SALES REVENUES
Revenues from the sale of goods and services
The Sogefi Group recorded net revenues for the amount of Euro 1,158,385 thousand during the period, compared with Euro 924,713 thousand in the previous year. Net of Euro 135,708 thousand realised by the Systèmes Moteurs Group, revenues would amount to Euro 1,022,677 thousand (+10.6% compared to 2010). Exchange rates being equal (at the average exchange rates of the previous year), corresponding revenues would amount to Euro 1,033,706 thousand (+11.8%).
Revenues from the sale of goods and services break down as follows:
By business sector:
| (in thousands of Euro) | 2011 | 2010 | ||
|---|---|---|---|---|
| Amount | % | Amount | % | |
| Engine systems | 611,505 | 52.8 | 465,133 | 50.3 |
| Suspension components | 547,725 | 47.3 | 461,632 | 49.9 |
| Intercompany eliminations | (845) | (0.1) | (2,052) | (0.2) |
| TOTAL | 1,158,385 | 100 | 924,713 | 100 |
By geographical area of “destination”:
| (in thousands of Euro) | 2011 | 2010 | ||
|---|---|---|---|---|
| Amount | % | Amount | % | |
| France | 246,932 | 21.3 | 207,377 | 22.4 |
| Germany | 158,304 | 13.7 | 119,873 | 13 |
| Great Britain | 97,060 | 8.4 | 79,043 | 8.5 |
| Italy | 79,400 | 6.9 | 71,562 | 7.7 |
| Benelux | 59,919 | 5.2 | 47,445 | 5.1 |
| Spain | 47,861 | 4.1 | 36,473 | 3.9 |
| Russia | 4,544 | 0.4 | 3,306 | 0.4 |
| Other European Conturies | 110,910 | 9.5 | 94,276 | 10.3 |
| Mercosur | 240,511 | 20.8 | 219,367 | 23.7 |
| United States | 53,971 | 4.7 | 18,616 | 2 |
| China | 17,246 | 1.5 | 12,639 | 1.4 |
| India | 13,325 | 1.2 | 9,685 | 1 |
| Mexico | 10,300 | 0.8 | 1,182 | 0.1 |
| Canada | 8,243 | 0.7 | 11 | 0 |
| Rest of the World | 9,859 | 0.8 | 3,858 | 0.5 |
| TOTAL | 1,158,385 | 100 | 924,713 | 100 |
Sogefi continued to pursue its strategy of strengthening its presence in non-European markets, with activity growing significantly in Mercosur (+9.6%), North America (+266.1% including the strong contribution from Systèmes Moteurs S.A.S.; on a like-for-like basis, the increase would have been by 46.1%), China (+36.4%) and India (+37.6%).
VARIABLE COST OF SALES
Details are as follows:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Materials | 577,325 | 425,766 |
| Direct labour cost | 104,663 | 92,652 |
| Energy costs | 33,883 | 29,169 |
| Sub-contracted work | 26,999 | 20,217 |
| Ancillary materials | 18,415 | 16,599 |
| Variable sales and distribution costs | 39,900 | 35,512 |
| Royalties paid to third parties on sales | 3,888 | 4,191 |
| Other variable costs | 825 | (1,143) |
| TOTAL | 805,898 | 622,963 |
The inclusion of Systèmes Moteurs Group in the scope of consolidation caused a change in “Variable cost of sales” for the amount of Euro 102,092 thousand.
The percentage on revenues of “Variable cost of sales” rose to 69.6% from 67.4% in 2010. Such growth is nearly entirely accounted for by “Materials”, and their percentage on revenues rose from 46% al 49.8%. The increase is mostly due to the product mix of the Systèmes Moteurs group, on which materials have a greater impact than other factors, and to an increase in steel price, in spite of extra costs being nearly totally passed on to sales prices.
The percentage of “Direct labour costs” fell from 10% to 9% due to lower expenses linked to the use of welfare support provisions, an improvement in production efficiency following the increase in volumes, the different product mix of the Systèmes Moteurs group mentioned above, and to the wider use of temporary staff, whose cost is included in “Sub-contracted work”.
“Other variable costs” represent the effect generated by direct labour cost and fixed cost following the reduction (in 2011) or the increase (in 2010) of the inventory of finished goods or semi-finished products.
