Ferrari N.V.
2015 ANNUAL REPORT
TABLE OF CONTENTS
Board Report
Board of Directors and Auditors
Letter form the Chairman
Letter from the Chief Executive Officer
Certain Defined Terms and Note on Presentation
Selected Financial and Other Data
Creating Value for Our Shareholders
Risk Factors
Overview
Industry Overview
Overview of Our Business
Operating Results
Subsequent Events and 2016 Outlook
Major Shareholders
Corporate Governance
Sustainability Disclosure
Risks, Risk Management and Control Systems
Remuneration of Directors
Financial Statements
Consolidated Financial Statements and Notes at December 31, 2015
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Company Financial Statements at December 31, 2015
Income Statement / Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Company Financial Statements
Other Information
Other Information
Independent Auditor's Report
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Board of Directors and Auditors
Board of Directors
Chairman
Sergio Marchionne
Chief Executive Officer
Amedeo Felisa
Directors
Piero Ferrari
Louis C. Camilleri
Eddy Cue
Sergio Duca
Giuseppina Capaldo
Elena Zambon
Independent Auditors
Ernst & Young Accountants LLP
3
Letter from the Chairman
Shareholders,
2015 was a momentous year for Ferrari: We set the Company on course for independence from Fiat Chrysler Automobiles to
allow it to realize its full potential and unlock greater value for shareholders. After an intense roadshow, we took 10% of the
Company public with the ticker RACE on the New York Stock Exchange on October 21st. The excitement and media attention
the IPO drew was an undeniable testimony of the power of the Ferrari brand.
We remain committed to preserving the exclusivity of the Ferrari brand and to upholding Enzo Ferrari’s tenet to produce
“one car less than what the market demands”. However, we will seize the opportunities the market offers and believe that the
demand for Ferrari is robust and growing. Therefore, if market conditions are right, we may increase production volumes in a
gradual and organic way over the coming years.
In product development, we are steadfast in our belief that each new car we develop has to be “best in class”. The
models introduced in 2015: the 488 GTB, the 488 Spider and the F12tdf underscore this principle, and their immediate success
can testify to this. The latter (a limited edition V12 model of 799 cars) was sold out before it was even announced. Both the 488
GTB and the 488 Spider have already collected a number of accolades and order books are full. Innovation is one of the key
principles that Ferrari is built on, and we plan to keep developing our range of V8 and V12 cars with leading-edge technology
and iconic design.
Racing is in Ferrari’s DNA, we have the most successful Formula 1 team in the history of the sport. Our ticker symbol
is RACE to remind us of our origins. The 2015 Formula 1 season was a decisive step in the right direction, but we are far from
satisfied. Over the last year, we made major changes to the team, most notably by bringing Sebastian Vettel, a four time world
champion, on board as one of our two main drivers (joining Kimi Raikkonnen) and hiring Maurizio Arrivabene, a seasoned
Formula 1 veteran as Team Principal. The season witnessed a Scuderia Ferrari comeback with 16 podium finishes including
three victories, and second place in the World Constructor’s Championship. But, this is not enough. We will work tirelessly to
take Ferrari back to the top as world champion, investing where needed. Ferrari’s racing tradition is not only key to innovation
for our road cars, it is fundamental for the value of our brand.
Ferrari is much more than an automotive company and a Formula 1 team, it is the very definition of a luxury brand.
Provenance, exclusivity, world-class craftsmanship, intrinsic value, unmistakable design - these are all attributes of the Ferrari
brand that we will continue to cultivate and elevate. At the same time, we are exploring ways in which we can extend the Ferrari
brand to create more value for our shareholders.
In closing, I would like to thank our shareholders, new and old, for their support. We are just getting started. We have
no doubt of Ferrari’s solidity and its potential, and no doubt that being a Ferrari shareholder will bring great rewards. The markets
may have their ups and downs, but Ferrari has what it takes to weather the storm.
February 25, 2016
Sergio Marchionne
Chairman
4
Letter from the Chief Executive Officer
Shareholders,
2015 saw Ferrari tackle major new production and commercial challenges. We launched two new production models (the 488
GTB and the 488 Spider) and the special limited edition F12tdf, which includes some of the technical features that soon will be
applied to the new V12 range, in addition to nearing completion of deliveries of the LaFerrari, a huge production and commercial
commitment that involved the whole Company focusing on improving the efficiency of our processes.
