185000000 IT Holding Finance SA

IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2002
27. Earnings per share
Basic earnings per share
The calculation of basic earnings per share at December 31, 2002 was based on the net income attributable to
ordinary shareholders of €42 thousand (2001: net loss of €1,943 thousand) and a weighted average number of
ordinary shares outstanding during the year ended December 31, 2002 of 221,016,059 (2001: 199,730,245). Basic
earnings per share at December 31, 2002 is equal to positive amount of €0.00 (2001: negative amount of €0.01).
28. Financial instruments
Exposure to credit, interest rate and currency risk arises in the normal course of the Group’s business. Derivative
financial instruments are used to hedge exposure to fluctuation in foreign exchange rates and interest rates.
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Receivables
form a core component of monthly reporting and are analyzed with respect to aging structure and seasonality on a
regular basis to avoid unforeseen adjustments for loan provisions.
Credit evaluation is performed individually for loans that are individually significant (“bad loans”) and collectively
for financial assets that are not individually significant.
The provision for doubtful receivables has been estimated on the basis of available data and in general on the basis of
historical data by writing down 0.5% of outstanding trade receivables.
When using financial derivatives, IT Holding is exposed to the risk that the counterparty may default. The risk that
the counterparties will not honor their commitments is limited, since such contracts were signed with leading financial
operators. Therefore the company does not expect any risk of insolvency.
In December 2002, IT HOLDING S.p.A. signed a servicing contract with the Milano branch of Credit Lyonnais S.A.
for administration and management activities, including the collection of receivables and management of bad debts
and receivables factored with recourse by subsidiaries of IT HOLDING S.p.A. to Credit Lyonnais S.A. under
factoring, guarantee and hold harmless agreements, signed by Credit Lyonnais S.A. and ITTIERRE S.p.A.,
ALLISON S.p.A., M.A.C.—Manifatture Associate Cashmere S.p.A., and ITF S.p.A. on December 20, 2002. The
servicing contract is valid until December 31, 2003.
On December 20, 2002, IT HOLDING S.p.A. signed a joint venture agreement with the Milano branch of Credit
Lyonnais S.A. through which the active partner (Credit Lyonnais S.A.) will offer the silent partner (IT HOLDING
S.p.A.) a share in the profits on the purchase, management and collection of receivables, as described above in
relation to the servicing project. Under this agreement, IT HOLDING S.p.A. made an initial contribution of Euro
9,146 thousand
Interest rate risk
In 2002 the Group was adopted a policy that, when adopted in full, will ensure that between 50 and 60 per cent of its
exposure to changes in interest rate on interest-bearing loans and borrowings is on fixed rate basis. Interest rate swaps,
denominated in euro, have been entered into to achieve an appropriate mix of fixed and floating rate exposure within
the Group’s policy. The swaps mature within the next two years and have fixed swaps rate ranging from 3.18 per cent
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