MANUFACTURING AND R&D OVERHEADS
These can be broken down as follows:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Labour cost | 84,115 | 70,895 |
| Materials, maintenance and repairs | 23,515 | 19,807 |
| Rental and hire charges | 6,739 | 5,193 |
| Personnel services | 7,477 | 7,443 |
| Technical consulting | 3,733 | 2,786 |
| Sub-contracted work | 1,900 | 1,200 |
| Insurance | 3,156 | 1,728 |
| Utilities | 1,352 | 1,396 |
| Capitalisation of internal construction costs | (18,376) | (12,507) |
| Other | 1,372 | 645 |
| TOTAL | 114,983 | 98,586 |
“Manufacturing and R&D overheads” show an increase of Euro 16,397 thousand, Euro 13,200 thousand of which incurred by the Systèmes Moteurs Group. On a like-for-like basis, an increase of Euro 3,197 thousand (+3.2%) is observed compared to the previous year (+ Euro 4,022 thousand if the effect of exchange rates is excluded).
If the Systèmes Moteurs Group is not considered, the increase regarded almost all the items and specifically:
- “Labour cost”, which grew by Euro 1,423 thousand mainly due to the lower use of welfare support provisions in Europe, higher workforce in China and India, and inflation trends in South America. The increase was partly offset by a significant reduction in labour cost at subsidiary Sogefi Filtration Ltd as a result of the restructuring plan implemented during the year;
- “Materials, maintenance and repairs”, up by Euro 1,928 thousand overall as a result to larger production volumes;
- “Technical consulting”, which grew by Euro 507 thousand due to a more extensive use of them in the development of new products in subsidiary Allevard Rejna Autosuspensions S.A.;
- “Insurance”, which increased by Euro 1,258 thousand, basically due to a more accurate distribution between “ Manufacturing and R&D overheads” and “Administrative and general expenses” (as a consequence these costs are lower in the latter item).
“Capitalisation of internal construction costs” increased by Euro 2,445 thousand, in particular at subsidiary Filtrauto S.A.. Euro 864 thousand were capitalised to the Holding Company Sogefi S.p.A.; these relate to the development of Group's new integrated ITC system.
Total costs for Research and Development (not reported in the table) amount to Euro 26,053 thousand (2.2% of sales revenues); on a
like-for-like basis they amount to Euro 21,257 thousand (2.1% of sales revenues) compared to Euro 20,224 thousand (2.2% of sales revenues) in the previous year.
DEPRECIATION AND AMORTISATION
Details are as follows:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Depreciation of tangible fixed assets | 36,252 | 34,673 |
| of which: assets under finance leases | 1,010 | 1,041 |
| Amortisation of intangible assets | 12,517 | 10,251 |
| TOTAL | 48,769 | 44,924 |
If the Systèmes Moteurs Group is excluded, “Depreciation and Amortisation” amount to Euro 43,834 thousand, compared to Euro 44,924 thousand in the same period of the previous year. The decrease is mostly originated from subsidiaries Filtrauto S.A., Allevard Rejna Autosuspensions S.A. and LPDN GmbH. Conversely, an uptrend is observed in all areas where the Group has been growing significantly (China, India, United States).
Industrial depreciation included in the total depreciation of tangible fixed assets amounted to Euro 34,793 thousand (Euro 31,389 thousand without Systèmes Moteurs) versus Euro 33,097 thousand in the same period of the previous year.
Amortisation of intangible assets refers principally to development costs capitalised in previous years.
DISTRIBUTION AND SALES FIXED EXPENSES
This item is made up of the following main components:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Labour cost | 21,204 | 19,318 |
| Sub-contracted work | 4,482 | 3,400 |
| Advertising, publicity and promotion | 3,771 | 4,081 |
| Personnel services | 2,920 | 2,596 |
| Rental and hire charges | 1,420 | 1,738 |
| Consulting | 838 | 665 |
| Other | 634 | 569 |
| TOTAL | 35,269 | 32,367 |
The trend of “Distribution and sales fixed expenses” reflects increased sales volumes; on a like-for-like basis, these costs turn out to have increased by Euro 568 thousand (+1.8%) overall compared with the previous year.
The main changes, net of Systèmes Moteurs figures, are commented below:
- the increase in “Labour cost” and “Personnel services” – by Euro 499 thousand overall – is mainly due to the increased volumes of the Suspension Components Division;
- “Sub-contracted work” and “Rental and hire charges” did not increase significantly overall, but reflect the new logistical approach focused on outsourcing management in the aftermarket segment of the Engine Systems Division;
- the savings on “Advertising, publicity and promotion” are to be traced back to the centralisation of this function which is now a responsibility of the aftermarket segment of the Engine Systems Division.
ADMINISTRATIVE AND GENERAL EXPENSES
These can be broken down as follows:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Labour cost | 30,490 | 27,764 |
| Personnel services | 3,918 | 3,486 |
| Maintenance and repairs | 3,721 | 3,501 |
| Cleaning and security | 3,558 | 3,490 |
| Consulting | 4,547 | 5,101 |
| Utilities | 2,767 | 2,810 |
| Rental and hire charges | 3,743 | 3,455 |
| Insurance | 1,319 | 2,131 |
| Participation des salaries | 976 | 79 |
| Administrative, financial and tax-related services provided by Parent Company | 1,820 | 1,860 |
| Audit fees | 1,365 | 1,157 |
| Directors' and statutory auditors' remuneration | 1,368 | 1,653 |
| Sub-contracted work | 648 | 665 |
| Other | 4,156 | 1,194 |
| TOTAL | 64,396 | 58,346 |
“Administrative and general expenses” rise to Euro 60,287 thousand on a like-for-like basis, recording an increase of Euro 1,941 thousand (+3.3%).
