING OR TO EXERCISE VOTING RIGHTS.
In light of the foregoing, all Beneficial Owners who wish to attend the
Meeting personally must obtain a proxy from The Bank of New York, as depositary
of the Ordinary Shares of the Company. Any such proxy will be issued by The Bank
of New York upon compliance by the Beneficial Owners with the requirements set
forth below.
All Beneficial Owners who wish to be granted a proxy to attend the Meeting
and vote thereat must provide The Bank of New York, not later than June 16, 2003
at 12:00 P.M. (noon) with the following documents:
1. The original Voting Instruction Card enclosed herewith and received by the
Beneficial Owners as part of the mailing of the Proxy Statement to all the
Beneficial Owners of American Depositary Shares of record on May 16, 2003.
2. A certification in the form of Schedule 1 hereto issued by the bank or
broker who is holding the American Depositary Shares on behalf of the
Beneficial Owners.
Upon fulfillment of the conditions set forth in sections 1 and 2 above to
the satisfaction of The Bank of New York, the latter shall issue a proxy in
favor of the Beneficial Owners for the number of Ordinary Shares represented by
the American Depositary Shares referred to in the certificate. The person in
favor
27
of whom the proxy will be issued will be entitled to receive the proxy either at
the offices of The Bank of New York, located at 101 Barclay Street West, New
York, New York, Vinu Kurian, ADR Department, during the four (4) business days
immediately preceding the date of the Meeting or starting from 9.00 a.m. on the
date of the Meeting at the registered office of the Company, Via C. Cantu 2, in
Milan, Italy. The validity of the proxy issued by The Bank of New York shall be
subject to the bank or broker who has issued the certification referred to in
section 2 above to be a holder of record on May 16, 2003 for the number of ADSs
referred to in the certification. The Bank of New York reserves the right to
check that such condition is satisfied and to refuse admission to the Meeting in
the event said condition is not duly met.
NOTE:
If the voting rights pertaining to the American Depositary Shares held by
any Beneficial Owner has been exercised through the mailing of the Voting
Instruction Card, the Beneficial Owners may nevertheless obtain from The Bank of
New York an attendance card for the Meeting with no voting powers. In such case,
the Beneficial Owner shall be required to provide The Bank of New York only with
the document referred to in section 2 above.
Please do not hesitate to contact the Company or The Bank of New York at the
addresses and telephone numbers set forth below if any clarification is
required. Best regards.
Sincerely yours,
LUXOTTICA GROUP S.p.A.
Luxottica Group S.p.A. The Bank of New York
Via Cantu, 2 101 Barclay Street West
20123 Milano, Italy New York, New York 10286
Attn: Marianna Nasce Attn: Vinu Kurian
Legal Department ADR Department
Tel. n. +39.0286334623 tel. n. 212.815.8365
Fax n. +39.0286334636 fax n. 212.571.3050
28
FORM OF CERTIFICATION FOR BENEFICIAL OWNERS
SCHEDULE 1 TO ANNEX C
The Bank of New York
101 Barclay Street West, Date _____________, 2003
New York, New York 10286
Attention: Vinu Kurian
Dear Sirs,
The undersigned _____________________, as bank/broker holding American
Depositary Shares of Luxottica Group S.p.A., hereby certifies, under its own
responsibility, as follows:
_____________________(name of ADS beneficial owner) is the beneficial owner
of no. ______ American Depositary Shares of Luxottica Group S.p.A., held by the
undersigned on his/her/its behalf, and such American Depositary Shares will be
so held up to and including June 25, 2003, or failing attendance of the required
quorum, up to and including June 27, 2003. As a result of the foregoing, the
undersigned will keep the deposited American Depositary Shares and will not
release them to the aforementioned beneficial owner, nor will the undersigned
consent to the assignment of the beneficial ownership of said American
Depositary Shares until such date. You are hereby authorized to rely upon this
certification in connection with the granting of a proxy to the aforementioned
beneficial owner enabling him/her/it to attend the Shareholders' Meeting of
Luxottica Group S.p.A., which will be held on June 25, 2003 on first call, or,
failing the attendance of the required quorum, on June 27, 2003 on second call.
Kind regards,
______________________________________
29
FORM FOR REGISTERED HOLDERS
ANNEX D
WARNING
ORDINARY SHAREHOLDERS' MEETING OF
LUXOTTICA GROUP S.P.A.
TO BE HELD ON JUNE 25, 2003 ON FIRST CALL OR
ON JUNE 27, 2003 ON SECOND CALL
HOW TO ATTEND IT
Dear Registered Holder of American Depositary Shares,
As indicated in the enclosed Notice of Call and in the Proxy Statement, the
ordinary shareholders' meeting (the "MEETING") of the shareholders of Luxottica
Group S.p.A. (the "COMPANY") will be held on June 25, 2003 on first call, or,
failing the attendance of the required quorum, on June 27, 2003 on second call,
in either case at the registered office of the Company, Via C. Cantu 2, in
Milan, Italy at 11.00 a.m.
The registered holders of American Depositary Shares of the Company ("ADS
HOLDERS") are entitled either:
A. to instruct The Bank of New York, as depositary of the Ordinary Shares of
the Company, as to the exercise of the voting rights pertaining to the Ordinary
Shares represented by their respective American Depositary Shares by marking,
signing, dating and returning to The Bank of New York, the enclosed Voting
Instruction Card; or
B. to attend the Meeting personally and cast thereat the vote pertaining to
the Ordinary Shares represented by the American Depositary Shares held by them.
By this letter the Company wishes to provide the ADS Holders with
instructions as to the requirements to be fulfilled by those Registered Holders
who wish to attend the Meeting and cast their vote personally.
PURSUANT TO ITALIAN LAW GOVERNING THE MEETING, MERELY HOLDING AMERICAN
DEPOSITARY SHARES DOES NOT AUTOMATICALLY PERMIT THE ADS HOLDERS TO ATTEND THE
MEETING OR TO EXERCISE VOTING RIGHTS.
In light of the foregoing, all ADS Holders who wish to attend the Meeting
personally must obtain a proxy from The Bank of New York, as depositary of the
Ordinary Shares of the Company. Any such proxy will be issued by The Bank of New
York upon compliance by the ADS Holders with the requirements set forth below.
All ADS Holders who wish to be granted a proxy to attend the Meeting and
vote thereat must provide The Bank of New York, not later than June 16, 2003 at
12:00 P.M. (noon) with the following documents:
1. The original Voting Instruction Card enclosed herewith and received by the
ADS Holders as part of the mailing of the Proxy Statement to all the Holders
of American Depositary Shares of record on May 16, 2003.
2. A notice in the form of Schedule 1 hereto.
Upon fulfillment of the conditions set forth in sections 1 and 2 above to
the satisfaction of The Bank of New York, the latter shall issue a proxy in
favor of the ADS Holder for the number of Ordinary Shares represented by the
American Depositary Shares referred to in the certification. The person in favor
of whom the proxy will be issued will be entitled to receive the proxy either at
the offices of The Bank of New York, located at 101 Barclay Street West, New
York, New York, Vinu Kurian, ADR Department, during the four (4) business days
immediately preceding the date of the Meeting or starting from 9:00 a.m. on the
30
date of the Meeting at the registered office of the Company, via C. Cantu 2, in
Milan, Italy. The validity of the proxy, issued by The Bank of New York shall be
subject to the ADS Holder being a registered holder of record of American
Depositary Shares on May 16, 2003. The Bank of New York reserves the right to
check that such condition is satisfied and to refuse admission to the Meeting in
the event said condition is not duly met.
NOTE:
If the voting rights pertaining to the American Depositary Shares held by
any ADS Holder has been exercised through the mailing of the Voting Instruction
Card, the ADS Holder may nevertheless obtain from The Bank of New York an
attendance card for the Meeting with no voting powers. In such case, the ADS
Holder shall be required to provide The Bank of New York only with the document
referred to in section 2 above.
Please do not hesitate to contact the Company or The Bank of New York at the
addresses and telephone numbers set forth below if any clarification is
required. Best regards.
Sincerely yours,
LUXOTTICA GROUP S.P.A.
Luxottica Group S.p.A. The Bank of New York
Via Cantu, 2 101 Barclay Street West
20123 Milano, Italy New York, New York
Attn: Marianna Nasce 10286
Legal Department Attn: Vinu Kurian
Tel. n. +39.0286334623 ADR Department
fax n. +39.0286334636 tel. n. 212.815.8365
fax n. 212.571.3050
31
FORM OF CERTIFICATION FOR REGISTERED HOLDERS
SCHEDULE 1 TO ANNEX D
The Bank of New York
101 Barclay Street West, Date _____________, 2003
New York, New York 10286
Attention: Vinu Kurian
Dear Sirs,
The undersigned _____________, in its capacity as registered holder of no.
_____________ American Depositary Shares of Luxottica Group S.p.A. (the "ADSS"),
hereby gives notice to The Bank of New York that the undersigned wishes to
attend personally the shareholders' meeting of Luxottica Group S.p.A. to be held
on June 25, 2003 or failing attendance of the required quorum, on June 27, 2003
(the "MEETING").
The undersigned further certifies that it will continue to be a registered
holder of the ADSs up to and including June 25, 2003 or failing attendance of
the required quorum, on June 27, 2003.
You are hereby authorized to rely upon this certification in connection with
the granting to Mr./Mrs./ Ms. _____________ on behalf of the undersigned, of a
proxy enabling said person to attend the Meeting of Luxottica Group S.p.A..
Kind regards,
___________________________________
LUXOTICA GROUP S.p.A. and Subsidiaries(*)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants 1
Consolidated Balance Sheets, December 31, 2001, and 2002 2
Statements of Consolidated Income for the Years Ended
December 31, 2000, 2001, and 2002 4
Statements of Consolidated Shareholders' Equity for the
Years Ended December 31, 2000, 2001, and 2002 6
Statements of Consolidated Cash Flows for the Years Ended
December 31, 2000, 2001, and 2002 7
Notes to Consolidated Financial Statements 9
--------------------------------------------------------------------------------
Deloitte & Touche S.p.A.
Revisione e organizzazione contabile
Viale della Repubblica, 22
31020 Fontane di Villorba
Treviso
Italia
Tel: + 39 0422 42 19 41
Fax: + 39 0422 42 01 71
R.E.A. Treviso n. 222191
www.deloitte.it [LOGO]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Luxottica Group S.p.A.:
We have audited the accompanying consolidated balance sheets of Luxottica
Group S.p.A. (an Italian corporation) and Subsidiaries (collectively, "the
Company") as of December 31, 2001, and 2002 and the related statements of
consolidated income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Luxottica Group
S.p.A. and Subsidiaries as of December 31, 2001 and 2002 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.
Our audits comprehended the translation of Euro amounts into U.S. dollar
amounts and, in our opinion, such translation has been made in conformity with
the basis stated in Note 1. Such U.S. dollar amounts are presented solely for
the convenience of international readers.
As described in Note 1 to the consolidated financial statement, effective as
of January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, which established new accounting and reporting standards for
the recording, amortization and impairment of goodwill and other intangible
assets.
/s/ Deloitte & Touche
Treviso, Italy
February 14, 2003
Milano Ancona Bari Bergamo Bologna Cagliari Firenze
Genova Napoli Parma Padova Roma Torino Treviso Vicenza
Sede legale: Palazzo Carducci - Via Olona, 2-20123 Milano -
[LOGO] Capitale Sociale Euro 3.354.488,80 i.v.
