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LAS DECISIONES
A residual portion of the Termoli site is recorded under non-current assets held for sale, for € 1,022 thousand. Definitive but complex negotiations for the sale of the land are continuing with potential buyers, with whom the difficult sales program is being prepared.
29. Shareholders’ equity
The Company manages its capital structure and makes changes to it depending on the economic conditions and the specific risks of the underlying asset. To maintain or change its capital structure, the Company may adjust the dividends paid to the shareholders and/or issue new shares. It should be noted that risk capital management is carried out at Group level. Please see the relative notes to the consolidated financial statements. For information on the composition and changes in shareholders’ equity for the periods under review, please refer to 'Statement of changes in shareholders equity'.
Share capital
At 31 December 2015, the share capital comprised 580,800,000 ordinary shares with a nominal value of € 0.10 each, fully paid-up. Following a resolution of the shareholders' meeting of 30 April 2015, the Company allocated the 2014 profit of € 98,732 thousand, partly to the payment of dividends (€ 45,700 thousand, equivalent to € 0.08 per outstanding share) and partly to earnings carried forward (€ 50,032 thousand).
Outstanding shares and own shares
Changes in outstanding shares and own shares during the year were as follows:
No. of shares Nominal value
31 December 2015 31 December 2014 31 December 2013 31 December 2015 31 December 2014 31 December 2013 € € €
Outstanding shares at the beginning of the period 576,918,717 575,683,176 576,301,882 57,691,872 57,568,318 57,630,188 Purchases for the employee stock option plan (11,518,418) (3,704,964) (8,264,835) (1,151,842) (370,496) (826,484)
Disposals 13,678,255 4,940,505 7,646,129 1,367,826 494,051 764,613
Outstanding shares at the end of the period 579,078,554 576,918,717 575,683,176 57,907,855 57,691,872 57,568,318
Total own shares held 1,721,446 3,881,283 5,116,824 172,145 388,128 511,682
Own shares as a % of share capital 0.3% 0.7% 0.9%
In 2015, 11,518,418 own shares were acquired at a purchase price of € 78,425 thousand, equating to an average price of € 6.81 per share. 13,678,255 own shares were sold at a market value of € 87,840 thousand. Own shares therefore amounted to 1,721,446 at 31 December 2015. In relation to the sales of own shares in the year, the Company recorded a net loss of € 49,433 thousand, which was recorded under shareholders' equity. This loss was partially offset by the use of the stock option reserve in the amount of € 14,861 thousand. Furthermore, after 31 December 2015 and until publication of these financial statements was authorized, the Company purchased an additional 995,337 own shares, at an average price of € 7.44, and own shares were sold for the exercise of stock options for a total of 126,186 shares. Thus, the number of own shares on the date this report was approved was 2,590,597.
Dividends paid and proposed
The table below shows the dividends approved and paid in 2015 and 2014 and the dividend submitted for the approval of the shareholders’ meeting called to approve the accounts for the year ending 31 December 2015.
Total amount Dividend per share
31 December 2015 31 December 2014 31 December 2015 31 December 2014
€ Thousand € Thousand € €
Dividends approved and paid during the year on ordinary shares 45,700 46,081 0.08 0.08
Dividends proposed on ordinary shares(*) 52,039 0.09
(*) calculated on the basis of outstanding shares at the date of the Board of Directors’ meeting on 1 March 2016. Other reserves Stock options Cash flow hedging Program contract reserve Remeasurement reserve for actuarial effects relating to defined benefit plans
Extraordinary reserve Reserve for VAT deductions 4- 6% (various laws) Reserve for grants (Law 696/83) Equity investment transfer reserve (Leg. Decree 544/92) Total € Thousand € Thousand € Thousand € Thousand € Thousand € Thousand € Thousand € Thousand € Thousand Balance at 31 December
2014 27,800 (4,029) 3,776 (465) 243,222 1,086 26 3,041 274,458
Stock option costs 4,724 4,724
Stock options in
subsidiaries 4,451 4,451
Stock options exercised (14,861) (14,861)
Losses (profits) reclassified
in the income statement (481) (481)
Profits (losses) allocated to
shareholders' equity (9) (9)
Cash flow hedge reserve allocated to shareholders’
equity 1,698 1,698
Tax effect allocated to
shareholders’ equity (464) 3 (461)
Balance at 31 December
Separate financial statements
Stock option reserve
Provisions made to the stock option reserve during the year with respect to share-based payments totaled € 9,176 thousand, with an offsetting entry posted to the related shareholdings of € 4,724 thousand, for the allocation of stock options to directors and employees of subsidiaries. Options cancelled over the year amounted to € 492 thousand, of which € 478 thousand related to directors and employees of subsidiaries. Lastly, options exercised during the year by beneficiaries at Davide Campari-Milano S.p.A. and its subsidiaries amounted to € 7,906 thousand and € 6,955 thousand respectively. For more information, see note 38 - ‘Stock option plans’.