The increase in “Labour cost” (+ Euro 880 thousand on a like-for-like basis) mainly originates from the inflation experienced by South American subsidiaries and higher bonuses.
The increase in “Personnel services” mainly relates to higher travelling expenses incurred by the Holding Company Sogefi S.p.A..
The decrease in “Consulting” fees is mostly originated from the French subsidiary Allevard Rejna Autosuspensions S.A..
The decrease in “Insurance” can be traced back to a more accurate classification under “Manufacturing and R&D overheads” and “Administrative and general expenses”.
The increase in “Participation des salaries” (profit-sharing scheme for employees of French subsidiaries) is due to the higher tax profit recorded in the year.
The increase in “Other” (+ Euro 1,964 thousand on a like-for-like basis) is mainly due to the actuarial valuation of the pension funds of the French subsidiaries, and to the fact that the welfare support provisions granted to subsidiary Filtrauto S.A. to maintain occupational levels have been used up.
“Directors' and statutory auditors' remuneration” is made up of the remuneration of Holding Company Directors for the amount of Euro 1,290 thousand and of Holding Company Statutory Auditors for the amount of Euro 80 thousand.
PERSONNEL COSTS
Personnel
Regardless of their destination, “Personnel costs” as a whole can be broken down as follows:
With respect to the previous year, “Personnel costs” have risen by Euro 32,105 thousand (+15%), of which Euro 22,512 thousand originate from the inclusion of the Systèmes Moteurs Group in the scope of consolidation. Scope of consolidation being equal and excluding the effect of exchange rates, the increase would amount to Euro 11,218 thousand (+5%), to be traced back to production growth, lesser use of welfare support provisions and an overall increase in prices recorded in South America.
Despite this increase in absolute values, “Personnel costs” as a percentage of sales fell to 20.9% from 22.8% recorded in the previous year.
The increase of “Participation des salaries ” was commented upon above.
“Wages, salaries and contributions”, “Pension costs: defined benefit plans" and “Pension costs: defined contribution plans” are posted in the tables provided above at lines “Labour cost” and “Administrative and general expenses”.
“Participation des salaries” is included in “Administrative and general expenses”.
“Other costs” is included in “Administrative and general expenses”.
“Imputed cost of stock option and stock grant plans” is included in “Other non-operating expenses (income)”. The following paragraph “Personnel benefits” provides details of the stock option and stock grant plans.
The average number of Group employees, broken down by category, is shown in the table below:
As of December 31, 2011, the Systèmes Moteurs group had 1,187 employees.
Personnel benefits
Sogefi S.p.A. implements stock-based incentive plans for the Managing Director and for managers of the Company and its subsidiaries that hold important positions of responsibility within the Group. The purpose is to foster greater loyalty to the Group and to provide an incentive that will raise their commitment to improving business performance and generating value in the long term.
The stock-based incentive plans of Sogefi S.p.A. are first approved by the Shareholders’ Meeting.
Except as outlined at the following paragraphs “Stock grant plans", “Stock option plans” and “Phantom stock option plans”, the Group has not carried out any other transaction that involves the purchase of goods or services with payments based on shares or any other kind of instrument representing portions of equity. As a result, it is not necessary to disclose the fair value of such goods or services.
As laid down in IFRS 2, only plans allocated after November 7, 2002 must be considered (note that the Company does not have any plans prior to said date) and therefore, in addition to that issued in 2011, the plans issued in the period from 2004 until 2010 must also be considered. The main details of these plans are provided below.
Stock grant plans
The 2011 stock grant plan provides for the free assignment of conditional rights (called “Units”) that cannot be transferred to third parties or other beneficiaries; each of them entitles to the free assignment of one Sogefi S.p.A. share. There are two categories of rights under the plan: Time-based Units, that vest upon the established terms and Performance Units, that vest upon the established terms provided that shares have achieved the target price value (determined under art. 9, sub 4. letter a, of the Italian Income Tax Consolidation Act) established in the regulation.
The regulation provides for a minimum holding period during which the shares held for the plan can not be disposed of.
All shares assigned under the 2011 plan will be treasury shares held by Sogefi S.p.A.. According to the regulation, a pre-condition for assigning the shares is a continued employer-employee relationship or the continued appointment as a director/executive of the Company or one of its subsidiaries throughout the vesting period of the rights.
