185000000 IT Holding Finance SA

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IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2004 Interest hedging contracts that qualify as cash flow hedges are composed of interest rate swaps for a nominal amount of Euro 30,000 thousand that mature within 2 years and have fixed swap rates ranging from 2.77% to 3.16% and an interest rate swap for a nominal amount of Euro 10,000 thousand that matures in November 2007 at a variable interest rate that is floored and capped within the following ranges: 1 st year 2.15%-3.63%, 2 nd year 2.5%- 3.63%, 3 rd year 2.75%-3.63%. These interest rate swaps have been designated to hedge the cash flow interest rate risk arising on the five year syndicated loan of Euro 85 million maturing interest at Euribor plus 240 basis points. Forward exchange contracts, currency options and FX swaps are entered into to off-set foreign exchange exposure. Hedge accounting is not applied as these derivative contracts do not qualify as fair value or cash flow hedges. Changes in fair value are therefore recognized in the income statement in the caption “financial income (charges)” as net foreign exchange gains or losses. On November 10, 2003 FERRÉ FINANCE S.A. entered in a loan for an original amount of YEN 22,103,200,000 with the parent company IT HOLDING S.p.A.. The companies entered into two currency interest swaps (put and call) with external parties to hedge the foreign currency and interest rate risk on their exposure in Japanese Yen. The nominal value of the swaps in being at December 31, 2004 was Euro 165 million (2003: Euro 188.5 million). Effective interest rate and repricing analysis In respect of interest-earning financial assets and interest bearing financial liabilities, the following table indicates their effective interest rate at the balance sheet date and the periods in which they reprice or mature. Effective 6 More Effective 6 More interest months 6-12 1-2 2-5 than interest months 6-12 1-2 2-5 than rate Total or less months years years 5 years rate Total or less months years years 5 years (In thousands of Euros) 2004 2004 2004 2004 2004 2004 2004 2003 2003 2003 2003 2003 2003 2003 Cash and cash equivalents 14,763 14,763 - - - - 36,770 36,770 - - - - Escrow account 2.04% 148,637 148,637 - - - - - - - - - - Junior notes 2.18% 38,128 38,128 - - - - 2.14% 30,699 30,699 - - - - Bank loans: Euro floating rate loan 5.76% (83,530) (83,530) - - - - - - - - - - effect of interest rate swap (2.77%) - 40,000 (40,000) - - - - - - - - Euro floating rate loan - - - - - - 4.68% (84,900) (84,900) - - - - effect of interest rate swap - - - - - - (3.07%) - 50,000 - (20,000) (30,000) - Euro floating rate loan 3.96% (1,249) (1,249) - - - - 4.68% (3,734) (3,734) - - - - Euro floating rate loan 3.45% (958) (958) - - - - 3.50% (1,413) (1,413) - - - - Euro fixed rate loan 2.58% (194) (194) - - - - 2.58% (579) (193) (193) (193) - - Euro floating rate loan - - - - - - 3.22% (555) (555) - - - - Bond issues: Eurobond 2005* 7.39% (182,552) (182,552) - - - - 7.39% (207,874) - - (207,874) - - senior notes due 2012* 12.46% (135,902) - - - - (135,902) - - - - - - Factoring: Euro floating rate liabilities 2.18% (76,152) (76,152) - - - - 2.14% (157,029) (157,029) - - - - Euro floating rate liabilities 3.71% (5,328) (5,328) - - - - - - - - - - Finance lease liabilities: Euro floating rate liabilities (82) (82) - - - - (1,177) (1,177) - - - - Bank facility: Ordinary current account (28,159) (28,159) - - - - (17,606) (17,606) - - - - Advances on export (7,279) (7,279) - - - - (14,908) (14,908) - - - - Bills withdrown falling due (3,222) (3,222) - - - - (2,789) (2,789) - - - - Advances on orders (1,306) (1,306) - - - - (2,407) (2,407) - - - - Total (324,385) (148,483) 0 (40,000) 0 (135,902) (427,502) (169,242) (193) (228,067) (30,000) 0 * These liabilities bear interest at a fixed rate. F- 41
IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2004 Fair values The following table shows the fair value of financial liabilities compared to their fair values: Carrying Fair Carrying Fair amount value amount value (In thousands of Euros) 2004 2004 2003 2003 Factoring: without recourse floating rate loan (76,152) (76,152) (157,029) (157,029) with recourse floating rate loan (5,328) (5,328) - - Bank loans: Euro floating rate loan (83,530) (90,313) - - Euro floating rate loan - - (84,900) (91,894) Euro floating rate loan (1,249) (1,254) (3,734) (3,829) others floating rate loan (1,152) (1,152) (2,547) (2,547) Bond issues: senior notes due 2012 (135,902) (214,524) - - Eurobond 2005 (182,552) (185,817) (207,874) (220,600) Finance lease liabilities: Euro floating rate liabilities (82) (82) (1,177) (1,177) Total (485,947) (574,621) (457,261) (477,076) Fair value has been determined either by reference to market value at the balance sheet date or by discounting the relevant cash flows using current interest rates for similar instruments without any credit spread. Had the Group considered its credit spread, the difference between fair value and carrying amount would have been lower. (29) Transactions with Related Parties The Group is controlled by PA Investments S.A.. The ultimate parent company is GTP HOLDING S.p.A. Transactions and balances between consolidated Group companies have been eliminated from the consolidated financial statements and are not discussed herein. The Group’s relationships with parent companies and other related parties are summarized below: 2004 2003 (In thousands of Euros) Parent companies: Receivables Payables Receivables Payables PA Investments S.A. 486 64 1,447 12 GTP HOLDING S.p.A. Companies controlled by PA Investments S.A.: 13 9 4 - Diners Club Italia S.p.A. Unconsolidated subsidiaries: - - 1 485 FINANCIÈRE MELPAR HOLDING S.A. - liquidated Associated companies: - - - - City Fashion S.r.l. 3,669 - - - Metropolis S.r.l. Other related parties: 3,846 - - - I.C.R. - Industrie Cosmetiche Riunite S.p.A. - - 4 8,657 Pavia & Ansaldo Law Firm - 758 - 90 Other sundry - - 1,040 666 F- 42
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CONFIDENTIAL Rule 144A Global Note
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Definitions In this annual report:
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• risks related to our principal
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Our Strategic Refocusing Program Du
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manufacturing of our products to th
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income tax on a consolidated basis
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(3) Net working capital is defined
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We must anticipate trends and respo
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We are subject to significant restr
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event of a foreclosure on the secur
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• avoid or invalidate all or a po
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a maximum of two years); (ii) a pro
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• pursuant to article 445 of the
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Our Company DESCRIPTION OF BUSINESS
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Versus is a medium-priced fashion b
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in print (fashion magazines and new
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We maintain a close working relatio
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Licensor and Brands Gianni Versace
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Legal proceedings Ordinary Course L
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OPERATING AND FINANCIAL REVIEW AND
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each year, when payments to our sup
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Income taxes In 2004, we incurred a
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Facilities and bank overdraft facil
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Page 49 and 50: Contractual obligations The followi
Page 51 and 52: An impairment loss in respect of go
Page 53 and 54: Salvatore Vicari has been a directo
Page 55 and 56: PRINCIPAL SHAREHOLDERS The table be
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Page 59 and 60: The Board of Directors IT Holding S
Page 61 and 62: REPORT OF THE AUDITORS The Board of
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IT HOLDING S.p.A. Notes to the cons
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