Partita ICVA/Codice Fiscale/Registro delle Impresse Milano
n. 03009430152 - R.E.A. Milano n. 945128
--------------------------------------------------------------------------------
1
LUXOTTICA GROUP S.p.A. and Subsidiaries(*)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2002
ASSETS
-----------------------------------------------------------------------------------------------
2001 2002 2002
(thousand of
U.S.
NOTES (thousand of Euro) Dollars)(1)
-----------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 199,202 151,418 $ 158,762
Restricted cash 1, 8 213,507 -- --
Accounts receivable
(Less allowance for doubtful accounts,
Euro 22.4 million in 2001, and Euro 18.1
million in 2002; U.S. Dollars 19.0
million) 2 381,281 370,234 388,190
Sales and income taxes receivable 23,327 10,956 11,487
Inventories 3 371,406 406,032 425,725
Prepaid expenses and other 75,468 53,385 55,974
Deferred tax assets 7 163,201 148,088 155,270
TOTAL CURRENT ASSETS 1,427,392 1,140,113 1,195,408
PROPERTY, PLANT AND EQUIPMENT--NET 2, 5 501,346 506,545 531,112
OTHER ASSETS
Intangible assets--net 6 2,009,740 1,916,526 2,009,478
Investments 4 5,798 12,837 13,460
Other assets 4,086 10,311 10,811
TOTAL OTHER ASSETS 2,019,624 1,939,674 2,033,749
TOTAL 3,948,362 3,586,332 $3,760,269
-----------------------------------------------------------------------------------------------
See notes to Consolidated Financial Statements
(*) In accordance with U.S. GAAP
(1) Translated for convenience at the New York City Noon Buying Rate as
determined in Note 1
2
LUXOTTICA GROUP S.p.A. and Subsidiaries(*)
CONSOLIDATED BALANCE SHEETS (Continued)
DECEMBER 31, 2001 AND 2002
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------------------------------
2001 2002 2002
(thousand of
U.S.
NOTES (thousand of Euro) Dollars)(1)
----------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Bank overdrafts 411,193 371,729 $ 389,758
Current portion of long-term debt 8 1,339,131 178,335 186,984
Accounts payable 183,431 202,897 212,738
Accrued expenses
Payroll and related 81,099 64,622 67,756
Customers' right of return 14,087 9,130 9,573
Other 264,765 153,262 160,695
Income taxes payable 7 5,793 18,748 19,657
TOTAL CURRENT LIABILITIES 2,299,499 998,723 1,047,161
LONG-TERM DEBT 8 132,247 855,654 897,153
LIABILITY FOR TERMINATION INDEMNITIES 9 35,029 48,945 51,319
DEFERRED TAX LIABILITIES 7 10,282 121,805 127,713
OTHER LONG-TERM LIABILITIES 9 122,989 133,605 140,085
COMMITMENTS AND CONTINGENCIES 14
MINORITY INTERESTS IN CONSOLIDATED
SUBSIDIARIES 5,473 9,705 10,176
SHAREHOLDERS' EQUITY
Capital stock par value Euro 0.06--
452,865,817 and 454,263,600 ordinary
shares authorized and issued at
December 31, 2001 and 2002,
respectively; 451,660,817 and
452,351,900 shares outstanding as of
December 31, 2001 and 2002 11 27,172 27,256 28,578
Additional paid-in capital 18,381 34,799 36,487
Retained earnings 1,152,508 1,447,374 1,517,572
Accumulated other comprehensive income
(loss) 1 147,116 (66,987) (70,236)
TOTAL 1,345,177 1,442,442 1,512,401
Less treasury shares at cost; 1,205,000
and 1,911,700 shares as of December 31,
2001 and 2002, respectively 2,334 24,547 25,739
SHAREHOLDERS' EQUITY 1,342,843 1,417,895 1,486,662
TOTAL 3,948,362 3,586,332 $ 3,760,269
----------------------------------------------------------------------------------------------
See notes to Consolidated Financial Statements
(*) In accordance with U.S. GAAP
(1) Translated for convenience at the New York City Noon Buying Rate as
determined in Note 1
3
LUXOTTICA GROUP S.p.A. and Subsidiaries(*)
STATEMENTS OF CONSOLIDATED INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
---------------------------------------------------------------------------------------------------------
2000 2001 2002(2) 2002(2)
(thousand of
U.S.
NOTES (thousand of Euro) Dollars)(1)
---------------------------------------------------------------------------------------------------------
NET SALES 12 2,416,788 3,064,907 3,132,201 $3,284,113
COST OF SALES 697,301 883,961 878,003 920,586
GROSS PROFIT 1,719,487 2,180,946 2,254,198 2,363,527
OPERATING EXPENSES
Selling and advertising 983,138 1,302,383 1,355,148 1,420,873
General and administrative 324,428 369,071 297,542 311,973
TOTAL OPERATING EXPENSES 1,307,566 1,671,454 1,652,690 1,732,846
INCOME FROM OPERATIONS 12 411,921 509,492 601,508 630,681
OTHER INCOME/(EXPENSES)
Interest income 16,562 15,060 5,036 5,280
Interest expense (72,562) (91,978) (65,935) (69,133)
Other--net 6,098 8,737 (1,167) (1,224)
OTHER INCOME/(EXPENSES) NET (49,902) (68,181) (62,066) (65,076)
INCOME BEFORE PROVISION FOR
INCOME TAXES 362,019 441,311 539,442 565,605
PROVISION FOR INCOME TAXES 7 101,488 123,450 162,696 170,587
INCOME BEFORE MINORITY
INTERESTS IN CONSOLIDATED
SUBSIDIARIES 260,531 317,861 376,746 395,018
MINORITY INTERESTS IN INCOME
OF CONSOLIDATED SUBSIDIARIES 5,254 1,488 4,669 4,897
NET INCOME 255,277 316,373 372,077 $ 390,121
---------------------------------------------------------------------------------------------------------
See notes to Consolidated Financial Statements
(*) In accordance with U.S. GAAP
(1) Translated for convenience at the New York City Noon Buying Rate as
determined in Note 1
(2) Results for the year ended December 31, 2002 include the effect of the
adoption of SFAS No. 142. For comparison among the three periods on a
pro-forma basis see Note 1 "Goodwill and Other Change in Accounting"
4
LUXOTTICA GROUP S.p.A. and Subsidiaries(*)
STATEMENTS OF CONSOLIDATED INCOME (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
----------------------------------------------------------------------------------------------
Years ended December 31,
------------------------------------------------
2000 2001 2002 (2) 2002 (2)
--------- --------- --------- -----
Euro U.S.
Dollars(1)
----------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
BASIC 0.57 0.70 0.82 $0.86
EARNINGS PER SHARE:
DILUTED 0.56 0.70 0.82 $0.86
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (THOUSAND):
Basic 449,987.9 451,037.0 453,174.0
Diluted 452,920.2 453,965.5 455,353.5
----------------------------------------------------------------------------------------------
See notes to Consolidated Financial Statements
(*) In accordance with U.S. GAAP
(1) Translated for convenience at the New York City Noon Buying Rate as
determined in Note 1
(2) Results for the year ended December 31, 2002 include the effect of the
adoption of SFAS No. 142. For comparison among the three periods on a
pro-forma basis see Note 1 "Goodwill and Other Change in Accounting"
5
LUXOTTICA GROUP S.p.A. and Subsidiaries(*)
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
------------------------------------------------------------------------------------------------------------------
Accumulated
Common stock Additional Other other Treasury
---------------------- paid-in Retained comprehensive comprehensive shares
Shares Amount capital earnings income/(loss) income/(loss) amount
----------- -------- ---------- ---------- ------------- ------------- --------
(NOTE 11) (Euro/000)
------------------------------------------------------------------------------------------------------------------
BALANCES,
JANUARY 1, 2000 450,539,600 23,268 2,774 682,529 80,055 (2,334)
Exercise of stock
options 1,042,700 54 7,992
Translation
adjustment 37,893 37,893
Dividends declared (38,345)
Net income 255,277 255,277
COMPREHENSIVE INCOME 293,170
BALANCES,
DECEMBER 31, 2000 451,582,300 23,322 10,766 899,461 117,948 (2,334)
Exercise of stock
options 1,283,517 71 11,394
Translation
adjustment 40,486 40,486
Euro Conversion 3,779 (3,779)
Cummulative effect of
SFAS 133 adoption (7,749) (7,749)
Change in fair value
of derivative
instruments (3,569) (3,569)
Dividends declared (63,326)
Net income 316,373 316,373
COMPREHENSIVE INCOME 345,541
BALANCES,
DECEMBER 31, 2001 452,865,817 27,172 18,381 1,152,508 147,116 (2,334)
Exercise of stock
options 1,397,783 84 9,483
Translation
adjustment (198,463) (198,463)
Minimum pension
liability, net of
taxes (26,569) (26,569)
Sell of treasury
shares, net of taxes 6,935 2,334
Purchase of treasury
shares (24,547)
Change in fair value
of derivative
instruments 10,929 10,929
Dividends declared (77,211)
Net income(2) 372,077 372,077
COMPREHENSIVE INCOME 157,974
BALANCES,
DECEMBER 31, 2002 454,263,600 27,256 34,799 1,447,374 (66,987) (24,547)
COMPREHENSIVE
INCOME(1) $165,636
BALANCES,
DECEMBER 31, 2002(1) 454,263,600 $ 28,578 $ 36,487 $1,517,572 $(70,236) $(25,738)
(thousands of
U.S.Dollars)(1)
------------------------------------------------------------------------------------------------------------------
See notes to Consolidated Financial Statements
(*) In accordance with U.S. GAAP
(1) Translated for convenience at the New York City Noon Buying Rate as
determined in Note 1
(2) Results for the year ended December 31, 2002 include the effect of the
adoption of SFAS No. 142. For comparison among the three periods on a
pro-forma basis see Note 1 "Goodwill and Other Change in Accounting"
6
LUXOTTICA GROUP S.p.A. and Subsidiaries(*)
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
--------------------------------------------------------------------------------------------------
2000 2001 2002 2002
(thousand
of
U.S.
(thousand of Euro) Dollars)(1)
--------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
INCOME BEFORE MINORITY INTERESTS 260,531 317,861 376,746 $395,018
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization 175,231 211,907 145,980 153,060
Benefit for deferred income taxes (14,234) (15,983) (7,785) (8,163)
(Gain)/Loss on disposals of fixed assets--net 254 1,764 (1,212) (1,271)
Termination indemnities matured during the year--net 2,861 2,886 5,977 6,267
CHANGES IN ASSETS AND LIABILITIES, NET OF
ACQUISITIONS OF BUSINESSES:
Accounts receivable (37,760) (56,021) (17,522) (18,372)
Prepaid expenses and other 22,182 8,012 56,339 59,071
Inventories 9,171 (29,200) (58,573) (61,414)
Accounts payable 30,239 (27,121) 8,926 9,359
Accrued expenses and other (74,708) 29,506 (78,611) (82,424)
Accrual for customers' right of return 2,467 745 (3,147) (3,300)
Income taxes payable (36,651) (8,310) 13,055 13,688
TOTAL ADJUSTMENTS 79,052 118,185 63,427 66,503
CASH PROVIDED BY OPERATING ACTIVITIES 339,583 436,046 440,173 461,521
--------------------------------------------------------------------------------------------------
See notes to Consolidated Financial Statements
(*) In accordance with U.S. GAAP
(1) Translated for convenience at the New York City Noon Buying Rate as
determined in Note 1
7
LUXOTTICA GROUP S.p.A. and Subsidiaries(*)
STATEMENTS OF CONSOLIDATED CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
-------------------------------------------------------------------------------------------------------
2000 2001 2002 2002
(thousand of Euro) (thousand of
U.S.