On April 19, 2011, after the Shareholders’ Meeting approved the 2011 stock grant Plan to assign a maximum of 1,250,000 conditional rights, the Board of Directors executed the 2011 stock grant plan restricted to the Managing Director of the Company and to managers of the Company and its subsidiaries, who were assigned a total of 757,500 Units (320,400 of which were Time-based Units and 437,100 Performance Units).
Time-based Units will vest in tranches on a three-monthly basis, accounting for 12.5% of their respective total, starting on April 20, 2013 and ending on January 20, 2015.
Performance Units will vest at the same vesting dates established for Time-based Units, provided that the price value of shares at vesting date is at least equal to the percentage of the initial value indicated in the regulation.
The fair value of the rights assigned during 2011 has been determined at the time the rights were assigned using the Cox, Ross and Rubinstein binomial option pricing model for US options and amounts to Euro 1,765 thousand overall.
Input data used for valuation and stock grants details are provided below:
Imputed cost for 2011 relating to the 2011 plan is Euro 448 thousand, booked to the income statement under “Other non-operating expenses (income)”.
Stock option plans
The stock option plans provide participants with the opportunity to exercise an option to subscribe to newly-issued Sogefi shares at a set price and within a specific period of time. According to the regulation, a pre-condition for exercising the option is a continued employer-employee relationship with or the continued appointment as a director/executive of the Company or one of its subsidiaries throughout the vesting period.
The main characteristics of the stock option plans approved during previous years and still under way are outlined below:
The imputed cost for 2011 for existing plans is Euro 163 thousand, booked to the income statement under “Other non-operating expenses (income)”.
The following table shows the total number of existing options with reference to the 2004-2010 plans and their average price of the year:
The line “Not exercised/not exercisable at the end of the year” refers to the total number of options, net of those exercised or cancelled during the current and previous years.
The line “Exercisable at the end of the year” refers to the total amount of options matured at the end of the year and not yet subscribed.
Details of the number of options exercisable at December 31, 2011 are given below:
Phantom stock option plans
Unlike traditional stock option plans, phantom stock option plans do not envisage the granting of a right to subscribe or to purchase a share, but entail paying the beneficiaries an extraordinary variable cash amount corresponding to the difference between the Sogefi share price in the option exercise period and the Sogefi share price at the time the option was awarded.
In 2009, as shown in the paragraph entitled “Stock option plans”, the Holding Company gave the beneficiaries of the 2007 and 2008 phantom stock option plans the opportunity to waive the options of the above-mentioned plans and to join the 2009 extraordinary stock option plan.
The main characteristics of existing plans are as follows:
Details of the number of phantom stock options as of December 31, 2011 are given below:
The fair value as of December 31, 2011 of the options awarded was calculated using the Black-Scholes method and amounts to Euro 59 thousand. The positive change compared to the previous year, corresponding to Euro 167 thousand, was booked to the Income Statement under “Directors' and statutory auditors' remuneration”.
Personnel
Regardless of their destination, “Personnel costs” as a whole can be broken down as follows:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Wages, salaries and contributions | 236,851 | 207,312 |
| Pension costs: defined benefit plans | 2,028 | 1,103 |
| Pension costs: defined contribution plans | 1,594 | 1,260 |
| Participation des salaries | 976 | 79 |
| Imputed cost of stock option and stock grant plans | 611 | 540 |
| Other costs | 529 | 190 |
| TOTAL recurring costs | 242,589 | 210,484 |
| Extraordinary bonuses to management (non-recurring cost) | - | - |
| TOTAL | 242,589 | 210,484 |
With respect to the previous year, “Personnel costs” have risen by Euro 32,105 thousand (+15%), of which Euro 22,512 thousand originate from the inclusion of the Systèmes Moteurs Group in the scope of consolidation. Scope of consolidation being equal and excluding the effect of exchange rates, the increase would amount to Euro 11,218 thousand (+5%), to be traced back to production growth, lesser use of welfare support provisions and an overall increase in prices recorded in South America.
Despite this increase in absolute values, “Personnel costs” as a percentage of sales fell to 20.9% from 22.8% recorded in the previous year.
The increase of “Participation des salaries ” was commented upon above.
“Wages, salaries and contributions”, “Pension costs: defined benefit plans" and “Pension costs: defined contribution plans” are posted in the tables provided above at lines “Labour cost” and “Administrative and general expenses”.
“Participation des salaries” is included in “Administrative and general expenses”.
“Other costs” is included in “Administrative and general expenses”.
“Imputed cost of stock option and stock grant plans” is included in “Other non-operating expenses (income)”. The following paragraph “Personnel benefits” provides details of the stock option and stock grant plans.
