Form 6-K
Securities and Exchange Commision
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
Of The
Securities Exchange Act of 1934
For the month of September 2004 | Commision file number 1-12260 |
DE RIGO S.P.A.
(Translation of registrant's name in English)
Republic of Italy
(Jurisdiction of incorporation or organization)
Zona Industriale Villanova
32013 Longarone (BL)
Italy
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1))
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7))
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
(Check One) Yes No X
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82- .)
This Report on Form 6-K contains the unaudited consolidated financial statements of De Rigo S.p.A. ("De Rigo" or the "Company") for the six months ended June 30, 2004 and 2003 (which have been prepared in accordance with generally accepted accounted principles in Italy), and the related notes thereto, including an unaudited reconciliation of net income and shareholders' equity to accounting principles generally accepted in the United States.
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DE RIGO S.p.A. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands of Euro, unless otherwise noted)
December | ||||||
June 30, | June 30, | 31, | ||||
2004 | 2003 | 2003 | ||||
(unaudited) | (unaudited) | (audited) | ||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | 30,488 | 21,990 | 19,634 | |||
Accounts receivable trade, net of allowances for | ||||||
doubtful accounts of € 6,585, € 8,274 and € 6,976 at | ||||||
June 30, 2004, June 30, 2003 and December 31, | ||||||
2003 respectively | 76,464 | 92,441 | 61,938 | |||
Inventories (note 2) | 45,540 | 55,929 | 49,366 | |||
Deferred income taxes | 12,958 | 13,854 | 13,018 | |||
Prepaid expenses and other current assets | 12,677 | 13,210 | 12,393 | |||
Total current assets | 178,127 | 197,424 | 156,349 | |||
Property, plant and equipment: | ||||||
Land | 17,069 | 17,576 | 16,848 | |||
Buildings | 55,485 | 54,991 | 54,587 | |||
Machinery and equipment | 25,974 | 25,485 | 25,491 | |||
Office furniture and equipment | 89,365 | 83,136 | 82,800 | |||
Construction in progress | -- | 274 | -- | |||
187,893 | 181,462 | 179,726 | ||||
Less: accumulated depreciation | (78,261) | (69,194) | (70,643) | |||
Property, plant and equipment, net | 109,632 | 112,268 | 109,083 | |||
Goodwill and intangible assets, net | 101,407 | 108,876 | 103,891 | |||
Other non current assets | 7,149 | 8,925 | 7,564 | |||
TOTAL ASSETS | 396,315 | 427,493 | 376,887 | |||
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DE RIGO S.p.A. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands of Euro, unless otherwise noted)
December | ||||||
June 30, | June 30, | 31, | ||||
2004 | 2003 | 2003 | ||||
(unaudited) | (unaudited) | (audited) | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Bank borrowings | 13,508 | 65,767 | 22,569 | |||
Current portion of long-term debt | 117 | 183 | 166 | |||
Accounts payable, trade | 70,900 | 72,170 | 66,141 | |||
Commissions payable | 1,079 | 2,014 | 895 | |||
Income taxes payable | 7,839 | 6,120 | 5,452 | |||
Deferred income taxes | 1,122 | 651 | 1,392 | |||
Accrued expenses and other current liabilities | 33,666 | 34,676 | 27,223 | |||
Total current liabilities | 128,231 | 181,581 | 123,838 | |||
Termination indemnities and other employee benefits | 9,942 | 9,371 | 9,755 | |||
Deferred income taxes | 8,452 | 9,801 | 8,670 | |||
Long –term debt, less current portion | 464 | 605 | 497 | |||
Other non current liabilities | 8,017 | 8,291 | 7,243 | |||
Shareholders' equity: | ||||||
Capital stock, authorized 45,800,000 ordinary shares | ||||||
par value 0.26 Euro per share at June 30, 2004, June | ||||||
30, 2003 and December 31, 2003. Issued and | ||||||
outstanding ordinary shares at June 30, 2004, June 30, | ||||||
2003 and December 31 2003 were respectively | ||||||
44,491,055, 44,714,255 and 44,491,055 | 11,626 | 11,626 | 11,626 | |||
Additional paid-in capital | 54,490 | 54,490 | 54,490 | |||
Retained earnings | 173,736 | 151,393 | 161,413 | |||
Foreign currency translation adjustments | (3,680) | (4,702) | (5,682) | |||
Revaluation surplus | 5,037 | 5,037 | 5,037 | |||
Total shareholders' equity | 241,209 | 217,844 | 226,884 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 396,315 | 427,493 | 376,887 | |||
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DE RIGO S.p.A. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Euro, unless otherwise noted)
For the six months ended June 30, | |||
2004 | 2003 | ||
(unaudited) | (unaudited) | ||
NET SALES | 275,886 | 273,366 | |
COST OF SALES | 105,176 | 108,710 | |
GROSS PROFIT | 170,710 | 164,656 | |
COSTS AND EXPENSES | |||
Commissions | 6,491 | 8,171 | |
