in the First Half of 2003 98th Fiscal Year - FIAT SpA

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OPERATING PERFORMANCE AND FINANCIAL POSITION OF FIAT S.P.A. Operating Performance The loss of Fiat S.p.A. in the first half of 2003 was 159 million euros, compared with a net income of 654 million euros in the corresponding period of the previous year. A breakdown of its principal components is provided below: (in millions of euros) 1st half 2003 1st half 2002 Investment income 282 290 Adjustments (224) – Net financial expenses (93) (9) Cost of personnel and services, less revenues (52) (62) Net extraordinary income (expenses) (16) 628 Income taxes (56) (193) Net result (159) 654 Investment income of 282 million euros is in line with the result of the first half of 2002. It consists of dividends, including the respective tax credits, paid by subsidiaries and associated companies. The adjustments of 224 million euros largely reflect writedowns in the book value of the following subsidiaries: Fiat Netherlands Holding N.V. following the losses recorded by the subsidiary CNH (93 million euros), Comau B.V. (73 million euros) and Iveco N.V. (42 million euros). Net financial expenses totaled 93 million euros (9 million euros in the first half of 2002) and refer to interests and commissions paid for the 3-billion-euro convertible facility that has a term of three years. The cost of personnel and services, less revenues, totaled 52 million euros (62 million euros in the first half of 2002). In particular: ❚ The cost of personnel and services came to 113 million euros, compared with 114 million euros in the first half of 2002. The Company’s staff averaged 173 employees, compared with 211 in the first half of 2002. ❚ Revenues totaled 61 million euros, compared with 52 million euros in the first half of 2002. They included royalties from the license to use the Fiat trademark and fees for services rendered by management personnel. Net extraordinary expenses amounted to 16 million euros and included commissions owed to Mediobanca for the future listing of Ferrari S.p.A. shares. In the first half of 2002 net extraordinary income represented the capital gain, net of expenses incurred, upon sale of 34% of Ferrari S.p.A. to Mediobanca S.p.A. Income taxes totaled 56 million euros, compared with 193 million euros in the first half of 2002. These amounts do not include the tax credits on dividends listed under “investment income”. 17 Operating Performance and Financial Position of the Fiat Group and Fiat S.p.A. in the First Half of 2003 Financial Position The balance sheet of Fiat S.p.A. is summarized as follows: (in millions of euros) 6/30/2003 12/31/2002 Change Fixed assets 9,409 8,144 1,265 Working capital (96) (169) 73 Net invested capital 9,313 7,975 1,338 Stockholders’ equity 5,775 5,934 (159) Net borrowings 3,538 2,041 1,497 Fixed assets consist mainly of investments in the Group’s companies, which at June 30, 2003 totaled 9,324 million euros, up from 8,050 million euros at December 31, 2002. The net increase of 1,274 million euros largely reflects the amounts subscribed for the rights offering of Fiat Netherlands Holding N.V. (1,382 million euros) for the 74% investment held by Fiat S.p.A. and Comau B.V. (100 million euros), net of the writedowns previously described. Working capital includes payables to Tax Authorities, suppliers, and employees of 112 million euros net of receivables, and ordinary treasury stock of 16 million euros (2,330,420 shares, or 0.54% of total stock, with a par value of 12 million euros). Working capital increased by 73 million euros compared with December 31, 2002 due to higher tax credits. Stockholders’ equity totaled 5,775 million euros at June 30, 2003, compared with 5,934 million euros at December 31, 2002. The decrease of 159 million euros reflects the loss for the period. Net borrowings totaled 3,538 million euros. They increased by 1,497 million euros from December 31, 2002, mainly due to the investments in equity holdings previously described.
In July 2003, Fiat S.p.A. and Avio Holding S.p.A., a company that is 70% owned by The Carlyle Group and 30% by Finmeccanica S.p.A., signed an agreement for the sale of the aerospace activities of FiatAvio S.p.A., which Fiat transferred to Avio S.p.A., a newly established company. The enterprise value attributed to Avio S.p.A. is approximately 1,500 million euros. This transaction will improve the financial position of the Group by about 1,400 million euros. The agreement is subject to the customary conditions precedent and approval by the competent antitrust authorities. The closing of the transaction is expected to take place by the end of the year. In July 2003 Fiat carried out the capital increase which the Board of Directors resolved upon at its meeting of June 26, 2003, on 18 Significant Events Occurring Since the End of the Period and Business Outlook for the Balance of the Year the occasion of the presentation and approval of the Fiat Group Relaunch Plan. The capital increase was concluded in August without the participation of the Underwriting Group. All of the 367,197,108 Fiat ordinary shares offered to stockholders in the form of a rights offering at a price of 5 euros per share were subscribed, for an overall amount of 1,836 million euros. Also in July 2003, CNH issued eight-year senior notes with a face value of about $750 million. Over 60% of the indebtedness incurred by CNH’s industrial operations, including this bond issue, now has a maturity of five years or more. In September, the bond issue was increased to a total of $1,050 million. Information on the business outlook for the balance of the year is provided in the Introduction.
Page 1 and 2: Report of the Board of Directors on
Page 3 and 4: 2 Financial Highlights of the Fiat
Page 5 and 6: KEY DEVELOPMENTS Despite the weakne
Page 7 and 8: INTRODUCTION In order to facilitate
Page 9 and 10: posted in the first half of 2002, m
Page 11 and 12: EBIT (Earnings Before Interest and
Page 13 and 14: Reserves At June 30, 2003, the rese
Page 15 and 16: statement of operations is illustra
Page 17: Toro Assicurazioni (35 million euro
Page 21 and 22: leading operator of call centers. T
Page 23 and 24: During the first half of 2003, the
Page 25 and 26: The key development in the first ha
Page 27 and 28: The general economic slowdown conti
Page 29 and 30: The difficulties encountered in the
Page 31 and 32: Based on preliminary estimates, sal
Page 34 and 35: Fiat Group — Consolidated Financi
Page 36 and 37: (in millions of euros) 35 Fiat Grou
Page 38 and 39: ACCOUNTING PRINCIPLES AND METHODS T
Page 40 and 41: December 31, 2002), Naveco Ltd. 113
Page 42 and 43: Other securities at June 30, 2003 i
Page 44 and 45: euros, change in the scope of conso
Page 46 and 47: The decrease of 13,592 million euro
Page 48 and 49: Other financial income (in millions
Page 50: 18 Income taxes for the period Inco
Page 53 and 54: (in millions of euros) 52 Fiat S.p.
Page 56 and 57: 55 Annex
Page 58 and 59: Subsidiaries consolidated on a line
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Subsidiaries consolidated on a line
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Subsidiaries valued by the equity m
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Subsidiaries valued at cost ❚ Aut
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Subsidiaries valued at cost (contin
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Subsidiaries valued at cost (contin
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Associated companies valued by the
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Associated companies valued at cost
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Other companies valued at cost ❚
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Significant investments sold effect
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Report of the Board of Directors on
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