The average number of Group employees, broken down by category, is shown in the table below:
| (Number of employees) | 2011 | 2010 |
|---|---|---|
| Managers | 97 | 86 |
| Clerical staff | 1,491 | 1,319 |
| Blue collar workers | 4,501 | 4,265 |
| TOTAL | 6,089 | 5,670 |
As of December 31, 2011, the Systèmes Moteurs group had 1,187 employees.
Personnel benefits
Sogefi S.p.A. implements stock-based incentive plans for the Managing Director and for managers of the Company and its subsidiaries that hold important positions of responsibility within the Group. The purpose is to foster greater loyalty to the Group and to provide an incentive that will raise their commitment to improving business performance and generating value in the long term.
The stock-based incentive plans of Sogefi S.p.A. are first approved by the Shareholders’ Meeting.
Except as outlined at the following paragraphs “Stock grant plans", “Stock option plans” and “Phantom stock option plans”, the Group has not carried out any other transaction that involves the purchase of goods or services with payments based on shares or any other kind of instrument representing portions of equity. As a result, it is not necessary to disclose the fair value of such goods or services.
As laid down in IFRS 2, only plans allocated after November 7, 2002 must be considered (note that the Company does not have any plans prior to said date) and therefore, in addition to that issued in 2011, the plans issued in the period from 2004 until 2010 must also be considered. The main details of these plans are provided below.
Stock grant plans
The 2011 stock grant plan provides for the free assignment of conditional rights (called “Units”) that cannot be transferred to third parties or other beneficiaries; each of them entitles to the free assignment of one Sogefi S.p.A. share. There are two categories of rights under the plan: Time-based Units, that vest upon the established terms and Performance Units, that vest upon the established terms provided that shares have achieved the target price value (determined under art. 9, sub 4. letter a, of the Italian Income Tax Consolidation Act) established in the regulation.
The regulation provides for a minimum holding period during which the shares held for the plan can not be disposed of.
All shares assigned under the 2011 plan will be treasury shares held by Sogefi S.p.A.. According to the regulation, a pre-condition for assigning the shares is a continued employer-employee relationship or the continued appointment as a director/executive of the Company or one of its subsidiaries throughout the vesting period of the rights.
On April 19, 2011, after the Shareholders’ Meeting approved the 2011 stock grant Plan to assign a maximum of 1,250,000 conditional rights, the Board of Directors executed the 2011 stock grant plan restricted to the Managing Director of the Company and to managers of the Company and its subsidiaries, who were assigned a total of 757,500 Units (320,400 of which were Time-based Units and 437,100 Performance Units).
Time-based Units will vest in tranches on a three-monthly basis, accounting for 12.5% of their respective total, starting on April 20, 2013 and ending on January 20, 2015.
Performance Units will vest at the same vesting dates established for Time-based Units, provided that the price value of shares at vesting date is at least equal to the percentage of the initial value indicated in the regulation.
The fair value of the rights assigned during 2011 has been determined at the time the rights were assigned using the Cox, Ross and Rubinstein binomial option pricing model for US options and amounts to Euro 1,765 thousand overall.
Input data used for valuation and stock grants details are provided below:
- curve of Euro risk-free interest rates as of April 19, 2011;
- price of the underlying equal to price of Sogefi S.p.A. share as of April 19, 2011, and equal to Euro 2.7892;
- average price of Sogefi S.p.A. share during the period starting on March 21, 2011 and ending on April 19, 2011 and equal to Euro 2.8159, for the determination of the stock grant Performance Units limit;
- historical volatility rate of the Sogefi S.p.A. share during 260 days, as of April 19, 2011 and equal to 37.49%;
- null dividend yield for stock grant valuation.
Imputed cost for 2011 relating to the 2011 plan is Euro 448 thousand, booked to the income statement under “Other non-operating expenses (income)”.
Stock option plans
The stock option plans provide participants with the opportunity to exercise an option to subscribe to newly-issued Sogefi shares at a set price and within a specific period of time. According to the regulation, a pre-condition for exercising the option is a continued employer-employee relationship with or the continued appointment as a director/executive of the Company or one of its subsidiaries throughout the vesting period.