Advertising and promotion expenses | 19,695 | 18,724 | |
Other selling expenses | 103,387 | 99,770 | |
General and administrative expenses | 18,197 | 18,712 | |
147,770 | 145,377 | ||
INCOME FROM OPERATIONS | 22,940 | 19,279 | |
OTHER (INCOME) EXPENSES | |||
Interest expense | 499 | 1,579 | |
Interest income | (280) | (222) | |
Other expenses, net | 34 | 439 | |
253 | 1,796 | ||
INCOME BEFORE INCOME TAXES | 22,687 | 17,483 | |
INCOME TAXES(note 3) | 10,056 | 8,516 | |
INCOME BEFORE MINORITY INTEREST | 12,631 | 8,967 | |
MINORITY INTEREST | 308 | 509 | |
NET INCOME | 12,323 | 8,458 | |
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DE RIGO S.p.A. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of Euro, unless otherwise noted)
For the six months ended June 30, | |||
2004 | 2003 | ||
(unaudited) | (unaudited) | ||
Cash flows from operating activities | |||
Net income | 12,323 | 8,458 | |
Adjustments to reconcile net income to net | |||
cash provided by operating activities | |||
Depreciation | 8,379 | 8,562 | |
Amortization | 4,196 | 4,466 | |
Provision for doubtful accounts | 57 | 1,376 | |
Provision for inventory obsolescence | 513 | 5,828 | |
Gain on sale of investments in debt securities | -- | (86) | |
Deferred income taxes | (364) | (1,921) | |
Other, non-cash items | 141 | (238) | |
Provision for termination indemnities and pension costs | 3,963 | 3,804 | |
Minority interest in income | 308 | 509 | |
Changes in operating assets and liabilities: | |||
Accounts receivable | (16,096) | (14,094) | |
Inventories | 3,827 | (3,266) | |
Accounts payable | 5,255 | (2,835) | |
Income taxes payable | 2,298 | 2,888 | |
Value added tax | (26) | 1,127 | |
Other - net | 6,325 | 8,284 | |
Payments of termination of indemnities and pension | |||
contributions | (2,481) | (2,106) | |
Net cash provided by operating activities | 28,618 | 20,756 | |
Cash flows from investing activities | |||
Net proceeds from sale of De Rigo Nederland | (339) | -- | |
Proceeds of sale of other non current assets | 2 | -- | |
Additions to property, plant and equipment | (7,372) | (3,313) | |
Proceeds from disposal of equipment and other assets | 221 | 660 | |
Additions to intangible assets | (580) | (327) | |
Proceeds from sale of investments in debt securities | -- | 1,993 | |
Net cash used in investing activities | (8,068) | (987) | |
Cash flows from financing activities | |||
Net change in short-term borrowings from lines of credit | (9,473) | (18,479) | |
Repayment of long-term debt and non-current liabilities | (83) | (126) | |
Net cash used by financing activities | (9,556) | (18,605) | |
Effect of exchange rate changes on cash | (140) | (202) | |
Increase (decrease) in cash and cash equivalents | 10,854 | 962 | |
Cash and cash equivalents at beginning of the period | 19,634 | 21,028 | |
Cash and cash equivalents at end of the period | 30,488 ==== | 21,990 ==== | |
Supplemental disclosures: | |||
Interest paid | 475 == | 1,803 === | |
Income taxes paid | 7,984 === | 5,870 === |
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UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of Euro, unless otherwise noted)
For the six months ended June 30, 2004: | ||||||
Share Capital | Additional Paid-in Capital | Retained Earnings | Foreign Currency Translation Adjustments | Revaluation Reserve | Total | |
Balance at December 31, 2003 | 11,626 | 54,490 | 161,413 | (5,682) | 5,037 | 226,884 |
Foreign currency translation adjustments | 2,002 | 2,002 | ||||
Net income for the six months | ||||||
ended June 30, 2004 | 12,323 | 12,323 | ||||
Balance at June 30, 2004 | 11,626 | 54,490 | 173,736 | (3,680) | 5,037 | 241,209 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of and for the six months periods ended June 30, 2004 and 2003
The accompanying unaudited consolidated financial statements of De Rigo S.p.A. and its subsidiaries (the "Group") as of June 30, 2004 and 2003 and for the related six-month periods then ended have been prepared by management. However, in the opinion of management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Group's financial position at those dates, and its results of operations and cash flows for the interim periods. These financial statements have been prepared on the basis of Italian GAAP and should be read in conjunction with the Group's audited Consolidated Financial Statements for the year ended December 31, 2003 and the related notes thereto included in De Rigo's Annual Report on Form 20-F for the fiscal year ended December 31, 2003 (the "Audited Financial Statements"). For the convenience of the reader, certain data relating to the Group's audited Balance Sheet at December 31, 2003 have been included in the accompanying financial statements and in Notes 2 and 4.
