185000000 IT Holding Finance SA

Our Strategic Refocusing Program
During 2004, we implemented a strategic refocusing program intended to concentrate our efforts on our profitable core
business of producing and distributing branded apparel and accessories and to dispose of certain brands and businesses
that we did not consider to be essential. Our strategic refocusing program comprised the following principal initiatives:
• In March 2004, we disposed of our fragrance business for €31.5 million in cash. The financial results of our
fragrance business have not been included in our consolidated financial results since December 31, 2003.
• In April 2004, we sold our shares in Gigli S.p.A., through which we held our former Romeo Gigli brands, for total
consideration comprising €1,000 in cash and certain licensing rights, and also disposed of our former
Gentryportofino brand for €3.7 million in cash.
• In October 2004, we sold our eyewear business for total consideration of €62.0 million comprising €5.0 million in
cash and the assumption of €57.0 million of debt by the purchaser. Of the €5.0 million cash amount, €4.0 million
was paid at closing and the remaining €1.0 million was paid in December 2004. Prior to its disposal as of October
5, 2004, our eyewear business generated €56.7 million in net revenues and recorded a net loss of €2.1 million on a
stand-alone basis.
• Throughout 2004, we continued to streamline our distribution platform. For example, we completed the elimination
of approximately 150 underperforming wholesale customers of our Ferré brands and closed our directly operated
Malo boutiques in London, New York and Chicago. We intend to continue these streamlining efforts and are
presently evaluating opportunities to convert additional directly operated stores to franchised points of sale on a caseby-case
basis. Going forward, we expect to pursue future retail growth exclusively through franchising and similar
arrangements.
The net effect of these initiatives was to contribute to the reduction of our net financial debt from €427.6 million as of
December 31, 2003 to €324.4 million as of December 31, 2004. We believe that, now that the implementation of our
strategic refocusing program is largely complete, we are poised to improve our financial performance by concentrating
on our profitable core apparel and accessories businesses.
Our Refinancing Program
In parallel with our strategic refocusing program, we have also been engaged in a refinancing program, which has
comprised the following initiatives:
• In October 2004, we entered into a new senior loan facility that provided us with €85.0 million of term loans (the
“New Credit Agreement”) to replace our former senior term loan and issued €150.0 million in principal amount of
9 7 /8% senior notes due 2012 (the “Notes”). We used the proceeds from borrowings under the New Credit
Agreement and the issuance of the Notes as well as existing cash to repay our former senior term loan, to fund an
escrow account (the “original Escrow Account”), the proceeds of which would be used to tender for our existing
7% Guaranteed Notes due 2005 (the “2005 Notes”), approximately €175.0 million of which were outstanding at
that time, and to pay certain fees and expenses.
• In December 2004, we launched such a tender offer, which resulted in us repurchasing approximately €80.5
million in principal amount of our 2005 Notes. All 2005 Notes repurchased by us pursuant to this tender offer,
which closed in January 2005, were cancelled. Accordingly, following the completion of the tender offer,
approximately €94.5 million in principal amount of the 2005 Notes remained outstanding.
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