Cash flow hedge reserve
The cash flow hedge reserve contains amounts (net of the related tax effect) pertaining to changes from fair value adjustments to financial derivatives recorded using cash flow hedging methodology; for further information, see note 37 - ‘Financial instruments: disclosures’.
Reserve for the Program Contract, "Agricultural and industrial consortium for disadvantaged areas in Piedmont" The reserve of € 3,776 thousand was created in 2010 following the request for financial assistance submitted under the program contract agreed on 24 July 2008 between the Piedmont agricultural and industrial consortium, of which the Company is a part, and the Italian Ministry of Economic Development, pursuant to the legislation in force. As the investment program for which the reserve was created has been completed, the reserve will be released over the next year.
Remeasurement reserve for actuarial effects relating to defined benefit plans
The reserve includes the effects of changes to the actuarial assumptions used to calculate net obligations for defined benefits.
Retained earnings
Following the resolution of the shareholders' meeting of 30 April 2015, the profit for the year to 31 December 2014, amounting to € 98,733 thousand, was allocated as follows:
€ 45,700 to dividends;
Availability of items under shareholders’ equity
(1) of which € 50,581 in earnings and € 7,499 for shareholder payments (2) for shareholder payments
Key:
A: for capital increase B: to hedge losses
C: for distribution to shareholders
30. Bonds and other non-current liabilities
The breakdown of bonds and other non-current liabilities is as follows.
31 December 2015 31 December 2014
€ Thousand € Thousand
Bond issued in 2003 (USD) 185,568 167,530
Bond issued in 2009 (Eurobond) - 352,415
Bond issued in 2012 (Eurobond) 396,165 395,166
Bond issued in 2015 (Eurobond) 594,092 -
Total bond issues 1,175,825 915,111
Derivatives on bond issue (USD) - 10,264
Other loans from related parties 200,000 200,000
Non-current financial liabilities 200,000 210,264
Other non-financial liabilities 373 1,405
Other non-current liabilities 200,373 211,669
Shareholders’ equity at 31 December 2015 Amount Possible
utilizations
Portion available
Summary of utilizations in the three previous years:
nature/description € Thousand € Thousand to hedge losses for other
reasons
Share capital (1) 58,080 - - -
Capital reserves:
Reserve for own shares (172) - - -
Legal reserve (2) 1,500 B 1,500
Earnings reserves:
Legal reserve 10,116 B 10,116
Extraordinary reserve 243,222 A, B, C 243,222
Equity investment transfer reserve (Leg. Decree 544/92) 3,041 A, B, C 3,041
Reserve for VAT deductions 4% Law 64/86 592 A, B, C 592
Reserve for VAT deductions 6% Law 67/86 451 A, B, C 451
Reserve for VAT deductions 6% Law 130/83 23 A, B, C 23
Reserve for VAT deductions 4% Law 675/77 2 A, B, C 2
Reserve for VAT deductions 6% Law 526/82 18 A, B, C 18
Reserve for capital grants (Law 696/83) 26 A, B, C 26
Program contract reserve 3,776 - - -
Merger surplus reserve 3,868 A, B, C 3,868
Profit carried forward from previous years 581,961 A, B, C 581,961
Other reserves:
Cash flow hedge reserve (3,275) - - - -
Pension funds remeasurement reserve (473) -
Stock option reserve 22,115 - - - -
Total reserves and share capital 924,872 844,820
Non-distributable portion 11,616
Residual distributable portion 833,204
Profit for the year 83,924
Separate financial statements The table below shows a breakdown of the Company's main financial liabilities, together with effective interest rates and maturities. It should be noted that, as regards the effective interest rate of hedged liabilities, the rate reported includes the effect of the hedging itself. Furthermore, the values of hedged liabilities include the value of the related derivative, whether it is an asset or liability.