The main characteristics of the stock option plans approved during previous years and still under way are outlined below:
- 2004 stock option plan restricted to employees of the Company and its subsidiaries for a maximum of 1,880,000 ordinary shares (1.61% of share capital as of December 31, 2011) at a price of Euro 2.64 per share, to be exercised at the end of each four-month period starting on September 30, 2004 and ending on September 30, 2014;
- 2005 stock option plan restricted to employees of the Company and its subsidiaries for a maximum of 1,930,000 shares (1.65% of the share capital as of December 31, 2011) with a subscription price of Euro 3.87, to be exercised between September 30, 2005 and September 30, 2015;
- 2006 stock option plan restricted to employees of the Company and its subsidiaries for a maximum of 1,770,000 shares (1.52% of the share capital as of December 31, 2011) with a subscription price of Euro 5.87, to be exercised between September 30, 2006 and September 30, 2016;
-
2007 stock option plan restricted to employees of the foreign subsidiaries for a maximum of 715,000 shares (0.61% of the share capital as of December 31, 2011) with an initial subscription price of Euro 6.96, to be exercised between September 30, 2007 and September 30, 2017. On April 22, 2008, the Board of Directors, under the authority vested in it by the Shareholders’ Meeting, adjusted the exercise price from Euro 6.96 to Euro 5.78 to take into account the extraordinary portion of the dividend distributed by the Shareholders’ Meeting on the same date;
- 2008 stock option plan restricted to employees of the foreign subsidiaries for a maximum of 875,000 shares (0.75% of the share capital as of December 31, 2011) with a subscription price of Euro 2.1045, to be exercised between September 30, 2008 and September 30, 2018;
- 2009 stock option plan restricted to employees of the Company and its subsidiaries for a maximum of 2,335,000 shares (2% of the share capital as of December 31, 2011) with a subscription price of Euro 1.0371, to be exercised between September 30, 2009 and September 30, 2019;
- 2009 extraordinary stock option plan restricted to beneficiaries of 2007 and 2008 phantom stock option plans, still employed by the Company or by its subsidiaries, after having waived their rights under the above-mentioned phantom stock option plans, for a maximum of 1,015,000 shares (0.87% of share capital as of December 31, 2011) of which 475,000 (first Tranche options) with a subscription price of Euro 5.9054, to be exercised between June 30, 2009 and September 30, 2017 and 540,000 (second Tranche options) with a subscription price of Euro 2.1045, to be exercised between June 30, 2009 and September 30, 2018;
- 2010 stock option plan restricted to the Managing Director of the Company and managers of the Company and its subsidiaries for a maximum of 2,440,000 shares (2.09% of the share capital as of December 31, 2011) with a subscription price of Euro 2.3012, to be exercised between September 30, 2010 and September 30, 2020.
The imputed cost for 2011 for existing plans is Euro 163 thousand, booked to the income statement under “Other non-operating expenses (income)”.
The following table shows the total number of existing options with reference to the 2004-2010 plans and their average price of the year:
| 2011 | 2010 | |||
|---|---|---|---|---|
| Number | Average price of the year | Number | Average price of the year | |
| Not exercised/not exercisable at the start of the year | 8,244,400 | 2.99 | 6,509,400 | 3.18 |
| Granted during the year | - | - | 2,440,000 | 2.30 |
| Cancelled during the year | (249,000) | 3.70 | (419,000) | 3.23 |
| Exercised during the year | (228,000) | 1.35 | (286,000) | 1.04 |
| Not exercised/not exercisable at the end of the year | 7,767,400 | 3.02 | 8,244,400 | 2.99 |
| Exercisable at the end of the year | 5,094,200 | 3.63 | 3,964,900 | 4.12 |
The line “Not exercised/not exercisable at the end of the year” refers to the total number of options, net of those exercised or cancelled during the current and previous years.
The line “Exercisable at the end of the year” refers to the total amount of options matured at the end of the year and not yet subscribed.
Details of the number of options exercisable at December 31, 2011 are given below:
| Total | |
|---|---|
| Number of exercisable options remaining at December 31, 2010 | 3,964,900 |
| Options matured during the year | 1,676,100 |
| Options cancelled during the year | (318,800) |
| Options exercised during the year | (228,000) |
| Number of exercisable options remaining at December 31, 2011 | 5,094,200 |
Phantom stock option plans
Unlike traditional stock option plans, phantom stock option plans do not envisage the granting of a right to subscribe or to purchase a share, but entail paying the beneficiaries an extraordinary variable cash amount corresponding to the difference between the Sogefi share price in the option exercise period and the Sogefi share price at the time the option was awarded.
In 2009, as shown in the paragraph entitled “Stock option plans”, the Holding Company gave the beneficiaries of the 2007 and 2008 phantom stock option plans the opportunity to waive the options of the above-mentioned plans and to join the 2009 extraordinary stock option plan.
The main characteristics of existing plans are as follows:
- 2007 phantom stock option plan restricted to the Managing Director, managers and project workers of the Holding Company and to managers of Italian subsidiaries, for a maximum of 1,760,000 options at the initial grant price of Euro 7.0854, adjusted to Euro 5.9054 in 2008, to be exercised between September 30, 2007 and September 30, 2017. Following subscription to the 2009 extraordinary stock option plan, 475,000 options were waived;
- 2008 phantom stock option plan restricted to the Managing Director and managers of the Holding Company and to managers of Italian subsidiaries, for a maximum of 1,700,000 options at the grant price of Euro 2.1045, to be exercised between September 30, 2008 and September 30, 2018. Following subscription to the 2009 extraordinary stock option plan, 540,000 options were waived.