Dollars)(1)
-------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Additions (78,358) (123,475) (173,330) (181,737)
Disposals 16,194 7,811 4,646 4,871
Purchases of business net of cash acquired -- (568,981) (27,428) (28,758)
Sales of treasury shares -- -- 9,269 9,719
Investment in treasury shares -- -- (24,547) (25,738)
(Increase) Decrease in investments 176 (2,718) (7,611) (7,980)
(Increase) Decrease in intangible assets (3,325) (23,714) 28,611 29,999
CASH USED IN INVESTING ACTIVITIES (65,313) (711,077) (190,390) (199,624)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (592,732) -- -- --
Long term debt:
Proceeds 757,202 500,000 1,000,714 1,049,249
Repayments (107,090) (245,916) (1,408,308) (1,476,611)
Repayment of acquired line of credit -- (104,155) -- --
(Investment in) Use of restricted cash deposit (249,750) 44,610 201,106 210,860
Exercise of stock options 8,046 11,465 9,567 10,031
Dividends (38,781) (63,326) (77,211) (80,956)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (223,105) 142,678 (274,132) (287,427)
EFFECT OF TRANSLATION ADJUSTEMENTS (3,578) (15,404) 3,944 4,135
INCREASE/(DECREASE) IN CASH 47,587 (147,757) (20,405) (21,395)
NET BANK OVERDRAFT, BEGINNING OF YEAR (114,953) (66,718) (211,991) (222,273)
EFFECT OF TRANSLATION ADJUSTMENTS IN CASH 648 2,484 12,085 12,672
NET BANK OVERDRAFT, END OF YEAR (66,718) (211,991) (220,311) $ (230,996)
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the year for interest 72,072 91,174 58,162 60,983
Cash paid during the year for income taxes 103,896 126,833 137,650 144,326
Acquisition of businesses:
Fair value of assets acquired -- (102,347) -- --
-------------------------------------------------------------------------------------------------------
See notes to Consolidated Financial Statements
(*) In accordance with U.S. GAAP
(1) Translated for convenience at the New York City Noon Buying Rate as
determined in Note 1
8
LUXOTTICA GROUP S.p.A. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Luxottica Group S.p.A. and its subsidiaries (collectively
"Luxottica Group" or the "Company") operates in two industry segments:
manufacturing and wholesale distribution, and retail distribution. Through its
manufacturing and wholesale distribution operations, Luxottica Group is engaged
in the design, manufacturing, wholesale distribution and marketing of house
brand and designer lines of mid- to premium-priced prescription frames and
suglasses. 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 International"). As of December 31, 2002,
LensCrafters operated 882 stores throughout the United States of America, Canada
and Puerto Rico and Sunglass Hut operated 1,914 stores located in North America,
Europe and Australia.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION--The consolidated
financial statements of Luxottica Group include the financial statements of the
Parent and all wholly- or majority-owned Italian and foreign subsidiaries. The
consolidated financial statements for all periods presented also include
50 percent-owned companies over which Luxottica Group exercises significant
economic and operational control. The Company's investments in unconsolidated
subsidiaries which are at least 20 percent-owned and where the Company exercises
significant influence over operating and financial policies are accounted for
using the equity method. Luxottica Group holds a 44 percent interest in a
affiliated wholesale distributor, located in India, and a 50 percent interest in
an affiliated company, located in Great Britain. Both companies are accounted
for under the equity method. The result of operations of these investments are
not material to the results of the operations of the Company. Investments in
other companies with less than a 20 percent interest are carried at cost. All
significant intercompany accounts and transactions are eliminated in
consolidation. Luxottica Group prepares its consolidated financial statements in
accordance with accounting principles generally accepted in United States of
America (U.S. GAAP).
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS--Luxottica Group accounts for
its foreign currency denominated transactions and foreign operations in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52
("Foreign currency translation"). The financial statements of foreign
subsidiaries are translated into Euro, which is the functional and the reporting
currency. Assets and liabilities of foreign subsidiaries are translated at
year-end exchange rates. Results of operations are translated using the average
exchange rates prevailing throughout the year. The resulting cumulative
translation adjustments have been recorded as a separate component of
accumulated other comprehensive income/(loss). Transactions in foreign
currencies are recorded at the exchange rate in effect at the transaction date.
The Company has one subsidiary in a high inflationary country. However,
these operations are currently not material to the Company's consolidated
financial statements. This entity's operations have been remeasured using the
historical exchange rate and the result of the remeasurement has been accounted
for in the current year earnings.
Realized exchange gains or losses during the year are recognized in
consolidated income in such year.
CASH AND CASH EQUIVALENTS--Luxottica Group considers investments purchased
with an original maturity of three months or less to be cash equivalents.
9
RESTRICTED CASH--As of December 31, 2001, Euro 213.5 million (U.S. Dollars
190 million) of cash was pledged as collateral for outstanding current debt (see
Note 8.e) and was classified as restricted cash on the consolidated balance
sheet. During 2002, the outstanding debt was repaid releasing the restricted
cash which was utilized by the Company.
INVENTORIES--Luxottica Group's manufactured inventories, approximately
83.5 percent and 82.5 percent of total inventory for 2001 and 2002,
respectively, are stated at the lower of cost, as determined under the
weighted-average method (which approximates the first-in, first-out method), or
market value. Retail inventory not manufactured by the Company or its
subsidiaries are stated at the lower of cost, as determined on a last-in,
first-out method ("LIFO"), or market value. The LIFO reserve was not material as
of December 31, 2001 and 2002.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
historical cost. Depreciation is computed principally on the straight-line
method over the estimated useful lives of the related assets as follows:
--------------------------------------------------------------------------------
ESTIMATED USEFUL LIFE
Buildings 19 to 33 years
Machinery and equipment 3 to 10 years
Aircraft 6 years
Other equipment 5 to 8 years
Leasehold improvements Less of 10 years
or the remaining life
of the lease
--------------------------------------------------------------------------------
Maintenance and repair expenses are expensed as incurred. Upon the sale or
disposition of property and equipment, the cost of the asset and the related
accumulated depreciation and leasehold amortization are removed from the
accounts and any resulting gain or loss is included in income.
GOODWILL AND CHANGE IN ACCOUNTING--In July 2001, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 141 ("Business combinations"), which
requires all business combinations initiated after June 30, 2001 to be accounted
for under the purchase method. SFAS No. 141 also sets forth guidelines for
applying the purchase method of accounting in the determination of intangible
assets, including goodwill acquired in a business combination, and expands
financial disclosures concerning business combinations consummated after
June 30, 2001. The application of SFAS No. 141 did not affect any previously
reported amounts included in goodwill.
Effective January 1, 2002, Luxottica Group adopted SFAS No. 142 ("Goodwill
and other intangible assets"), which established new accounting and reporting
requirements for goodwill and other intangible assets. SFAS No. 142 requires
that goodwill amortization be discontinued and replaced with periodic tests of
impairment.
The Company's goodwill was tested for impairment during the first half of
2002, as well as in connection with the announcement of the termination of the
license agreement for the production and distribution of the Giorgio Armani and
Emporio Armani collections incurred in November 2002, as required by the
transitional provisions of SFAS No.142. The result of this process was the
determination that the carrying value of the Company was not impaired when
compared to the carrying value of goodwill and as such, Luxottica Group has not
recorded an asset impairment charge for the adoption.
Actual results of operations for the year ended December 31, 2002 and
pro-forma results of operations for the year ended December 31, 2001 and 2000
had the Company applied the
10
non-amortization provisions of SFAS No. 142 in those periods follows (thousands
of Euro, except per share amounts):
2000 2001 2002
-------- -------- --------
Reported net income 255,277 316,373 372,077
Add: Goodwill amortization, net of tax 59,781 80,249 --
------- ------- -------
ADJUSTED NET INCOME 315,058 396,622 372,077
======= ======= =======
Weighted number of share (thousand)
Basic 449,988 451,037 453,174
Diluted 452,920 453,966 455,354
Basic earning per share (Euro) 0.70 0.88 0.82
Diluted earning per share (Euro) 0.70 0.87 0.82
TRADE NAMES--In connection with various acquisitions, Luxottica Group has
recorded as intangible assets certain trade names under the names of
"LensCrafters", "Ray-Ban" and "Sunglass Hut International". Trade names, which
the Company has determined have a finite life, continue to be amortized on a
straight-line basis over periods ranging from 20 to 25 years (see Note 6) and
are subject to testing for impairment in accordance with SFAS No. 144
("Accounting for the impairment or disposal of long-lived assets"). Amortization
for the years ended December 31, 2000, 2001 and 2002 is Euro 23.6 million, Euro
23.8 million and Euro 36.1 million, respectively.
IMPAIRMENT OF ASSETS--Luxottica Group's long-lived assets, other than
goodwill, are tested for impairment whenever events or changes in circumstances
indicate that the net carrying amount may not be recoverable. When such events
occur, the Company measures impairment by comparing the carrying value of the
long-lived asset to the estimated undiscounted future cash flows expected to
result from the use of the assets and their eventual disposition. If the sum of
the expected undiscounted future cash flows were less than the carrying amount
of the assets, the Company would recognize an impairment loss. The impairment
loss, if determined to be necessary, would be measured as the amount by which
the carrying amount of the asset exceeds the fair value of the asset in
accordance with SFAS No. 144. The Company determined that, as of December 31,
2001 and 2002, there had been no impairment in the carrying value of its
long-lived assets.
ACCRUAL FOR CUSTOMERS' RIGHT OF RETURN--Luxottica Group records an accrual
for estimated returns of merchandise in connection with their conditions of
sale. Such amount is included in the caption "Accrued expenses--customers' right
of return".
STORE OPENING AND CLOSING COSTS--Store opening costs are charged to
operations as incurred in accordance with Statement of Position 98-5
("Accounting for the cost of start-up activities"). The costs associated with
closing stores or facilities are accrued when the decision is made to close the
location.
INCOME TAXES--Income taxes are recorded in accordance with SFAS No. 109
("Accounting for income taxes"), which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the Company's consolidated financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the consolidated financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
LIABILITY FOR TERMINATION INDEMNITIES--Termination indemnities represent
amounts accrued for employees in Australia, Austria, Greece, Israel, Italy and
Japan, determined in accordance with labor laws and agreements in each
respective country (see Note 9).
REVENUE RECOGNITION--Revenues from sales of products are recognized at the
time of shipment to or receipt by the customer. In connection with the
conditions of sale in certain countries, certain subsidiaries of the Company
record as a liability an amount based on an estimate of anticipated returns
11
of merchandise by customers in subsequent periods. Such amount is included in
the consolidated balance sheet under the caption "Accrued expenses--customers'
right of return". Revenues from retail sales, including Internet and catalog
sales, are recorded upon customer purchase.
PERVASIVENESS OF ESTIMATES--The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
EARNINGS PER SHARE--Luxottica Group calculates the basic and diluted
earnings per share in accordance with SFAS No. 128 ("Earnings per share"). 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 and warrants) outstanding during the period, except when the common
stock equivalents are anti-dilutive.