This produced more than satisfactory results as overall we delivered 7,664 cars to the dealership network, an increase
of 6% on the previous year. Specifically, the new 8-cylinder models grew by 17%, although there was a slowdown in the 12-
cylinders, particularly the FF and the F12berlinetta, which are now nearing the end of their product lifecycles.
Last year, in fact, we laid the foundations for an overhaul of the 12-cylinder range which began with the new GTC4Lusso,
launched at the start of 2016 to replace the FF. From a geographical distribution perspective, we would like to highlight the
solid growth figures compared to the previous year from North America (+7%), EMEA (+2%), in addition to double-figure
growth in the Rest of APAC which increased by 26%. The only exception worldwide was Greater China (China, Hong Kong
and Taiwan) where there was a contraction of 10%. However, there was a trend reversal in the fourth quarter of +7% growth,
thanks to the introduction of the 488 GTB in this market.
Another area that continues to deliver consistent growth is the personalization of our cars, most notably the Tailor Made
program that allows our clients to create genuinely exclusive cars. This program is enjoying growing success thanks to the
introduction of a vast range of materials from outside the automotive sector that make each model absolutely unique.
We also continued our ongoing client relations work, particularly with prestigious events such as the Cavalcade, now
on its fourth edition, and the International Cavalcade which debuted last August.
Consolidation and rationalization of our brand-related activities also forged ahead during 2015 with the opening of
directly-managed stores in strategic locations, such as Milan, and franchises in other areas, such as the two new stores in the
United Arab Emirates. Several licenses, however, were not renewed due to their marginal nature and the fact they were not in
line with our core business. We also increased our range of branded products, for example with the launch of a Junior collection
in Asia.
Our Ferrari Challenge activities also warrant special mention. This global championship now has three well-established
challenges in North America, Europe and Asia Pacific. Aside from involving both gentleman and professional drivers, the
competitions are used for the “Passione Ferrari” (Ferrari Passion) pilot project through which we organize test-drives throughout
the race weekends. This experiment received an excellent response and we are therefore continuing this initiative to help bring
the brand and its products to a whole spectrum of new clients and enthusiasts.
February 25, 2016
Amedeo Felisa
Chief Executive Officer
5
Certain Defined Terms and Note on Presentation
Certain Defined Terms
In this report, unless otherwise specified, the terms “we,” “our,” “us,” the “Group,” the “Company” and “Ferrari” refer
to Ferrari N.V., individually or together with its subsidiaries, as the context may require. References to “Ferrari N.V.” refer to
the registrant (formerly named FE New N.V.) following completion of the Separation and to the registrant's predecessor (formerly
named New Business Netherlands N.V.), prior to completion of the Separation. References to “FCA” or “FCA Group” refer to
Fiat Chrysler Automobiles N.V., together with its subsidiaries and its predecessor prior to the completion of the merger of Fiat
S.p.A. with and into FCA on October 12, 2014 (at which time Fiat Investments N.V. was named Fiat Chrysler Automobiles N.V.,
or FCA), or any one of them, as the context may require. References to “Fiat” refer solely to Fiat S.p.A., the predecessor of
FCA. References to the “Separation” refer to the series of transactions through which the Ferrari business was separated from
FCA as described in the section "Overview."
Note on Presentation
The Annual Report includes the consolidated financial statements of Ferrari N.V. for the years ended December 31,
2015, 2014 and 2013 prepared in accordance with International Financial Reporting Standards as adopted by the European
Union ("EU-IFRS") and with Part 9 of Book 2 of the Dutch Civil Code. We refer to these consolidated financial statements
collectively as the “Consolidated Financial Statements.”