Details of the number of phantom stock options as of December 31, 2011 are given below:
| 2011 | |
|---|---|
| Not exercised/not exercisable at the start of the year | 1,830,000 |
| Granted during the year | - |
| Cancelled during the year | - |
| Exercised during the year | - |
| Not exercised/not exercisable at the end of the year | 1,830,000 |
| Exercisable at the end of the year | 1,731,000 |
The fair value as of December 31, 2011 of the options awarded was calculated using the Black-Scholes method and amounts to Euro 59 thousand. The positive change compared to the previous year, corresponding to Euro 167 thousand, was booked to the Income Statement under “Directors' and statutory auditors' remuneration”.
RESTRUCTURING COSTS
These amount to Euro 8,754 thousand (compared with Euro 12,022 thousand the previous year) and relate to restructuring plans already under way mainly in the engine systems division aimed at downsizing the Llantrisant plant in Wales.
“Restructuring costs” are made up of the accruals to the “Provision for restructuring” (Euro 619 thousand, net of the not used provisions made during the previous years) and for the remaining part of costs incurred and paid during the year.
LOSSES (GAINS) ON DISPOSAL
Losses on disposal amount to Euro 101 thousand. As of December 31, 2010, gains for the amount of Euro 509 thousand had been booked to accounts.
EXCHANGE (GAINS) LOSSES
Net exchange losses as of December 31, 2011 amounted to Euro 866 thousand (Euro 220 thousand as of December 31, 2010).
OTHER NON-OPERATING EXPENSES (INCOME)
These amount to Euro 19,836 thousand compared with Euro 14,021 thousand the previous year. The following table shows the main elements:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Indirect taxes | 6,972 | 6,249 |
| Other fiscal charges | 2,996 | 2,702 |
| Imputed cost of stock option and stock grant plans | 611 | 540 |
| Other non-operating expenses (income) | 9,257 | 4,530 |
| TOTAL | 19,836 | 14,021 |
“Indirect taxes” include tax charges such as property tax, taxes on sales revenues (French companies), non-deductible VAT and taxes on professional training.
“Other fiscal charges” consist of the cotisation économique territoriale (previously called taxe professionelle) relating to the French companies, which is calculated on the value of tangible fixed assets and on added value. The increase reflects Euro 398 thousand relating to subsidiary Systèmes Moteurs S.A.S..
The main components of “Other non-operating expenses (income)” are as follows:
of which non-recurring:
- costs for the amount of Euro 4,395 thousand reflecting the fees of consultants who assisted the Holding Company Sogefi S.p.A. with the legal, financial and tax due diligence for the acquisition of the Systèmes Moteurs Group;
- write-downs of assets for the amount of Euro 3,412 thousand relating to subsidiary Sogefi Filtration Ltd for the restructuring process under way;
- costs for the amount of Euro 803 thousand relating to the recognition of the margin on finished products, semi-finished products and work in progress (the so-called “inventory step-up”) to income statement, recognised when the fair value of acquired Systèmes Moteurs Group's assets on change of control date was determined;
of which recurring:
- provisions for legal disputes with employees and third parties mainly in the subsidiaries Sogefi Filtration do Brasil Ltda and Allevard Rejna Autosuspensions S.A. for a total of Euro 748 thousand;
- pension costs for employees no longer on the books of Allevard Federn GmbH for the amount of Euro 148 thousand;
- net actuarial gains for the amount of Euro 328 thousand originated from pension fund valuation;
- other recurring costs for the amount of Euro 79 thousand.
FINANCIAL EXPENSES (INCOME), NET
Financial expenses are detailed as follows:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Interest on amounts due to banks | 8,669 | 5,027 |
| Financial charges under lease contracts | 449 | 476 |
| Financial component of pension funds and termination indemnities | - | 43 |
| Loss on interest-bearing hedging instruments | 1,302 | 2,446 |
| Other interest and commissions | 4,654 | 3,007 |
| TOTAL FINANCIAL EXPENSES | 15,074 | 10,999 |
Financial income is detailed as follows:
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Gain on interest-bearing hedging instruments | 47 | 28 |
| Interest on amounts given to banks | 1,589 | 1,241 |
| Financial component of pension funds and termination indemnities | 541 | - |
| Other interest and commissions | 217 | 176 |
| TOTAL FINANCIAL INCOME | 2,394 | 1,445 |
| TOTAL FINANCIAL EXPENSES (INCOME), NET | 12,680 | 9,554 |
Financial expenses, net show an increase of Euro 3,126 thousand basically due to the higher net financial indebtedness as a result of the acquisition of the Systèmes Moteurs Group and to rising interest rates.
