PININFARINA S.p.A. ANNUAL FINANCIAL · PDF filePininfarina Maroc SAS ... The case is...
Transcript of PININFARINA S.p.A. ANNUAL FINANCIAL · PDF filePininfarina Maroc SAS ... The case is...
1
(Translation from the Italian original which remains the definitive version)
PININFARINA S.p.A.
ANNUAL FINANCIAL REPORT
31 DECEMBER 2013
Pininfarina S.p.A. - Share capital €30,166,652 fully paid-up - Registered office in Turin, Via Bruno Buozzi 6
Tax Code and Turin Company Registration no. 00489110015
2
The Board of Director approved the separate financial statements of Pininfarina S.p.A., the consolidated
financial statements as at and for the year ended 31 December 2013 and the directors’ report thereon on
20 March 2014.
3
ORDINARY SHAREHOLDERS’ MEETING
29 APRIL 2014
The shareholders are called for their ordinary meeting on first call at 4 pm at the Sala “Mythos” of
Pininfarina S.p.A. in Via Nazionale 30 Cambiano (Turin) on 29 April 2014.
AGENDA
1) Approval of the separate financial statements as at and for the year ended 31 December
2013 and related resolutions .
2) Remuneration report and resolution pursuant to article 123-ter of Legislative decree no.
58/1998.
4
5
Board of Directors
Chairman * Paolo Pininfarina
Chief Executive Officer Silvio Pietro Angori
Directors Gianfranco Albertini (4) (5)
Edoardo Garrone (1) (2) (3)
Enrico Parazzini (3)
Carlo Pavesio (1)
Roberto Testore (1) (2) (3)
(1) Member of the Nomination and Remuneration Committee
(2) Member of the Control and Risk Committee
(3) Member of the Committee for Transactions with Related Parties
(4) In charge of financial reporting
(5) Responsible for the Internal Control and Risk Management System
Board of Statutory Auditors
Chairman Nicola Treves
Standing Statutory Auditors Giovanni Rayneri
Mario Montalcini
Alternate Statutory Auditors Alberto Bertagnolio Licio
Guido Giovando
Secretary to the Board of Directors Gianfranco Albertini
Independent Auditors KPMG S.p.A.
*Powers Pursuant to article 22 of the bylaws, the Chairman is the parent’s legal representative vis-à-vis third parties and in court proceedings.
6
7
CONTENTS
Directors’ report page 9
Events after the reporting date page 15
Outlook page 22
Proposal for the allocation of the loss for the year page 23
Consolidated financial statements as at and for the year ended 31 December 2013
page 25
Notes to the consolidated financial statements page 32
Other information page 77
Disclosure required by article 149-duodecies of the Consob regulation page 78
Statement on the consolidated financial statements pursuant to article 154-bis of Legislative decree no. 58/98
page 81
Statutory Auditors’ report on the consolidated financial statements as at and for the year ended 31 December 2013
page 82
Independent Auditors’ report page 85
8
9
DIRECTORS’ REPORT
General considerations
The Group
During 2013, the Pininfarina Group confirmed its trend of growing value of production (revenue) that began in previous years, posting a further increase of 16.2% on 2012, mainly due to the engineering activities carried out in Italy and Germany, with a significant contribution of industrial design activities.
EBITDA (gross operating loss) and EBIT (operating loss) improved compared to the previous year, despite remaining negative, due to fierce market competition and the high quality level requested by certain premium customers.
Net financial expense rose from €3.7 million in 2012 to €5.8 million (including €6.5 million due to unrealised interest expense arising on the measurement of the amounts due to the lending institutions at amortised cost). Thanks to the enforcement of the new Rescheduling Agreement, the Group recognised a gain of €44.8 million in 2012.
The Group recognised a loss of €1.2 million on the sale of the investment in the subsidiary Pininfarina Maroc SAS – caused by a deep crisis of the local market on which the subsidiary totally depended. The amount, which includes both the operating loss for the period and the loss on the sale of the investment, has been classified as “Loss from discontinued operations”. The 2012 positive contribution of the Moroccan subsidiary has been reclassified to the same caption for comparative purposes.
The €10.4 million loss for 2013 is compared with a 2012 profit of €32.9 million, which benefited from the above-mentioned financial gain.
Equity decreased due to the loss for the year, from €39.8 million to €29.4 million. The net financial debt rose from €30.6 million at 31 December 2012 to €36.4 million at the reporting date. However, bank loans and borrowings (principal) decreased by €32.4 million from €73.5 million at 31 December 2012.
Compared to 2012, the Group structure has changed, following the exit of Pininfarina Maroc SAS, sold to the French group Segula for €100 thousand, from the consolidation scope. Within the German group headed by Pininfarina Deutschland GmbH, mpx Leonberg GmbH was merged into the group company mpx Munich GmbH as from 1 October 2013. Both transactions are part of the measures taken to contain inefficiencies due to the general market crisis or duplications of overheads.
The workforce numbered 779 at the reporting date (31 December 2012: 781).
Pininfarina S.p.A.
The 2013 key events of Pininfarina S.p.A. may be summarised as follows:
With respect to compliance with the Rescheduling Agreement between Pininfarina S.p.A. and the
lending institutions, the parent failed to comply with the consolidated EBTDA covenant in 2013. It
immediately requested that the lending institutions waive their right to the remedies provided for by
the Rescheduling Agreement (i.e., the possible termination of the Agreement), as it is convinced that
the business and financial plan presented in 2012, on which the current arrangements are based, is
still sustainable.
On the other hand, the consolidated net financial debt – which is the second covenant required by
the Rescheduling Agreement - at the reporting date is fully compliant.
10
Pursuant to IAS 1.74, the amounts due to the lending institutions have been classified as current liabilities due to the non-compliance with the EBITDA covenant at the reporting date.
On 24 December 2013, the parent was notified of 14 orders for payment of taxes and decisions to
impose penalties (“Orders”), each relating to a pro rata “financial liability” recognised by Pininfarina
S.p.A. with almost all lending institutions involved in the Rescheduling Agreement signed in Lugano
(Switzerland) on 31 December 2008. In addition to the request for payment of the allegedly due
registration tax and related interest, each Order imposes a sanction amounting to 120% of the
assessed tax. The overall amount requested is €11.4 million.
Almost all lending institutions received similar orders for payment, which are jointly and severally
liable with the parent vis-a-vis the tax authorities.
As it is certain of its correct conduct, the parent appealed against the Orders on 5 February 2014
(paying the assessed taxes plus interest for an overall amount of €5.6 million). The case is currently
pending before the local tax court.
No further progress has been made with respect to the VAT dispute originated in 2006 which, after
two levels of judgements, is pending before the Supreme Court of Cassation since Spring 2011.
Human resource and the environment
A breakdown of group employee at the reporting date by business and geographical segments is set
out below.
Business segment
Engineering Operations Design Staff TOTAL
2013 466 99
102 112 779
2012 441 112
103 125 781
The 31 December 2013 figure of the operations segment does not include 52 employees who were
transferred to a third party on 1 April 2011 by virtue of a business lease agreement (involving 54
people in 2012) that expired on 31 December 2013 and was renewed for another three years.
Moreover, the total figure at 31 December 2012 includes 87 people covered by a redundancy
programme due to discontinuation of activities (originally 127 people in 2011).
Geographical segment
Italy Germany China TOTAL
2013 441 333 5 779
2012 450 320 11 781
Research
During 2013, the Group continued its international collaboration as part of EC projects on the following: development of systems and specific components for electric vehicles, activities in the aero-acoustic field for the optimisation of aircraft with high energy efficiency and tuning up and finalisation of product development processes and methods. Moreover, in the same context, the Group commenced the following activities: development of a gas heat pump, eco-design and concept validation of a motor-wheel for electric vehicles, modular development of rolling chassis and life cycle analysis of vehicles. Total research expenditure approximated €0.5 million. Pininfarina S.p.A.
In October 2011, the parent launched a redundancy programme due to discontinuation of production activities covering 127 people. On 2 December 2011, upon conclusion of negotiations with the trade unions and the Piedmont regional authorities, the parent signed an agreement, which was
11
formalised in a special report at the Piedmont regional office on 19 December 2011. The key arrangements were the resort to the government-sponsored lay-off scheme up to 30 April 2012 and, subsequently, application for an extraordinary 24-month government-sponsored lay-off scheme due to partial discontinuation of activities. During the 24-month period, the parent would make excess personnel redundant, firstly on a non-opposition basis and then, at the end of the 24-month period, on a legal basis. Therefore, upon conclusion of the first government-sponsored lay-off scheme on 30 April 2012, the parent applied for the extraordinary government-sponsored lay-off scheme due to partial discontinuation of activities. It was granted the first 12 months (from 1 May 2012 to 30 April 2013) through a specific Ministerial decree (no. 67867 of 18 September 2012) and the additional 12 months were approved in 2013 by Ministerial decree no. 77751 of 20 December 2013.
Moreover, the parent applied for an extraordinary government-sponsored lay-off scheme due to crisis, involving only the Cambiano facility, for the period from 21 October 2013 to 31 May 2014. The Ministerial decree for approval is still pending.
In 2013, there were no deaths or accidents at work causing serious or very serious injuries to registered employees, nor was the parent found liable for occupational diseases contracted by employees or former employees or mobbing. On the other hand, the parent reached out-of-court agreements covering remuneration issues with employees and with former employees for financial and physiological damage (e.g., personal injuries, moral damage, hedonic damage, etc.).
With reference to investments in safety in the workplace and the environment, the parent pays utmost attention to the continuous upgrading and/or improvement of operating layouts and machinery/equipment in line with relevant legislation. Expected investments for 2014 amount to roughly €500,000.
With respect to the sale agreement (31 December 2009) for the Grugliasco facility, an environmental audit was carried out in 2011 that found that the hydrocarbons parameter in one area exceeded the legal limit. The parent immediately commenced the reclamation procedures provided for by the environmental legislation. It filed the risk analysis for the area involved in summer 2013, showing the acceptability/absence of risk. However, the Grugliasco local authorities have deferred the approval of the risk analysis until the characterisation of the entire facility has been completed. The parent appealed to the Piedmont regional administrative court against this decision, alleging that it was unable to carry out an environmental analysis of the entire site since it had not been abandoned. The Piedmont regional administrative court disallowed the appeal on 5 March 2014. Accordingly, the parent will proceed in accordance with the legal provisions.
The parent’s waste disposal and recycling environmental policies are available on its website.
Moreover, Pininfarina S.p.A. has a 2004 UNI EN ISO 14001-certifed environmental management system. A notified body checked the system’s continued compliance in the Italian facilities during 2013, finding it compliant.
12
2013 performance by business segment
Operations
This segment mainly involves the sale of car spare parts, expense and revenue relating to central functions and other transactions with third parties, including the lease of a business unit for the production of electric cars for the car sharing service of the Paris Municipality. It recognised value of production of €9.1 million (€12.6 million in 2012; -27.8%), accounting for 11% of consolidated value of production (18% in 2012). However, the 2012 figure benefited from the €3.2 million gain on the sale of the investment in Pininfarina Sverige. This segment’s EBIT was a negative €5.8 million, compared to a negative €6.9 million in 2012, which was affected by the above-mentioned gain. Services
This segment, comprising the design, industrial design and engineering businesses, recognised value of production of €70.7 million (€56.1 million in 2012; +26%), making up 89% of the consolidated figure (82% in 2012). Segment EBIT amounted to €2.4 million, a sharp increase from the €1.4 million operating loss for 2012.
The main activities carried out in Italy by the services segment in 2013 were:
Design
Activities relating to two Ferrari models were completed: the 458 Special presented at the 2013 Frankfurt international motor show and the new California T, which was launched worldwide at the 2014 Geneva international motor show. Meanwhile, styling of a new series project was started and work on three customised cars continued. Styling for certain longstanding customers in the Chinese market continued, with the assistance of on-site support from dedicated group personnel. In particular, the completion of the exterior and interior design of a mid-segment SUV is worth mentioning. With regard to the Japanese market, redesigning of a sedan for the European market continued and an interior styling project for a major market leader was launched and will be developed mostly in 2014. On the Indian market, styling development for a major company in the automotive industry continued with the finalisation of a mass product and strategic research for the design of a whole vehicle family. Moreover, an agreement was signed with a new customer for exterior design styling. The Pininfarina Sergio concept car was launched at the 2013 Geneva international motor show and the one-off BMW Pininfarina Gran Lusso Coupé car was presented at the 2013 Villa d’Este competition of elegance. Both projects met with great success and received international mentions and prestigious awards. Furthermore, the Cambiano concept car won the innovation award in the ADI Design Index 2013. In the non-automotive means of transport business, the Group continued to work with Prinoth. New commercial negotiations began with a major European company for the exterior design of an agricultural vehicle family.
Industrial design
Many important events affecting the industrial design segment took place during the year, following the latest developments in the architecture field. The numerous customers of this segment belong to very different sectors including: high-end watchmaking, aviation, marine, beverage, household appliances and writing products. The results in terms of business volumes and profitability were gratifying and this was accompanied by certain events that demonstrate that Pininfarina is considered an important player in the non-automotive design market: the “Ferra” project (building architecture) earned the cover of the book “100 Italian designers” which definitively consolidates Pininfarina’s presence in that industry, the entry of Pininfarina Extra among the top ten Italian architecture and design companies according to the 2013 report on project entrepreneurship, the Visconti/Pininfarina “carbongraphite” pen won two international awards: the Best Design award from the French magazine Stylographe and the Middle East premier award from the magazine MPP Arabia. Finally, the “Ferra” project won the Object of Design award from the online portal iProperty.com.
13
Engineering
Relationships with top customers, such as BMW, Mahindra and Toyota, consolidated, also thanks to
the contribution of the prototypes. With reference to human resource management, in line with the
organisational model rolled out at the end of 2011, Pininfarina continued to improve its staff’s skills.
Activities carried out include turnkey development projects for Chinese customers and services
provided to the FIAT Group, progressing to developing dashboard engineering. With reference to
unique cars, Pininfarina produced a special one-off car and is currently working on a second one. It
also continued to provide wind tunnel services to third party customers, mainly automotive, with a
significant increase in this business compared to the previous year.
Information required by Consob (the Italian Commission for listed companies and the stock exchange) pursuant to article 114.5 of Legislative decree no. 58/98
1) The net financial debt of the Pininfarina Group, with separate classification of current and non-current items, is shown on page 21 hereof.
2) The Group has no past-due liabilities (of a commercial, financial, tax or social security nature). No actions against the Group have been filed by creditors.
3) The Group’s related party transactions are detailed on page 77 hereof.
4) Further to its failure to comply with the EBITDA covenant for 2013 required by the Rescheduling Agreement, the parent immediately requested that the lending institutions waived their right to the remedies provided for by the Rescheduling Agreement (i.e., the possible termination of the Agreement). The agent bank informed the parent that 13 institutions out of the 14 institutions that signed the Rescheduling Agreement have already given their consent to its request and the last institution’s decision-making process was still ongoing at the date of this report. Accordingly, the parent expects that it will receive the formal consent of all lending institutions shortly. The net financial debt covenant for 2013 has been complied with.
5) The restructuring of the parent’s financial debt is in line with the Rescheduling Agreement with the lending institutions.
6) Excluding that mentioned above for 2013, there are presently no critical issues affecting the 2011-2018 business plan’s forecasts from 2014 onwards.
14
Group companies Pininfarina S.p.A.
€’million 31.12.2013 31.12.2012 Variation
Value of production 48.0 40.2 7.8
EBIT (7.3) (11.8) 4.5
Profit (loss) for the year (11.9) 31.0 (42.9)
Net financial debt (39.2) (31.3) (7.9)
Equity 32.1 44.0 (11.9)
Number of employees at the reporting date 419 428 (9)
Pininfarina Extra Group
€’million 31.12.2013 31.12.2012 Variation
Value of production 5.9 4.7 1.2
EBIT 1.5 0.9 0.6
Profit for the year 1.0
.0
0.6 0.4
Net financial position 3.7 3.1 0.6
Equity 5.4 5.1 0.3
Number of employees at the reporting date 22 22 -
Pininfarina Deutschland Group
€’million 31.12.2013 31.12.2012 Variation
Value of production 29.2 26.0 3.2
EBIT 0.4 0.6 (0.2)
Profit for the year 0.4
.0
0.5
.0
(0.1)
Net financial debt (1.2) (2.7) 1.5
Equity 19.2 18.8 0.4
Number of employees at the reporting date 333 320 13
Pininfarina Automotive Engineering Shanghai Co Ltd
€’million 31.12.2013 31.12.2012 Variation
Value of production 1.9 0.6 1.3
EBIT 0.8 (0.7) 1.5
Profit for the year 0.7
.0
(0.8) 1.5
Net financial (position) debt 0.3 (0.2) 0.5
Equity (deficit) - (0.7) 0.7
Number of employees at the reporting date 5 11 (6)
Pininfarina Maroc SAS
This investment was sold to third parties on 30 December 2013.
15
Events after the reporting date
Loan to the ultimate parent
On 20 December 2013, the tax authorities notified Pincar, the parent of Pininfarina S.p.A., of 13 orders for payment of taxes and decisions to impose penalties (“Orders”), for a total amount of €1,922,094.23, including interest accrued up to the Order issue date. With such Orders, the tax authorities allege that Pincar failed to pay the registration tax on certain agreements signed by Pincar and the lending institutions in Lugano (Switzerland) on 31 December 2008. As it is certain of its correct conduct, the ultimate parent appealed against the Orders on 30 January 2014. The lending institutions were notified of similar orders for payment of their pro rata portion of tax, penalties and interest. Under the Rescheduling Agreement, Pininfarina agreed to directly pay or reimburse “any and all costs, taxes and related legal costs incurred by the lending institutions in connection with the drafting, negotiation, signing, execution and implementation of the financial documentation”. Based on this obligation and in order to avoid any additional outlays, the Board of Directors of Pininfarina S.p.A. resolved to grant a loan of €964,000.00 to the ultimate parent, which did not have the funds necessary to make the advance payment required by the law for appeals. The loan accrues annual interest at market rates and has a term of ten years. It can be used only for the tax purposes mentioned above and bears an acceleration clause.
Non-compliance with the 2013 EBITDA covenant
Failure to comply with the 2013 EBITDA covenant triggers the termination clause of the Rescheduling Agreement currently in force with the lending institutions. As discussed earlier, the parent immediately requested that the lending institutions waived their right to the remedies provided for by the Rescheduling Agreement for such breach. On 19 March 2014, the agent bank, on behalf of the lending institutions, informed the parent that 13 institutions out of the 14 institutions that signed the Rescheduling Agreement had already given their consent to its request and the last institution’s decision-making process was still ongoing. Accordingly, the parent expects that the breach will be rectified shortly. On this basis and also considering the business results and the current financial and performance expectations, the directors have prepared the consolidated financial statements on a going concern basis.
There are no other significant events that occurred after the reporting date.
Other information
None of the group companies has approved the distribution of dividends to Pininfarina S.p.A. after the reporting date.
Report on corporate governance and ownership structure
With reference to article 89-bis.2 of the Issuer Regulation, the information on the adoption of the
codes of conduct (Report on corporate governance and ownership structure) is available in the
“Finance” section of the parent’s website (www.pininfarina.com) as well as through the other
methods provided for by current legislation.
Remuneration report
With reference to article 84-quater of the Issuer Regulation, the 2013 remuneration report will be
available in the “Finance” section of the parent’s website (www.pininfarina.com) as well as through
the other methods provided for by current legislation.