FAIR VALUE OF FINANCIAL INSTRUMENTS--Financial instruments consist primarily
of investments in cash, marketable securities, trade account receivables,
accounts payable, notes payable, long-term debt, restricted cash and derivative
financial instruments. Luxottica Group estimates the fair value of financial
instruments based on interest rates available to the Company and by comparison
to quoted market prices. As of December 31, 2001 and 2002, the fair value of the
Company's financial instruments approximated the carrying value except as
otherwise disclosed.
SFAS No. 123 ("Accounting for stock-based compensation"), as amended,
requires the disclosure of pro-forma net income and earnings per share had
Luxottica Group adopted the fair value method as of the beginning of 1998. Under
SFAS No. 123, the fair value of stock-based awards to employees is calculated
through the use of option pricing models, even though such models were developed
to estimate the fair value of freely tradable, fully transferable options
without vesting restrictions, which significantly differ from the Company's
stock option awards. These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly
affect the calculated values. The Company's calculations were made using the
Black-Sholes option-pricing model with the following weighted average
assumptions:
2000 2001 2002
-------- -------- --------
Dividend yield 0.97% 0.53% 0.70%
Risk free interest rate 6.10% 5.74% 4.48%
Expected option life (years) 5 5 5
Expected volatility 44.50% 53.58% 47.04%
Weighted average fair value (Euro) 6.44 8.00 7.37
Luxottica Group's calculations are based on a multiple option valuation
approach and forfeitures are recognized as they occur.
12
If compensation cost for the Company's outstanding and vested stock options
had been determined consistent with SFAS No. 123, Luxottica Group's net income
and earnings per share would have been the pro-forma amounts indicated below:
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 2001 2002
------------ ------------ ------------
NET INCOME (thousands of Euro):
As reported 255,277 316,373 372,077
Pro-forma 247,435 307,345 362,718
BASIC EARNINGS PER SHARE (Euro):
As reported 0.57 0.70 0.82
Pro-forma 0.55 0.68 0.80
DILUTED EARNINGS PER SHARE (Euro):
As reported 0.56 0.70 0.82
Pro-forma 0.55 0.68 0.80
DERIVATIVE FINANCIAL INSTRUMENTS--Effective January 1, 2001, Luxottica Group
adopted SFAS No. 133 ("Accounting for derivative instruments and hedging
activities"). SFAS No. 133, as amended and interpreted, establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 requires that all derivatives, whether designed in hedging
relationship or not, be recorded on the balance sheet at fair value regardless
of the purpose or intent for holding them. If a derivative is designated as a
fair-value hedge, changes in the fair value of the derivative and the related
change in the hedge item are recognized in operations. If a derivative is
designated as cash-flow hedge, changes in the fair value of the derivative are
recorded in other comprehensive income ("OCI") in the consolidated statement of
stockholders' equity and are recognized in the consolidated statements of income
when the hedged item-effects operations. For a derivative that does not qualify
as a cash flow hedge, changes in fair value are recognized in operations.
Luxottica Group uses derivative financial instruments, principally interest
rate and currency swap agreements as part of its risk management policy to
reduce its exposure to market risks from changes in interest and foreign
exchange rates. Although it has not done in the past, the Company may enter into
other derivative financial instruments when it assesses that the risk can be
hedged effectively.
On January 1, 2001 as part of the transition adjustment related to the
adoption of SFAS No. 133, the Company adjusted the debt associated with the
currency swap agreement to fair value and recorded a reduction to OCI of
approximately Euro 7.8 million (U.S. Dollars 7 million) as a cumulative
transition adjustment for its derivative as a cash flow type hedge upon adoption
SFAS No. 133.
RECENT ACCOUNTING PRONOUNCEMENTS--In August 2001, the FASB issued SFAS
No. 143 ("Accounting for asset retirement obligations"). The standard requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. The standard is effective for
fiscal years beginning after June 15, 2002. The adoption of SFAS No. 143 is not
expected to have a material impact on the Company's consolidated financial
position or results of operations.
In July 2002, the FASB issued SFAS No. 146 ("Accounting for costs associated
with exit or disposal activities"). SFAS No. 146 requires companies to recognize
the costs associated with exit or disposal activities when they are incurred.
Currently, these types of costs are recognized at the time management commits
the Company to the exit/disposal plan in accordance with Emerging Issues Task
force ("EITF") issue No. 94-3 ("Liability recognition for certain employee
termination benefits and other costs to exit an activity (Including certain
costs incurred in restructuring)"). SFAS No. 146 is effective for exit or
disposal activities initiated subsequent to December 31, 2002. Luxottica Group
expects that adoption of this statement will not have material impact on the
Company's consolidated financial statements.
13
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45")
("Guarantor's accounting and disclosure requirements for guarantees, including
indirect guarantees of indebtedness of other"), which requires that a guarantor
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. FIN 45 also elaborates on
the disclosures to be made by a guarantor in its financial statements about its
obligation under certain guarantees it has issued. The initial recognition and
measurement provisions of this Interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002 and the
disclosure requirements are effective for financial statements ending after
December 15, 2002. Luxottica Group does not expect the adoption of this
Interpretation to have a material impact on the Company's consolidated financial
statements.
In December 2002, the FASB issued SFAS No. 148 ("Accounting for stock-based
compensation-transition and disclosure"), an amendment of FASB Statement
No. 123. SFAS No. 148 amends SFAS No. 123 ("Accounting for stock-based
compensation"), to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in annual
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. Finally,
this Statement amends APB Opinion No. 28 ("Interim financial reporting") to
require disclosure about those effects in interim financial information. SFAS
No. 148 is effective for fiscal years ending after December 15, 2002. The
interim disclosure provisions are effective for financial reports containing
financial statements for interim periods beginning after December 15, 2002.
Since the Company is continuing to account for stock-based compensation
according to APB No. 25, adoption of SFAS No. 148 requires the Company to
provide prominent disclosures about the effects of SFAS No. 123 on reported
income and will require disclosure of these effects in interim financial
statements as well. Luxottica Group does not expect the adoption of SFAS
No. 148 to have a material effect on its consolidated financial position,
results of operations, or cash flows.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46")
("Consolidation of variable interest entities"), which requires the
consolidation of variable interest entities, as defined. FIN 46 requires
existing unconsolidated variable interest entities to be consolidated by their
primary beneficiaries if the entities do not effectively disperse risks among
parties involved. FIN 46 applies to variable interest entities created after
January 31, 2003, and to the variable interest entities in which an enterprise
obtains an interest after that date. The Interpretation applies in the first
fiscal year or interim period beginning after June 15, 2003, to variable
interest entities in which the enterprise holds a variable interest that it
acquired before February 1, 2003. The Company is evaluating the impact of this
Interpretation on its consolidated financial statements.
INFORMATION EXPRESSED IN U.S. DOLLARS--The consolidated financial statements
are stated in Euro, the currency of the country in which the Company is
incorporated and operates. The translation of Euro amounts into U.S. Dollar
amounts is included solely for the convenience of international readers and has
been made at the rate of Euro 1 to U.S. Dollar 1.0485. Such rate was determined
by the noon buying rate of the Euro to U.S. Dollars as certified for custom
purposes by the Federal Reserve Bank of New York as of December 31, 2002. Such
translations should not be construed as representations that Euro amounts could
be converted into U.S. Dollars at that or any other rate.
14
RECLASSIFICATIONS AND EURO CONVERSION--Starting January 1, 2002, certain
costs and expenses of the optical retailing division included in the statement
of consolidated income have been reclassified. Therefore the presentation of
certain prior years information has been reclassified to conform to the current
year presentation.
As part of the European Economic and Monetary Union ("EMU"), a single
currency, the Euro, replaced the national currencies of most of the European
countries in which the Company conducts business. As a result, all information
contained in the consolidated financial statements relating to the period 2000
have been converted at the fixed exchange rate of Euro 1 to Italian Lire
1936.27.
2. RELATED PARTY TRANSACTIONS
DUE FROM RELATED PARTY--In December 2000, Luxottica Group became a listed
public company also on the Italian Stock Exchange. Expenses incurred in the
listing process were to be recovered from the majority shareholder of the
Company (La Leonardo Finanziaria S.r.l.). As of December 31, 2001, an amount of
Euro 1.4 million was included in account receivables. This amount was repaid in
full in 2002.
FIXED ASSETS--In January 2002, a subsidiary of Luxottica Group acquired for
Euro 28.5 million certain assets and a loan from "Partimmo S.a.S.", a company
owned by the Company's Chairman. The assets acquired were a building, including
all improvements for a total cost of Euro 42.0 million. The Company's
headquarter is located in this building. The loan acquired had an outstanding
balance of Euro 20.6 million on such date. In connection with the acquisition of
this building the Company's subsidiary entered into an agrement with the
Chairman who leases for Euro 0.5 million annually a portion of this building.
The expiration date of this lease is 2010.
INVESTMENT--On December 31, 2001, a U.S. subsidiary held on 1,205,000 of the
Company's ordinary shares, which had been previously purchased at a cost of U.S.
Dollars 3.1 million (Euro 2.3 million at historical exchange rate). These shares
were sold during 2002 at an after-tax net profit of U.S. Dollars 8.8 million
(Euro 9.3 million) and were recorded as an increase to the Company's additional
paid-in capital balance. Approximately 63 percent of these shares were sold to a
related party at an after-tax net gain of U.S. Dollars 4,273,000 (Euro
4.4 million).
3. INVENTORIES
Inventories consisted of the following (thousands of Euro):
--------------------------------------------------------------------------------
December 31,
2001 2002
---------------------------------------------------------------------------------
Raw materials and packaging 59,460 64,581
Work-in process 23,634 22,624
Finished goods 288,312 318,827
TOTAL 371,406 406,032
---------------------------------------------------------------------------------
4. ACQUISITIONS AND INVESTMENTS
a) Ray-Ban
On June 26, 1999, Luxottica Group acquired certain assets and liabilities of
the Eyewear Division of Bausch & Lomb Incorporated. ("Ray-Ban"). The transaction
included all of the Bausch & Lomb sunglass lines, including the Ray-Ban, Revo,
Arnette and Killer Loop brands. The acquisition of Bausch & Lomb's eyewear
business was accounted for by the purchase method, and accordingly, the purchase
price of approximately Euro 635 million (U.S. Dollars 655 million) was allocated
to the assets acquired and liabilities assumed based on their fair values at the
date of acquisition. During 2000, the Company
15
finalized the assumed value of all liabilities and in connection therewith
increased goodwill by approximately Euro 150 million. The excess of purchase
price over net assets acquired ("goodwill") has been recorded in the
accompanying consolidated balance sheet and, prior to 2002, was amortized over a
20 year life.
In accordance with the terms of the Purchase Agreement, the purchase price
was subject to a post-closing adjustment based upon the amount of the Closing
Net Operating Assets, as defined by the Purchase Agreement.
In 2001, as a result of the business combination between two wholly-owned
subsidiaries, deferred tax assets previously deemed less likely than not to be
realized were thereafter considered realizable in the amount of Euro
66.5 million. As a result of this reversal of the valuation allowance, goodwill
was been reduced by an equal amount.
On January 22, 2002, Luxottica Group resolved its dispute with Bausch & Lomb
Incorporated relating to the purchase agreement of assets and liabilities
acquired. The result of this settlement was a purchase price reduction of U.S.