Basis of Preparation of the Consolidated Financial Statements
As explained in Note 1 to the Consolidated Financial Statements and in "Overview - History of the Company", the
separation of Ferrari S.p.A. from FCA (the "Separation") was completed on January 3, 2016 through a series of transactions
including (i) an intra-group restructuring which resulted in our acquisition of the assets and business of Ferrari North Europe
Limited and the transfer by FCA of its 90 percent shareholding in Ferrari S.p.A. to us, (ii) the transfer of Piero Ferrari’s 10
percent shareholding in Ferrari S.p.A. to us, (iii) the initial public offering of our common shares, and (iv) the distribution,
following the initial public offering, of FCA’s remaining interest in us to its shareholders. The transactions referred to in (i) and
(ii) are defined in the Consolidated Financial Statements as the “Restructuring” and were completed in October 2015. The
transaction referred to in (iii) was completed on October 21, 2015 when the Company's shares were admitted to listing on the
New York Stock Exchange. The distribution referred to in (iv) was completed on January 3, 2016.
The Restructuring comprised: (i) a capital reorganization of the group under the Company and (ii) the issuance of
promissory note to FCA (the "FCA Note") which was subsequently refinanced through the issuance of third party debt (the FCA
Note and subsequent refinancing are described under "Operating Results - Indebtedness with FCA and Refinancing of the FCA
Note".) In preparing the Consolidated Financial Statements, the Company has retrospectively applied FCA's basis of accounting
for the periods prior to the Restructuring presented in the Consolidated Financial Statements based on the following:
(i) The capital reorganization:
•
The Company was formed by FCA solely to effect the Separation and was controlled by FCA until completion
of the Separation on January 3, 2016. Therefore, the capital reorganization does not meet the definition of a
business combination in the context of IFRS 3 - “Business Combinations” but rather a combination of entities
under common control and as such is excluded from the scope of IFRS 3. IFRS has no applicable guidance
in accounting for such transactions. IAS 8 - “Accounting Policies, Changes in Accounting Estimates and
Errors” states that in the absence of an IFRS which specifically applies to a transaction, the Company may
consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual
framework to develop accounting standards or other accounting literature and accepted industry practices,
to the extent that these do not conflict with the requirements in IFRS for dealing with similar and related
issues or the definitions, recognition criteria and measurement concepts for assets, liabilities, income and
expenses in the IFRS Conceptual Framework for Financial Reporting (the “Framework”). Accordingly, the
Company has considered the guidance in ASC 805-50-30-5 on common control transactions, which indicates
that the receiving entity (the Company) is able to reflect the transferred assets and liabilities in its own
accounting records at the carrying amount in the accounting records of the transferring entity (FCA). As a
6
result, the Consolidated Financial Statements include FCA’s recorded goodwill relating to Ferrari S.p.A. in
the amount of €780,542 thousand.
•
The retrospective accounting for the capital reorganization is consistent with the principles underlying
paragraph 64 of IAS 33 - “Earnings per Share” which requires calculation of basic and diluted earnings per
share for all periods presented to be adjusted retrospectively if changes occur to the capital structure after
the reporting period but before the financial statements are authorized for issue. SAB Topic 4C also requires
that such changes be given retroactive effect in the balance sheet where they occur after the reporting period
but before the financial statements are authorized for issue. The capital reorganization has been accounted
for as though it had occurred effective January 1, 2013 in the Consolidated Financial Statements. In particular:
•
•
•
The issuance of 156,917,727 common shares and 161,917,727 special voting shares in the Company
to FCA has been reflected as an increase in share capital and share premium in the amounts of €3.2
million and €5,096.8 million, respectively, with an offset to retained earnings of €5.1 billion.
The issuance of 27,003,873 common shares and special voting shares in the Company to Piero Ferrari
has been reflected as an increase in share capital and share premium in the amounts of €0.6 million and
€877.4 million, respectively, with an offset to retained earnings of €878.0 million.
The historical number of common shares, nominal value per common share, basic and diluted earnings
per common share amounts and other per share disclosures retrospectively reflect the capital structure
of the Company post Restructuring for all periods presented, with the required disclosures presented
in Notes 12 and 20 to the Consolidated Financial Statements.
The Restructuring was performed based on an independent appraisal performed for Dutch legal requirements.
(ii) The issuance of the FCA Note:
•
The FCA Note and subsequent refinancing were reflected in the Consolidated Financial Statements only from
the dates on which they occurred. In particular, the FCA Note for a principal amount of €7.9 billion was
issued on October 17, 2015 and following the application of the proceeds from the issuance of the shares to
FCA referred to above, the principal amount outstanding was €2.8 billion. The principal amount under the
FCA Note was repaid on December 16, 2015 using cash deposits held with FCA and for the remainder from
third party financing.