16
Financial performance and financial position of the Pininfarina Group
Financial performance
Revenue rose by €6.8 million to €69.1 million from €62.3 million in 2012. The change in finished goods and work in progress became a positive €3.3 million (negative €0.8 million in the previous year). Other revenue and income increased to €7.4 million from €7.1 million in the previous year and mainly comprise the business lease income for the Bairo Canavese facility.
2013 consolidated value of production rose to €79.8 million from €68.7 million in the previous year. The 16.2% increase is mainly due to the engineering activities carried out in Italy and Germany. A breakdown of revenue by business segment is set on page 54. 2012 net gains on the sale of non-current assets (equity investments) totalled €3.2 million (sale of the investment in Pininfarina Sverige) compared to substantially nil in 2013.
Operating expense, including changes in inventory, came to €34.8 million (€32.6 million in 2012;+ 6.7%).
Value added rose by €5.8 million to €45 million from €39.2 million in the previous year.
Labour cost increased to 47.5 million (€44 million in 2012; +8%), due to the increase in the number of employees and the average wage and salaries for certain employee categories, especially in Germany.
EBITDA is a negative €2.6 million, compared to the €4.8 million gross operating loss for the previous year, which was strongly affected by the above-mentioned gain of €3.2 million.
Amortisation and depreciation amounted to €3.4 million with an increase of €0.2 million (€3.2 million for 2012). Additions to/utilisation of provisions and impairment losses came to a positive €2.6 million (compared to a negative €0.3 million in 2012). Specifically, additions were €0.5 million (€1.4 million for 2012), utilisation €3.2 million (€1.2 million for 2012) and impairment losses €0.1 million, in line with 2012.
As a result, EBIT was a negative €3.3 million (operating loss of €8.3 million in 2012).
Net financial expense rose to €5.8 million from €3.7 million in the previous year. The increase is mainly due to smaller income on investments of cash, which decreased compared to the previous year, due to financial market trends.
The 2012 gain of €44.8 million on the extinguishment of financial liabilities, as a result of the new Rescheduling Agreement with lending institutions, was not repeated in 2013.
The loss before taxes totalled €9.1 million, compared to a profit before taxes of €32.8 for the
previous year. Taxes came to €0.1 million, in line with 2012. Therefore, the loss from continuing
operations was €9.2 million compared to a profit of €32.8 million for 2012.
Further to the sale of the investment in the subsidiary Pininfarina Maroc SAS on 30 December 2013, the
Group reclassified its results for 2013 and 2012 to the specific caption “Profit (loss) from discontinued
operations” pursuant to IFRS 5. The 2013 figures was a loss of €1.2 million, whereas the 2012 figure was
a profit of €0.2 million.
The loss for 2013 came to €10.4 million compared to a profit of €32.9 million for 2012.
17
Reclassified income statement
(€’000)
(*) Materials and services are net of utilisations of the provisions for product warranty and risks (€889 thousand and €321 thousand for 2012 and 2013, respectively). (**) Labour cost is net of utilisations of the restructuring and other provisions (€742 thousand and €817 thousand for 2012 and 2013, respectively). As required by Consob resolution no. DEM/6064293 of 28 July 2006, a reconciliation of the data in the consolidated financial statements with those in the reclassified schedules is provided below: - Materials and services include raw materials and components, other variable production costs, external variable
engineering services, exchange rate gains and losses and other expenses. - Amortisation and depreciation comprise amortisation of intangible assets and depreciation of property, plant and
equipment and investment property. - (Additions to)/utilisation of provisions and impairment losses include additions to/utilisation of provisions, impairment
losses and inventory write-downs. - Net financial expense comprises net financial expense and dividends. The corresponding figures for 2012 have been restated following the adoption of the revised IAS 19 - Employee Benefits.
Following the sale of the investment in the subsidiary Pininfarina Maroc SAS, effective as from 1 December 2013, the 2012 figures have been restated in accordance with IFRS 5 to separate the results of discontinued operations as from 1 January 2012.
2013 % 2012 % Variation
Revenue from sales and services 69,064 86.58 62,311 90.75 6,753
Change in inventories and contract work in progress 3,325 4.17 (799) (1.16) 4,124
Other revenue and income 7,369 9.25 7,147 10.41 222
Value of production 79,758 100.00 68,659 100.00 11,099
Net gains on the sale of non-current assets 1 0.00 3,182 4.63 (3,181)
Materials and services (*) (35,295) (44.25) (32,664) (47.57) (2,631)
Change in raw materials 494 0.62 42 0.06 452
Value added 44,958 56.37 39,219 57.12 5,739
Labour cost (**) (47,535) (59.60) (43,987) (64.07) (3,548)
EBITDA (2,577) (3.23) (4,768) (6.94) 2,191
Amortisation and depreciation (3,392) (4.25) (3,246) (4.73) (146)
(Additions to)/utilisation of provisions and impairment losses 2,634 3.30 (278) (0.41) 2,912
EBIT (3,335) (4.18) (8,292) (12.08) 4,957
Net financial expense (5,776) (7.24) (3,696) (5.38) (2,080)
Gain on the extinguishment of financial liabilities - - 44,835 65.30 (44,835)
Share of loss of equity-accounted investees (3) (0.01) - - (3)
Profit (loss) before taxes (9,114) (11.43) 32,847 47.84 (41,961)
Income taxes (112) (0.14) (84) (0.12) (28)
Profit (loss) from continuing operations (9,226) (11.57) 32,763 47.72 (41,989)
Profit (loss) from discontinued operations (1,161) (1.46) 181 0.26 (1,342)
Profit (loss) for the year (10,387) (13.02) 32,944 47.98 (43,331)
18
Financial position
Net capital requirements at 31 December 2013 decreased by €4.6 million on the previous year end, mainly due to a reduction in net non-current assets and the smaller working capital requirement.
Specifically:
net non-current assets totalled €66.1 million (down by €2.3 million on 31 December 2012), comprising decreases of €0.4 million, €1.8 million and €0.1 million in intangible assets, property, plant and equipment and equity investments, respectively (the latter due to the sale of the 50% investment in Pininfarina Recchi Buildingdesign S.r.l.);
working capital fell by €2.4 million to €6.9 million from €9.3 million at 31 December 2012);
post-employment benefits decreased to €7.1 million from €7.3 million at the previous year end.
Capital requirements are covered by:
- a €10.4 million decrease in equity, which went from €39.8 million at 31 December 2012 to
€29.4 million at 31 December 2013. The decrease is mainly attributable to the parent’s loss
for the year;
- an increase in net financial debt to €36.4 million from €30.6 million at 31 December 2012.
Reconciliation between the parent’s profit (loss) and equity and consolidated profit (loss) and equity
The parent’s loss and equity as at and for the year ended 31 December 2013 are reconciled with the Group’s relevant figures below.
2013 2012 31.12.2013 31.12.2012
Pininfarina S.p.A.'s separate financial statements (11,924,310) 31,033,695 32,120,861 44,027,727
- Subsidiaries' contribution 2,142,225 548,926 3,007,403 1,492,318
- Goodwill of Pininfarina Extra S.r.l. - - 1,043,497 1,043,497
- Elimination of trademark licence in Germany - - (6,749,053) (6,749,053)
- Intragroup dividends (601,400) (1,246,204) - -
- Share of profit (loss) of equity-accounted investees (3,485) 2,607,345 (3,485) -
- Other minor - - - -
Consolidated financial statements (10,386,970) 32,943,762 29,419,223 39,814,489
Profit (loss) for the year Equity
19
Reclassified statement of financial position
(€’000)
(*) Other liabilities include the following items: deferred tax liabilities, other financial liabilities, current tax liabilities and other liabilities.
31.12.2013 31.12.2012 Variation
Net non-current assets (A)
Net intangible assets 2,772 3,211 (439)
Net property, plant and equipment and investment
property 63,008 64,825 (1,817)
Equity investments 303 356 (53)
Total A 66,083 68,392 (2,309)
Working capital (B)
Inventories 6,587 2,771 3,816
Net trade receivables and other assets 23,175 33,067 (9,892)
Assets held for sale - - -
Deferred tax assets 947 929 18
Trade payables (15,211) (14,259) (952)
Provisions for risks and charges (2,698) (6,816) 4,118
Other liabilities (*) (5,911) (6,407) 496
Total B 6,889 9,285 (2,396)
Net invested capital (C=A+B) 72,972 77,677 (4,705)
Post-employment benefits (D) 7,146 7,286 (140)
Net capital requirements (E=C-D) 65,826 70,391 (4,565)
Equity (F) 29,419 39,814 (10,395)
Net financial debt (G)
Non-current loans and borrowings 7,442 90,293 (82,851)
Net current financial (position) debt 28,965 (59,716) 88,681
Total G 36,407 30,577 5,830
Total as in E (H=F+G) 65,826 70,391 (4,565)
20
Net financial debt
Net financial debt worsened by €5.8 million from €30.6 million at 31 December 2012 to €36.4 million at 31 December 2013. This was mainly due to the recognition of unrealised losses of €6.5 million which increased the amounts due to the lending institutions.
Net financial debt
(€’000)
Cash and cash equivalents include a restricted account of €5,000,000. Reference should be made to note 12 for further details.
31.12.2013 31.12.2012 Variation
Cash and cash equivalents 18,394 41,501 (23,107)
Current assets held for trading 41,952 50,809 (8,857)
Current loans and receivables - - -
Loan assets - associates and joint ventures - - -
Current bank overdrafts - (167) 167
Current financial lease liabilities (51,992) (16,898) (35,094)
Current portion of bank loans and borrowings (37,319) (15,529) (21,790)
Net current financial position (debt) (28,965) 59,716 (88,681)
Non-current loans and receivables - third parties - - -
Non-current loans and receivables - associates and joint
ventures 80 50 30
Non-current held-to-maturity investments - - -
Non-current finance lease liabilities - (47,988) 47,988
Non-current bank loans and borrowings (7,522) (42,355) 34,833
Non-current loans and borrowings (7,442) (90,293) 82,851
NET FINANCIAL DEBT (36,407) (30,577) (5,830)
21
Net financial debt (Consob)
(CESR recommendations no. 05-04b – EU Regulation no. 809/2004)
(€’000)
The “Net financial debt” set out above is presented in accordance with the format recommended by the Consob in Communication DEM no. 6064293 of 28 July 2006, implementing CESR (now ESMA) recommendation no. 05-04b. Because the purpose of this table is to show “Net financial debt”, assets are shown with a minus sign and liabilities with a plus sign. On the contrary, in the “Net financial debt” table provided on page 20, assets are shown with a plus sign and liabilities with a minus sign. The reason for the difference between the amount of the “Net financial debt” on page 20 and on this page is that the latter does not include non-current loan assets. The total amount of these differences at the relevant reporting dates is shown below:
- At 31 December 2013: €80 thousand - At 31 December 2012: €50 thousand
31.12.2013 31.12.2012 Variation
A. Cash (18,394) (41,501) (23,107)
B. Other cash equivalents - - -
C. Securities held for trading (41,952) (50,809) (8,857)
D. Total cash and cash equivalents (A.)+(B.)+(C.) (60,346) (92,311) (31,965)
E. Current loan assets - - -
F. Current bank loans and borrowings - 167 167
Current portion of secured bank loans - 5,037 5,037
Current portion of unsecured bank loans 37,319 10,492 (26,827)
G. Current portion of non-current debt 37,319 15,529 (21,790)
H. Other current loans and borrowings 51,992 16,898 (35,094)
I. Current financial debt (F.)+(G.)+(H.) 89,311 32,594 (56,717)
J. Net current financial (position) debt 28,965 (59,717) (88,682)
Non-current portion of secured bank loans 7,522 12,559 5,037
Non-current portion of unsecured bank loans - 29,796 29,796
K. Non-current bank loans and borrowings 7,522 42,355 34,833
L. Bonds issued - - -
M. Other non-current loans and borrowings - 47,988 47,988
N. Net non-current financial debt (K.)+(L.)+(M.) 7,522 90,343 82,821
O. Net financial debt (J+N) 36,487 30,627 (5,860)
22
OUTLOOK
Consolidated value of production for 2014 is expected to be in line with the 2013 figure and the EBIT is forecast to be positive. The net financial debt at the end of 2014 is expected to worsen compared to 31 December 2013, due to net working capital trends and the accumulated unrealised losses resulting from the measurement of financial liabilities at amortised cost.
23
PROPOSAL FOR THE ALLOCATION OF THE LOSS FOR THE YEAR
We propose to carry forward the loss for the year of €11,924,310.
Turin, 20 March 2014
Chairman of the Board of Directors
(Paolo Pininfarina)
(signed on the original)
24
25
Pininfarina Group
Consolidated financial statements as at and for the year ended 31 December 2013
26
Statement of financial position
Note 31.12.2013 31.12.2012
Land and buildings 1 46,976,638 48,231,409
Land 11,176,667 11,176,667
Buildings 27,261,472 28,157,695
Leased property 8,538,499 8,897,047
Plant and machinery 1 5,414,428 5,499,247
Machinery 172,888 262,642
Plant 5,241,540 5,236,605
Leased machinery and equipment - -
Furniture, fixtures and other assets 1 1,518,453 1,630,303
Furniture and fixtures 239,855 274,953
Hardware and software 847,911 924,181
Other assets, including vehicles 430,687 431,169
Assets under construction 1 - - - -
Property, plant and equipment 53,909,519 55,360,958 -
Investment property 2 9,098,558 9,464,243
Goodwill 3 1,043,495 1,043,495
Licences and trademarks 3 1,571,907 1,950,892
Other 3 156,590 216,870 - -
Intangible assets 2,771,992 3,211,257 - Subsidiaries - -
Associates 4 50,515 54,000
Joint ventures 4 - 50,000
Other companies 5 252,017 252,017 - -
Equity investments 302,532 356,017 -
Deferred tax assets 18 946,970 928,815
Held-to-maturity investments - -
Loans and receivables 6 80,000 50,313
Third parties - -
Associates and joint ventures 80,000 50,313
Available-for-sale financial assets - - - -
Non-current financial assets 80,000 50,313 -
-
TOTAL NON-CURRENT ASSETS 67,109,571 69,371,604 -
Raw materials 654,255 159,784
Work in progress -
Finished goods 240,858 424,993 - -
Inventories 8 895,113 584,777 -
Contract work in progress 9 5,691,494 2,185,726
Assets held for trading 7 41,952,071 50,809,450
Loans and receivables - -
Third parties - -
Associates and joint ventures - -
Available-for-sale financial assets - - - -
Current financial assets 41,952,071 50,809,450 -
Derivatives - -
Trade receivables 10 16,514,442 19,259,333
Third parties 16,514,442 19,259,333
Associates and joint ventures - -
Other 11 6,660,170 13,808,017 - -
Trade receivables and other assets 23,174,612 33,067,350 - -
Cash on hand and cash equivalents 22,670 36,302
Short-term bank deposits 18,371,004 41,465,108 - -
Cash and cash equivalents 12 18,393,674 41,501,410 -
-
TOTAL CURRENT ASSETS 90,106,964 128,148,713 -
Assets held for sale - - -
TOTAL ASSETS 157,216,535 197,520,317
27
Statement of financial position
Pursuant to Consob resolution no. 15519 of 27 July 2006, an ad hoc statement showing related party transactions has not been prepared as these are already shown in the financial statements schedules. As for transactions with other related parties, such as directors and statutory auditors, Other liabilities include accrued fees for the year of €58,516. The corresponding figures as at 31 December 2012 have been restated following the adoption of the revised IAS 19 - Employee Benefits and the inclusion of an additional caption (Investment property) for better presentation purposes.
Note 31.12.2013 31.12.2012
Share capital 13 30,150,694 30,150,694
Share premium reserve - -
Reserve for treasury shares 13 175,697 175,697
Legal reserve 13 6,033,331 2,231,389
Translation reserve 13 (17,767) (2,976)
Other reserves 13 2,646,208 2,646,208
Retained earnings (losses carried forward) 13 818,030 (28,330,285)
Profit (loss) for the year 13 (10,386,970) 32,943,762
EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT 29,419,223 39,814,489
Equity attributable to non-controlling interests - -
EQUITY 29,419,223 39,814,489
Finance lease liabilities - 47,988,048
Other loans and borrowings 7,521,896 42,354,625
Third parties 7,521,896 42,354,625
Associates and joint ventures - -
Non-current loans and borrowings 14 7,521,896 90,342,673
Deferred tax liabilities 18 - -
Italian post-employment benefits 7,145,948 7,286,941
Other - -
Post-employment benefits 15 7,145,948 7,286,941
TOTAL NON-CURRENT LIABILITIES 14,667,844 97,629,614
Bank overdrafts 12 - 166,743
Finance lease liabilities 51,991,710 16,898,070
Other loans and borrowings 37,318,605 15,528,932
Third parties 37,318,605 15,528,932
Current loans and borrowings 14 89,310,315 32,593,745
Wages and salaries payable 1,783,550 1,786,569
Social security charges payable 981,716 1,648,536
Other 2,004,623 2,012,197
Other financial liabilities 16 4,769,889 5,447,302
Third parties 14,098,039 13,266,794
Associates and joint ventures - -
Advances for contract work in progress 1,113,259 992,405
Trade payables 16 15,211,298 14,259,199
Direct tax liabilities 12,621 31,331
Other tax liabilities 623,830 444,450
Current tax liabilities 636,451 475,781
Derivatives - -
Provision for product warranty 62,611 63,578
Restructuring provision 2,299,512 4,462,500
Other provisions 335,564 2,289,495
Provisions for risks and charges 17 2,697,687 6,815,573
Other liabilities 503,828 484,614
TOTAL CURRENT LIABILITIES 113,129,468 60,076,214
TOTAL LIABILITIES 127,797,312 157,705,828
Liabilities associated with assets held for sale - -
TOTAL LIABILITIES AND EQUITY 157,216,535 197,520,317
28
Income statement
Note 2013
of which:
related
parties 2012
of which:
related
parties
Revenue from sales and services 19 69,064,459 20,019 62,311,138 494,505
Internal work capitalised - - - -
Change in inventories and contract work in progress 3,325,423 (798,687)
Change in contract work in progress 3,499,092 (777,748)
Change in finished goods and work in progress (173,669) (20,939)
Other revenue and income 20 7,368,600 7,146,846
Revenue 79,758,482 20,019 68,659,297 494,505
Gains on sale of non-current assets and equity investments 2,479 - 3,181,662 -
Gain on sale of equity investments - 3,179,662
Raw materials and components 21 (9,700,430) (9,675,012)
Change in raw materials 494,471 41,634
Inventory write-downs - (263,471)
Raw materials and consumables (9,205,959) - (9,896,849) -
Consumables (862,364) (617,483)
External maintenance (775,530) (1,128,628)
Other variable production costs (1,637,895) - (1,746,111) -
External variable engineering services 22 (11,422,039) - (7,751,350) (20,877)
Blue collars, white collars and managers (45,924,464) (42,450,296)
Independent contractors and temporary workers - -
Social security contributions and other post-employment benefits (1,610,361) (1,537,189)
Wages, salaries and employee benefits 23 (47,534,826) - (43,987,485) -
Depreciation of property, plant and equipment and investment property (2,721,908) (2,682,462)
Amortisation of intangible assets (669,635) (563,549)
Losses on sale of non-current assets and equity investments (1,359) -
(Additions to)/utilisation of provisions and impairment losses 24 2,633,794 (14,947)
Amortisation, depreciation and impairment losses (759,108) - (3,260,958) -
Net exchange rate losses (32,312) (24,561)
Other expenses 25 (12,504,658) (13,465,732)
Operating loss (3,335,834) 20,019 (8,292,087) 473,628
Net financial expense 26 (5,774,673) 1,816 (3,696,370) 125,903
Gain on the extinguishment of financial liabilities 27 - - 44,835,434 -
Dividends - - - -
Share of loss of equity-accounted investees (3,485) - - -
Profit (loss) before taxes (9,113,994) 21,835 32,846,977 599,531
Income taxes 18 (112,384) - (83,832) -
Profit (loss) from continuing operations (9,226,377) 21,835 32,763,145 599,531
Profit (loss) from discontinued operations 28 (1,160,593) - 180,617 -
Profit (loss) for the year (10,386,970) 21,835 32,943,762 599,531
- Profit (loss) for the year attributable to the owners of the parent (10,386,970) 32,943,762
- Profit (loss) for the year attributable to non-controlling interests - -
Basic/diluted earnings (losses) per share:
- Profit (loss) for the year attributable to the owners of the parent (10,386,970) 32,943,762
- Number of ordinary shares, net 30,150,694 30,150,694
- Basic/diluted earnings (losses) per share (0.34) 1.09
29
Statement of comprehensive income
Pursuant to Consob resolution no. 15519 of 27 July 2006, the effects of related party transactions on the income statement of the Pininfarina Group are shown in the table provided above and in the “Other Information” section of the notes. The corresponding figures for 2012 have been restated following the adoption of the revised IAS 19 - Employee Benefits. Following the sale of the investment in the subsidiary Pininfarina Maroc SAS, effective as from 1 December 2013, the 2012 figures have been restated in accordance with IFRS 5 to separate the results of discontinued operations as from 1 January 2012.