Dollars 42 million to Luxottica Group. As a result of this agreement, goodwill
and due to Bausch & Lomb Incorporated previously recorded was reduced and a net
receivable of U.S. Dollars 23 million for the balance due by Bausch & Lomb
Incorporated was included in the Company's 2001 consolidated financial
statements. The net receivable was subsequently realized. As a consequence of
the settlement agreement, goodwill was further reduced for an amount of Euro
36.2 million in 2001.
b) Sunglass Hut International, Inc.
On February 20, 2001, Luxottica Group formed an indirect wholly-owned U.S.
subsidiary, Shade Acquisition Corp., for the purpose of making a tender offer
for all the outstanding common stock of Sunglass Hut International, Inc.
("SGHI"), a publicly traded company on the NASDAQ National Market. The tender
offer commenced on March 5, 2001 and was completed on March 30, 2001. On
April 4, 2001, Shade Acquisition Corp. was merged with and into SGHI and SGHI
became an indirect wholly-owned subsidiary of the Company. As such, the results
of SGHI have been consolidated into the Company's consolidated financial
statements as of the acquisition date. The acquisition was accounted by using
the purchase method, and accordingly, the purchase price of Euro 558 million
(including approximately Euro 33.9 million of acquisition-related expenses) was
allocated to the assets acquired and liabilities assumed based on their fair
value at the date of the acquisition. This included an independent valuation of
the value of intangibles, including trade names. As a result of the final
independent valuation, which was completed in March 2002, the aggregate balance
of goodwill and other intangibles previously recorded as of December 31, 2001
increased by approximately Euro 147 million. The excess of purchase price over
net assets acquired has been recorded in the accompanying consolidated balance
sheets.
16
The purchase price and expenses have been allocated based upon the valuation
of the Company's acquired assets and liabilities assumed as follows:
--------------------------------------------------------------------------------
THOUSANDS
OF EURO
ASSETS PURCHASED
Cash and cash equivalents 17,023
Inventories 90,034
Property, plant and equipment 113,212
Prepaid expenses and other current assets 14,717
Accounts receivable 2,161
Trade name 340,858
Other assets including deferred tax assets 34,657
LIABILITIES ASSUMED
Accounts payable and accrued expenses (101,020)
Other current liabilities (52,200)
Deferred tax liabilities (135,340)
Long-term debts (128,691)
Bank overdraft (104,155)
FAIR VALUE OF NET ASSETS 91,256
Other intangible assets (including goodwill) 466,790
TOTAL PURCHASE PRICE 558,046
--------------------------------------------------------------------------------
Pro-forma consolidated statements of operation for each year ended
December 31, 2000 2001, assuming the acquisition took place at January 1, 2000:
-----------------------------------------------------------------------------------
2000 2001
(Thousands of Euro)
-----------------------------------------------------------------------------------
Sales 3,110,988 3,211,063
Operating income 440,489 490,998
Net income 248,000 297,851
Number of shares (thousands) 449,988 451,037
Earnings per share (Euro) 0.55 0.66
-----------------------------------------------------------------------------------
c) First American Health Concepts, Inc.
During 2001, Luxottica Group acquired all outstanding shares of First
American Health Concepts, Inc. ("FAHC"), a publicly traded company on the
American Stock Exchange, for approximately Euro 27.7 million (U.S. Dollars
23.5 million), net of cash acquired (Euro 3.6 million or U.S. Dollars
3 million). FAHC markets and administers vision care plans throughout the United
States of America. FAHC tangible assets and liabilities assumed were
insignificant individually and in aggregate and accordingly substantially the
entire purchase price was allocated to goodwill. No pro-forma financial
information is required as the acquisition was not material to the Company's
consolidated financial statements.
17
d) Other acquisitions and establisments:
--In 2001, Luxottica Group established a new subsidiary, Luxottica Poland
Sp. Z.o.o, which is 75 percent-owned by the Company. Luxottica Poland is a
wholesale subsidiary with an initial investment of approximately Euro
0.1 million.
--In 2001, Luxottica Group acquired the remaining interest in some
manufacturing and wholesale subsidiaries (Tristar Optical Co., Ltd and Luxottica
Australia PTY, Ltd) for an aggregate cash consideration of Euro 8.5 million.
These subsidiaries have been accounted for as step acquisitions and the Company
has recorded goodwill of approximately Euro 4.8 million in connection therewith.
--In 2001, Luxottica Group acquired 51 percent of capital stock of Mirarian
Marketing Ltd for an initial investment of Euro 1.9 million. The subsidiary is
engaged in marketing and sales activity of the Company's products in Asia.
--During 2002 the Company acquired six retail companies for an aggregate
amount of Euro 35.0 million (U.S. Dollars 33.5 million). All tangible assets and
liabilities assumed were insignificant individually and in aggregate and,
accordingly, substantially the entire purchase price were allocated to goodwill.
No pro-forma financial information is required as the acquisitions were not
material to the Company's consolidated financial statements. One of these
company is accounted for under the equity method.
--At the end of 2002, the Company established a new wholly owned subsidiary
in China, Luxottica Tristar Optical Co. with an initial investment of Euro
3.8 million. The subsidiary is engaged in the manufacturing and distribution of
frames worldwide.
5. PROPERTY, PLANT AND EQUIPMENT--NET
Property, plant and equipment consisted of the following (thousands of Euro):
-------------------------------------------------------------------------------------
December 31,
2001 2002
-------------------------------------------------------------------------------------
Land and buildings 408,501 451,900
Machinery and equipment 366,335 366,027
Aircraft 24,252 25,185
Other equipment 324,380 263,340
Building, held under capital lease 2,332 2,332
1,125,800 1,108,784
Less: accumulated depreciation and amortization 624,454 602,239
TOTAL 501,346 506,545
-------------------------------------------------------------------------------------
Depreciation and amortization expenses for the years ended December 31,
2000, 2001 and 2002 are Euro 86.1 million, Euro 101.1 million and Euro
103.8 million, respectively. Included in other equipment is approximately Euro
51.6 million and Euro 25.1 million of construction in-progress as of
December 31, 2001 and 2002, respectively.
18
6. INTANGIBLE ASSETS--NET
Intangible assets consisted of the following (thousands of Euro):
-------------------------------------------------------------------------------------
December 31,
2001 2002
-------------------------------------------------------------------------------------
Goodwill, which arose in connection with the acquisition of
LensCrafters, net of accumulated amortization of Euro
208,082 thousands and Euro 176,646 thousand as of December
31, 2001 and 2002, respectively(a) 577,133 489,944
Goodwill, which arose in connection with the acquisition of
Ray-Ban, net of accumulated amortization of Euro 44,575
thousands and Euro 44,575 thousand as of December 31, 2001
and 2002, respectively (see Note 4)(b) 231,194 228,354
Goodwill, which arose in connection with the acquisition of
Sunglass Hut International, net of accumulated amortization
of Euro 24,556 and Euro 13,681 thousand as of December 31,
2001 and 2002, respectively (see Note 4)(c) 635,837 409,036
LensCrafters trade name, the value of which has been
established as part of an independent valuation performed in
connection with the acquisition ofLensCrafters, net of
accumulated amortization of Euro 65,498 thousand and Euro
63,996 thousands as of December 31, 2001 and 2002,
respectively(d) 181,665 145,827
Ray-Ban acquired trade names, net of accumulated
amortization of Euro 42,295 and Euro 48,896 thousand as of
December 31, 2001 and 2002, respectively (see Note 4)(d) 258,775 230,305
Sunglass Hut International trade name, the value of which
has been established as part of an independent valuation
performed in connection with the acquisition of Sunglass
Hut, net of accumulated amortization of Euro 20,162 thousand
as of December 31, 2002 (see note 4)(d) -- 267,868
Goodwill, which arose in connection with other business
acquisitions, net of accumulated amortization of Euro 47,344
thousands and Euro 43,589 thousand as of December 31, 2001
and 2002, respectively(e) 106,100 117,325
Other intangibles, net 19,036 27,867
TOTAL 2,009,740 1,916,526
-------------------------------------------------------------------------------------
(a) The acquisition of LensCrafters in 1995 was accounted for by the purchase
method and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based on their fair values at the date
of acquisition. The excess of purchase price over the fair value of net
assets acquired (U.S. Dollars 698.9 million) was recorded in the
accompanying consolidated balance sheets. Since the Company changed its
accounting, effective January 1, 2002, for goodwill will no longer be
subjected to periodic amortization matter, but rather will be subjected to
an impairment test method. Amortization expense for the year ended
December 31, 2001 was Euro 31.2 million. In connection with the acquisition
of LensCrafters incurred in May 1995, Luxottica Group recorded certain
liabilities for commitments and other costs expected to be paid in future
periods. As a result of negotiations with vendors and other settlements, the
Company settled these liabilities at an amount less than the accrual set up
at the date of the acquisition. Accordingly, included in the consolidated
results for fiscal 2001 and 2002 is income of approximately Euro
10.1 million (U.S. Dollars 9 million) and Euro 3.8 million (U.S. Dollars
4.0 million), net of taxes, for the final settlement of these liabilities,
respectively.
(b) The acquisition of Ray-Ban in 1999 was accounted for by the purchase method
and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based on their fair values at the date
of acquisition. The excess of purchase price over the fair value of net
assets acquired (Euro 272.9 million) was recorded in the accompanying
consolidated balance sheets. Since the Company changed its accounting,
effective January 1, 2002, for goodwill will no longer be subjected to
periodic amortization matter, but rather will be subjected to an impairment
test method. Amortization expense for the year ended December 31, 2001 was
of Euro 16.2 million.
(c) The acquisition of Sunglass Hut International in 2001 was accounted for by
the purchase method and, accordingly, the purchase price has been allocated
to the assets acquired and the liabilities assumed based on their fair
values at the date of acquisition. The excess of purchase price over the
fair value of net assets acquired (Euro 466.7 million) was recorded in the
accompanying consolidated balance sheets. Since the Company changed its
accounting, effective January 1, 2002, for
19
goodwill will no longer be subjected to periodic amortization matter, but
rather will be subjected to an impairment test method. Amortization expense
for the year ended December 31, 2001 was of Euro 14.5 million.
(d) The LensCrafters, Ray-Ban and Sunglass Hut International trade names
continue to be amortized on a straight-line basis over a period of
25 years, 20 years and 25 years, respectively, as the Company believes these
trade names to be finite life assets.
(e) Goodwill was also created as the difference between the purchase price paid
over the value of net assets of many additional businesses acquired,
resulting from retail locations and wholesales entities over the past
several years. Beginning in fiscal 2002, goodwill is no longer amortized on
a finite-life basis but tested for impairment annually in accordance with
SFAS No. 142. Amortization for the year ended December 31, 2001 in such
goodwill, exclusive of the amortization of the LensCrafters, Ray-Ban and
Sunglass Hut International goodwill discussed in (a), (b), (c) above, was
approximately Euro 9.2 million.
--------------------------------------------------------------------------------
7. INCOME TAXES
The provisions for income taxes consisted of the following (thousands of
Euro):
-------------------------------------------------------------------------------------------
Year ended December 31,
2000 2001 2002
-------------------------------------------------------------------------------------------
CURRENT
Italian companies 13,738 15,079 52,616
Foreign companies 101,984 124,354 117,865
115,722 139,433 170,481
DEFERRED
Italian companies (8,422) (10,619) (14,204)
Foreign companies (5,812) (5,364) 6,419
(14,234) (15,983) (7,785)
TOTAL 101,488 123,450 162,696
-------------------------------------------------------------------------------------------
The Italian statutory tax rate is the result of two components: national
("IRPEG") and regional ("IRAP") tax. IRAP could have a substantially different
base for its computation. In 2001, the statutory tax rate was reduced to
40.25 percent.