LOSSES (GAINS) FROM EQUITY INVESTMENTS
As of December 31, 2011, this item amounts to zero.
INCOME TAXES
| (in thousands of Euro) | 2011 | 2010 |
|---|---|---|
| Current taxes | 18,667 | 13,665 |
| Deferred tax liabilities (assets) | (115) | (2,312) |
| Income (expenses) from Group tax filing system | 389 | 217 |
| TOTAL | 18,941 | 11,570 |
The year 2011 recorded a tax rate of 40.4% compared to 35.7% in the previous year.
The line “Income (expenses) from Group tax filing system” includes the payment for the fiscal surplus received from the companies that have joined the CIR Group tax filing system.
A reconciliation between the standard tax rate (that of the Holding Company Sogefi S.p.A.) and the effective tax rate for 2011 and 2010 is shown in the table below. Taxes have been calculated at the domestic rates applicable in the various countries. The differences between the rates applied in the various countries and the standard tax rate are included in the line “Other permanent differences and tax rate differentials”.
| (in thousands of Euro) | 2011 | 2010 | ||
|---|---|---|---|---|
|
Tax rate % |
Tax rate % |
|||
| Result before taxes | 46,833 | 0 | 32,419 | 27.50% |
| Theoretical income taxes | 12,879 | 8,915 | ||
| Effect of increases (decreases) with respect to the standard rate: | ||||
| Statutory amortisation of goodwill | (249) | 0 | (257) | (0.80%) |
| Non-deductible costs, net | 6 | 0 | 346 | 1.10% |
| Use of deferred tax assets not recognised in previous years | (487) | 0 | - | 0.00% |
| Deferred tax assets on losses for the year not recognised in the financial statements | 2,171 | 4.60% | 576 | 1.80% |
| Taxed portion of dividends | 1,008 | 2.20% | 819 | 2.50% |
| Other permanent differences and tax rate differentials | 3,614 | 7.60% | 1,171 | 3.60% |
| Income taxes in the consolidated income statement | 18,941 | 40.40% | 11,570 | 35.70% |
“Deferred tax assets on losses for the year not recognised in the financial statements” are mainly attributable to the French subsidiaries of the Suspension Components Division, for which there was no probability at the end of the year that such losses would be recovered.
The “Taxed portion of dividends” refers to the portion of dividends received from Group companies that is not tax-exempt.
DIVIDENDS PAID
Dividends paid during the year 2011 amounted to Euro 14,888 thousand, corresponding to a dividend per share of Euro 0.13.
The Company did not issue any shares other than ordinary shares; treasury shares are always excluded from the dividend.
EARNINGS PER SHARE (EPS)
Basic EPS
| 2011 | 2010 | |
|---|---|---|
| Net result attributable to the ordinary shareholders (in thousands of Euro) | 24,736 | 18,821 |
| Weighted average number of shares outstanding during the year (thousands) | 114,326 | 114,349 |
| Basic EPS (Euro) | 0.216 | 0.165 |
Diluted EPS
The Company only has one category of potential ordinary shares, namely those deriving from the potential conversion of the stock options granted to Group employees.
| 2011 | 2010 | |
|---|---|---|
| Net result attributable to the ordinary shareholders (in thousands of Euro) | 24,736 | 18,821 |
| Average number of shares outstanding during the year (thousands) | 114,326 | 114,349 |
| Weighted average number of shares potentially under option during the year (thousands) | 2,024 | 3,440 |
| Number of shares that could have been issued at fair value (thousands) | (1,513) | (3,440) |
| Adjusted weighted average number of shares outstanding during the year (thousands) | 114,837 | 114,349 |
| Diluted EPS (Euro) | 0.215 | 0.165 |
The “Weighted average number of shares potentially under option during the year” represents the average number of shares that are potentially outstanding under stock option plans (only for potentially dilutive options, i.e. with an exercise price lower than the average annual fair value of the ordinary shares of Sogefi S.p.A.), for which the subscription right has vested but has not yet been exercised at the end of reporting period. These shares have a potentially dilutive effect on Basic EPS and are therefore taken into consideration in the calculation of Diluted EPS.
The “Number of shares that could have been issued at fair value” represents the normalisation factor, being the number of shares that would have been issued dividing the proceeds that would have been received from subscription of the stock options by the average annual fair value of the Sogefi S.p.A. ordinary shares, which in 2011 amounted to Euro 2.4062, compared to Euro 2.1410 in 2010.
Please note that 2,622,535 shares that could dilute Basic EPS in the future were not included in the calculation of Diluted EPS for 2011 because their exercise price is higher than the average annual fair value of the ordinary shares of Sogefi S.p.A. in 2011.