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(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
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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.
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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.
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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.
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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
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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.
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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
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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.
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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.
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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.
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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.
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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.
http://www.pininfarina.com/http://www.pininfarina.com/
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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.
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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)
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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
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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)
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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
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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
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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
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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
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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
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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 th