Effective interest rate Maturity 31 December 2015 31 December 2014
at 31 December 2015 € Thousand € Thousand
Payables and loans due to banks Variable Euribor + 115-200 basis points 2014 - 9,322
Company bond issues:
- issued in 2003 (in USD) fixed rate from 4.03% to 4.37%(1) 2018 176,090 263,653
6-month € LIBOR + 60 basis points(2)
- issued in 2009 (Eurobond) fixed rate 5.375% 2016 353,185 357,041
- issued in 2012 (Eurobond) fixed rate 4.5% 2019 396,165 395,166
- issued in 2015 (Eurobond) fixed rate 2.75% 2020 594,092
Other loans from related parties 4.19-4.25% 2019 200,000 232,070
(1) Rate applied to the portion of the bond issue hedged by an interest rate swap, corresponding to a nominal value of €128,977 thousand (2) Rate applied to the portion of the bond issue hedged by an interest rate swap, corresponding to a nominal value of €42,992 thousand
Bonds
Bonds issued by the Company include the following four loans:
The first bond was placed on the US market and structured in two tranches of USD 100 million and USD 200 million, maturing in 2015 (bond settled by the Company in July 2015) and 2018, with a bullet repayment at maturity. The six- monthly coupons are based on an original fixed rate of 4.63%.
The second bond, of € 350 million, was placed on the European market (Eurobond 2009) with a maturity of October 2016 and was therefore classified under short-term liabilities at 31 December 2015. The offer was placed at a price of 99.431% and pays coupons annually, calculated at a fixed rate of 5.375%. The gross return on the bond is therefore 5.475%.
The third bond (Eurobond 2012), of € 400 million, was placed on the European market and matures on 25 October 2019. The offer was placed at a price of 99.068%; coupons are paid annually at a fixed rate of 4.5%. The gross return on the bond is therefore 4.659%.
The fourth bond (Eurobond 2015), of € 600 million, was placed on the European market and matures on 30 September 2020. The offer was placed at 99.715% of the nominal value. Coupons are payable at a nominal fixed interest rate of 2.75%. The gross return on the bond is therefore 2.81%.
The Company has put in place various instruments to hedge the exchange rate and interest rate risks.
A cross currency swap has been taken out on the first bond placed on the US market to offset the risks related to fluctuations in the US dollar and movements in interest rates; this changes the US dollar-based fixed interest rate to a variable euro rate (6-month Euribor + 60 basis points).
On the same bond, various interest rate swaps were put in place involving the payment of an average fixed rate of 4.25% on underlying USD 150 million (maturing in 2018).
The changes in the reported bond values and associated hedges in 2015 relate to the following:
for the 2003 bond (USD), the valuations of existing hedging instruments (which have a positive effect of € 19,830 thousand, including the impact of the transactions settled during the year with the payment of the maturing tranche) and the effects on the hedged bonds and the amortized cost (a negative effect of € 18,040 thousand); as the derivative's value was positive at 31 December 2015, it was accordingly reclassified under non-current financial assets (note 22).
the payable for the 2009 Eurobond, which matures in 2016, was reclassified under current financial liabilities (see note 31 - ‘Payables to banks and other current financial payables’ for further details);
the effects of the amortized cost (negative at € 999 thousand) for the Eurobond issued in 2012.
For more information on the changes during the year, see note 37 - ‘Financial instruments’.
Other debt
The item includes the loans taken out with Group companies. They will be settled with a bullet repayment in 2019. For further details on these transactions, see note 40 - ‘Related parties’.
31. Payables to banks and other short-term financial payables
31 December 2015 31 December 2014
€ Thousand € Thousand
Payables and loans due to banks 9,673 9,322
Short-term portion of bond (USD) issued in 2003 - 85,984
Short-term portion of Eurobond issued in 2009 350,000 -
Amortized cost effect on short-term bonds 3,185 1,359
Accrued interest on bonds 15,338 12,383
Short-term portion of derivatives on bond (USD) issued in 2003 - 3,045
Financial liabilities on hedging contracts 119 178
Other financial liabilities in respect of related parties 32,196 32,070
Total other financial payables 400,837 135,020
Payables to banks
Short-term payables to banks relate to short-term loans or credit facilities used by the Company to obtain additional financial resources. At 31 December 2015, the item only included payables to factoring companies, of € 9,673 thousand.
Bonds
The changes in the reported bond values and associated hedges in 2015 relate to the following:
the amount shown under short-term liabilities relating to the Eurobond issued in 2009 represents the total value of the bond maturing in July 2016, of € 350 million, as well as the liabilities arising from the valuation at fair value made in previous years, of € 3,185 thousand;
for the 2003 issue (USD), the valuations of existing hedging instruments (which have a positive effect of €7,715 thousand due to the settlement of transactions during the year via payment of the maturing tranche) and the effects on the hedged and the amortized cost (a negative effect of € 7,840 thousand).