Reconciliation between the Italian statutory tax rate and the effective tax
rate is as follows:
----------------------------------------------------------------------------------------------------
Year ended December 31,
2000 2001 2002
----------------------------------------------------------------------------------------------------
Italian statutory tax rate 41.3% 40.3% 40.3%
Aggregate effect of different rates in foreign jurisdictions (0.5%) (1.6%) (2.3%)
Permanent differences, principally losses in subsidiary
companies funded through capital contributions, net of
non-deductible goodwill (12.8%) (10.7%) (7.8%)
EFFECTIVE RATE 28.0% 28.0% 30.2%
----------------------------------------------------------------------------------------------------
For income tax purposes, the Company and its Italian Subsidiaries file tax
returns on a separate company basis.
The deferred tax assets and liabilities as of December 31, 2001 and 2002,
respectively are comprised of (thousands of Euro):
20
---------------------------------------------------------------------------------------------------
December 31,
2001 2002
DEFERRED TAX DEFERRED TAX
ASSET/(LIABILITY) ASSET/(LIABILITY)
---------------------------------------------------------------------------------------------------
CURRENT PORTION
Inventory 64,821 43,459
Insurance and other reserves 20,106 16,993
Restructuring reserve 49,826 24,080
Net operating losses--carryforward 46,004 48,120
Loss on investments 15,901 14,128
Dividends (49,704) (5,616)
Other, net 16,247 6,924
NET CURRENT DEFERRED TAX ASSETS 163,201 148,088
NON-CURRENT PORTION
Difference in basis of fixed assets (63,642) (53,486)
Net operating losses--carryforward 200,893 128,016
Sale of businesses 2,554 2,023
Restructuring reserve 22,903 5,265
Occupancy reserves 4,398 5,473
Depreciation (4,197) (3,042)
Employee-related reserves (including minimum pension
liability) 7,119 21,845
Trade name -- (104,643)
Trade mark lease (38,712) (55,777)
Valuation allowance (149,272) (76,285)
Other, net 7,674 8,806
NET NON-CURRENT DEFERRED TAX LIABILITIES (10,282) (121,805)
---------------------------------------------------------------------------------------------------
Percentages ranging from 36 percent to 41.25 percent were applied to the
individual deferred tax items, based on the different deductibility allowed by
the new regional tax. From 2001 percentage of income tax has been reduced to
40.25 percent. Beginning 2003, the income tax percentage has been reduced to
38.25 percent. As a consequence, deferred tax assets and liabilities have been
recomputed according with the new tax rate. The immaterial result of the change
in the Italian tax rate has been included in deferred tax income.
Tax years for Italian companies are open from 1997 and subject to review
pursuant to Italian Law. Certain Luxottica Group companies have been subject to
tax reviews for previous years. Management believes no significant unaccrued
liabilities will arise from the related tax reviews.
As of December 31, 2002, the taxes that would be due on the distribution of
retained earnings, including net earnings of the year, of subsidiaries for the
year 2002 and prior to the related parent company would approximate Euro
121.5 million. Luxottica Group has not provided an accrual for taxes on such
distributions, nor has it provided an accrual for taxes on its investments in
such subsidiaries as the likelihood of distribution is remote and such earnings
and investments are deemed to be permanently reinvested. In connection with the
2002 earnings of certain subsidiaries, the Company has provided for an accrual
for Italian income taxes related to declared dividends of earnings.
As of December 31, 2001 and 2002, the Company has recorded an aggregate
valuation allowance of Euro 149.3 million and Euro 76.3 million, respectively,
against deferred tax assets recorded in connection with net operating losses.
In connection with various founded capital contributions, certain Italian
subsidiaries, which file tax returns on separate company basis, have incurred
net operating losses, which expire in five years. It is management's belief that
such net operating losses are not more likely that not to be realized in future
periods, valuation allowances have been recorded in the Company's consolidated
financial statements.
21
Management will continue to evaluate the likelihood of such deferred tax assets
and will reverse such valuation allowance when realization of deferred tax
assets become more likely than not.
8. LONG-TERM DEBT
Long-term debt consisted of the following (thousands of Euro):
-------------------------------------------------------------------------------------
December 31,
2001 2002
-------------------------------------------------------------------------------------
Credit agreement with various financial institutions(a) 775,000 675,000
Notes payable issued by Luxottica Luxembourg, interest at
3.625 percent, subsequently repaid(b)(c) 350,000 --
UniCredito Italiano credit facility(d) -- 333,810
San Paolo IMI credit facility, subsequently repaid(e) 212,309 --
Notes payable, interests at 8.63 percent, payable
semi-annually, subsequently repaid(f) 49,738 --
5.25 percent convertible subordinated notes, net of
un-amortized discount of Euro 225 thousand, interest payable
semi-annually, subsequently repaid(g) 77,128 --
Capital lease obligations, payable in installments through
2005 985 1,040
Loans with banks and other third parties, interest at
various rates (from 2.47 to 4.48 percent per annum), payable
in installments through 2017. Certain subsidiaries' fixed
assets are pledged as collateral for such notes 6,218 24,139
TOTAL 1,471,378 1,033,989
Less: current maturities 1,339,131 178,335
LONG-TERM DEBT 132,247 855,654
-------------------------------------------------------------------------------------
(a) In June 2000, Luxottica Group entered into a credit agreement with several
financial institutions. The credit facility provided for a total maximum
borrowing of Euro 500 million. This unsecured credit facility expires in
June 2003, and allows the Company to select interest periods of one, two,
three or six months.
In March 2001, the Company entered into a new credit facility with Banca
Intesa S.p.A. to finance the acquisition of Sunglass Hut International, as
described earlier. The credit facility was unsecured and on December 27,
2002, the amount outstanding at that time was repaid in full.
In December 2002, Luxottica Group entered into a new unsecured credit
facility with Banca Intesa S.p.A. for a maximum available line of Euro
650 million. This line of credit maintains a term portion of Euro
500 million 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 based on Euribor as defined in the
agreement plus 0.45 percent (3.317 percent on December 31, 2002). The
revolver portion allows the Company a maximum line available of Euro
150 million which 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 (3.40 percent on December 31, 2002). The final maturity of all
outstanding principle amounts and interest is December 27, 2005. The Company
has the option to choose interest periods of one, two or three months. The
debt contains financial covenants of minimum EBITDA and maximum debt to
equity ratios as defined in the agreement. Luxottica Group is in compliance
with those covenants.
In December 2002, the Company entered into two interest rate swap
transactions (the "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 by Euro 25 million during each subsequent
three-month period. The Intesa Swaps will expire on December 27, 2005. The
Intesa Swaps were entered into as a cash flow hedge of a portion of the
Banca Intesa Euro 650 million unsecured credit facility disclosed above. The
Intesa Swaps exchange the floating rate based on Euribor to a fixed rate of
2.985 percent per annum.
(b) In June 1999, Luxottica Luxembourg (a subsidiary of the Company) issued Euro
350 million of notes ("Euroloan"). The Euroloan principal matured in
June 2002 and required annual interest payments to be made based on a fixed
interest rate of 3.625 percent, as defined in the Euroloan agreement. Notes
were repaid in full.
(c) In November 1999, a subsidiary of the Company entered into a currency swap
agreement ("Swap 99") with an Italian bank. Swap 99 terminated on June 25,
2002 whereby the Company's notional amount of U.S. Dollars 350.2 million was
paid and received a notational amount of Euro 340 million.
(d) In June 2002, a U.S. subsidiary entered into a U.S. Dollars 350 million
credit facility with a group of four Italian banks led by UniCredito
Italiano S.p.A the proceeds of which refinanced the Euroloan noted in
(b) above. The new credit facility is guaranteed by Luxottica Group and
matures in June 2005. The term loan portion of the credit facility provided
U.S. Dollars 200 million of borrowing and requires equal quarterly principal
installments beginning March 2003. The revolving loan portion of the credit
facility allows for a maximum borrowings of U.S. Dollars 150 million.
Interest accrues at Libor as defined in the agreement plus 0.5 percent
(1.905 percent as of December 31, 2002) and the credit facility allows the
Company to select
22
interest periods of one, two or three months. The credit facility contains
financial and operating covenants. The Company is in compliance with those
covenants.
The U.S. subsidiary entered into a Convertible Swap Step-Up ("Swap 2002")
with an initial notional amount of U.S. Dollars 275 million which decreases
quarterly by U.S. Dollars 20 million starting March 17, 2003. The Swap 2002
expiration date is June 17, 2005. Swap 2002 was entered into to convert the
UniCredito floating rate credit agreement to a mixed position rate
agreement. Swap 2002 allows the U.S. subsidiary to pay a fixed rate of
interest if Libor remains under certain defined thresholds and for the U.S.
subsidiary to receive an interest payment of the three month Libor rate as
defined in the agreement. This amount is settled net every three months.
This derivative instrument does not qualify for hedge accounting under SFAS
No. 133 and as such is marked to market with the gain or losses from the
change in value included in the consolidated financial statements. As of
December 31, 2002 a loss of Euro 2.6 million is included in current
operations.
(e) In December 2000, the Company received a credit facility of Euro
256.3 million from San Paolo IMI S.p.A. Bank. The credit facility, utilized
as of December 31, 2001 for an amount of Euro 212.3 million, was pledged by
a restricted cash deposit in a U.S. subsidiary's bank account for an amount
of U.S. Dollars 190 million (Euro 213.5 million). In June 2002 the credit
facility matured and the amount outstanding at that time was paid in full.
(f) As of December 31, 2001, a subsidiary of Luxottica Group had notes
outstanding issued under a bond indenture which matured and was paid in full
in October 2002.
(g) The Company's subsidiary Sunglass Hut International, issued Euro
129 million (U.S. Dollars 115 million) principal amount of convertible
subordinated notes to certain qualified institutional investors. The resale
of these convertible subordinated notes was later registered with the
Securities and Exchange Commission in October 1996. The notes accrued
interest at 5.25 percent payable semi-annually and were to mature in
June 2003. The notes were subordinated to all existing and future
indebtedness of the Company. In March 2002, Luxottica Group redeemed the
outstanding convertible subordinates notes at the redemption price set forth
in the bond agreement. The net loss on the extinguishment of the debt was
not material to the Company's consolidated financial statements.
--------------------------------------------------------------------------------
Long-term debt matures in the years subsequent to December 31, 2003 as
follows (thousands of Euro):
-------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
2004 378,168
2005 457,984
2006 1,540
2007 1,606
2008 1,674
Thereafter 14,682
TOTAL 855,654
-------------------------------------------------------------------------------
9. EMPLOYEE BENEFITS
LIABILITY FOR TERMINATION INDEMNITIES--The liability for termination
indemnities represents amounts accrued for employees in Australia, Austria,
Greece, Israel, Italy and Japan, determined in accordance with labor laws and
labor agreements in each respective country. Each year, Luxottica Group adjusts
its accrual based upon headcount, changes in compensation level and inflation.
This liability is not funded. Therefore, the accrued liability represents the
amount that would be paid if all employees were to resign or be terminated as of
the balance sheet date. This treatment is in accordance with SFAS No. 112
("Employers' accounting for post employment benefits"), which requires employers
to expense the costs of benefit paid before retirement (i.e. severance) over the
service lives of employees. The charge to earnings during the years ended
December 31, 2000, 2001 and 2002 aggregated Euro 8.5 million, Euro 7.8 million
and Euro 5.7 million, respectively.