2013 2012
Profit (loss) for the year (10,386,970) 32,943,762
Other comprehensive income (expense):
Items that will not be reclassified to profit or loss:
- Actuarial gains (losses) on defined benefit plans - IAS 19 2,339 (95,129)
- Income taxes 4,156 13,884
- Other - -
Total items of other comprehensive income (expense) that will not be
reclassified to profit or loss, net of tax effect:
Items that will or may be subsequently reclassified
to profit or loss:
- Losses from translation of financial statements of foreign operations - IAS 21 (14,791) (2,604,524)
- Other - -
Total items of other comprehensive income (expense) that will be subsequently
reclassified to profit or loss, net of tax effect:
Total other comprehensive expense, net of tax effect (8,296) (2,685,769)
Comprehensive income (expense) (10,395,267) 30,257,993
Of which:
- Comprehensive income (expense) attributable to the owners of the parent (10,395,267) 30,257,993
- Comprehensive income (expense) attributable to non-controlling interests - -
Of which:
- Comprehensive income (expense) from continuing operations (9,234,674) 30,077,376
- Comprehensive income (expense) from discontinued operations (1,160,593) 180,617
6,495 (81,245)
(14,791) (2,604,524)
30
Statement of changes in equity
The corresponding figures as at 31 December 2012 have been restated following the adoption of the revised IAS 19 - Employee Benefits .
31.12.2011
Comprehensive
income
Allocation of
prior year
profit (loss) 31.12.2012
Share capital 30,150,694 - - 30,150,694
Share premium reserve - - - -
Reserve for treasury shares 175,697 - - 175,697
Legal reserve 2,231,389 - - 2,231,389
Translation reserve 2,601,548 (2,604,524) - (2,976)
Other reserves 2,646,208 - - 2,646,208
Losses carried forward (16,764,106) (81,245) (11,484,934) (28,330,285)
Profit (loss) for the year (11,484,934) 32,943,762 11,484,934 32,943,762
9,556,496 30,257,993 - 39,814,489
Equity attributable to non-controlling interests - - - -
EQUITY 9,556,496 30,257,993 - 39,814,489
31.12.2012
Comprehensive
expense
Allocation of
prior year
profit (loss) 31.12.2013
Share capital 30,150,694 - - 30,150,694
Share premium reserve - - - -
Reserve for treasury shares 175,697 - - 175,697
Legal reserve 2,231,389 - 3,801,942 6,033,331
Translation reserve (2,976) (14,791) - (17,767)
Other reserves 2,646,208 - - 2,646,208
Retained earnings (losses carried forward) (28,330,285) 6,495 29,141,820 818,030
Profit (loss) for the year 32,943,762 (10,386,970) (32,943,762) (10,386,970)
39,814,489 (10,395,267) - 29,419,223
Equity attributable to non-controlling interests - - - -
EQUITY 39,814,489 (10,395,267) - 29,419,223
EQUITY ATTRIBUTABLE TO THE OWNERS
OF THE PARENT
EQUITY ATTRIBUTABLE TO THE OWNERS
OF THE PARENT
31
Statement of cash flows
Pursuant to Consob resolution no. 15519 of 27 July 2006, the impact of transactions with related parties, which solely relates to transactions with the joint venture Pininfarina Sverige AB and the associate Goodmind S.r.l., are disclosed in notes 4, 10 and 16(a). The corresponding figures for 2012 have been restated following the adoption of the revised IAS 19 - Employee Benefits. (*) Other changes in 2012 relate to the reclassification of operating lines made in accordance with the new Rescheduling Agreement. Closing net cash and cash equivalents at 31 December 2013 include a restricted account of €5,000,000. Reference should be made to note 12 for further details.
2013 2012
Profit (loss) for the year (10,386,970) 32,943,762
Adjustments:
- Income taxes 112,385 121,452
- Depreciation of property, plant and equipment and investment property 2,721,908 2,710,224
- Amortisation of intangible assets 669,635 630,062
- Impairment losses, provisions and change in accounting estimates (3,965,133) (2,650,602)
- Gains on the sale of non-current assets (1,120) (3,179,662)
- Financial expense 7,499,714 7,210,401
- Financial income (1,701,723) (4,895,959)
- (Dividends) - -
- Share of loss of equity-accounted investees 3,485 -
- Profit from discontinued operations 910,748 -
- Other adjustments 415,332 (43,423,825)
Total adjustments 6,665,231 (43,477,909)
Change in work ing capital:
- (Increase)/decrease in inventories (274,766) 541,269
- (Increase)/decrease in contract work in progress (3,505,768) 761,113
- (Increase)/decrease in trade receivables and other assets 9,363,467 (11,227,619)
- (Increase)/decrease in receivables from associates and joint ventures - -
- Increase in trade payables and other financial liabilities 273,096 1,905,237
- Increase/(decrease) in payables to associates and joint ventures - (20,670)
- Other changes 245,334 (2,005,823)
Total changes in work ing capital 6,101,363 (10,046,493)
Gross cash flows from (used in) operating activities 2,379,624 (20,580,639)
- Interest expense (472,778) (575,171)
- Income taxes (60,071) (291,835)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 1,846,775 (21,447,645)
- Purchases of non-current assets and equity investments (1,547,468) (2,198,164)
- Proceeds from the sale of non-current assets and equity investments 7,043 30,003,540
- Proceeds from the sale of discontinued operations, net of cash sold 57,771 -
- Repayment of loans and receivables - third parties - 11,292,276
- Repayment of loans and receivables - associates and joint ventures (27,871) 9,077,679
- Interest income 747,179 2,635,193
- Dividends collected - -
- Other changes 8,402,582 (4,447,746)
CASH FLOWS FROM INVESTING ACTIVITIES 7,639,236 46,362,779 46,237,783 25,336,549
- Proceeds from the issue of shares - -
- Increase in finance lease liabilities and other loans and borrowings - third parties - -
- Increase in other loans and borrowings - associates and joint ventures - -
- Repayment of finance lease liabilities and other loans and borrowings - third parties(32,427,004) (73,470,937)
- Repayment of other loans and borrowings - associates and joint ventures - -
- Dividends paid - -
- Other changes/Other non-cash items (*) - 18,000,000
CASH FLOWS USED IN FINANCING ACTIVITIES (32,427,004) (55,470,937)
TOTAL CASH FLOWS (22,940,993) (30,555,804)
Opening net cash and cash equivalents 41,334,667 71,890,471
Closing net cash and cash equivalents 18,393,674 41,334,667
32
Notes to the consolidated financial statements: GENERAL INFORMATION Foreword The core business of the Pininfarina Group (the “Group”) is based on the establishment of comprehensive collaborative relationships with carmakers. Operating as a global partner enables it to work with customers through the entire process of developing new products, including design, planning, development, industrialisation and manufacturing, or to provide support separately during any one of these phases with the utmost flexibility. Pininfarina S.p.A., the Group’s parent, is listed on the Italian Stock Exchange. Its registered office is in via Bruno Buozzi 6, Turin. Market investors own 22.66% of its share capital, with the remaining 77.34% held by the following shareholders:
Pincar S.r.l. 76.06%. The shares held by Pincar S.r.l. are charged with a senior pledge, without voting rights, in favour of the parent’s lending institutions;
Segi S.r.l. 0.60%, parent of Pincar S.r.l.;
Seglap S.s. 0.63%;
treasury shares held by Pininfarina S.p.A. 0.05%. A list of the group companies, with their complete name and address, is provided on page 35. The consolidated financial statements are presented in Euros, the functional and presentation currency of the parent, where most of the activities and consolidated revenue are concentrated, and its main subsidiaries. All amounts are presented in Euros, unless stated otherwise. The Board of Directors approved these consolidated financial statements as at and for the year ended 31 December 2013 on 20 March 2014. The consolidated financial statements are audited by KPMG S.p.A.. Basis of presentation In accordance with IAS 1 - Presentation of Financial Statements, the consolidated financial statements are the same as those of the parent. They include the following schedules:
statement of financial position, in which current and non-current assets and liabilities are classified separately;
income statement and statement of comprehensive income, shown as two separate schedules in which costs are classified by nature;
statement of cash flows, presented in accordance with the indirect method, as allowed by IAS 7 - Statement of Cash Flows;
statement of changes in equity.
Moreover, as required by Consob resolution no. 15519 of 28 July 2006, the Group presents the following information in separate schedules:
there were no non-recurring events or transactions, i.e., those transactions or events that are not repeated frequently in the normal course of business;
33
the net financial debt, with a breakdown of the main components and balances with related parties, is provided on page 20 of the directors’ report;
related party transactions are not presented in separate schedules because they are listed as separate items in the statement of financial position, shown on pages 26 and 27.
Basis of preparation These consolidated financial statements are prepared on a going concern basis, which the directors deemed appropriate. References should be made to the “Events after the reporting date” section of the directors’ report for further details. These consolidated financial statements at 31 December 2013 comply with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and endorsed by the European Union. They are also consistent with the regulations enacted to implement article 9 of Legislative decree no. 38/2005. The term IFRS includes the International Financial Reporting Standards, the International Accounting Standards (“IAS”) and all interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), previously called the Standing Interpretation Committee (“SIC”), endorsed by the European Commission as of the date of the Board of Directors’ meeting convened to approve the draft financial statements and listed in the applicable regulations published by the European Union as of the above-mentioned date. These consolidated financial statements are prepared in accordance with the general principle of the historical cost, except for those items that, pursuant to the IFRS, shall be measured at fair value, as explained in the “Accounting policies” section. The accounting policies adopted to prepare these consolidated financial statements at 31 December 2013 are the same as those used in the 2012 annual consolidated financial statements, except as noted in the “Change in accounting policies” section. Change in accounting policies Starting from 2013, the Group has adopted IAS 19 (revised) as published in the Italian Official Journal on 6 June 2012. The amended version of IAS 19 – Employee Benefits eliminates the option of deferring the recognition of actuarial gains and losses with the corridor approach (which the Group stopped applying in 2012), requiring instead that the entire plan deficit or surplus be presented in the statement of financial position. The amended standard also requires the separate recognition of the service costs and net interest expense in the income statement, as well as the recognition of any actuarial gains or losses resulting from the annual remeasurement of the plan assets and liabilities in other comprehensive income. The return on plan assets, which is included in the computation of net interest expense, shall be determined based on the discount rate applied to the liabilities and no longer on their expected rate of return. Lastly, the amendment introduces new disclosures to be provided in the notes. In order to provide reliable and more relevant information, the revised version of IAS 19, as endorsed by the European Commission, requires that the above-mentioned items be reflected directly in Retained earnings/(losses carried forward) in equity and recognised immediately in the statement of comprehensive income. As required by IAS 8, the corresponding figures for the year ended 31 December 2012 have been restated for comparative purposes. The table below shows the effect of the adoption of the amendment on the captions of the prior year consolidated financial statements. It consists of reclassifying actuarial gains and losses from Wages, salaries and employee benefits to other comprehensive income. The related tax effect is also shown.
34
In addition, as required by IAS 40 – Investment Property and for the sake of a better presentation, the buildings owned by the subsidiary Pininfarina Deutschland GmbH in Renningen have been reclassified from Land and buildings to Investment property in the statement of financial position. Lastly, starting from 2013, the Group adopted the following standards, amendments and interpretations, which had no material impact on it:
- Amendment to IAS 1 Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income
- IFRS 13 – Fair Value Measurement - Amendment to IFRS 7 – Financial Instruments: Disclosures – Offsetting Financial Assets
and Financial Liabilities - Amendment to IAS 12 - Income Taxes – Deferred Tax: Recovery of Underlying Assets
Standards and interpretations applicable to annual periods beginning on or after 1 January 2013 that may be applied earlier but which the Group has not yet adopted
On 16 December 2011, the IASB issued certain amendments to IAS 32 - Financial Instruments: Presentation, clarifying the offsetting criteria in this standard. The amendments are applicable retrospectively to annual periods beginning on or after 1 January 2014. The Pininfarina Group has not identified any significant effects due to the application of these amendments.
On 12 May 2011, the IASB issued IFRS 10 - Consolidated Financial Statements, which will replace SIC 12 - Consolidation: Special Purpose Entities and part of IAS 27 -Consolidated and Separate Financial Statements, which will change its name to Separate Financial Statements and will only cover the treatment of investments in the separate financial statements. In addition to establishing a new control model, the new standard provides guidance on how to establish the existence of control in difficult situations. The standard is applicable retrospectively no later than for annual periods beginning on or after 1 January 2014. The Pininfarina Group has not identified any significant effects due to the application of the new standard.
On the same date, the IASB issued IFRS 11 - Joint Arrangements, which will replace IAS 31 - Interests in Joint Ventures and SIC 13 - Jointly Controlled Entities: Non-monetary Contributions by Venturers. The new standard provides guidance to identify the substance of the arrangement, based on the underlying rights and obligations rather than their legal form. It requires that entities account for an investment in the arrangement using the equity method in their consolidated financial statements. The standard is applicable retrospectively no later than for annual periods beginning on or after 1 January 2014. The Pininfarina Group has not identified any significant effects due to the application of the new standard.
On 12 May 2011, the IASB issued IFRS 12 – Disclosure of Interests in Other Entities, which is a new and complete standard requiring additional disclosures on each type of investment, including subsidiaries, joint arrangements, associates, special purpose entities and other unconsolidated vehicles. The standard is applicable retrospectively no later than for annual periods beginning on or after 1 January 2014.
2012
Income statement
Wages, salaries and employee benefits 95,129
Income taxes (13,884)
Profit for the year 81,245
Statement of comprehensive income
Actuarial losses on defined benefit plans - IAS 19 (95,129)
Tax effect 13,884
Total other comprehensive expense (81,245)
Comprehensive income (expense) -
35
Other standards effective from 1 January 2014
Amendment to IAS 12: The amendment provides an exception to the current measurement of deferred taxes relating to investment property measured at fair value. No effects for the Group are expected.
IAS 28 revised: the revised standard specifies certain applications of the equity methods. No significant effects for the Group are expected.
ACCOUNTING POLICIES Consolidated financial statements The consolidated financial statements include the financial statements of all subsidiaries, from the date the Group acquires their control until when control ceases to exist. Investments in joint ventures and associates are measured using the equity method, in accordance with paragraph 38 of IAS 31 – Interests in Joint Ventures and paragraph 11 of IAS 28 – Investments in Associates, respectively. Intragroup expenses, revenue, receivables, payables, gains and losses are eliminated in the consolidation process. When necessary, the accounting policies of subsidiaries, associates and joint ventures are amended to make them consistent with those of the parent. (a) Subsidiaries and business combinations A list of the companies consolidated line by line is provided below:
The reporting date of the subsidiaries is the same as that of the parent, Pininfarina S.p.A..
On 30 December 2013, Pininfarina S.p.A. and the subsidiary Pininfarina Extra S.r.l. sold their investments in Pininfarina Maroc to third parties. The company left the consolidation scope on 1 December 2013. The former subsidiary was not classified as a discontinued operation or an asset held for sale at 31 December 2012. Accordingly, the Group restated the prior year corresponding figures presented in its statement of comprehensive income and the related tables set out in the notes for comparative purposes, in order to present the discontinued operation separately from its continuing operations in accordance with IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations.
Name Registered office
Investment
% Held by
Currency
Share/quota
capital
Pininfarina Extra S.r.l. Via Bruno Buozzi 6, Turin, Italy 100% Pininfarina S.p.A. € 388,000
Pininfarina of America Corp. 1101 Brickell Ave - South Tower
- 8th Floor - Miami FL USA
100% Pininfarina Extra S.r.l. USD 10,000
Pininfarina Deutschland GmbH Riedwiesenstr. 1, Leonberg,
Germany
100% Pininfarina S.p.A. € 3,100,000
mpx Entwicklung GmbH Frankfurter Ring 17, Munich,
Germany
100% Pininfarina Deutschland GmbH € 25,000
Pininfarina Automotive Engineering
(Shanghai) Co Ltd
Room 806, No. 888 Moyu (S)
Rd. Anting Town, 201805,
Jiading district, Shanghai, China
100% Pininfarina S.p.A. CNY 3,702,824
36
On 2 August 2013, the parent’s Board of Directors approved the merger of mpx Entwicklung GmbH (Leonberg) into the group company mpx Entwicklung GmbH (Munich). The transaction took effect on 1 October 2013 without impacting the consolidated financial statements, as the merged companies were consolidated on a line-by-line basis.
(b) Acquisition/sale of investments subsequent to the acquisition of control
Acquisitions and sales of investments subsequent to the acquisition of control that do not result in a loss of control are accounted for as owner transactions.
In the case of acquisitions, the difference between the consideration paid and the pro rata interest in the carrying amount of the net assets acquired is recognised in equity. In the case of sales, the resulting gain or loss is also recognised directly in equity.
If the Group loses control or significant influence, the remaining non-controlling interest is remeasured at fair value and any positive or negative difference between carrying amount and fair value is recognised in profit or loss.
(c) Associates and joint ventures
Associates are listed below:
At their meeting of 30 April 2013, the shareholders resolved to dissolve the joint venture Pininfarina Recchi Buildingdesign S.r.l. as it did not attain the business objects for which it had been set up in 2008. The application for striking off the company from the company register became effective on 20 December 2013.
(d) Other companies
Investments in other companies that are available-for-sale financial assets are measured at fair value, if feasible, and any resulting gains or losses are recognised in equity until the investments are sold. At that point, fair value gains or losses accumulated in equity are reclassified to the income statement for the year.