Certain amounts in the financial statement as of June 30, 2003 have been reclassified to conform with presentations as of December 31, 2003 and of June 30, 2004.
The Group's results of operations for the six months ended June 30, 2004 and 2003 are not necessarily indicative of its operating results for the full years ending December 31.
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Inventories consisted of the following at the dates indicated:
(In thousands of Euro, unless otherwise noted) | |||||
June 30, | June 30, | December 31, | |||
2004 | 2003 | 2003 | |||
(unaudited) | (unaudited) | (audited) | |||
Raw materials and supplies | 5,172 | 5,785 | 5,068 | ||
Semi-finished goods | 3,304 | 4,901 | 5,077 | ||
Finished goods | 37,064 | 45,243 | 39,221 | ||
Total | 45,540 | 55,929 | 49,366 | ||
Allowance for obsolete and slow moving items | 25,995 | 27,644 | 24,355 | ||
3. INCOME TAXES
The effective consolidated tax rate for the six months ended June 30, 2004 was 44.3% as compared to a rate of 48.7%, for the six months ended June 30, 2003. The decrease in the effective tax rate is primarily attributable to the decrease of the Italian tax rate from38.25% to 37.25% and by the use of accumulated net operating losses by certain subsidiaries to offset profitable operating results.
4. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA
The Group's consolidated financial statements have been prepared in accordance with Italian GAAP, which differ in certain respects from accounting principles generally accepted in the United States of America ("U.S. GAAP") ( See note 19 to the Audited Financial Statements).
For supplemental informational purposes, an unaudited reconciliation of net income and shareholders' equity to U.S. GAAP for the six month periods ended June 30, 2004 and 2003 and an audited reconciliation at December 31, 2003 follows. To facilitate a comparison with the Audited Financial Statements, the letters shown preceding each adjustment are the same as those used in the Audited Financial Statements.
The following table summarizes the results from continuing operations and the results from discontinued operations for the six month periods ended June 30, 2004 and 2003:
for the six months ended June 30, | |||
(unaudited) | |||
2004 | 2003 | ||
Net sales from continuing operations | 275,886 | 253,757 | |
Gross profit from continuing operations | |||
Income from continuing operations | 170,718 | 155,238 | |
Other expenses from continuing operations | 26,366 | 21,034 | |
Income from continuing operations before income taxes | 253 | 1,022 | |
and minority interests | 26,113 | 20,012 | |
Income taxes | 10,163 | 8,199 | |
Income from continuing operations before minority interests | 15,950 | 11,813 | |
Minority interests | 308 | 161 | |
Net income from continuing operations | 15,642 | 11,652 | |
Discontinued operations | |||
Net sales from discontinued operations | -- | 19,609 | |
Gross profit from discontinued operations. | -- | 9,424 | |
Income from discontinued operations | -- | 1,652 | |
Other expenses from discontinued operations | -- | 652 | |
Income from discontinued operations before income taxes | |||
and minority interests | -- | 1,000 | |
Income taxes | -- | 419 | |
Income from discontinued operations before minorityinterests | -- | 581 | |
Minority interests | -- | 348 | |
Net income from discontinued operations | -- | 233 | |
Net income in accordance with U.S. GAAP | 15,642 | 11,885 | |
NET INCOME (In thousands of Euro, unless otherwise noted):
for the six months ended June 30, | ||||||||
(unaudited) | ||||||||
2004 | 2003 | |||||||
Netincome as reported per the unaudited consolidated | ||||||||
statementsof income | 12,323 | 8,458 | ||||||
Adjustmentsrequired for U.S. GAAP | ||||||||
Reporting purposes: | ||||||||
(b) | Elimination of depreciation relating to revaluationof certain assets prior to 1992 | 6 | 6 | |||||