The Group’s financial information is presented in Euro. In some instances, information is presented in U.S. Dollars.
All references in this Annual Report to “Euro” and “€” refer to the currency introduced at the start of the third stage of European
Economic and Monetary Union pursuant to the Treaty on the Functioning of the European Union, as amended, and all references
to “U.S. Dollars,” “U.S.$” and “$” refer to the currency of the United States of America (the “United States”).
The language of this Annual Report is English. Certain legislative references and technical terms have been cited in
their original language in order that the correct technical meaning may be ascribed to them under applicable law.
Certain totals in the tables included in this Annual Report may not add due to rounding.
7
Selected Financial and Other Data
The following tables set forth selected historical consolidated financial and other data of Ferrari and have been derived
from:
(i) the audited Consolidated Financial Statements, included elsewhere in this Annual Report;
(ii) the audited consolidated income statement of the Company for the year ended December 31, 2012;
(iii) the unaudited statement of financial position at December 31, 2012, and
(iv) the unaudited financial information for the year ended December 31, 2011.
This financial information has been prepared in accordance with IFRS.
For the purposes of the financial information set forth in this section, with the exception of the FCA Note and subsequent
refinancing, which were reflected from the dates on which they occurred, the Restructuring has been retrospectively reflected
as though it had occurred effective January 1, 2012.
The following information should be read in conjunction with the sections “Certain Defined Terms and Note on
Presentation—Note on Presentation,” “Risk Factors,” “Operating Results” and the Consolidated Financial Statements included
elsewhere in this Annual Report. Historical results for any period are not necessarily indicative of results for any future period.
Consolidated Income Statement Data
Net revenues
EBIT
Profit before taxes
Net profit
Attributable to:
Owners of the parent
Non-controlling interest
Basic and diluted earnings per common share (in Euro)(1)
Dividends paid per share (in Euro)
For the years ended December 31,
2015
2014
2013
2012
2011
(€ million, except per share data)
2,854
2,762
2,335
2,225
2,067
444
434
290
288
2
1.52
—
389
398
265
261
4
1.38
—
364
366
246
241
5
1.27
—
335
334
233
225
8
1.19
—
298
301
196
188
8
n.a.
n.a.
_____________________________
(1) Retrospectively reflects the issuance of 188,921,600 common shares as if the Restructuring had occurred on January 1, 2012. See also Notes 12 and 20
to the Consolidated Financial Statements.
8
Consolidated Statement of Financial Position Data
At December 31,
2015
2014
2013
2012
2011
(€ million, except shares issued)
Cash and cash equivalents
Deposits in FCA Group cash management pools (1)
Total assets
Debt
Total (deficit)/equity
(Deficit)/Equity attributable to owners of the parent
Non-controlling interests
Share capital (2)
Ordinary shares issued (in thousands of shares) (2)
183
139
3,875
2,260
(19)
(25)
6
4
134
942
4,641
510
2,478
2,470
8
4
114
684
3,895
317
2,316
2,290
26
4
100
457
3,465
261
2,041
2,019
22
4
188,922
188,922
188,922
188,922
94
529
3,369
522
1,769
1,748
21
n.a.
n.a.
_____________________________
(1) Deposits in FCA Group cash management pools relate to our participation in a group-wide cash management system at FCA prior to the Separation,
where the operating cash management, main funding operations and liquidity investment of the Group were centrally coordinated by dedicated treasury
companies with the objective of ensuring effective and efficient management of our funds. Following the Separation on January 3, 2016, these arrangements
were terminated and we manage our liquidity and treasury function on a standalone basis.
(2) Retrospectively reflects the issuance of 188,921,600 common shares and the same number of special voting shares, all with a nominal value of €0.01, as
if the Restructuring had occurred on January 1, 2012. See also Note 20 to the Consolidated Financial Statements.
Other Statistical Information
2015
2014
2013
2012
2011
For the years ended December 31,
Shipments (number of cars)
Average number of employees
for the period
7,664
2,954
7,255
2,843
7,000
2,774
7,405
2,708
7,195
2,709
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Creating Value for Our Shareholders
Ferrari is among the world’s leading luxury brands with unique, world-class capabilities, and a vision built on our
historic foundations and strengths.