If the investments are not listed on a regulated market and their fair value cannot be reliably determined, they are measured at cost, adjusted for any impairment losses, which cannot be reversed.
Translation of foreign currency captions
(a) Presentation currency and translation of financial statements denominated in currencies other than the Euro
The Group’s presentation currency is the Euro.
Name Registered office
Investment
% Held by
Currency
Quota
capital
Goodmind S.r.l. Via Nazionale 30,
Cambiano, Italy
20% Pininfarina Extra
S.r.l.
€ 20,000
37
The table below lists the exchange rates used to translate financial statements denominated in functional currencies different from the presentation currency:
(b) Foreign currency assets, liabilities and transactions
Transactions carried out in currencies other than the Euro are initially translated at the exchange rate in force on the date of the transaction.
At the reporting date, monetary assets and liabilities denominated in foreign currencies are retranslated into Euros at the closing rate. All resulting exchange rate gains and losses are recognised in profit or loss, except for those stemming from foreign currency loans that hedge investments in foreign operations. Any such gains or losses, and the relevant tax effects, are recognised directly in equity. When the equity investment is sold, the accumulated translation differences are reclassified to profit or loss.
Non-monetary items that are carried at historical cost are translated into Euros at the exchange rate in force when the underlying transaction was initially recognised. Non-monetary items that are carried at fair value are translated into Euros at the exchange rate in force on the measurement date.
None of the group companies operates in a hyperinflationary economy.
Investment property
Property held to earn rentals of for capital appreciation are classified as investment property and measured at purchase or production cost, including any related costs and net of accumulated depreciation and impairment losses.
Property, plant and equipment
Property, plant and equipment comprise items used in production, including those held under finance lease. They are recognised at purchase or production cost, net of accumulated depreciation and impairment losses, except for land, which is not depreciated.
The cost includes all purchase-related outlays, i.e., those incurred to bring the asset to the place and conditions necessary for their operation.
Depreciation of buildings and other generic assets is calculated on a straight-line basis, in order to allocate their residual carrying amount over their estimated useful life. Depreciation of specific equipment related to certain cars manufactured on behalf of third parties is based on production volumes, in accordance with paragraphs 50 and 60 of IAS 16 - Property, plant and equipment.
Euro vs currency 31.12.2013 2013 31.12.2012 2012
US dollar - USD 1.38 1.33 1.32 1.29
Swedish krona - SEK - - 8.58 8.70
Moroccan dirham - MAD 11.25 11.17 11.14 11.10
Chinese renminbi (yuan) - CNY 8.35 8.16 8.11 8.22
38
The depreciation rates applied to each asset category are set out below:
Land is recognised separately and is not depreciated but tested for impairment whenever the Group identifies indicators that the carrying amount exceeds the recoverable amount. Subsequent costs are capitalised only if it is probable that they will generate future economic benefits and their amount can be determined reliably. Should a portion be replaced, its carrying amount is derecognised. Costs that do not meet these requirements are immediately recognised in profit or loss. The carrying amount and useful life of property, plant and equipment are reviewed at each reporting date and adjusted, if necessary, prospectively pursuant to paragraphs from 32 to 38 of IAS 8 - Accounting policies, changes in accounting estimates and errors. Gains and losses on the sale, calculated as the difference between the asset’s carrying amount and sales price, are recognised in profit or loss. In these notes, impairment losses mean the losses recognised to adjust the assets’ carrying amounts to their recoverable amount.
Government grants
Government grants are recognised at fair value only if the Group is reasonably certain that they will be disbursed and has met all conditions for their collection. They are recognised as revenue in proportion to the costs incurred. As required by paragraph 17 of IAS 20 - Accounting for government grants and. disclosure of government assistance, grants related to assets are recognised as deferred income and reclassified to profit or loss in line with the depreciation pattern of the related asset.
Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance. They are controlled by the Group and generate measurable future economic benefits. They are recognised at cost, calculated using the same criteria as for property, plant and equipment.
(a) Goodwill
Goodwill is the excess of the purchase price with respect to the acquisition-date fair value of the net assets acquired. It is not amortised, but tested for impairment at least annually. Impairment testing
Category
Bairo and San
Giorgio facilities Other facilities
Land Indefinite Indefinite
Buildings and property under finance leases 50 33
Machinery 20 10
Plant 20 10
Leased machinery and equipment - 5
Furniture and fixtures 10 8
Hardware - 5
Other, including vehicles - 5
Useful life - years
39
allocates goodwill to the related cash-generating units, which are the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. If the carrying amount of the net assets of a cash-generating unit, including allocated goodwill, exceeds their recoverable amount, the identified impairment loss is firstly allocated to goodwill, up to its entire carrying amount. Any remaining impairment loss is then allocated pro rata to the carrying amount of the assets making up the cash-generating unit. Impairment losses recognised on goodwill cannot be reversed. Any negative goodwill is recognised as income in profit or loss.
(b) Software and other licences
Software and other similar licences are recognised as assets at cost, including that incur to use them. They are amortised over their estimated useful life, which ranges between three and five years. Costs incurred to maintain software programs are immediately recognised in profit or loss. Those incur to develop identifiable software that is controlled by the Group, which are very likely to produce future economic benefits exceeding the costs incurred, if any, are recognised as intangible assets and amortised over their useful life, which does not exceed three years.
(c) Research and development expenditure
Research expenditure, as defined by IAS 38 - Intangible assets, is expensed when incurred in accordance with IAS 38.54. Development expenditure is recognised as an intangible asset only if it can be measured reliably and if it is probable that the related project is likely to be successful, with reference to its technical feasibility, the availability of financial resources to complete it and its commercial penetration. Development expenditure that does not meet these requirements is expensed when incurred. This expense is never reclassified as an asset in subsequent years, if the requirements for its recognition as an asset is met after it is recognised in profit or loss. Development expenditure is amortised from when the related output is marketed over the estimated period during which it will generate economic benefits, which can never exceed five years. It is tested for impairment when the Group identifies indicators that its carrying amount exceeds its recoverable amount. The Group carries out development projects on behalf of third parties as part of both styling, engineering and car manufacturing contracts and solely designing and engineering contracts. Development expenditure incurred as part of styling and engineering sold to third parties is classified as a contractual cost under IAS 11 - Construction contracts and, accordingly, no intangible asset is recognised. Development expenditure related to styling, engineering and manufacturing contracts which give the Group a total or partial guarantee that the investment made on behalf of a customer will be recovered is classified as a financial asset under IFRIC 4 - Determining whether an arrangement contains a lease (see subsequent note), or, when the conditions for the application of this interpretation are not met, in the carrying amount of specific equipment under property, plant and equipment.
(d) Other intangible assets
Other intangible assets separately acquired are recognised at cost. Those acquired as a result of a business combination are recognised at their acquisition-date fair value. After initial recognition, those with a finite useful life are subsequently measured at cost, adjusted for accumulated amortisation and impairment losses, whereas those with an indefinite useful life are measured at cost but not amortised. They are tested for impairment at least annually. Where possible, any changes are made prospectively pursuant to paragraphs from 32 to 38 of IAS 8 - Accounting policies, changes in accounting estimates and errors.
Impairment of non-financial assets
Intangible assets with an indefinite useful life, including goodwill, are tested for impairment at least annually and whenever there are indicators of impairment. Property, plant and equipment, investment property and intangible assets with a finite useful life are tested for impairment only if the Group identifies indicators that their carrying amount may exceed their recoverable amount. The recoverable amount is the higher of an asset’s (or cash-generating unit’s) fair value less costs to sell and its value in use, which is calculated as the present value of the future cash flows expected to be derived from an asset, to be based on reasonable and supportable assumptions that represent
40
management’s best estimate of the future economic conditions. The discount rate used reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted. This rate for the Group is the weighted average cost of capital (“WACC”).
When the carrying amount of an asset exceeds its recoverable amount, the Group recognises the difference as an impairment loss in profit or loss. If the reasons for the impairment loss no longer exist in future years, the impairment loss is reversed to the extent of the pre-impairment carrying amount, less amortisation/depreciation. Impairment losses on goodwill can never be reversed. Cash-generating units are identified in line with the Group’s organisational structure and business, by grouping those assets that are able to generate cash inflows independently, as required by IAS 36 - Impairment of assets; they are not larger than the two operating segments identified under IFRS 8 - Operating segments: 1) styling and engineering; 2) operations. In assessing the recoverable amount for impairment testing purposes, the Group makes reference to the fair value of owned real estate complexes, measured using the market valuations available at the Public Real Estate Registry Office and possibly appraisals prepared by independent experts.
Assets held for sale
Non-current assets, together with current and non-current assets included in disposal groups, whose carrying amount will be recovered through their sale rather than continuing use, are classified as held for sale. Assets held for sale and directly-associable liabilities are classified in the statement of financial position separately from the Group’s other assets and liabilities, in accordance with paragraphs from 38 to 40 of IFRS 5 - Non-current assets held for sale and discontinued operations. Assets held for sale are not amortised or depreciated and are measured at the lower of their carrying amount and fair value less costs to sell. Any difference between the carrying amount and fair value less costs to sell is recognised in profit or loss as an impairment loss. Any subsequent improvement in fair value less costs to sell is recognised as a reversal to the extent of the impairment losses previously recognised, including those recognised prior to the classification of the asset as held for sale.
Financial assets
Financial assets are recognised at the trade date, which is the date on which the Group assumes the obligation to acquire them.
In accordance with IAS 39 - Financial instruments: recognition and measurement, they are classified in the following four categories:
financial assets at fair value through profit or loss;
loans and receivables;
held-to-maturity investments;
available-for-sale financial assets. Financial assets are derecognised when the right to receive their cash flows ceases or is transferred or when the Group has substantially transferred all risks and rewards relating to the financial instrument, in addition to control thereover.
Financial assets and financial liabilities are not offset. They can be offset and the net balance is presented in the statement of financial position only when (i) the Group has a legally enforceable right to set off the recognised amounts and (ii) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
(a) Financial assets at fair value through profit or loss
This category includes:
financial assets mainly acquired to be sold in the short term (financial assets held for trading);
financial assets designated in this category on initial recognition, if the relevant requirements are met;
41
derivatives, excluding hedges. They are measured at fair value with fair value gains or losses recognised in profit or loss. Financial instruments belonging to this category are classified as current assets if they are held for trading, or if they are expected to be sold within twelve months of the reporting date. The current or non-current classification depends on the group strategic policies about how long it intends to hold the asset and the asset’s actual marketability.
(b) Loans and receivables
This category includes non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. It mainly comprises trade receivables, including those recognised in accordance with IFRIC 4 - Determining whether an arrangement contains a lease. Loans and receivables are classified as current assets, except for those due after more than twelve months of the reporting date, which are classified as non-current assets. They are measured at amortised cost, using the effective interest method. Should the Group identify objective evidence of impairment, their carrying amount is adjusted to the present value of their estimated cash flows, discounted using their original effective interest rate. Objective evidence that a financial asset is impaired includes: (i) significant financial difficulty of the issuer or obligor, (ii) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; (iii) adverse changes in the payment status of borrowers including delayed payments. Impairment losses are recognised in profit or loss. If the reason for the impairment loss no longer exists in future years, the impairment loss is reversed to the extent of the pre-impairment carrying amount measured at amortised cost.
(c) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity.
They are initially recognised at acquisition cost, including any transaction costs. They are subsequently measured at amortised cost, using the effective interest method, adjusted for any impairment losses. Should the Group identify evidence of impairment, it applies the same criteria described above for loans and receivables.
(d) Available-for-sale financial assets
These are non-derivative financial assets that are designated either as available for sale or cannot be classified in any of the other previous categories. Available-for-sale financial assets are measured at fair value, with fair value gains or losses recognised in equity and reclassified to profit or loss only when the financial asset is actually sold or when the accumulated fair value losses are deemed to no longer be recoverable. If the fair value cannot be measured reliably, these instruments are measured at cost, adjusted for impairment losses. Impairment losses recognised on equity instruments cannot be reversed. Fair value losses that are deemed to be irrecoverable, for example due to a prolonged decline in the fair value of the financial assets, are reclassified from equity to profit or loss.
Derivatives
The Group has no derivatives in place, either for trading or hedging purposes.
Contract work in progress
The Group recognises styling and engineering contracts in accordance with IAS 11 - Construction contracts. Contract costs are recognised as incurred. Contract revenue is recognised as follows:
if the performance of the contract cannot be estimated reliably, revenue is recognised to the extent of the incurred costs that are deemed to be recoverable;
if the performance of the contract can be estimated reliably and a contract profit is probable, revenue is recognised over the term of the contract on an accruals basis;
conversely, if a contract loss is probable, the loss is calculated as the difference between contract revenue and costs and is recognised in its entirety when identified.
42
The Group allocates contract revenue and costs to each year using the percentage of completion method set out in paragraph 25 of IAS 11 - Construction contracts. The percentage of completion is determined as the ratio of total costs incurred at the reporting date to the estimated total costs to complete the contract. Progress billings are included in contract work in progress to the extent of the costs incurred. If they exceed the stage of completion, the balance is recognised as a liability under the caption “Deferred income” classified in “Trade payables - third parties”. If the stage of completion exceeds progress billings, the difference is recognised as an asset under contract work in progress.
Financial expense
In accordance with IAS 23 - Borrowing costs, borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Otherwise, they are recognised in profit or loss on an accruals basis.
Inventories
Inventories are recognised at the lower of cost and net realisable value, which is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. Under IAS 2 - Inventories, the cost is calculated using the FIFO (“first-in first-out”) method. The cost of finished goods and semi-finished products includes design, raw materials and direct labour costs, other direct costs and other indirect costs that can be directly allocated to the production activity based on normal production capacity. This cost does not include borrowing costs. Based on the assets’ expected future use and net realisable value, materials, finished goods, spare parts and other obsolete or slow-moving items are written down through an allowance account. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
Trade receivables and other assets
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, net of impairment losses due to uncollectibility. Impairment losses are recognised if there is objective evidence that the Group is unable to collect all the amount due at the due dates agreed with the customer. The impairment loss, calculated as the difference between the asset’s carrying amount and present value of future collections, discounted using the effective interest rate, is recognised in profit or loss.
Cash and cash equivalents
Net cash and cash equivalents include cash-in-hand, on-demand bank deposits, other investments that may be sold within three months and bank overdrafts, which are recognised in the relevant caption under current liabilities. In accordance with paragraph 8 of IAS 7 - Statement of cash flows, the cash flow for the year is equal to the change in net cash and cash equivalents.
Share capital
Ordinary shares are classified in equity. There are no other share categories. Costs directly related to the issue of ordinary shares or options are recognised in equity. If a Group company acquires the parent’s shares, or if the parent itself acquires its own shares within the limits established by article 2357 of the Italian Civil Code, the consideration paid, net of any transaction cost, is deducted from equity attributable to the owners of the parent until when the treasury shares are cancelled, possibly assigned to employees or resold. The parent’s share capital comprises 30,166,652 ordinary shares with a unit nominal amount of €1. The parent’s shares held by the ultimate parent, Pincar S.r.l., equal to 76.06% of the share capital, are charged with a senior pledge, without voting rights, in favour of the parent’s lending institutions.
43
Loan and lease liabilities
Loan and lease liabilities are initially recognised at fair value, equivalent to the cash obtained, net of any transaction costs. In accordance with IAS 39 - Financial instruments: recognition and measurement, after initial recognition, they are measured at amortised cost. The difference between the amount collected, net of any transaction costs, and the amount repayable (principal and interest) is recognised in profit or loss on an accrual basis using the effective interest method. The portion of loan and lease liabilities due within one year is recognised under current liabilities. When the Group has an unconditional right to defer payment, the portion due after one year is recognised under non-current liabilities. In accordance with paragraph 74 of IAS 1 - Presentation of Financial Statements, if, at the reporting date, the Group has not complied with the loan and lease contractual provisions and the residual liability becomes fully due on demand (acceleration clause), the entire amount is reclassified to current liabilities, even when the Group has reached an agreement with its creditors for repayment at the original maturity before the publication date of the financial statements. This is because, at the reporting date, the Group does not have an unconditional right to defer payment of the liability to after twelve months.
Employee benefits
(a) Pension plans
The Pininfarina Group’s employees participate in defined contribution plans and defined benefit plans. The latter are a portion of the Italian post-employment benefits provided for by article 2120 of the Italian Civil Code and, therefore, do not comprise any plan assets. Defined contribution plans are formalised plans for post-employment benefits that require that the Group pay contributions to an insurance company or a pension funds. By doing this, the Group does not have any other legal or constructive obligation to pay additional contributions should the fund not have sufficient resources to pay all benefits accrued by employees over their current and past service periods when the benefits become due. These contributions paid in exchange for the service rendered by employees are recognised as an expense on an accruals basis. This category includes the payments made to the Cometa and Previp funds. Under defined benefit plans, the Group has a future obligation to pay the pension benefit to the employee upon termination of employment. The amount of the benefit depends on different factors, such as age, seniority and remuneration. The Group, therefore, takes on actuarial and investment risks arising from the plan. The Group calculates the present value of the plan liability and the service cost using the projected unit credit method, based on the actuarial calculation that uses demographic (mortality rate and turnover) and financial (discount rate and future salary and benefit increases) variables. The post-employment benefits of the Group’s Italian employees are classified as follows pursuant to IAS 19 - Employee Benefits:
defined benefit plan for the portion vested prior to enactment of Finance Act (Law no. 296 of 27 December 2006) and related implementing decrees;
defined contribution plan for the portion accrued thereafter. At the annual and half year reporting dates, the Group calculates the benefits using an actuarial valuation. The accumulated actuarial losses and gains arising from changes in estimates are recognised in profit or loss. Any curtailment or extinguishment of a plan liability is immediately recognised in profit or loss.
(b) Incentives, bonuses and profit-participation plans
The Group recognises a cost and a liability for its obligations for incentives, bonuses and profit-participation plans. The liability is recognised when the Group has a legal or constructive obligation and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
(c) Termination benefits
The Group recognises a liability and personnel expense when it is demonstrably committed to terminating the employment of an employee or group of employees before the normal retirement date or provide termination benefits as a result of an offer made in order to encourage voluntary
44
redundancy. The Group is demonstrably committed to a termination when, and only when, it has a detailed formal plan for the termination and is without realistic possibility of withdrawal.
(d) Share-based payments
The Group has not granted benefits in the form of shares (e.g., stock options) to its employees which would trigger application of IFRS 2 - Share-based payment.
Provisions for risks and charges, contingent liabilities
The provisions for risks and charges include specific costs and losses whose existence is certain or probable but whose amount or due date is unknown at the reporting date. Provisions are recognised when all the following conditions are met: (i) the Group has a present obligation (legal or constructive) as a result of a past event; (ii) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; (iii) a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation or transfer it to third parties at the reporting date. Where the effect of the time value of money is material and the payment dates can be estimated reliably, the provision is discounted to present value. The Group recognises expected restructuring costs when a restructuring plan is formalised only if it has raised a valid expectation in those affected that it will carry out the restructuring. The liability accrued in the provisions for risks and charges are regularly adjusted for changes in estimated costs, expected timing and discount rates. Changes in estimates of provisions are recognised in the same income statement caption as the related addition. Disclosures about contingent liabilities, i.e.: (i) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; (ii) a present obligation that arises from past events, whose amount cannot be measured reliably or whose settlement will not probably require an outflow of resources embodying economic benefits.