(c) | Recognize tax effects on reversal of trademarkrevaluation at end of 2001 | |||||||
(ii) recognize deferred tax asset on trademarkrevaluation | (94) | (96) | ||||||
(iv) reversal of amortization of trademarks revaluation | 252 | 252 | ||||||
(d) | Reversal of goodwill amortization | 3,138 | 3,187 | |||||
(h) | Deferred charges | 30 | -- | |||||
(n) | Marketable securities available forsale | -- | 111 | |||||
(i) | Deferred income taxes on (b), (g), and (n) above | |||||||
after considering change in tax rate on deferred | ||||||||
tax for (b) in 2004 and 2003 | (13) | -- | ||||||
Netincome in accordance with U.S. GAAP before | ||||||||
reconciliationeffects of discontinuedoperations | 15,642 ==== | 11,918 ==== | ||||||
Total effect of the reconciling differences on discontinued | ||||||||
operations – EID | ||||||||
(g) | Amortization of intangible asset in respect of | |||||||
Prada's 5% options | -- | (39) | ||||||
(i) | Deferred income taxes on (b), (g), and (n) above | |||||||
after considering change in tax rate on deferred | ||||||||
tax for (b) in 2004 and 2003 | -- | 6 | ||||||
Netincome in accordance with U.S. GAAP | 15,642 | 11,885 | ||||||
Earningsper share and per ADS: | ||||||||
Numerator for basic earnings and diluted earnings per | ||||||||
shareand per ADS: | ||||||||
Netincome | 15,642 | 11,885 | ||||||
Denominator | ||||||||
Denominator for basic earnings per share and per ADS– | ||||||||
weighted average shares and ADS shares | 44,491,055 | 44,714,255 | ||||||
Effectsof dilutive employee stock options | 643,935 | 586,672 | ||||||
Denominator for diluted earnings per share and per ADS | ||||||||
– adjusted weighted average shares and ADS | 45,134,990 ====== | 45,300,927 ====== | ||||||
Basic earnings per share and per ADS | €. 0.35 ==== | €. 0.27 ==== | ||||||
Diluted earnings per share and per ADS | €. 0.35 ==== | €. 0.26 ==== | ||||||
Dividendsper share and per ADS | €. ---- === | €. ---- === |
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SHAREHOLDERS' EQUITY (In thousands of Euro, unless otherwise noted):
June 30, | June 30, | December 31, | ||||||
2004 | 2003 | 2003 | ||||||
(unaudited) | (unaudited) | (audited) | ||||||
Balance as reported in the consolidated financial | ||||||||
statements | 241,209 | 217,844 | 226,884 | |||||
Adjustments required for U.S. GAAP reporting purposes: | ||||||||
(a) | Decrease in retained earnings as a result | |||||||
of the charge to income for additional | ||||||||
compensation paid in 1994 by shareholders to | ||||||||
Managing Director | (9,554) | (9,554) | (9,554) | |||||
and concurrent increase in additional paid-in | ||||||||
capital | 9,554 | 9,554 | 9,554 | |||||
(b) | Elimination of revaluations of certain assets prior | |||||||
to 1992, net of accumulated depreciation of | ||||||||
€ 697, € 684, and € 691 in June 2004, June | ||||||||
2003 and December 2003, respectively | (255) | (268) | (261) | |||||
(c) | Elimination of revaluation of trademarks net of | |||||||
accumulated amortization of € 1,260, € 756 and € | ||||||||
1,008 in June 2004, June 2003 and December | ||||||||
2003, respectively | (3,783) | (4,287) | (4,035) | |||||
(d) | Reversal of goodwill amortization | 15,964 | 9,594 | 12,826 | ||||
(e) | Elimination of amortization of offering | |||||||
expenses, deferred for Italian purposes | 2,128 | 2,128 | 2,128 | |||||
(e) | Offering expenses less estimated tax | |||||||
benefits of € 1,030 in each of June 2004, June | ||||||||
2003 and December 2003 and charged to paid in | ||||||||
capital | (1,098) | (1,098) | (1,098) | |||||
(f) | Reduce retained earnings for amount of | |||||||
stock compensation | (4,800) | (3,999) | (4,800) | |||||
(f) | Increase additional paid in capital for accretion | |||||||
