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accessories business caused by higher royalty fees and advertising commitments payable following the<br />
renegotiation of our royalty agreements in 2002. Many of these increased royalty and advertising amounts only<br />
took effect in 2003. This increase was also due to the impact of advertising, design and other similar costs for our<br />
apparel and accessories business relating to the launch of our Ferré diffusion collections. This increase was also<br />
due to increased outside services costs for our eyewear business due to the launch of new product lines, and to<br />
increased outside services costs for our fragrances business.<br />
Personnel expenses<br />
Consolidated personnel expenses were essentially flat, at €86.8 million in 2003 compared to €85.5 million in 2002.<br />
Other operating expenses<br />
Consolidated other operating expenses were essentially flat, at €35.8 million in 2003 compared to €35.2 million in<br />
2002.<br />
EB<strong>IT</strong>DA<br />
Consolidated EB<strong>IT</strong>DA decreased by €11.3 million, or 10.5%, to €96.7 million for 2003 from €108.0 million for<br />
2002. This decrease was primarily due to the increase in outside services costs discussed above.<br />
Depreciation and amortization<br />
Consolidated depreciation and amortization increased by €63.3 million, or 75.9%, to €146.7 million for 2003 from<br />
€83.4 million for 2002. This increase was primarily due to our decision to write down all of the €29.2 million book<br />
value accorded to our Romeo Gigli brands as a result of our decision to discontinue their development, and to<br />
write-down €23.2 million of goodwill relating to our Malo brand and our eyewear business. The decision to writedown<br />
the value of this goodwill was made following a revaluation of the brands to which they related and<br />
conditions in the luxury goods industry generally. This increase also reflects, to a lesser extent, increased<br />
amortization relating to investments in collection development and increased amortization arising from capital<br />
expenditures made in connection with the launch of our new GF Ferré brand and to open and renovate additional<br />
Gianfranco Ferré directly operated stores.<br />
Operating income<br />
Consolidated operating income decreased by €74.6 million, to a loss for 2003 of €50.0 million from consolidated<br />
operating income of €24.6 million for 2002. This decrease was primarily due to the non-cash effect of the writedown<br />
of the value of our Romeo Gigli brands and of other intangible and tangible assets, as discussed above.<br />
Income taxes<br />
Net income tax benefit was €21.7 million for 2003 compared to €1.9 million for 2002. Net income tax benefit for<br />
2003 reflected the effect of a tax benefit on dividends paid to <strong>IT</strong> <strong>Holding</strong> S.p.A. from Ittierre S.p.A. <strong>IT</strong> <strong>Holding</strong><br />
S.p.A. was able to take advantage of this benefit due to its having tax losses against which the benefit could be<br />
applied for the period in which the dividend was received.<br />
Net income<br />
For the reasons set forth above, consolidated net income decreased by € 62.7 million, to a loss of €62.7 million for<br />
2003 from net income of €0.04 million for 2002.<br />
Liquidity and Capital resources<br />
Our principal sources of funds are cash provided by operations, amounts received from the assignment of trade<br />
receivables under our securitization program, as well as amounts available under the Uncommitted Bilateral Loan<br />
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