Leases
(a) Finance leases
Under IAS 17 - Leases, a lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership from the lessor to the Group (lessee). They are accounted for as follows:
(a1) Leases where the Group is the lessee
The Group enters into these leases to fund its investment in property, plant and equipment, as defined earlier. The leased asset is recognised as an item of property, plant and equipment and depreciated over the lower of its useful life and the lease term. At the commencement of the lease term, the asset is recognised at the lower of its fair value and the present value of the minimum lease payments determined at the inception of the lease. The financial liability to the lessor is recognised as described earlier for loan and lease liabilities.
(a2) Leases where the Group is the lessor
The Group becomes a lessor when it applies IFRIC 4 - Determining whether an arrangement contains a lease, relating to IAS 17 - Leases, to certain specific plant and machinery in connection with certain design, engineering and car manufacturing contracts. IFRIC 4 applies to those arrangements that do not have the legal form of a lease, but that give the Group’s counterparty the right to use certain assets in exchange for a series of payments. This right implies that the arrangement is or contains a lease. The requirements for the application of this interpretation are as follows:
fulfilment of the arrangement is dependent on the use of a specific asset;
the arrangement conveys a right to use the asset;
it is possible to assess whether an arrangement contains a lease at the inception of the arrangement;
45
it is possible to separate payments for the lease from other payments. Briefly, under IFRIC 4, it is possible to identify and separate the lease from an arrangement and recognise it in accordance with IAS 17 - Leases. In this case, the Group recognises a financial asset equal to the present value of the lease payments. The difference between future collections and their present value is the interest income which is recognised in profit or loss over the lease term constant periodic rate of return.
(b) Operating leases
When a lease does not meet the requirements to be classified as a finance lease, it is classified as an operating lease. Lease payments, net of incentives received from the lessor, are recognised as an expense on a straight-line basis over the lease term.
Income taxes
(a) Current taxes
Current taxes are recognised by each Group company on the basis of their estimated taxable profit using the tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date, taking into account any domestic tax consolidation arrangements, applicable exemptions and tax assets.
(b) Deferred taxes
Under IAS 12 - Income taxes, deferred taxes are calculated for all temporary differences between the assets’ and liabilities’ tax bases and carrying amounts, except in two cases: (i) goodwill arising from a business combination, (ii) the initial recognition of an asset or liability in a transaction which is not a business combination and affects neither accounting profit nor taxable profit (tax loss). Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are respectively classified as non-current assets and liabilities. They are offset at individual company level if related to taxes that can be legally offset. The resulting balance, if positive, is recognised as a deferred tax asset and, if negative, as a deferred tax liability. Current and deferred taxes related to transactions directly affecting equity are recognised in equity. The Group recognises deferred tax assets to the extent that it is probable that taxable profit will be available against which the temporary difference can be utilised. The carrying amount of a deferred tax asset is reviewed at each reporting period date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised. Deferred taxes on undistributed profits of the group companies are recognised only if the company really intends to distribute such profits and, in any case, if there are no tax consolidation arrangements cancelling their taxation.
Revenue recognition
As required by IAS 18 - Revenue, revenue is measured at the fair value of the consideration received or receivable from the sale of goods and services, net of VAT, returns, discounts and intragroup transactions. It is recognised as follows:
(a) Sale of goods
Revenue is recognised when all the following conditions have been satisfied:
the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
the Group retains neither effective nor continuing managerial involvement over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits will flow to the Group;
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
46
(b) Rendering of services
Revenue from services is recognised by reference to the stage of completion of the transaction when the services are rendered. Revenue is recognised when all the following conditions are satisfied:
the amount of revenue can be measured reliably;
it is probable that the economic benefits will flow to the Group;
the stage of completion of the transaction at the reporting date can be measured reliably;
the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
Revenue from styling and engineering services on behalf of third parties are recognised based on the stage of completion.
(c) Interest, royalties and dividends
Revenue arising from the use by others of entity assets yielding interest, royalties and dividends is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be measured reliably. Interest is recognised using the effective interest method, which is the rate that exactly discounts estimated future cash flows through the expected life of the financial instrument. Royalties are recognised on an accruals basis in accordance with the substance of the relevant agreement. Dividends are recognised when the shareholder’s right to receive payment is established.
Dividend distribution
The Group recognises a liability for dividends to be distributed when the distribution has been approved by the shareholders.
Earnings or losses per share
Basic earnings or losses per share are calculated by dividing the profit or loss for the year attributable to the owners of the parent’s ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted earnings or losses per share are derived by adjusting the weighted average number of outstanding shares for all potential ordinary shares with a dilutive effect.
Events after the reporting date
The events after the reporting date are those events, favourable and unfavourable, that occur between the reporting date (31 December for the Group) and the date when the financial statements are authorised for issue. Two types of events can be identified: (i) those that provide evidence of conditions that existed at the reporting date and (ii) those that are indicative of conditions that arose after the reporting date.
In accordance with IAS 10 - Events after the reporting period, in the first case (i) the Group adjusts the carrying amounts for the events that occurred after the reporting date and in the second case (ii) the Group does not adjust the carrying amounts, but discloses the events held significant in the notes.
Reference should be made to the directors’ report for further details.
Statement of cash flows
The statement of cash flows is presented in accordance with the indirect method allowed by IAS 7 - Statement of cash flows.
47
Repayment of loans and receivables recognised under IFRIC 4 - Determining whether an arrangement contains a lease, are recognised as cash flows from investing activities at the line “Repayment of loans and receivables - third parties”, in line with the definition of investment activities set out in IAS 7, with the Group’s financial position and net financial debt structures and in accordance with IAS 7.16-f.
ASSESSMENTS THAT AFFECT THE CONSOLIDATED FINANCIAL STATEMENTS
(a) Going concern
The going concern assumption is a key principle for the preparation of financial statements. When assessing whether the Group is able to continue as a going concern, the directors express their current opinion on the outcome of future events or circumstances which are, by their nature, uncertain. Any opinion about future events is based on information available when the opinion is expressed. Future events may contradict an opinion which, when it was expressed, was reasonable. Some of the elements that affect the opinion on the outcome of future event or circumstances include the size and complexity of an entity, the nature and circumstances of its business and its dependency on external factors.
(b) Additions to the provisions for risks and charges and contingent liabilities and contingent assets
Provisions are liabilities whose due date and amount are uncertain. The directors measure them based on the estimated costs to be incurred to extinguish the obligation at the reporting date.
Contingent liabilities and assets are presented in the financial statements in accordance with paragraphs 27 and 31, respectively, of IAS 37 - Provisions, contingent liabilities and contingent assets.
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group, or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.
Where necessary, the directors make their estimate with the assistance of their legal advisors and experts.
(c) Impairment
Investments in subsidiaries, associates and joint ventures are tested for impairment by estimating their value in use, which is usually calculated as the Group’s share of the investee’s equity derived from the consolidated financial statements plus the expected operating cash flows and the cash flow arising from its sale, net of selling costs, if it is material and can be determined reliably.
Cash flows are forecast by directors based on reasonable and supportable assumptions that represent their best estimate of the future economic conditions.
The discount rate used reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
Non-financial assets that are comprised in cash-generating units are tested for impairment on the basis of the expected future profits, whose estimate depends on a number of factors not wholly within the control of the Group.
Property is tested for impairment by comparing its carrying amount to its fair value, measured using the market valuations available at the Public Real Estate Registry Office and possibly appraisals prepared by independent experts engaged by the Board of Directors.
48
(d) Fair value measurement and hierarchy for financial instruments
Pursuant to IFRS 7 – Financial Instruments: Disclosures, the classification of financial instruments at fair value shall be based on the quality of the inputs used for measurement purposes. The IFRS 7 classification is based on the following fair value hierarchy:
level 1: fair value is determined based on prices quoted on an active market for identical assets or liabilities. This category includes financial assets classified as “held for trading”, which are mainly government bonds and high-rating bonds;
level 2: fair value is determined based on inputs that, while different from the quoted prices used in Level 1, can be observed either directly or indirectly. These consolidated financial statements do not present any financial instruments of this type;
level 3: fair value is determined based on valuation models, the input of which is not based on observable market data. These financial statements do not present any financial instruments of this type.
(e) Current and deferred taxes
Current taxes are calculated on the basis of a best estimate of the tax expense for the year, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are measured on the basis of the parent’s and Group’s expectations on how the carrying amount of their assets and liabilities will be recovered/extinguished, subject to the probability that they will earn future taxable profit. Deferred tax assets and liabilities are measured on the basis of tax rates that are expected to be applicable when the assets will be realised or the liabilities will be extinguished, therefore based on tax rates or changes to tax laws that have been enacted by the reporting date.
(f) Italian post-employment benefits
Following the supplementary pension reform, the portion of Italian post-employment benefits vested before 1 January 2007 is considered to be a defined benefit under IAS 19 - Employee Benefits. Under defined benefit plans, the amount of the benefit due to the employee upon termination of employment depend on different factors, such as age, seniority and remuneration. Despite being prudently estimated and based on internal historical figures, these estimated parameters may be subject to change.
The directors estimate the post-employment benefit obligation assisted by an independent expert included in the Italian Actuary Register.
TYPES OF FINANCIAL INSTRUMENTS AND FAIR VALUE HIERARCHY The financial instruments held by the Group include:
cash and cash equivalents;
financial assets held for trading;
non-current loan liabilities and finance lease liabilities;
trade receivables and payables and loans and receivables - associates and joint ventures. Financial assets held for trading mainly consist of government bonds, bonds and other financial assets, mostly traded in regulated markets, with a low risk profile, held because they are readily saleable and provide principal protection. The Group has no derivatives in place, either for speculative or cash flow/fair value hedging purposes.
49
As required by IFRS 7, the table below lists the types of financial instruments included in the consolidated financial statements and shows the measurement criteria adopted:
Pursuant to IFRS 7 – Financial Instruments: Disclosures, the classification of financial instruments at fair value shall be based on the quality of the inputs used for measurement purposes.
FINANCIAL RISK MANAGEMENT Financial risk factors, as identified in IFRS 7 – Financial Instruments: Disclosures, are described below:
Market risk: the risk that the fair value or the future cash flows of a financial instrument could fluctuate as a result of changes in market prices. Market risk includes the following other types of risk: currency risk, interest rate risk and price risk.
Currency risk: the risk that the fair value or the future cash flows of a financial instrument could fluctuate as a result of changes in exchange rates.
Interest rate risk: the risk that the fair value or the future cash flows of a financial instrument could fluctuate as a result of changes in interest rates.
Price risk: the risk that the fair value or the future cash flows of a financial instrument could fluctuate as a result of changes in market prices (other than changes covered by the interest rate and currency risks), irrespective as to whether such fluctuations are determined by factors specific to the financial instrument or its issuer or by factors that affect all similar market-traded financial instruments.
Credit risk: the risk that one of the parties causes the other party to incur a financial loss by failing to fulfil an obligation.
Liquidity risk: the risk that an entity may be unable to fulfil obligations associated with financial liabilities.
(a) Currency risk The Group entered into most of its financial instruments in Euros, which is its functional and presentation currency. Because it operates in an international environment, it has a limited exposure to fluctuations in the exchange rates of the following currencies against the Euro: US dollar (USD), and Chinese Yuan (CNY). (b) Interest rate risk The Rescheduling Agreement signed by Pininfarina S.p.A. with the lending institutions (BRE, Intesa Sanpaolo, BNL, Italease, Unicredit, BP, MPS, UBI Leasing, Leasint, MPS Leasing, Selmabipiemme, Unicredit Leasing, BNP Lease and Release), effective from 1 May 2012 to 31 December 2018, defined a fixed contractual interest rate of 0.25% per annum, based on a year of 360 days,
Fair value
hierarchy
Financial
instruments
at amortised
cost
Equity
investments
at cost
Carrying
amount at
31.12.2013
Carrying
amount at
31.12.2012
profit or
loss
equity
Assets:
Equity investments in other companies - - 252,017 252,017 252,017
Loans and receivables - - 80,000 - 80,000 50,313
Assets held for trading 41,952,071 - Level 1 - - 41,952,071 50,809,450
Trade receivables and other assets - - 23,174,612 - 23,174,612 33,067,351
Net cash and cash equivalents - - 18,393,674 - 18,393,674 41,501,410
Liabilities:
Finance lease liabilities - - 51,991,710 - 51,991,710 64,886,118
Other loans and borrowings - - 44,840,501 - 44,840,501 58,050,300
Trade payables and other liabilities - - 17,719,749 - 17,719,749 16,756,010
Financial instruments
at fair value through:
50
applicable to the rescheduled facilities, leases and operating lines over the entire term of the Agreement. As a result, the Group is only marginally exposed to the interest rate risk on a loan from Banca Nazionale del Lavoro (formerly Fortis Bank), which is not included in the above-mentioned Rescheduling Agreement and accrues interest at the six-month Euribor, plus a spread of 0.9%, on the outstanding balance of €12 million at 31 December 2013. Moreover, it is exposed in connection with a loan provided by Volksbank Region Leonberg to Pininfarina Deutschland GmbH, which accrues interest at the three-month Euribor plus a spread of 0.55% on the outstanding balance of €0.5 million. Interest on the short-term operating lines is computed at a fixed rate ranging between 5.26% and 6.75%, with regular accrual and payment in arrears at the end of each utilisation period. A breakdown of the Group’s financial debt by fixed and variable interest rate at 31 December 2013 is as follows:
Due to the new structure of the interest rates on medium to long-term financing, that at variable rates accounts for 13% of total indebtedness. Consequently, the Group has not performed a sensitivity analysis. (c) Price risk Because the Group exited the manufacturing sector and primarily operates within the Eurozone, its exposure to the risk of fluctuations in commodity prices is currently immaterial. Current assets held for trading, which totalled €42 million at 31 December 2013, are measured at fair value. Because they mainly consist of government bonds, bonds and other financial assets held because they are readily saleable and provide principal protection, most of which are traded in regulated markets, the price risk presented by these assets is deemed to be limited. A breakdown of these assets by nature is provided below:
(d) Credit risk
Styling and engineering contracts, which are the Group’s primary revenue source, are agreed with
highly rated customers located both inside and outside the European Union. In order to minimise the
credit risk from non-EU customers, the Group seeks to align both progress billings and their
collection with the relevant contract’s stage of completion. There is no significant credit
concentration with individual customers.
31.12.2013 % 31.12.2012 %
- Fixed rate 84,273,406 87% 105,173,960 86%
- Variable rate 12,558,805 13% 17,762,458 14%
Gross financial debt 96,832,211 100% 122,936,418 100%
31.12.2013 % 31.12.2012 %
Italian government bonds 15,253,327 36.36 21,274,936 41.87
Foreign government or government-guaranteed bonds 4,287,860 10.22 5,552,846 10.93
Supranational securities 4,483,452 10.69 9,439,790 18.58
Bank and insurance bonds 8,934,391 21.30 5,789,942 11.40
Other bonds 5,425,450 12.93 4,711,597 9.27
Bond funds 3,567,591 8.50 4,040,339 7.95
Assets held for trading 41,952,071 100.00 50,809,450 100.00
51
The Group did not carry out transactions involving the derecognition of financial assets, such as the factoring of trade receivables without recourse.
Financial transactions are carried out exclusively with financial institutions whose reliability is beyond
question. (e) Liquidity risk The effects of the Rescheduling Agreement, effective from 1 May 2012 to 31 December 2018, are summarised as follows:
- it rescheduled term financing and finance leases totalling €182.5 million and operating lines amounting to €18 million to 2018;
- it resulted in the adoption of a fixed interest rate of 0.25% per annum, based on a year of 360 days, for long-term financing, finance leases and rescheduled operating lines;
- it established mandatory and voluntary early repayments upon the occurrence of specific
events, including the sale of certain assets and the generation of cash flows in excess of those forecast in the 2011-2018 business plan.
The cash flows of the above-mentioned Agreement were determined based on the figures forecast in the 2011-2018 business plan, which was prepared by the Board of Directors with the support of Roland Berger and was approved on 20 April 2012. Consequently, over the medium to long term, the liquidity risk is directly correlated to the achievement of the business plan targets.
A breakdown of the contractual amount of the Group’s financial debt is set out below. As discussed
in the directors’ report, due to its failure to comply with one of the two 2013 covenants, the Group
has reclassified its loans and borrowings to current liabilities, except for those with BNL S.p.A. as
they are not covered by the Rescheduling Agreement.
The Group repaid €32.4 million to the lending institutions mainly using its cash and cash equivalents. The Group holds net cash and cash equivalents and assets held for trading totalling €60.3 million, including €7.4 million restricted, as explained in notes 7 and 12. Consequently, the Group is not exposed to liquidity risk over the medium term.
(f) Risk of default and debt covenants This risk refers to the possibility that, in addition to the Rescheduling Agreement, effective as of 1 May 2012, the Group’s leases and financing agreements could contain acceleration clauses upon the occurrence of certain events, thereby creating a liquidity risk. The Rescheduling Agreement, effective as of 1 May 2012, introduced the following financial covenants:
Carrying
amount
31.12.2013
Contractual
cash flows
Of which:
due within one
year
Of which:
due from one
to five years
Of which:
due after five
years
Short-term credit facilities and bank overdrafts - - - - -
Term financing 32,781,696 41,588,045 41,088,045 500,000 -
Finance lease liabilities 51,991,710 66,174,896 66,174,896 - -
BNL S.p.A., formerly Fortis Bank 12,058,805 12,058,805 5,036,909 7,021,896 -
Leases and financing 96,832,211 119,821,746 112,299,850 7,521,896 -
52
Compliance with the covenants is checked on each Verification Date, based on the most recent
annual consolidated financial statements.
As a result of the tax disputes involving the parent and the ultimate parent, Pincar S.r.l. (see
previous comments in the directors’ report on page 10 and in the Events after the reporting date
section on page 15), the parent had to pay €6.6 million in advance to the tax authorities, pending the
outcome of the litigation. Once the decision-making process of the lending institutions has been
completed, the above amount will be added to the figures provided for by the current Rescheduling
Agreement and shown in the above table for the purposes of the calculation of the annual
consolidated net financial debt starting from 2014 and until the tax litigation procedure is completed.
The Group failed to comply with the consolidated gross operating profit (EBTDA) covenant in 2013.
Reference should be made to pages 9 and 15 of the directors’ report for additional details. The definitions of net financial debt, liquidity, gross operating profit (loss) and financial expense are set out below:
“Financial debt” with reference to the Pininfarina Group’s consolidated figures, means any debt
relating to:
(i) loans and borrowings of any type and form;
(ii) bonds and credit instruments issued in any form and similar instruments;
(iii) finance leases;
(iv) transfers of loans and receivables (with and/or without recourse) including as part of
factoring, securitisation and discounting transactions;
(v) payment of the price of any asset deferred to more than 180 days;
(vi) derivative transactions;
(vii) any guarantee or obligation of any type (presented or that may be presented in the
memorandum and contingency accounts) which gives or may give rise to a cash
outflow;
(viii) any counter guarantee or hold harmless guarantee given, or recourse or compensation
obligation, in relation to guarantees, bonds, credit letters or other similar instruments
issued by a bank, financial intermediary, insurance company or other party; or
(ix) any guarantee, hold harmless guarantee or similar obligation in relation to any of the
items set out from point (i) to point (viii).