We are fiercely protective of our brand, which is among the most iconic and recognizable in the world and critical to
our value proposition to all of our stakeholders. We strive to maintain and enhance the power of our brand and the passion we
inspire in clients and the broader community of automotive enthusiasts by continuing our rigorous production and distribution
model, which promotes hard-to-satisfy demand and scarcity value in our cars. We also support our brand value by promoting a
strong connection to our company and our brand among the community of Ferrari enthusiasts. We focus relentlessly on
strengthening this connection by rewarding our most loyal clients through a range of initiatives, such as driving events and client
activities in Maranello and at motor shows and, most importantly, by providing our most loyal and active clients with preferential
access to our newest, most exclusive and highest value cars. As a result, we enjoy a strong and loyal client base with most of
our cars being sold to existing Ferrari owners and approximately 34% of our clients being owners of more than one Ferrari,
which reinforces the demand for our cars and the image of luxury and exclusivity inherent in our brand.
Our commitment to excellence and our pursuit of innovation, state-of-the-art performance and distinction in design
and engineering in our luxury cars is inseparable from our commitment to integrity, transparency and responsibility in the conduct
of our business. By fully integrating environmental and social considerations with economic objectives we are able to identify
potential risks and capitalize on additional opportunities, resulting in a process of continuous improvement. Sustainability is a
core element of our governance model and executive management plays a direct and active role in developing and achieving
our sustainability objectives under the oversight of our Board of Directors.
The foundation of a responsible company rests on being fully attentive to the nature and extent of this interconnection
and our understanding of both the potential effects of our activities and how those effects can be mitigated through responsible
management.
Responsible management requires that we consider all potential implications of our strategic decisions and projects.
Ferrari’s sustainability efforts focus on our emissions reduction program, through the improvement of efficiency in our luxury
cars and in our production processes, as well as through our Formula Uomo initiative, a program which places its people at the
heart of the Company. We see our personnel as the cornerstone of our activities. Our commitment to environmental sustainability
begins with a commitment to the community that is the home of our production campus, and the quality and safety of the working
environment we provide to our personnel. As a fundamental part of our sustainability drive, Ferrari has also invested heavily
to achieve independence in energy production through the extensive use of solar power and natural gas.
To provide for tangible long-term value creation, we place particular emphasis on:
a governance model based on transparency and integrity;
a safe and eco-friendly working environment including proper working conditions and respect for human rights;
proper management and professional development of our employees;
•
•
•
• mutually beneficial relationships with business partners and the communities in which we operate;
• mitigation of environmental impacts from our production processes and the luxury cars we produce.
We use a variety of channels, including our website and social networks, to promote our sustainability commitments
and results.
The Sustainability section of our 2015 Annual Report addresses those aspects of our sustainability efforts that we have
identified as being of greatest importance to our internal and external stakeholders.
10
Risks Factors
We face a variety of risks in our business. The risks and uncertainties described below are not the only ones facing us.
Additional risks and uncertainties that we are unaware of or that we currently believe to be immaterial, may also become
important factors that affect us.
Risks Related to Our Business, Strategy and Operations
We may not succeed in preserving and enhancing the value of the Ferrari brand, which we depend upon to drive demand
and revenues.
Our financial performance is influenced by the perception and recognition of the Ferrari brand, which, in turn,
depends on many factors such as the design, performance, quality and image of our cars, the appeal of our dealerships and
stores, the success of our promotional activities including public relations and marketing, as well as our general profile,
including our brand’s image of exclusivity. The value of our brand and our ability to achieve premium pricing for Ferrari-
branded products may decline if we are unable to maintain the value and image of the Ferrari brand, including, in particular,
its aura of exclusivity. Maintaining the value of our brand will depend significantly on our ability to continue to produce
luxury performance cars of the highest quality. The market for luxury goods generally and for luxury automobiles in
particular is intensely competitive, and we may not be successful in maintaining and strengthening the appeal of our brand.
Client preferences, particularly among luxury goods, can vary over time, sometimes rapidly. We are therefore exposed to
changing perceptions of our brand image, particularly as we seek to attract new generations of clients. Any failure to preserve
and enhance the value of our brand may materially and adversely affect our ability to sell our cars, to maintain premium
pricing, and to extend the value of our brand into other activities profitably or at all.