resulting from stock compensation expense | 4,800 | 3,999 | 4,800 | |||||
(g) | Increase in additional paid in capital as a result of | |||||||
recording the fair value of Prada's 5% options on | ||||||||
the total outstanding share capital | 465 | 465 | 465 | |||||
(g) | Decrease in retained earnings as a result of the | |||||||
charge to income for amortization of the intangible | ||||||||
asset arising on the valuation of Prada's 5% | ||||||||
options | (465) | (427) | (465) | |||||
(h) | Deferred charges | (89) | (178) | (119) | ||||
(j) | Recognition of minimum pension liability | (21,047) | (22,859) | (19,623) | ||||
(n) | Increase retained earnings for marketable securities | -- | 111 | 111 | ||||
(n) | (Reduce) Other Comprehensive Income related to | |||||||
unrealized gains on marketable securities | -- | (111) | (111) | |||||
(o) | Treasury stock | (753) | -- | (753) | ||||
(i) | Recognition of deferred income taxes on (b), (e), | |||||||
(g), (h) and (j) above | 5,412 | 6,209 | 4,998 | |||||
(c) | Tax effect on elimination of trademarks | |||||||
revaluation in 2001 (c) above, after considering | ||||||||
change in tax rate in 2002 to | ||||||||
(i) recognize deferred tax asset on revalued assets | 1,409 | 1,640 | 1,503 | |||||
(ii) recognize deferred tax liability on revaluation | ||||||||
reserve on Italian basis | (706) | (756) | (706) | |||||
Balance in accordance with U.S. GAAP | 238,391 ===== | 208,007 ===== | 221,744 |
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Shareholders' Equity
As described in Note 19 to the Audited Financial Statements:
Due to operating losses incurred by a subsidiary through December 31, 1993, the Company, pursuant to Italian legal requirements, has eliminated losses reported for Italian purposes amounting to € 2,195,000 against additional paid in capital by the former shareholders of the subsidiary. For U.S. GAAP financial reporting purposes, such operating losses would be reflected as a reduction of consolidated retained earnings, and the amount of capital used to eliminate such losses would be reflected as additional paid-in capital.
The components of shareholders' equity under U.S. GAAP, at June 30, 2004, at June 30, 2003 and at December 31, 2003, after giving retroactive effect to 1994 for the capitalization of earnings in May 1995 with respect to the stock split in the form of a stock dividend, are as follows (in thousands of Euro):
Italian | U.S. | ||||
June 30, 2004 (unaudited) | GAAP | Adjustments | GAAP | ||
Share capital | 11,626 | -- | 11,626 | ||
Treasury Shares | -- | (753) | (753) | ||
Additional paid in capital | 54,490 | 15,916 | 70,406 | ||
Retained earnings | 173,736 | 1,789 | 175,525 | ||
Other comprehensive income | (3,680) | (14,733) | (18,413) | ||
Revaluation reserves | 5,037 | (5,037) | -- | ||
241,209 | (2,818) | 238,391 | |||
Italian | U.S. | ||||
June 30, 2003 (unaudited) | GAAP | Adjustments | GAAP | ||
Share capital | 11,626 | -- | 11,626 | ||
Additional paid in capital | 54,490 | 15,115 | 69,605 | ||
Retained earnings | 151,393 | (3,914) | 147,479 | ||
Other comprehensive income | (4,702) | (16,001) | (20,703) | ||
Revaluation reserves | 5,037 | (5,037) | -- | ||
217,844 | (9,837) | 208,007 | |||
Italian | U.S. | ||||
December 31, 2003 (audited) | GAAP | Adjustments | GAAP | ||
Share capital | 11,626 | -- | 11,626 | ||
Treasury Shares | -- | (753) | (753) | ||
Additional paid in capital | 54,490 | 15,916 | 70,406 | ||
Retained earnings | 161,413 | (1,530) | 159,883 | ||
Other comprehensive income | (5,682) | (13,736) | (19,418) | ||
Revaluation reserves | 5,037 | (5,037) | -- | ||
226,884 | (5,140) | 221,744 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 22, 2004 | DE RIGO S.p.A. |
By: ________________________ Ennio De Rigo Chairman of the Board and Chief Executive Officer |
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