“Net financial debt” with reference to the Pininfarina Group’s consolidated figures, means:
(i) financial debt,
(ii) less liquidity. “Liquidity” includes all amounts presented as “Cash and cash equivalents”, “Assets held for
trading”, “Available-for-sale financial assets” and “Current held-to-maturity investments” in the
statements of financial position, to the extent of the amounts that are not subject to restrictions and
that are cash, government bonds, other listed bonds with a rating not lower than A or other short-
term temporary liquidity investment instruments (e.g., monetary funds), net of bank overdrafts
(including operating lines). “Gross operating profit (loss)”: with reference to the Pininfarina Group’s consolidated financial
statements, means:
(i) the income statement caption “Operating profit (loss)”;
plus:
53
(ii) to the extent that they have been excluded from the calculation of the operating profit
(loss): (I) amortisation of intangible assets, (II) Depreciation of property, plant and
equipment and investment property, (III) other impairment losses on non-current assets,
(IV) impairment losses on current loans and receivables and cash and cash equivalents,
(V) provisions for risks, (VII) other provisions, (VII) non-recurring costs, including,
without limitation, losses on the sale of property, plant and equipment, investment
property and intangible assets, (VIII) financial expense and (IX) tax expense;
less:
(iii) to the extent they have been included in the calculation of operating profit (loss): (I) non-
recurring income, including, without limitation, gains on the sale of property, plant and
equipment, investment property and intangible assets, but excluding any income
relating to the company’s ordinary production and sales activities, which are never
considered non-recurring, and (II) financial income.
“Financial expense” with reference to the Pininfarina Group, means the income statement caption
“Financial expense”.
54
SEGMENT REPORTING
Operating segments are identified in accordance with paragraphs 5 to 10 of IFRS 8 – Operating
segments. In the Operations business segment, the operating segments coincide with a series of
activities mainly involving the supply of spare parts for cars manufactured by Pininfarina S.p.A., the
lease of certain businesses for the production of electric cars for the car sharing service of the Paris
Municipality and support functions.
Financial income and expense and income taxes are not allocated to the reporting segments
because management makes the relevant decisions on an aggregate segment basis. Intra-segment
transactions are carried out at market conditions. In accordance with IFRS 8.4, the Group presents
segment reporting in its consolidated financial statements only.
The Group’s business segments are not affected by seasonal factors.
Segment reporting for the years ended 31 December 2013 and 2012 is set out below. Amounts are in thousands of Euros.
Reference should be made to the directors’ report for an analysis of the operating segments. A breakdown of assets and liabilities by operating segment is set out below:
Operations
Design &
engineering Total Operations
Design &
engineering Total
A B A + B A B A + B
Revenue 9,406 74,284 83,690 13,160 58,361 71,521
(Intra-segment revenue) (344) (3,588) (3,932) (594) (2,268) (2,862)
Revenue - third parties 9,062 70,696 79,758 12,566 56,093 68,659
Operating profit (loss) (5,768) 2,433 (3,335) (6,881) (1,411) (8,292)
Net financial expense (5,776) (3,696)
Gain on the extinguishment of financial liabilities - 44,835
Dividends - -
Share of loss of equity-accounted investees - (3) (3) - - -
Profit (loss) before taxes - - (9,114) - - 32,847
Income taxes - - (112) - - (84)
Profit (loss) from continuing operations - - (9,226) - - 32,763
Profit (loss) from discontinued operations - - (1,161) - - 181
Profit (loss) for the year - - (10,387) - - 32,944
Other information required by IFRS 8:
- Amortisation and depreciation (2,052) (1,340) (3,392) (2,110) (1,136) (3,246)
- Impairment losses - (85) (85) - (164) (164)
- Provisions/change in accounting estimates 2,041 678 2,719 (31) (83) (114)
- Net gains (losses) on the sale of non-current assets (1) - (1) 3,182 - 3,182
2013 2012
Operations
Design &
engineering Unallocated Total
Production /
Operations
Design &
engineering Unallocated Total
A B C A + B + C A B C A + B + C
Assets 40,270 58,351 58,596 157,217 42,617 59,015 95,888 197,520
Liabilities 55,769 27,007 45,021 127,797 74,422 24,361 58,923 157,706
Of which: other information required by IFRS 8:
- Equity-accounted investments - 51 - 51 - 104 - 104
- Intangible assets - 1,744 1,028 2,772 - 2,248 963 3,211
- Property, plant and equipment and investment property 35,310 26,975 723 63,008 36,157 27,895 773 64,825
- Employees 99 606 74 779 112 588 81 781
31 December 2013 31 December 2012
55
A breakdown of sales by geographical segment is provided below:
The corresponding figures for the year ended 31 December 2012 have been restated following the adoption of the revised IAS 19 - Employee Benefits.
Following the sale of the investment in the subsidiary Pininfarina Maroc SAS, effective as from 1 December 2013, the 2012 figures have been restated in accordance with IFRS 5 to separate the results of discontinued operations as from 2012.
2013 2012
Italy 9,888 8,819
EU 42,885 37,348
Non-EU countries 16,291 16,144
Revenue from sales and services 69,064 62,311
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Property, plant and equipment The carrying amount of property, plant and equipment at 31 December 2013 decreased to €53.9 million from €55.4 million at 31 December 2012. Capital expenditure was contained during the year and the Group’s commitments to purchase items of property, plant and equipment are immaterial at the reporting date.
The Bairo Canavese industrial site was leased to a third party in 2011, while the San Giorgio
Canavese site, following the discontinuance of production contracts, was used for the sale of spare
parts for the manufactured cars, a marginal business for the Group.
The carrying amount of the San Giorgio Canavese, Bairo Canavese and Cambiano real estate
complexes was tested for impairment by comparing it with independent experts’ appraisals or their
cash flows, as required by IAS 36 – Impairment of assets. The test did not identify any impairment
loss.
Details of the items of property, plant and equipment and related changes are provided in the
following tables. “Reclassification: Historical cost” and “Reclassification: Accumulated depreciation
and impairment losses” present historical costs and accumulated depreciation and impairment
losses separately, without affecting the carrying amount of property, plant and equipment at the
current and prior year reporting dates. Changes in property, plant and equipment and an analysis of the items making up the captions are set out below.
Land and buildings include the carrying amounts of owned and leased real estate complexes, comprising the production facilities located in via Castellamonte 6, Bairo Canavese (TO) and Strada provinciale per Caluso, San Giorgio Canavese (TO), the styling and engineering sites in via Nazionale 30, Cambiano (TO) and two properties in Turin and Beinasco (TO). Leased property shows the carrying amount of the portion of the Cambiano real estate complex under finance lease and accounted for in accordance with IAS 17 - Leasing.
Land BuildingsLeased
propertyTotal
Historical cost 11,176,667 42,499,353 13,066,662 66,742,682
Accumulated depreciation and impairment losses - (14,341,658) (4,169,615) (18,511,273)
Carrying amount at 31 December 2012 11,176,667 28,157,695 8,897,047 48,231,409
Reclassification: Historical cost - 9,478,245 - 9,478,245
Reclassification: Acc. depreciation and imp. losses - (9,478,245) - (9,478,245)
Additions - - - -
Disposals: Historical cost - - - -
Disposals: Acc. depreciation and imp. losses - - - -
Depreciation - (896,223) (358,548) (1,254,771)
Impairment losses - - - -
Reclassifications - - - -
Other changes - - - -
Carrying amount at 31 December 2013 11,176,667 27,261,472 8,538,499 46,976,638
of which
Historical cost 11,176,667 51,977,598 13,066,662 76,220,927
Accumulated depreciation and impairment losses - (24,716,126) (4,528,163) (29,244,289)
57
All land and buildings located in Italy are owned by Pininfarina S.p.A.. They are mortgaged to Banca Nazionale del Lavoro S.p.A. to secure the outstanding financing of €12 million at 31 December 2013. Reference should be made to the “Change in accounting policies” section and the note to Investment property for details about the reclassification of the property owned by the subsidiary Pininfarina Deutschland GmbH.
Plant and machinery at 31 December 2013 include generic production plant and machinery, mainly
based at the production facilities located in Bairo and San Giorgio Canavese and the plant and
machinery used in the Cambiano facility.
Additions of the year mainly relate to plant installed at the Cambiano facility.
Machinery Plant
Leased plant
and
machinery
Total
Historical cost 61,339,153 163,005,698 122,353,360 346,698,211
Accumulated depreciation and impairment losses (61,076,511) (157,769,093) (122,353,360) (341,198,964)
Carrying amount at 31 December 2012 262,642 5,236,605 - 5,499,247
Reclassification: Historical cost (55,605,065) (81,617,865) - (137,222,930)
Reclassification: Acc. depreciation and imp. losses 55,605,065 81,617,865 - 137,222,930
Additions - 642,321 - 642,321
Disposals: Historical cost - - - -
Disposals: Acc. depreciation and imp. losses - - - -
Depreciation (29,654) (636,783) - (666,437)
Impairment losses (60,100) - - (60,100)
Reclassifications - (621) - (621)
Other changes - 18 - 18
Carrying amount at 31 December 2013 172,888 5,241,540 - 5,414,428
of which
Historical cost 5,734,088 82,029,533 122,353,360 210,116,981
Accumulated depreciation and impairment losses (5,561,200) (76,787,993) (122,353,360) (204,702,553)
Furniture and
fixtures
Hardware and
softwareOther assets Total
Historical cost 4,470,005 8,766,935 1,779,853 15,016,793
Accumulated depreciation and impairment losses (4,195,052) (7,842,754) (1,348,684) (13,386,490)
Carrying amount at 31 December 2012 274,953 924,181 431,169 1,630,303
Reclassification: Historical cost (2,038,154) (3,362,698) (992,444) (6,393,296)
Reclassification: Acc. depreciation and imp. losses 2,038,154 3,362,698 992,444 6,393,296
Additions 68,142 281,573 40,614 390,329
Disposals: Historical cost (44,250) (259,758) (31,551) (335,559)
Disposals: Acc. depreciation and imp. losses 23,414 212,859 31,262 267,535
Depreciation (81,259) (312,136) (41,619) (435,014)
Impairment losses - - - -
Reclassifications 1,627 (1,666) - (39)
Other changes (2,772) 2,858 812 898
Carrying amount at 31 December 2013 239,855 847,911 430,687 1,518,453
of which
Historical cost 2,457,370 5,424,386 796,472 8,678,228
Accumulated depreciation and impairment losses (2,217,515) (4,576,475) (365,785) (7,159,775)
58
Additions to furniture and fixtures are mainly related to the Pininfarina Deutschland Group, while those to hardware and software refer to the parent and the subsidiaries Pininfarina Extra and Pininfarina Maroc SAS and are mainly purchases of IT material for technological upgrading. “Disposals: Historical cost” and “Disposals: Depreciation and impairment losses” principally relate to the deconsolidation of the subsidiary Pininfarina Maroc SAS from 30 November 2013. 2. Investment property The Group’s investment property consists of buildings owned by Pininfarina Deutschland GmbH in Renningen, near Stuttgart, Germany, which are leased to third parties. They are mortgaged for €1 million to secure a loan received by the German subsidiary, which currently has an outstanding amount of €500,000.
3. Intangible assets The carrying amount of intangible assets at 31 December 2013 decreased to €2.8 million from €3.2 million at 31 December 2012.
“Reclassification: Historical cost” and “Reclassification: Accumulated amortisation and impairment
losses” present historical costs and accumulated amortisation and impairment losses separately,
without affecting the carrying amount of intangible assets at the current and prior year reporting
dates.
Land Buildings Total
Historical cost 5,807,378 12,130,247 17,937,625
Accumulated depreciation and impairment losses - (8,473,382) (8,473,382)
Carrying amount at 31 December 2012 5,807,378 3,656,865 9,464,243
Additions - - -
Disposals: Historical cost - - -
Disposals: Acc. depreciation and imp. losses - - -
Depreciation - (365,685) (365,685)
Impairment losses - - -
Reclassifications - - -
Other changes - - -
Carrying amount at 31 December 2013 5,807,378 3,291,180 9,098,558
of which
Historical cost 5,807,378 12,130,247 17,937,625
Accumulated depreciation and impairment losses - (8,839,067) (8,839,067)
59
The increase for the year mainly refers to software development activities and acquisition of licences by Pininfarina S.p.A. and Pininfarina Extra S.r.l.. The remaining goodwill of €1,043,495, which is the Group’s only intangible asset with an indefinite useful life, originates from the consolidation of Pininfarina Extra S.r.l.. Within the Pininfarina Group, the Pininfarina Extra subgroup, which is comprised of Pininfarina Extra S.r.l., Pininfarina of America Corp. (formerly Pininfarina USA Corp.) and the associate Goodmind S.r.l., engages in styling activities that are not related to the automotive industry. Consequently, it constitutes a separate cash generating unit. The impairment test on the Pininfarina Extra subgroup’s net assets did not identify any impairment loss. As detailed below, the test has been carried out using the Unlevered Discounted Cash Flow model:
the subgroup’s operating cash flows from third parties have been discounted using a WACC rate of 9.05% (8.23% at the previous year end). The estimated future cash flows are those set out in the plans prepared by the directors based on reasonable and supportable assumptions that represent their best estimate of the future economic conditions;
the Pininfarina Extra subgroup’s net financial debt with third parties and net assets have been deducted from the discounted cash flows; the resulting figure has been compared with the carrying amount of goodwill.
As required by IAS 36 - Impairment of assets, the current and prior year parameters used to calculate the WACC rate are set out below:
segment beta: this shows the segment’s risk level and amounts to 1.8 (1.8 at the previous year end);
Market Risk Premium (“MRP”): equal to 5.7%, this shows the difference between the expected return
on a risky asset and risk-free asset (5% at the previous year end);
Risk Free Rate (“RFR”): amounts to 4.5 (4.5% at the previous year end);
cost of debt: amounts to 6.5 (6.5% at the previous year end). “Decrease” and “Decrease: amortisation and impairment losses” principally relate to the deconsolidation of the subsidiary Pininfarina Maroc SAS as from 30 November 2013.
GoodwillLicences and
trademarksOther assets Total
Historical cost 1,043,495 13,185,536 2,261,489 16,490,520
Accumulated amortisation and impairment losses - (11,234,644) (2,044,619) (13,279,263)
Carrying amount at 31 December 2012 1,043,495 1,950,892 216,870 3,211,257
Reclassification: Historical cost - (8,183,742) (201,900) (8,385,642)
Reclassification: Acc. amortisation and imp. losses - 8,183,742 201,900 8,385,642
Increase - 499,942 9,270 509,212
Decrease - (504,623) - (504,623)
Decrease: Acc. amortisation and imp. losses - 221,932 - 221,932
Amortisation - (596,236) (73,399) (669,635)
Impairment losses - - - -
Reclassifications - - 3,849 3,849
Other changes - - - -
Carrying amount at 31 December 2013 1,043,495 1,571,907 156,590 2,771,992
of which
Historical cost 1,043,495 4,997,113 2,072,708 8,113,316
Accumulated amortisation and impairment losses - (3,425,206) (1,916,118) (5,341,324)
60
4. Investments in associates and joint ventures Associates Goodmind S.r.l., incorporated in July 2012, provides communication services to companies and public sector entities. It was inactive and did not have any employee at 31 December 2012. The Group’s share of its 2013 loss amounts to €3,485. Goodmind S.r.l. had one employee at the reporting date.
Joint ventures At their meeting of 30 April 2013, the shareholders resolved to dissolve the joint venture Pininfarina Recchi Buildingdesign S.r.l. as it did not attain the business objects for which it was set up in 2008. The application for striking off the company from the company register took effect on 20 December 2013. The impairment loss recognised in 2013 is €24,521.
5. Equity investments in other companies There was no change compared to 31 December 2012. 6. Loans and receivables Changes in loans and receivables (third parties and joint ventures) are set out below.
The non-current portion of loans and receivables includes the loan provided by Pininfarina Extra S.r.l. to the associate Goodmind S.r.l. to finance its start-up activities. 7. Assets held for trading
Assets held for trading mainly consist of government bonds and highly rated bonds, which represent
temporary, unrestricted investments of liquid assets that are not subject to a significant credit risk
exposure. However, these investments do not meet all the requirements for recognition as cash and
cash equivalents.
These assets are measured at fair value, based on their market prices. Fair value gains or losses
are recognised in profit or loss under Financial income/expense.
Management of the investment portfolio is outsourced to top flight counterparties with a market
reputation of high reliability.
The balance at 31 December 2013 includes a restricted investment of €2,000,000 to secure a surety
issued to De Tomaso Automobili S.p.A. to cover compensation obligations, as is customary in
31.12.2012 Increase Collection 31.12.2013
Third parties - - - -
Associates and joint ventures 50,313 31,816 (2,129) 80,000
Loans and receivables - Non-current portion 50,313 31,816 (2,129) 80,000
Third parties - - - -
Associates and joint ventures - - - -
Loans and receivables - Current portion - - - -
Loans and receivables 50,313 31,816 (2,129) 80,000
61
transactions involving the sale of business units. The maximum guaranteed liability equals the sales
price. The surety expires on 30 January 2015. 8. Inventories
Raw materials mainly consist of various materials used for the production of cars and prototypes at
the Cambiano facility. Finished goods consist of car spare parts manufactured by the Group, which
are sold to carmakers.
The table below shows a breakdown of inventories and the allowance for inventory write-down:
Changes in the allowance for inventory write-down, which reflects the risk of obsolete and slow-
moving items that arose during the phase out of production activities, are set out below.
Utilisations are due to the scrapping of production materials during the year. 9. Contract work in progress Contract work in progress shows the balance of gross contract work in progress less progress payments and advances.
The change for the year refers to styling and engineering contracts from customers inside and
outside the European Union.
31.12.2013 31.12.2012
Raw materials 1,208,113 743,986
(Allowance for inventory write-down) (553,858) (584,202)
Finished goods 580,602 769,963
(Allowance for inventory write-down) (339,744) (344,970)
Inventories 895,113 584,777
Allowance for
raw material
write-down
Allowance for
finished goods
write-down
Allowance for
raw material
write-down
Allowance for
finished goods
write-down
Opening balance 584,202 344,970 992,243 221,446
Additions - - - 263,472
Utilisations (30,344) (5,226) (408,041) (139,948)
Other changes - - - -
Closing balance 553,858 339,744 584,202 344,970
31.12.2013 31.12.2012
62
10. Trade receivables - third parties, associates and joint ventures The following table shows trade receivables at 31 December 2013 and 2012:
The Group’s main counterparties are major carmakers with a high credit rating. Since there are no
insurance contracts on receivables, the Group’s maximum exposure to credit risk is equal to the
carrying amount of the receivables less the allowance for impairment. The Group did not factor any
receivables during the current or the previous year. Trade receivables are mostly denominated in
Euros. Changes in the allowance for impairment are set out below:
Additions for the year refer to receivables of the Pininfarina Extra subgroup. Utilisations for 2012 and 2013 mainly refer to losses on the parent’s receivables from customers within and outside the European Union. The 31 December 2012 other changes reflected the effect of the deconsolidation of the portion of the allowance pertaining to the subsidiary Matra Automobiles Engineering SAS, which equalled the carrying amount of the corresponding trade receivables, which were also deconsolidated.
31.12.2013 31.12.2012
Italy 4,051,293 5,364,643
EU 8,756,718 11,113,781
Non-EU countries 5,009,953 3,928,782
(Allowance for impairment) (1,303,522) (1,147,873)
Third parties 16,514,442 19,259,333
Associates and joint ventures - -
Trade receivables 16,514,442 19,259,333
31.12.2013 31.12.2012
Opening balance 1,147,873 2,374,642
Additions 267,835 160,609
Utilisations (112,186) (448,808)
Other changes - (938,570)
Closing balance 1,303,522 1,147,873
63
11. Other assets The following table shows other assets at 31 December 2013 and 2012:
The change in the VAT asset is mainly attributable to the repayment collected by the parent in
September.