DEFINED BENEFIT PLANS--During 1998, a U.S. subsidiary of the Company ("U.S.
Holding") merged all of its pension plans into a single plan sponsored by a U.S.
subsidiary. This plan covers substantially all employees of the U.S.
subsidiaries and affiliates. This pension plan was amended effective January 1,
2002 to allow the employees of Sunglass Hut International to participate in the
plan.
The Company's funding policy is in accordance with minimum funding
requirements of the Employee Retirement Income Security Act of 1974 as amended.
No contributions were made in 2000,
23
2001 and 2002. Net periodic pension cost for 2000, 2001 and 2002 includes the
following components (thousands of Euro):
--------------------------------------------------------------------------------------------
2000 2001 2002
--------------------------------------------------------------------------------------------
Service cost 8,791 9,776 10,518
Interest cost 11,405 12,901 12,168
Return on plan assets (13,918) (16,123) (14,672)
Net amortization and deferral 759 747 671
NET PERIODIC PENSION COST 7,037 7,301 8,685
--------------------------------------------------------------------------------------------
For convenience all amounts are translated at noon buying rate in effect at
the end of each year.
The following table summarizes key information pertaining to the Company's
defined benefit plan as of September 30, 2001 and 2002 (thousands of Euro):
---------------------------------------------------------------------------------
2001 2002
---------------------------------------------------------------------------------
Change in benefits obligation:
Benefit obligation, beginning of year 170,132 194,634
Translation differences 5,892 (29,365)
Service cost 9,838 10,518
Interest cost 12,983 12,168
Actuarial loss 3,586 20,219
Benefits paid (7,797) (6,602)
BENEFIT OBLIGATION, END OF YEAR 194,634 201,572
Change in plan assets:
Fair value of plan assets, beginning of year 218,306 180,860
Translation differences 7,559 (27,323)
Actual return in plan assets (37,208) (14,385)
Benefits paid (7,797) (6,602)
FAIR VALUE OF PLAN ASSETS, END OF YEAR 180,860 132,550
Funded status (13,774) (69,021)
Unrecognized net actuarial gain 8,677 56,643
Unrecognized prior service cost 4,797 3,439
ACCRUED BENEFIT COSTS (300) (8,939)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
2001 2002
---------------------------------------------------------------------------------
Amounts recognized in the consolidated balance sheet
consist of the following:
LIABILITIES
Accrued pension cost 300 8,939
Additional minimum liability -- 41,565
LIABILITIES--OTHER LONG TERM LIABILITIES 300 50,504
ASSET--INTANGIBLE ASSET -- 3,439
EQUITY--OTHER COMPREHENSIVE INCOME -- 38,126
WEIGHTED AVERAGE ASSUMPTIONS AS OF SEPTEMBER 30:
Discount rate 7.25% 6.50%
Expected return on assets 9.00% 9.00%
Rate of compensation increase 5.50% 5.50%
---------------------------------------------------------------------------------
24
Plan assets were invested in equity securities, United States Government
obligations, other fixed income securities and money market funds.
SUPPLEMENTAL RETIREMENT PLAN--A U.S. subsidiary of Luxottica Group maintains
an unfunded supplemental retirement plan for participants of its Pension Plan to
provide benefits in excess of amounts permitted under the provisions of
prevailing tax law. The pension liability associated with this plan is accrued
using the same actuarial methods and assumptions as those used for the
subsidiary's Pension Plan noted above, and such amounts are not material to the
consolidated financial statements.
HEALTH BENEFIT PLANS--A U.S. subsidiary of the Company partially subsidizes
health care benefits for eligible retirees. Included in other non-current
liabilities on December 31, 2001 and 2002 is approximately Euro 1.7 million and
Euro 1.6 million of accrued benefits, respectively.
OTHER BENEFITS--A U.S. subsidiary of Luxottica Group provides certain
post-employment medical and life insurance benefits. The Company's accrued
liability related to this obligation as of December 31, 2001 and 2002 was Euro
1.4 million and Euro 1.3 million, respectively.
SAVING PLAN--Luxottica Group also sponsors a tax incentive savings plan
covering all employees. U.S. Holding makes quarterly contributions in cash to
the plan based on a percentage of employees' contributions. Additionally, the
Company may make an annual discretionary contribution to the plan, which may be
made in the Company's American Depositary Receipts (ADRs) or cash. Aggregate
contributions made to the tax incentive savings plan by the Company for the
years ended December 31, 2001 and 2002 were Euro 9.1 million and Euro
6.4 million, respectively.
10. STOCK OPTION AND INCENTIVE PLANS
STOCK OPTION PLAN--Beginning in April 1998, certain officers and other key
employees of the Company and its subsidiaries were granted stock options of
Luxottica Group under the Company's stock option plan. The stock options were
granted at a price equal to the market value of the shares at the date of grant.
These options become exercisable in three equal annual installments from the
date of grant and expire on or before January 31, 2011.
As Luxottica Group has elected to apply Accounting Principles Board Opinion
No. 25, ("Accounting for stock issued to employees"), no compensation expense
was recognized because the option exercise price was equal to the fair market
value on the date of grant.
25
The following table summarizes information about stock options outstanding
as of December 31, 2002 as analyzed for the stock split (see note 11):
--------------------------------------------------------------------------------------------
Weighted average
Number exercise price
of options (Denominated
outstanding in Euro)(3)
--------------------------------------------------------------------------------------------
OUTSTANDING AS OF JANUARY 1, 2000 6,099,800 5.75
Granted 2,142,200 9.52
Forfeitures (467,400) 6.75
Exercised (1,042,700) 6.31
OUTSTANDING AS OF DECEMBER 31, 2000 6,731,900 6.80
Granted 2,079,300 17.08
Forfeitures (119,900) 10.34
Exercised (1,283,517) 6.49
OUTSTANDING AS OF DECEMBER 31, 2001 7,407,783 9.67
Granted 2,348,400 16.98
Forfeitures (248,367) 14.54
Exercised (1,397,783) 6.67
OUTSTANDING AS OF DECEMBER 31, 2002 8,110,033 11.51
--------------------------------------------------------------------------------------------
(3) For convenience all amounts are translated at noon buying rate in effect at
the end of each year.
Stock options outstanding as of December 31, 2002 are summarized as follows:
----------------------------------------------------------------
Exercise price
denominated Number Number Remaining
in Euro(4) outstanding exercisable life (Years)
----------------------------------------------------------------
7.38 953,533 953,533 4.1
4.38 1,513,300 1,513,300 5.1
9.52 1,538,400 945,200 6.1
14.49 1,863,500 585,700 7.1
16.98 2,241,300 -- 8.1
----------------------------------------------------------------
(4) Certain options were granted in U.S. Dollars and have been converted for the
footnote as of December 31, 2002 conversion rate of the Euro to the U.S.
Dollar of 1 to 1.0485.
Included as an addition to the Luxottica Group's paid-in-capital account in
fiscal 2001 and 2002 is Euro 3.1 million and Euro 3.9 million, respectively of
tax benefits the Company received from employees exercising these stock options.
STOCK INCENTIVE PLAN
Luxottica Group granted stock options to certain employees under an
incentive plan. These options vest and became exercisable only if certain
financial performance measures are met over a three year period ending
December 2004. As of December 31, 2002, there are 970,000 shares outstanding at
an exercise price of Euro 15.32 (U.S. Dollars 16.06) per share. Compensation
expense will be recognized for the options issued under the incentive plan based
on the market value of the underlying ordinary shares when the number of shares
to be issued is known.
11. SHAREHOLDERS' EQUITY
In June 2001 and 2002, at the Company's Annual Shareholders' Meetings, cash
dividends of Euro 63.3 million and Euro 77.2 million, respectively, were
approved. These amounts became payable in July 2001 and 2002, respectively.
Italian law requires that 5 percent of net income be retained, as a legal
26
reserve until this reserve is equal to one-fifth of the issued share capital. As
such, this legal reserve is not available for dividends to the shareholders.
Legal reserves of the Italian entities included in retained earnings as of
December 31, 2001 and 2002 aggregated Euro 7.5 million and Euro 6.4 million,
respectively. In addition, there is an amount of Euro 2.3 million, which
represents other legal reserves of foreign entities that is not available for
dividends to the shareholders.
On May 3, 2000, the Shareholders' Meeting approved a two-for-one stock split
of the Company's common stock. All prior years presented have been restated to
reflect the stock split, as if they occurred on the first day of earliest period
presented.
On June 26, 2001, as consequence of Euro conversion, an amount of Euro
3.8 million was recognized as free capital stock increase.
In accordance with SFAS No. 87, Luxottica Group has recorded a minimum
pension liability for underfunded plan of Euro 41.6 million as of December 31,
2002, representing the excess of unfunded accumulated benefit obligations over
previously recorded pension cost liabilities. A corresponding amount is
recognized as an intangible asset except to the extent that these additional
liabilities exceed related unrecognized prior service cost and net obligation,
in which case the increase in liabilities is charged directly to shareholders'
equity. The principal cause of the deterioration of the funded status in the
pension liability was caused by negative returns from investments held in the
worldwide equity market. As of December 31, 2002, Euro 26.5 million of the
excess minimum liability, net of income taxes, resulted in a charge to equity.
A U.S. subsidiary held as of December 31, 2001, 1,205,000 of Luxottica
Group's ordinary shares, which had been previously purchased at a cost of U.S.
Dollars 3.1 million (Euro 2.9 million at December 31, 2002 noon buying rate).
These shares were sold during 2002 at an after-tax net profit of U.S. Dollars
8.8 million (Euro 9.3 million) and were recorded as an increase to the Company's
additional paid-in capital balance. See also note 2.
In September 2002 the Board of Directors authorized a wholly owned U.S.
subsidiary to repurchase through the open market up to 11,500,000 Luxottica
Group's ADRs, representing 2.5 percent of the authorized and issue share
capital, during a 18-month period starting in September 2002. The actual amount
and timing of the ADR purchases will depend on market conditions and other
factors. Through December 31, 2002, the U.S. subsidiary has purchased 1,911,700
ADRs at an aggregate purchase price of Euro 24.5 million (U.S. Dollars
24.8 million). In connection with the repurchase, an amount of Euro
24.5 million has been accounted as treasury shares in the Company's consolidated
financial statements. The market value of the stock as of December 31, 2002 is
approximately Euro 24.6 million (U.S. Dollars 26.0 million).
12. SEGMENTS AND RELATED INFORMATION
Luxottica Group adopted SFAS No. 131, ("Disclosures About Segments of an
Enterprise and Related Information"), in 1998. The Company operates in two
industry segments: manufacturing and wholesale distribution, and retail
distribution. Through its manufacturing and wholesale distribution operations,
Luxottica Group is engaged in the design, manufacturing, wholesale distribution
and marketing of house brand and designer lines of mid- to premium-priced
prescription frames and suglasses. The Company operates in the retail segment
through its Optical Retail Division, consisting of LensCrafters, Inc. and, since
April 2001, Sunglass Hut International. As of December 31, 2002, LensCrafters
operated 882 stores throughout the United States of America, Canada and Puerto
Rico and Sunglass Hut operated 1,914 stores located internationally in North
America, Europe and Australia.
The following tables summarize the segmental and geographic information
deemed essential by the Company's management for the purpose of evaluating the
Company's performance and for making decisions about future allocations of
resources.