Other financial liabilities
The item includes liabilities arising from cash pooling management by some Companies in respect of other Group companies. The corresponding asset positions for the Company are shown under Current financial assets and explained in note 26 - ‘Current financial assets’. For more details, see note 40 - ‘Related parties’.
32. Defined benefit plans
The employee liability indemnity (TFR), which relates to the Company’s employees, pursuant to article 2120 of the Italian civil code, falls under the scope of IAS 19. Employee indemnity liability (TFR) contributions accrued up to 31 December 2006 remain in the company. For contributions accruing from 1 January 2007, employees have the choice to allocate them to a complementary pension scheme, or keep them in the company, which will transfer the TFR contributions to a fund held at the INPS (Italian social security agency). Consequently, TFR contributions accrued from 1 January 2007 are classified as defined contribution plans.
Since the Company usually pays contributions through a separate fund, without further obligations, it records its contributions to the fund for the year to which they relate, in respect of employees’ service, without making any actuarial calculation. Since the contributions in question had already been paid by the Company at the reporting date, no liability is recorded in the statement of financial position. Conversely, TFR contributions accrued up to 31 December 2006 will continue to be classified as defined benefit plans, with the actuarial valuation criteria remaining unchanged in order to show the current value of the benefits payable on the amounts accrued at 31 December 2006 when employees leave the Company.
The tables below summarize the components of the net cost of benefits reported in the income statement and the statement of comprehensive income in 2015 and 2014.
Separate financial statements
€ Thousand Liabilities
Liabilities at 31 December 2014 6,135
Movements recognized in the income statement
- current service costs 43
- net interest 88
Total 130
Reassessment of gains/(losses) recognized in the income statement
- gains/(losses) resulting from changes in actuarial assumptions 9
Total 9
Changes in balance sheet items
- benefits paid (555)
- change in basis of consolidation 65
Total (490)
Liabilities at 31 December 2015 5,784
€ Thousand Liabilities
Liabilities at 31 December 2013 6,931
Movements recognized in the income statement
- net interest 203
Total 203
Reassessment of gains (losses) recognized in the income statement
- gains/(losses) resulting from changes in actuarial assumptions 313
Total 313
Changes in balance sheet items
- benefits paid (1,081)
- TFR for employees transferred from/to Group Companies (231)
Total (1,312)
Liabilities at 31 December 2014 6,135
The main assumptions used in determining the obligations resulting from the plans described are indicated below.
2015 2014
Discount rate 1.81% 1.49%
Staff turnover rate 2.95% 2.70%
Forecast inflation rate 1.50% 0.6%-1.5%
Quantitative sensitivity analysis of the significant assumptions used at 31 December 2015 is shown below.
Change in the assumptions Impact of positive change Impact of negative change
Discount rate +/- 0.5% -4.09% 4.38%
Staff turnover, disability and early retirement +/- 0.5% -0.16% 0.18%
Forecast inflation rate +/- 0.5% 2.72% -2.62%
The sensitivity analysis shown above is based on a method involving extrapolation of the impact on the obligation of reasonable changes to the key assumptions made at the end of the financial year. The methodology and the assumptions made in preparing the sensitivity analyses remain unchanged from the previous year. Given that pension liabilities have been corrected on the basis of the consumer prices index, the pension plan is exposed to the inflation rate, to interest rate risks and to changes in the life expectancy of former employees. In view of the fact that nothing has been done to support the plans, the Company is not exposed to market risk in the sectors in which the plan is invested.
The following payments are the expected contributions that will be made in future years: 31 December 2015 € Thousand Within 12 months 219 Within 5 years 848 After 5 years 997 Total 2,064
Average plan duration (years) 9.5
Cash flows expected for future payments into the plan are not likely to have a significant effect on the Company’s statement of financial position or income statement.
33. Provisions for risks and charges
The table below indicates changes to this item during the period.
Tax provision Restructuring provisions Agent severance fund Other Total
€ Thousand € Thousand € Thousand € Thousand € Thousand
Balance at 31 December 2014 1,227 107 1,522 153 3,009
Accruals 210 685 895
Utilizations (926) (36) (160) (1,122)
Releases (71) (15) (22) (108)
Balance at 31 December 2015 301 - 1,557 816 2,674
of which estimated outlay:
- due within 12 months 301 - - 685 986
- due after 12 months - - 1,557 131 1,668
The tax provision at 31 December 2015 included estimated potential liabilities of € 301 thousand arising from outstanding disputes, including some for incorporated companies for tax years 2004-2005. The provision for risks included under 'Other' mainly related to estimated future liabilities that the Company will incur due to legal disputes in progress.