Grants for the Program II.3 “Più Sviluppo” project are due from the Piedmont Regional Authorities as
the first and second instalment of the forgivable loan for the “AMPERE” industrial research and
experimental development project. 12. Cash and cash equivalents The table below shows a breakdown of this caption and a comparison with the previous year-end corresponding figures:
Short-term bank deposits include the parent’s restricted account of €5,000,000 in favour of Banca Intermobiliare to secure the surety of the same amount that the latter provided to Reale Mutua Assicurazione, which, in turn, issued a surety of €9,649,751 to the tax authorities securing the repayment of the 2012 VAT receivable to the parent. The surety expires on 26 November 2016.
31.12.2013 31.12.2012
VAT 2,258,395 9,830,192
Withholding taxes 1,949,928 2,114,258
Advances to suppliers 133,607 133,231
Amounts due from INAIL (the Italian Workers Compensation Authority) 21,866 20,128
Amounts due from employees 34,824 56,098
Prepayments and accrued income 846,673 886,723
Grants for the Program II.3 "Più sviluppo" project 1,111,441 493,974
Other 303,436 273,413
Other assets 6,660,170 13,808,017
31.12.2013 31.12.2012
Cash on hand 22,670 36,302
Short-term bank deposits 18,371,004 41,465,108
Cash and cash equivalents 18,393,674 41,501,410
(Bank overdrafts) - (166,743)
Net cash and cash equivalents 18,393,674 41,334,667
64
13. Equity (a) Share capital
The share capital of the parent is comprised of 30,166,652 ordinary shares, with a unit nominal amount of €1. There are no other classes of shares. Treasury shares are held in accordance with the limits imposed by article 2357 of the Italian Civil Code. As required by the Framework Agreement of 31 December 2008, the shares held by Pincar S.r.l., equal to 76.06% of the share capital, are charged with a senior pledge, without voting rights, in favour of the parent’s lending institutions. Detailed information about the parent’s shareholders is provided in the the “General information” section of these notes. (b) Reserve for treasury shares This reserve of €175,697, unchanged from the previous year end, is recognised in accordance with the provisions of article 2357 of the Italian Civil Code. (c) Legal reserve The legal reserve of €6,033,331, which pursuant to the provisions of article 2430 of the Italian Civil Code cannot be distributed as dividends, increased by €3,801,942 as per the resolution passed by the shareholders on 6 May 2013. (d) Translation reserve The translation reserve reflects the cumulative differences from the translation of financial statements of companies with functional currencies other than the Euro, which is the Group’s presentation currency. These companies are Pininfarina Automotive Engineering (Shanghai) Co Ltd. and Pininfarina of America Corp.. Following the sale of the investment in Pininfarina Maroc SAS, cumulative translation difference on the foreign operations of €7,515 have been reclassified to the loss for the year calculated in connection with the disposal of the subsidiary in accordance with IAS 21 - The Effects of Changes in Foreign Exchange Rates. (e) Other reserves Other reserves are unchanged from the previous year end. The Group has no stock option plans or other instruments requiring share-based payments. (f) Retained earnings (losses carried forward) Retained earnings totalled €818,030 at the reporting date, up by €29,148,315 from the 31 December 2012 figure. The increase includes the 2012 profit of €32,943,762, net of the allocation of €3,801,942 to the legal reserve and the effect for the year of the adoption of IAS 19 (revised), quantified at €6,495.
Nominal
amount No.
Nominal
amount No.
Ordinary shares 30,166,652 30,166,652 30,166,652 30,166,652
(Treasury shares) (15,958) (15,958) (15,958) (15,958)
Share capital 30,150,694 30,150,694 30,150,694 30,150,694
31.12.2013 31.12.2012
65
The table classifying the parent’s equity reserves by possible use and availability is provided in the notes to the parent’s separate financial statements, to which reference is made. The table reconciling the parent’s loss and equity as at and for the year ended 31 December 2013 with the Group’s relevant figures is provided in the directors’ report, to which reference is made. 14. Loans and borrowings
Rescheduling Agreement
(a) Rescheduling Agreement
The Rescheduling Agreement (the “Agreement”) between Pininfarina S.p.A. and its lending
institutions became effective on 1 May 2012. Its effects are summarised below:
- the rescheduling of term financing and finance leases totalling €182.5 million and a portion of
the operating lines amounting to €18 million to 2018;
- the adoption of a fixed annual interest rate of 0.25% for the borrowings mentioned above.
The Agreement does not apply to the loan granted to Pininfarina S.p.A. by BNL (formerly Fortis
Bank).
(b) Fair value of restructured debt
The fair value of the restructured debt was determined by discounting the cash flows from the
Rescheduling Agreement to their present value at a 6.5% rate, determined with the support of a
third-party financial advisor, as the sum of 1) the return on risk-free investments and 2) a credit
spread attributed to Pininfarina S.p.A..
The table below summarises the changes in loans and borrowings:
31.12.2012
2013
repayments
Figurative
interest
Changes in
operating
lines
Current/non-
current
reclassification 31.12.2013
Finance lease liabilities 47,988,048 - 4,003,662 - (51,991,710) -
Other loans and borrow ings 42,354,625 - 2,485,878 - (37,318,607) 7,521,896
Non-current portion 90,342,673 - 6,489,540 - (89,310,317) 7,521,896
Bank overdrafts 166,743 - - (166,743) - -
Finance lease liabilities 16,898,070 (16,898,070) - - 51,991,710 51,991,710
Other loans and borrow ings 15,528,932 (15,528,934) - - 37,318,607 37,318,605
Current portion 32,593,745 (32,427,004) - (166,743) 89,310,317 89,310,315
Current and non-current portions 122,936,418 (32,427,004) 6,489,540 (166,743) - 96,832,211
Of which:
Finance lease liabilities 64,886,118 (16,898,070) 4,003,662 - - 51,991,710
Other loans and borrow ings 57,883,557 (15,528,934) 2,485,878 - - 44,840,501
Leases and financing 122,769,675 (32,427,004) 6,489,540 - - 96,832,211
66
Other loans and borrowings include the amounts due to the lending institutions of Pininfarina S.p.A., parties to the Agreement, and to Banca Nazionale del Lavoro S.p.A. (formerly Fortis Bank), pursuant to the relevant loan and financing agreements.
A breakdown of the contractual amount of the Group’s financial debt is set out above. As discussed
in the directors’ report, due to its failure to comply with one of the two 2013 covenants, the Group
has reclassified its loans and borrowings to current liabilities, except for those with BNL S.p.A. as
they are not covered by the Rescheduling Agreement.
A breakdown of the contractual cash flows by maturity is provided in paragraph (e) of the “Financial
risk management” section. In line with the disclosures provided in previous financial statements, a breakdown of changes by lender is set out below:
Transactions with Banca Nazionale del Lavoro S.p.A., formerly Fortis Bank
On 25 June 2008, Pininfarina S.p.A. and Banca Nazionale del Lavoro S.p.A. (formerly Fortis Bank)
entered into an agreement (the “Fortis Agreement”) separate from the Rescheduling Agreement of
31 December 2008, aimed at defining a plan for the repayment of interest-bearing debt in half-yearly
instalments, the last one of which is due on 31 December 2015. This separate agreement is
independent of the new Rescheduling Agreement that became effective on 1 May 2012.
Further to the court orders served on Pininfarina S.p.A. on 28 March 2008 and 19 April 2008, Banca
Nazionale del Lavoro S.p.A. (formerly Fortis Bank) was granted court-ordered mortgages on the
buildings owned by the parent, which secure loans currently approximating €12 million.
31.12.2012 2013
repayments
Figurative
interest 31.12.2013
Leasint S.p.A. 14,379,258 (3,744,741) 887,242 11,521,759
MPS Leasing & Factoring S.p.A. 7,189,630 (1,872,370) 443,621 5,760,881
Selmabipiemme S.p.A. 7,189,630 (1,872,370) 443,621 5,760,881
Release S.p.A. 19,325,478 (5,032,869) 1,192,438 15,485,047
BNP Paribas Lease Groupe S.p.A. 6,173,740 (1,607,806) 380,938 4,946,872
UBI Leasing S.p.A. 3,086,869 (803,903) 190,469 2,473,435
Unicredit Leasing S.p.A. 7,541,513 (1,964,011) 465,333 6,042,835
Finance lease liabilities 64,886,118 (16,898,070) 4,003,662 51,991,710
Banca Intesa Sanpaolo S.p.A. 11,134,214 (2,899,646) 687,014 8,921,582
Banca Intesa Sanpaolo S.p.A. (former operating line) 3,146,277 (819,373) 194,134 2,521,038
Banca Italease S.p.A. 835,067 (217,473) 51,526 669,120
Unicredit S.p.A. 9,074,033 (2,363,120) 559,895 7,270,808
Banca Nazionale del Lavoro S.p.A. 1,687,003 (439,340) 104,093 1,351,756
Banca Regionale Europea S.p.A. 4,639,257 (1,208,186) 286,255 3,717,326
Banca Regionale Europea S.p.A. (former operating line) 2,097,516 (546,249) 129,423 1,680,690
Banco Pop. Cooperativo S.p.A. 3,479,443 (906,139) 214,692 2,787,996
Banco Pop. Cooperativo S.p.A. (former operating line) 1,573,137 (409,686) 97,067 1,260,518
MPS S.p.A. (former operating line) 2,621,894 (682,811) 161,779 2,100,862
Volksbank Region Leonberg (GER) 500,000 - - 500,000
Loans and borrowings 40,787,841 (10,492,023) 2,485,878 32,781,696
BNL S.p.A. (formerly Fortis Bank) 17,095,716 (5,036,911) - 12,058,805
Leases and financing 122,769,675 (32,427,004) 6,489,540 96,832,211
67
Other information
The €500,000 loan is due to Volksbank Region Leonberg (GER) by Pininfarina Deutschland, which is the only consolidated company with non-current debt.
Consequently, the Group’s loans and borrowings are not subject to currency risk.
15. Post-employment benefits
Post-employment benefits shows the present value of the obligation to employees under article
2120 of the Italian Civil Code. Following the changes introduced to Italian laws five years ago,
benefits vested before 1 January 2007 are classified as defined benefit plans pursuant to IAS 19 -
Employee Benefits, while those accrued thereafter are classified as defined contribution plans.
Changes for the year are provided below:
The business lease signed by the parent and a company of the Cecomp Group in 2011 expired on 31 December 2013. It was renewed with Bluecar Italy S.r.l., a company of the Bolloré Group. The agreement includes the transfer of 52 employment contracts and related post-employment benefits up until the lease expires (31 December 2016).
The main assumptions underlying the actuarial calculation of the liability in the current and previous
years are set out below:
The adopted discount rate refers to the market yield of AA-rated Euro securities. Moreover, the sensitivity analysis carried out increasing/decreasing the base rate by 10% did not show significant changes with respect to the current post-employment benefit obligation.
31.12.2013 31.12.2012
Opening post-employment benefits 7,286,941 7,547,822
Interest cost recognised in profit or loss 214,128 197,513
Current service cost recognised in profit or loss 38,033 9,618
Actuarial (gains) losses recognised in other comprehensive income (expense) (2,340) 95,129
Payments (390,814) (563,141)
Closing post-employment benefits 7,145,948 7,286,941
2013 2012
Annual inflation rate 1.5% 2.2%
Benefit discount rate 2.5% 3.0%
Annual salary increase rate 0.5% - 1.5% 0.5% - 1.5%
68
16. Trade payables and other financial liabilities (a) Trade payables
The reporting-date balance does not include significant overdue amounts and comprises amounts
that will be paid within twelve months of the reporting date. Trade payables to third parties includes
deferred income of €3.3 million relating to the portion of progress billings exceeding the styling and
engineering contracts’ stage of completion. Advances for contract work in progress mainly relate to new contracts. (b) Other financial liabilities
17. Provisions for risks and charges, contingent liabilities and litigation (a) Provisions for risks and charges Changes in provisions for risks and charges are set out below, with a comment on the main changes:
The provision for product warranty represents the best estimate of the parent’s contractual and legal obligations with regard to costs entailed by warranties provided on certain components of the vehicles it manufactured for a specific period, starting from the sale of the vehicles to end customers. The above-mentioned estimate was determined based on the Group’s experience, specific contractual terms and product specifications and defect data generated by the statistical survey systems of the Group’s customers.
31.12.2013 31.12.2012
Third parties 14,098,039 13,266,794
Associates and joint ventures - -
Advances for contract work in progress 1,113,259 992,405
Trade payables 15,211,298 14,259,199
31.12.2013 31.12.2012
Wages and salaries payable 1,783,550 1,786,569
Social security charges payable 981,716 1,648,536
Other 2,004,623 2,012,197
Other financial liabilities 4,769,889 5,447,302
31.12.2012 Additions Utilisations
Other
changes 31.12.2013
Provision for product warranty 63,578 - (967) - 62,611
Restructuring provision 4,462,500 - (612,988) (1,550,000) 2,299,512
Other provisions 2,289,495 328,001 (659,541) (1,622,391) 335,564
Provisions for risks and charges 6,815,573 328,001 (1,273,496) (3,172,391) 2,697,687
69
The restructuring provision represents the best estimate of the liability for restructuring at the
reporting date. The “Other changes” column reflects the effects of changes in estimates of the
liability initially recognised in 2011 following the announcement of the Group’s intention to make 127
people redundant (87 at the reporting date) due to the discontinuance of production. Utilisations
cover the 2013 costs for termination benefits.
Other provisions reflect the estimated liabilities that may arise from losses to complete styling and
engineering contracts, potential disputes with former employees and environmental risks.
The “Other changes” column mainly reflects the effects of changes in estimates of certain liabilities
related to terminated production activities and other effects generated by the exit of Pininfarina
Maroc SAS from the consolidation scope. (b) Contingent liabilities and litigation
Registration tax
On 24 December 2013, the parent was notified of 14 orders for payment of tax and decisions to
impose penalties (“Orders”), each relating to a pro rata “financial liability” recognised by Pininfarina
S.p.A. with almost all lending institutions involved in the Rescheduling Agreement signed in Lugano
(Switzerland) on 31 December 2008. In addition to the request for payment of the allegedly due
registration tax and related interest, each Order imposes a sanction amounting to 120% of the
assessed tax. The overall amount requested is €11.4 million.
Almost all lending institutions received similar orders for payment, which are jointly and severally
liable with the parent vis-a-vis the tax authorities.
As it is certain of its correct conduct, the parent appealed against the Orders on 5 February 2014
(paying the assessed taxes plus interest for an overall amount of €5.6 million). The case is currently
pending before the local tax court.
VAT
This dispute, which arose in 2007 regarding the allegation that VAT should have been levied on the
amounts invoiced in 2002 and 2003 by the parent to Peugeot Citroen Automobiles SA, is currently
pending before the Supreme Court of Cassation. There was no development in this case as of the
approval date hereof. 18. Current and deferred taxes (a) Deferred taxes The table below provides a breakdown of deferred tax assets and liabilities:
The net deferred tax assets shown in the consolidated financial statements mainly refer to the German companies (Pininfarina Deutschland GmbH, mpx Entwicklung GmbH – Munich and mpx Entwicklung GmbH – Stuttgart). They reflect the recoverable portion of the tax loss carryforward,
31.12.2013 31.12.2012
Deferred tax assets 946,970 928,815
(Deferred tax liabilities) - -
Net deferred tax assets 946,970 928,815
70
determined based on forecast future taxable profit and taking into account the agreement for the filing of a national consolidated tax return signed by the German companies. A breakdown of unrecognised deferred tax assets and liabilities and related comments are set out below:
“Offsettable” deferred tax assets and liabilities are calculated for all differences between the assets’ and liabilities’ carrying amount and tax base in accordance with paragraph 74 of IAS 12 - Income taxes, which requires offsetting if the Group has a legally enforceable right to set off in the same tax jurisdiction. Deferred tax assets on tax loss carryforwards are calculated applying the relevant tax rate to the tax loss carryforwards shown in the annual tax return. The balance is mainly attributable to Pininfarina S.p.A., the Pininfarina Deutschland GmbH subgroup and the subsidiary Pininfarina Automotive Engineering Shanghai Co Ltd.. A breakdown of tax loss carryforwards and related deferred tax assets by geographical segment is set out below:
The Group has not recognised the deferred tax assets resulting from the above calculation as the generation of taxable profit in the short-medium term enabling the full use of the tax losses and deductible temporary differences is not probable. (b) Current taxes Income taxes recognised in profit or loss are detailed below:
31.12.2013 31.12.2012
Deferred tax assets on tax losses 27,151,190 18,649,378
Offsettable deferred tax assets on other temporary differences 12,919,526 17,967,422
(Offsettable deferred tax liabilities on other temporary differences) (5,706,325) (5,488,178)
Total 34,364,391 31,128,622
Tax loss
carryforwards
Deferred tax
assets
Tax loss
carryforwards
Deferred tax
assets
31.12.2013 31.12.2013 31.12.2012 31.12.2012
Italy 80,928,771 22,255,412 48,813,331 13,423,666
Germany 43,283,000 4,798,664 44,028,000 4,906,554
China 388,455 97,114 1,276,633 319,158
Tax loss carryforwards 124,600,226 27,151,190 94,117,964 18,649,378
2013 2012
Income taxes (1,253) (48,656)
IRAP (Regional tax on production activities) (125,132) (97,852)
Release of excess provision - 26,262
Current taxes (126,385) (120,246)
Net deferred tax income 14,001 36,414
Income taxes (112,384) (83,832)
71
Income taxes refer to the subsidiaries Pininfarina Extra S.r.l., Pininfarina of America Corp. and Pininfarina Deutschland GmbH. IRAP solely refers to Pininfarina Extra S.r.l.. The corresponding figures for 2012 have been restated following the adoption of the revised IAS 19 - Employee Benefits. Following the sale of the investment in the subsidiary Pininfarina Maroc SAS, effective as from 1 December 2013, the 2012 figures have been restated in accordance with IFRS 5 to separate the results of discontinued operations as from 1 January 2012. 19. Revenue from sales and services
Sales refer mainly to revenue from sales of spare parts. Services show amounts invoiced for styling
and engineering services.
Segment reporting is provided on page 54. Following the sale of the investment in the subsidiary Pininfarina Maroc SAS, effective as from 1 December 2013, the 2012 figures have been restated in accordance with IFRS 5 to separate the results of discontinued operations as from 1 January 2012. 20. Other revenue and income
Lease income mainly refers to the business lease signed by Pininfarina S.p.A. and a third party on 1 April 2011 and leases for the two buildings located in Renningen, near Stuttgart, in Germany, owned by the subsidiary Pininfarina Deutschland GmbH. Prior year income refers to prior period income and estimating differences, other than errors, resulting from the regular updating of estimates made in previous years by Pininfarina S.p.A. and the Pininfarina Deutschland subgroup.