The "Inter-segments transactions and corporate adjustments" column includes
the elimination of inter-segment activities and corporate related expenses not
allocated to reportable segments. This has
27
the effect of increasing reportable operating profit for the manufacturing and
wholesale and retail segments. Identifiable assets are those tangible and
intangible assets used in operations in each segment. Corporate identifiable
assets are principally cash, goodwill and trade names.
----------------------------------------------------------------------------------------------------
Inter-segments
(thousands of Euro) Manufacturing transactions
Year Ended and and corporate
December 31, wholesale Retail adjustments Consolidated
----------------------------------------------------------------------------------------------------
2002
Net revenues 1,128,670 2,158,346 (154,815) 3,132,201
Operating income 287,627 319,425 (5,544) 601,508
Capital expenditure 81,651 91,679 -- 173,330
Depreciation and amortization 46,298 77,217 22,465 145,980
Identifiable assets 1,431,317 882,113 1,272,902 3,586,332
2001
Net revenues 1,146,595 2,112,575 (194,263) 3,064,907
Operating income 287,570 320,149 (98,227) 509,492
Capital expenditure 45,801 77,674 -- 123,475
Depreciation and amortization 63,162 84,288 64,457 211,907
Identifiable assets 1,327,993 954,653 1,665,716 3,948,362
2000
Net revenues 1,076,241 1,444,536 (103,989) 2,416,788
Operating income 253,596 202,298 (43,973) 411,921
Capital expenditure 40,512 37,846 -- 78,358
Depreciation and amortization 68,828 62,808 43,595 175,231
Identifiable assets 1,498,789 547,271 922,148 2,968,208
----------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(thousands of Euro) Adjustments
Year Ended North and
December 31, Italy (6) America (6) Other (6) eliminations Consolidated
------------------------------------------------------------------------------------------------------
2002
Net revenues(5) 1,009,882 2,274,390 675,941 (828,012) 3,132,201
Operating income 207,250 323,038 82,187 (10,965) 601,508
Identifiable assets 974,412 2,457,955 421,748 (267,783) 3,586,332
2001
Net revenues(5) 996,442 2,283,939 622,331 (837,805) 3,064,907
Operating income 240,581 328,518 68,752 (128,359) 509,492
Identifiable assets 1,161,117 2,828,158 416,278 (457,191) 3,948,362
2000
Net revenues(5) 889,788 1,713,660 563,150 (749,810) 2,416,788
Operating income 217,463 222,618 51,294 (79,454) 411,921
Identifiable assets 914,253 1,769,638 396,428 (112,111) 2,968,208
------------------------------------------------------------------------------------------------------
(5) No single customer represents 5 percent or more of sales in any year
presented
(6) Sales, operating income and identifiable assets are the result of
combination for legal entities located in the same geographic area
Certain amounts for the years 2001 and 2000 have been reclassified to conform to
the 2002 presentation.
28
13. FINANCIAL INSTRUMENTS
FOREIGN EXCHANGE RISK MANAGEMENT
Luxottica Group may enter into foreign currency futures contracts on a
continuing basis for periods consistent with its managed foreign currency
exposures. The Company in certain circumstances does this to minimize the impact
of foreign exchange rate movements on the Company's operating results.
As of December 31, 2001, Luxottica Group had one outstanding contract to
sell U.S. Dollars 107 million on January 31, 2002. This contract was denoted as
a fair value hedge of the receivable balance from a U.S. subsidiary.
CONCENTRATION OF CREDIT RISK
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of customers comprising the Company's customer
base. Ongoing credit evaluations of customer's financial condition are
performed.
CONCENTRATION OF SUPPLIER RISK
As result of the Sunglass Hut International acquisition, Oakley Inc. has
become the Luxottica Group's largest supplier. For the 2001 and 2002 fiscal
years, Oakley accounted for approximately 9.1 percent and 11.8 percent of the
Company's total merchandise purchases, respectively. In December 2001 Luxottica
Group signed a three years purchase contract with Oakley. Management believes
that the loss of this vendor would not cause a significant impact on the future
operations of the Company as it could replace this vendor quickly with other
third party and Luxottica Group manufactured products.
14. COMMITMENTS AND CONTINGENCIES
ROYALTY AGREEMENTS
Luxottica Group is obligated under non-cancelable distribution agreements
with designers, which expire at various dates through 2006. In accordance with
the provisions of such agreements, the Company is required to pay royalties and
advertising fees based on a percentage of sales (as defined) with, in certain
agreements, minimum guaranties of such payments in each year of the agreements.
In November 2002, Luxottica Group announced that its license agreement for the
production and distribution of the Giorgio Armani and Emporio Armani eyewear
collections will terminate in the first half of 2003.
Minimum payments required in each of the years subsequent to December 31,
2002 are detailed as follows (thousands of Euro):
----------------------------------------------------------------------
YEARS ENDING DECEMBER 31,
2003 18,441
2004 15,303
2005 2,305
2006 2,305
2007 --
TOTAL 38,354
----------------------------------------------------------------------
LEASES AND LICENSES
Luxottica Group leases through its worldwide subsidiaries various retail
store, plant, warehouse and office facilities, as well as certain of its data
processing and automotive equipment under lease arrangements expiring between
2002 and 2015, with options to renew at varying terms. The lease and license
arrangements for the Company's U.S. retail locations often include escalation
clauses and provisions requiring the payment of incremental rentals, in addition
to any established minimums contingent upon the achievement of specified levels
of sales volume.
29
Future minimum annual rental commitments are as follows (thousands of Euro):
----------------------------------------------------------------------
YEARS ENDING DECEMBER 31,
2003 145,986
2004 132,461
2005 121,739
2006 102,120
2007 75,267
Thereafter 118,907
TOTAL 696,480
----------------------------------------------------------------------
Total rent expense for the years ended December 31, 2000, 2001 and 2002
aggregated Euro 101.1 million, Euro 203.7 million and Euro 276.5 million,
respectively.
CREDIT FACILITIES
As of December 31, 2001 and 2002 Luxottica Group had unused short-term lines
of credit of approximately Euro 395.3 million and Euro 308.1 million,
respectively.
These lines of credit are renewed annually and are guaranteed by the
Company. At December 31, 2002, there was principal amount of borrowings
out-standing and Euro 8.8 million in aggregate face amount of standby letters of
credit outstanding under these lines of credit (see below).
OUTSTANDING STAND BY LETTERS OF CREDIT
A U.S. subsidiary has obtained various standby letters of credit from banks
that aggregate Euro 9.8 million as of December 31, 2002. Most of these letters
of credit are used for security in risk management contracts or as security on
store leases. Most contain evergreen clauses under which the letter is
automatically renewed unless the bank is notified not to renew.
LITIGATION
Luxottica Group and certain of its subsidiaries are named as defendants in
an action pending in the U.S. District Court for the Central District of
California for patent infringement and related claims originally commenced by
Oakley, Inc. ("Oakley") in 1998 against Bausch & Lomb Incorporated and certain
of its subsidiaries. The alleged liability of the defendants in this action is
premised on the fact that, in connection with the Company's acquisition of the
Ray-Ban business in 1999, Luxottica Group assumed certain of Bausch & Lomb's
liabilities, including the potential liability in this case. Oakley is seeking
lost profits and damages for the alleged patent infringement and has asked that
the damages be trebled for willful infringement. Various amendments of the
complaint have been filed and the defendants have filed an answer to the
complaint and certain counterclaims against Oakley. A tentative trial date of
March 16, 2004 has been set. Luxottica Group intends to defend against Oakley's
claims and assert its own claims vigorously and believes that such defenses and
claims are meritorious, but can provide no assurance as to the likely outcome of
the case.
In November 2001, Oakley filed a second action in the same Court naming
Luxottica Group and certain of its subsidiaries as defendants. The complaint
alleges that the defendants purportedly misappropriated what Oakley claims as
certain of its trade dress, allegedly consisting of sunglasses that feature
coordinated colored lenses, frames and ear stems. The complaint also asserts
that two colors of lens coatings used in manufacturing by the Company and sold
by its subsidiaries infringe on an Oakley patent that is also involved in the
first action. Oakley seeks a permanent injunction and compensatory and punitive
damages. In November 2001, the Court granted a preliminary injunction that
prohibits the defendants from offering, selling and importing sunglasses
featuring the lenses having the coating. In December 2001, the defendants filed
an answer and counterclaims, denying the allegations in Oakley's complaint in
all material respects. Defendants' counterclaims assert that Oakley's patent and
claimed trade dress should both be declared to be invalid and unenforceable. A
tentative trial date of April 27,
30
2004 has been set. The Company also intends to defend against Oakley's claims
and assert its own claims vigorously in this second action and believes that
such defenses and claims are meritorious, but can provide no assurance as to the
likely outcome of the case.
In November 1999, Lantis Eyewear, Inc. ("Lantis"), a former distributor of
Baush & Lomb, filed a complaint against Luxottica Group and one of its
subsidiaries claiming that, in terminating its distribution agreement with
Lantis, the Company allegedly breached the agreement. In October 2000, the Court
granted a motion by Luxottica Group to dismiss certain other claims made by
Lantis, leaving only the breach of contract claim. The Company in November 2000
filed its answer and counterclaim agaist Lantis. In December 2002, the parties
entered into a mutual release and settlement agreement and the case was
dismissed with prejudice. This settlement did not have a material impact on the
Company's 2002 consolidated financial statements.
In May 2001, certain former stockholders of Sunglass Hut
International, Inc. commenced an action in the U.S. District Court for the
Eastern District of New York against the Company, its acquisition subsidiary
formed to acquire Sunglass Hut International and certain other defendants, on
behalf of a purported class of former Sunglass Hut International stockholders,
alleging in the original and in the amended complaint filed later, among other
claims, that the defendants violated certain provisions of U.S. securities, laws
and rules there under in connection with the acquisition of Sunglass Hut
International in a tender offer and second-step merger, by reason of entering
into a consulting, non-disclosure and non-competition agreement, prior to the
commencement of the tender offer, with the former chairman of Sunglass Hut
International, which purportedly involved paying consideration to such person
for his Sunglass Hut International shares and his support of the tender offer
that was higher than that paid to Sunglass Hut International's stockholders in
the tender offer. Luxottica Group and the other defendants have filed a motion
to dismiss the complaint in its entirety, and such motion is pending. The
Company intends to defend against such claims vigorously and believes that its
defenses are meritorious, but can provide no assurance as to the likely outcome
of the case.
In late 2002 Luxottica Group was informed that the Attorney General of the
State of New York is conducting an investigation into the Company's pricing and
distribution practices relating to sunglasses under applicable state and federal
antitrust laws. Luxottica Group intends to fully cooperate with this
investigation by providing documents and other information to the New York
Attorney General. Although the Company believes it has not violated any
applicable antitrust laws, it is unable at this time to predict the outcome or
timing of this investigation.
Luxottica Group and its subsidiaries are defendants in various lawsuits
arising in the ordinary course of business. It is the opinion of management of
the Company that it has meritorious defenses against all outstanding claims,
which Luxottica Group will vigorously pursue, and that the outcome will not have
a material adverse effect on either the Company's consolidated financial
position or results of operations.
15. SUBSEQUENT EVENTS
In January 2003, Luxottica Group 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 years.
* * * * *
31
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.
LUXOTTICA GROUP S.p.A.
By: /s/ Roberto Chemello
------------------------
DATE: June 10, 2003 ROBERTO CHEMELLO,
CHIEF EXECUTIVE OFFICER