2013 2012
Sales - Italy 988,076 1,544,112
Sales - EU 2,369,657 5,165,157
Sales - Non-EU countries 445,203 1,686,091
Services - Italy 8,900,173 7,275,305
Services - EU 40,515,814 32,182,823
Services - Non-EU countries 15,845,536 14,457,650
Revenue from sales and services 69,064,459 62,311,138
2013 2012
Lease income 5,669,712 5,655,785
Prior year income 171,359 35,710
Insurance compensation 10,290 63,368
Royalties 593,722 549,000
Rebilling 173,247 151,105
Grants relating to income 666,412 614,756
Sundry 83,858 77,122
Other revenue and income 7,368,600 7,146,846
72
Royalties mainly refers to fees for the licence to use the Pininfarina trademark granted to the Bolloré S.A. Group for the electric cars produced at the Bairo Canavese facility and residual effects on foreign subsidiaries.
Grants relating to income include the forgivable loan for the “AMPERE” industrial research and
experimental development project granted by the Piedmont regional authorities.
Following the sale of the investment in the subsidiary Pininfarina Maroc SAS, effective as from 1 December 2013, the 2012 figures have been restated in accordance with IFRS 5 to separate the results of discontinued operations as from 1 January 2012. 21. Raw materials and components Raw materials and components mainly include purchases of equipment and materials used for the styling and engineering contracts and spare parts resold by the Group. 22. External variable engineering services External variable engineering services mainly refer to design and technical services. 23. Wages, salaries and employee benefits
The €3.5 million increase is mainly due to the parent (€0.6 million), the Pininfarina Deutschland subgroup (€2.7 million) and the Pininfarina Extra subgroup (€0.2 million). In the case of Pininfarina S.p.A., despite a reduction of 15 heads in the average number of employees during the year, employees with higher qualification were also hired, leading to an increase in the average cost. In Germany, the average number of employees increased (30 heads) compared to 2012, in order to meet production requirements. The average number of employees of the Pininfarina Extra subgroup increased by one.
Utilisation of the restructuring provision refers to the amounts paid to employees who resigned
during the year, in accordance with the voluntary redundancy plan.
Post-employment benefits – defined contribution plan reflect the costs related to post-employment
benefits both for defined benefit and defined contribution plans.
The corresponding figures for 2012 have been restated following the adoption of the revised IAS 19 - Employee Benefits.
Following the sale of the investment in the subsidiary Pininfarina Maroc SAS, effective as from 1 December 2013, the 2012 figures have been restated in accordance with IFRS 5 to separate the results of discontinued operations as from 1 January 2012.
2013 2012
Wages and salaries (37,324,127) (34,495,078)
Social security contributions (9,417,542) (8,697,547)
Utilisation of restructuring and other provisions 817,204 742,329
Blue collars, white collars and managers (45,924,465) (42,450,296)
Post-employment benefits - defined contribution plan (1,610,361) (1,537,189)
Wages, salaries and employee benefits (47,534,826) (43,987,485)
73
A breakdown of the actual number of employees at 31 December 2013 and the average number for the year is set out below, as per article 2427 of the Italian Civil Code, calculated by adding the number of employees at the beginning and end of the year and dividing the result by two:
The business lease to a third party, which expired on 31 December 2013 and was renewed for another three years, includes the transfer of 52 employment contracts (54 at 31 December 2012).
Following the sale of the investment in the subsidiary Pininfarina Maroc SAS, effective as from 1 December 2013, the 2012 numbers of employees have been restated in accordance with IFRS 5 to separate those of the discontinued operations as from 2012 (decrease of 34 heads at 31 December 2012 and 35 in the average 2012 figure).
The actual number of employees at the reporting date includes 87 employees (originally 127) covered by a redundancy programme due to discontinuation of production activities.
24. Additions to/utilisation of provisions and impairment losses
Reference should be made to note 17 for details of additions to the provisions for risks and charges.
actual average actual average
Managers 21 23 24 23
White collars 689 697 694 677
Blue collars 69 62 63 68
Total 779 783 781 768
2013 2012
2013 2012
Impairment losses/reversals of impairment losses on loans and receivables (214,084) (160,609)
Additions to provisions for risks and charges (328,001) (940,132)
Utilisation and revised estimates of provisions for risks and charges 3,260,500 1,210,969
Impairment losses on property, plant and equipment (60,100) - Impairment losses on loans - -
Impairment losses on equity investments (24,521) (125,175)
Net additions to/utilisation of provisions and impairment losses 2,633,794 (14,947)
74
25. Other expenses
Travel expenses mainly include costs incurred for the transfer to Germany of personnel dedicated to the BMW contract.
Consulting and other services for 2012 included costs incurred by the parent for assistance with the
preparation of the new business and financial plan.
Indirect taxes includes the single local tax of €448,679, the €189,490 tax on service contracts with
certain Chinese customers and other minor taxes.
General services and other expenses include costs for guarantees and settlements in court, net of
utilisations of the relevant provisions, incurred by the parent and miscellaneous expenses incurred
by subsidiaries.
Leases mainly refer to IT equipment, forklift trucks and cars used by employees. These are
operating leases pursuant to IAS 17 – Leases and do not entail special commitments for the Group.
The increase for the year is principally due to the German Group.
2013 2012
Travel expenses (2,476,240) (1,589,358)
Leases (2,157,327) (2,047,616)
Directors' and statutory auditors' fees (1,153,216) (1,082,927)
Consulting and other services (2,615,051) (4,189,592)
Other personnel costs (710,108) (684,564)
Postal expenses (439,253) (425,244)
Cleaning and waste disposal services (211,661) (250,105)
Advertising (373,916) (502,282)
Indirect taxes (813,104) (913,020)
Insurance (471,337) (512,935)
Membership fees (106,192) (95,651)
Prior year expense (63,162) (27,631)
General services and other expenses (614,612) (757,754)
Other (299,479) (387,054)
Other expenses (12,504,658) (13,465,733)
75
26. Net financial expense
Bank interest and expense refer to interest paid on credit lines by subsidiaries and bank fees.
Lease interest expense of €4,213,370 shows the effect of amortised-cost accounting (€4,003,662)
and interest paid under the new Agreement (€209,708).
Interest expense on loans and financing of €2,817,371 comprises the effect of amortised-cost
accounting (€2,485,878), interest accrued on the loan due to Banca Nazionale del Lavoro (formerly
Fortis Bank) (€197,019) and interest accrued under the new Agreement (€130,669). The remainder
is due to foreign companies.
Lease interest expense and interest expense on loans and financing was paid on 28 June and 31
December 2013, whereas that accrued to Banca Nazionale del Lavoro (formerly Fortis Bank) was
paid on 1 July and 31 December 2013, as contractually provided for.
Bank interest income accrued on the current account positive balances.
The fair value gains on assets held for trading arise from the different performances and amounts of the securities in portfolio during the current and previous years.
Interest income on loans and receivables - third parties for the previous year related to the measurement of financial assets at amortised cost, as required by IFRIC 4. It was fully collected.
Interest income on loans and receivables - associates and joint ventures of €1,816 accrued on the
loan granted to the associate Goodmind S.r.l. by Pininfarina Extra S.r.l.. 27. Gain on the extinguishment of financial liabilities
In 2012, the substantial modification of the terms of financial liabilities resulted in the extinguishment
of the carrying amount of the pre-rescheduling obligation outstanding on the effective date (1 May
2012) and the recognition of the restructured obligation at its fair value.
The positive difference between these two amounts, amounting to €44,835,434, has been
recognised as a gain on extinguishment of financial liabilities.
2013 2012
Bank interest and expense (472,778) (575,171)
Lease interest expense (4,213,370) (5,290,175)
Interest expense on loans and financing (2,817,371) (2,704,858)
Financial expense (7,503,519) (8,570,204)
Bank interest income 747,179 1,528,343
Fair value gains on assets held for trading 952,728 2,134,863
Interest income on loans and receivables - third parties 27,123 1,084,725
Interest income on loans and receivables - joint ventures 1,816 125,903
Financial income 1,728,845 4,873,834
Net financial expense (5,774,673) (3,696,370)
76
28. Profit (loss) from discontinued operations
(a) Profit (loss) from discontinued operations The investments in the subsidiary Pininfarina Maroc SAS held by Pininfarina S.p.A. and the subsidiary Pininfarina Extra S.r.l. were sold to third parties on 30 December 2013. The sold company was not classified as a discontinued operation or an asset held for sale at 31 December 2012. Accordingly, the Group restated the prior year corresponding figures presented in its statement of comprehensive income for comparative purposes, in order to present the discontinued operation separately from its continuing operations. The 2013 loss from the discontinued operation and the 2012 profit from the discontinued operation, restated in accordance with IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations, are detailed below:
(b) Cash flows from discontinued operations
These are set out below:
2013 2012
Revenue 783,420 1,513,215
Expense (1,022,432) (1,281,094)
Operating profit (loss) (239,013) 232,122
Income taxes (10,832) (51,505)
Operating profit (loss), net of tax (249,845) 180,617
Loss on the sale of discontinued operations (910,748) -
Profit (loss) from discontinued operations (1,160,593) 180,617
2013
Net cash and cash equivalents from operating activities 27,596
Net cash and cash equivalents from investing activities 57,771
Net cash and cash equivalents from financing activities -
Net cash and cash equivalents from discontinued operations 85,367
Effect of the sale on the Group's financial position 2013
Property, plant and equipment (43,547)
Intangible assets (222,085)
Assets held for trading (513,152)
Trade receivables and other assets (373,622)
Cash and cash equivalents (42,229)
Trade payables and other financial liabilities 104,694
Provisions for risks and charges and other liabilities 79,192
Net assets (1,010,748)
Cash consideration collected 100,000
Cash and cash equivalents sold (42,229)
Net cash flow generated 57,771
77
OTHER INFORMATION Events after the reporting date: Reference should be made to the relevant section of the directors’ report for a discussion of events after the reporting date. Related party transactions The table below, which is presented pursuant to Consob communication no. DEM/6064293 of 28 July 2006, summarises related party transactions, including intragroup transactions. These transactions were carried out at market conditions, consistent with the nature of the goods exchanged or services provided. They were neither atypical nor unusual for the purposes of the above-mentioned communication.
In addition to the above figures, Studio Professionale Pavesio e Associati, related to the director Carlo Pavesio, provided legal assistance to the parent for total fees of €222,888 and Pantheon Italia S.r.l., related to the director Roberto Testore, provided commercial assistance for total fees of €60,000. Significant non-recurring transactions As required by Consob communication no. DEM/6064293 of 28 July 2006, the Group specifies that it did not recognise any significant non-recurring transactions in 2013. Atypical and unusual transactions As required by Consob communication no. DEM/6064293 of 28 July 2006, the Pininfarina Group specifies that it did not carry out atypical or unusual transactions during the year, as defined in the above-mentioned Communication, according to which atypical and/or unusual transactions are transactions that, because of their significance/material amount, nature of the counterparty, subject, method used to determine the transfer price and timing of the event, could create doubts as to: the fairness/completeness of the disclosure provided in the financial statements, the existence of a conflict of interest, the safeguarding of corporate assets and the protection of non-controlling investors.
Assets Liabilities Assets Liabilities Revenue Expense Income Expense
Goodmind S.r.l. - - 80,000 - 20,019 - 1,816 -
Total - - 80,000 - 20,019 - 1,816 -
Commercial Financial Operating Financial
78
Disclosure required by article 149-duodecies of the Issuer Regulation The 2013 fees for audit and non-audit services provided by KPMG and other entities of its network are detailed below, pursuant to article 149-duodecies of the Issuer Regulation.
(1) The figure includes €10,000 for the translation of financial documents. (2) The figure include additional fees of €1,000, for the procedures performed in connection with
the merger carried out by the German Group.
Service
Service
provider
Service
recipient Fee
KPMG S.p.A. Pininfarina S.p.A. (1) 83,000
KPMG S.p.A. Pininfarina Extra S.r.l. 10,000
KPMG network Subsidiaries (2) 43,500
136,501 Audit
79
LIST OF CONSOLIDATED COMPANIES
Name Registered off ice Country
Share/
quota capital Currency
Consolidated
% Investor
Investment
%
Parent
Parent
Pininfarina S.p.A. Turin
Via Bruno Buozzi 6 Italy 30,166,652 € 100
Consolidated subsidiaries
Italian subsidiaries
Pininfarina Extra S.r.l. Turin
Via Bruno Buozzi 6 Italy 388,000 € 100 Pininfarina S.p.A. 100
Foreign subsidiaries
Pininfarina of America Corp.
Miami FL
1101 Brickell Ave - South Tow er -
8th Floor USA 10,000 USD 100 Pininfarina Extra S.r.l. 100
Pininfarina Deutschland GmbH Leonberg
Riedw iesenstr. 1 Germany 3,100,000 € 100 Pininfarina S.p.A. 100
mpx Entw icklung GmbH Munchen
Frankfurter Ring 17 Germany 25,000 € 100 Pininfarina Deutschland GmbH 100
Pininfarina Automotive Engineering (Shanghai) Co Ltd
Room 806, No. 888 Moyu (S) Rd.
Anting Tow n, 201805, Jiading
district, Shanghai, China China 3,702,824 CNY 100 Pininfarina S.p.A. 100
Equity-accounted investees
Goodmind S.r.l.Cambiano (TO)
Via Nazionale 30 Italy 20,000 € 20 Pininfarina Extra S.r.l. 20
80
Key figures of the main Group companies
(IFRS figures)
Pininfarina Extra Group Registered office: Turin - I Quota capital €388,000 Investment percentage 100%
31.12.2013 31.12.2012 (€’million) Value of production 5.9 4.7 Profit for the year 1.0 0.6 Equity 5.4 5.1 Net financial position 3.7 3.1
Pininfarina Deutschland Group
Registered office: Leonberg - D Share capital €3,100,000 Investment percentage 100%
31.12.2013 31.12.2012 (€’million) Value of production 29.2 26.0 Profit for the year 0.4 0.5 Equity 19.2 18.8 Net financial debt (1.2) (2.7)
Pininfarina Automotive Engineering Co Ltd Registered office: Shanghai - PRC Share capital CNY3,702,824 Direct investment percentage 100%
31.12.2013 31.12.2012 (€’million) Value of production 1.9 0.6 Profit (loss) for the year 0.7 (0.8) Deficit (0.0) (0.7) Net financial position (debt) 0.3 (0.2)
Chairman of the Board of Directors
Paolo Pininfarina
(signed on the original)
81
Statement on the consolidated financial statements
pursuant to article 154-bis of Legislative decree no. 58/98
◊ The undersigned Paolo Pininfarina, as chairman, and Gianfranco Albertini, as manager in
charge of financial reporting of Pininfarina S.p.A., also considering the provisions of article 154-
bis.3/4 of Legislative decree no. 58 of 24 February 1998, state that the administrative and
accounting policies adopted for the preparation of the consolidated financial statements:
- are adequate in relation to the Group’s characteristics and
- have been effectively applied during 2013.
◊ Moreover, they state that the consolidated financial statements as at and for the year ended 31
December 2013
- have been prepared in accordance with the International Financial Reporting Standards
endorsed by the European Community pursuant to (EC) regulation no. 1606/2002 issued by
the European Parliament and Council on 19 July 2002;
- are consistent with the accounting ledgers and records;
- are suitable to give a true and fair view of the financial position, financial performance and
cash flows of the issuer and the group of companies included in the consolidation scope.
The directors’ report includes a reliable analysis of the Group’s performance and results of
operations and the issuer’s and consolidated companies’ financial position and performance, as well
as a description of the main risks and uncertainties to which they are exposed.
20 March 2014
Chairman
Paolo Pininfarina
(signed on the original)
Manager in charge of
financial reporting
Gianfranco Albertini
(signed on the original)
82
(Translation from the Italian original which remains the definitive version)
STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL
STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2013
Dear shareholders,
The Board of Directors has presented the consolidated financial statements of the
Pininfarina Group as at and for the year ended 31 December 2013, comprising the statement
of financial position, income statement, statement of comprehensive income, statement of
changes in equity, statement of cash flows and related notes.
These consolidated financial statements show equity of €29,419,223, including the loss of
the year of €10,386,970.
The consolidated financial statements as at and for the year ended 31 December 2013 have
been prepared in accordance with the IFRS.
Starting from 2013, the Group has adopted IAS 19 (revised) and has restated the
corresponding 2012 figures accordingly for comparative purposes.
Moreover, in accordance with IAS 40, the Group has reclassified buildings owned by the
subsidiary Pininfarina Deutschland GmbH to “Investment property”.
The consolidated financial statements have been made available to the Board of Statutory
Auditors within the legal terms, together with the separate financial statements and the
directors’ report.
The latter adequately describes the financial position, financial performance and cash flows,
including at consolidation level, of Pininfarina S.p.A. and its subsidiaries during the year
and after the reporting date. It also provides a breakdown of business volumes by the main
business segments and the consolidated results.
The consolidation scope has been adequately defined. At 31 December 2013, it includes the
parent, five consolidated subsidiaries and one associate measured using the equity method.
Conversely, the subsidiaries Pininfarina Maroc SAS, sold in 2013, mpx Entwicklung GmbH
of Leonberg, merged into the associate mpx Entwicklung GmbH of Munich in 2013, and
Pininfarina Recchi Buildingdesign S.r.l., discontinued, exited the consolidation scope.
83
Moreover, the subsidiary Matra Automobile Engineering SAS had already been
deconsolidated in 2012 due to the immateriality of its net assets.
Based on their checks, the independent auditors, KPMG S.p.A., confirmed that carrying
amounts in the 2013 consolidated financial statements are consistent with the parent’s
accounting records, the subsidiaries’ financial statements and relevant information
communicated by the latter.
The subsidiaries’ financial statements prepared by their relevant bodies and provided to the
parent for consolidation purposes were checked/audited by the individual companies’
relevant bodies and/or parties, in accordance with local legislation. The independent
auditors performed the procedures necessary for the audit of the consolidated financial
statements.
The checks of the Board of Statutory Auditors do not cover those financial statements, as
provided for by specific legal provisions (Consolidated Finance Act and article 41.3 of
Legislative decree no. 127 of 9 April 1991).
KPMG S.p.A., as the independent auditors engaged for the audit of the Pininfarina Group’s
consolidated financial statements, issued their unqualified audit report today, in which they
state that, in their opinion, the consolidated financial statements of the Pininfarina Group as
at and for the year ended 31 December 2013 comply with the IFRS endorsed by the
European Union and the Italian regulations implementing article 9 of Legislative decree no.
38/05.
KPMG’s report includes the same emphasis of matter paragraph as that set out in the Board
of Statutory Auditors’ report on the separate financial statements, to which reference is
made.
Based on our checks and procedures, we state that:
- the consolidation scope, consolidation policies and procedures comply with the IFRS
requirements. Accordingly, the structure of the consolidated financial statements is
technically correct and, as a whole, consistent with relevant legislation;
- our examination of the directors’ report did not identify any inconsistencies with the
figures and results presented in the consolidated financial statements;
84
- all information used for consolidation purposes relates to the entire reporting period,
which is the year ended 31 December 2013;
- the accounting policies are consistent with those used in the previous year, except
where stated otherwise.
Lastly the chairman and the manager in charge of financial reporting issued a statement
pursuant to article 81-ter of Consob regulation no. 11971/1999, as subsequently amended,
and article 154-bis.3/4 of the Consolidated Finance Act (Legislative decree no. 58/1998).
Turin, 4 April 2014
STATUTORY AUDITORS
(Nicola Treves)
(signed on the original)
(Giovanni Rayneri)
(signed on the original)
(Mario Montalcini)
(signed on the original)
85
86