We selectively license the Ferrari brand to third parties that produce and sell Ferrari-branded luxury goods and
therefore we rely on our licensing partners to preserve and enhance the value of our brand. If our licensees or the
manufacturers of these products do not maintain the standards of quality and exclusivity that we believe are consistent with
the Ferrari brand, or if such licensees or manufacturers otherwise misuse the Ferrari brand, our reputation and the integrity
and value of our brand may be damaged and our business, operating results and financial condition may be materially and
adversely affected.
Our brand image depends in part on the success of our Formula 1 racing team.
The prestige, identity, and appeal of the Ferrari brand depend on the continued success of the Scuderia Ferrari
racing team in the Formula 1 World Championship. The racing team is a key component of our marketing strategy and may
be perceived by our clients as a demonstration of the technological capabilities of our Sports and GT cars which also supports
the appeal of other Ferrari-branded luxury goods. The success of our Formula 1 racing team has declined over the past
several years as our most recent driver’s championship and constructors’ championship were in 2007 and 2008, respectively.
As a result, we are enhancing our focus on Formula 1 activities with the goal of improving racing results and restoring our
historical position as the premier racing team in Formula 1. If we are unable to attract and retain the necessary talent to
succeed in international competitions or devote the capital necessary to fund successful racing activities, the value of the
Ferrari brand and the appeal of our cars and other luxury goods may suffer. Even if we are able to attract such talent and
adequately fund our racing activities, there is no assurance that this will lead to competitive success for our racing team.
The success of our racing team depends in particular on our ability to attract and retain top drivers and racing
management and engineering talent. Our primary Formula 1 drivers, team managers and other key employees of Scuderia
Ferrari are critical to the success of our racing team and if we were to lose their services, this could have a material adverse
effect on the success of our racing team and correspondingly the Ferrari brand. If we are unable to find adequate
replacements or to attract, retain and incentivize drivers and team managers, other key employees or new qualified personnel,
the success of our racing team may suffer. As the success of our racing team forms a large part of our brand identity, a
sustained period without racing success could detract from the Ferrari brand and, as a result, potential clients’ enthusiasm for
the Ferrari brand and their perception of our cars, which could have an adverse effect on our business, results of operations
and financial condition.
If we are unable to keep up with advances in high performance car technology, our competitive position may suffer.
Performance cars are characterized by leading-edge technology which is constantly evolving. In particular,
advances in racing technology often lead to improved technology in road cars. Although we invest heavily in research and
11
development, we may be unable to maintain our leading position in high performance car technology and, as a result, our
competitive position may suffer. As technologies change, we plan to upgrade or adapt our cars and introduce new models in
order to continue to provide cars with the latest technology. However, our cars may not compete effectively with our
competitors’ cars if we are not able to develop, source and integrate the latest technology into our cars.
Developing and applying new automotive technologies is costly, and may become even more costly in the future as
available technology advances and competition in the industry increases. If our research and development efforts do not lead
to improvements in car performance relative to the competition, or if we are required to spend more to achieve comparable
results, sales of our cars or our profitability may suffer.
If our car designs do not appeal to clients, our brand and competitive position may suffer.
Design and styling are an integral component of our models and our brand. Our cars have historically been
characterized by distinctive designs combining the aerodynamics of a sports car with powerful, elegant lines. We believe our
clients purchase our cars for their appearance as well as their performance. However, we will need to renew over time the
style of our cars to differentiate the new models we produce from older models, and to reflect the broader evolution of
aesthetics in our markets. We devote great efforts to the design of our cars and most of our current models are designed by
Ferrari Design Centre, our in-house design team. If the design of our future models fails to meet the evolving tastes and
preferences of our clients and prospective clients, or the appreciation of the wider public, our brand may suffer and our sales
may be adversely affected.
The value of our brand depends in part on the automobile collector and enthusiast community.
An important factor in the connection of clients to the Ferrari brand is our strong relationship with the active global
community of automotive collectors and enthusiasts, particularly collectors and enthusiasts of Ferrari automobiles. This is
influenced by our close ties to the automotive collectors’ community and our support of related events (such as car shows and
driving events), at our headquarters in Maranello and through our dealers, the Ferrari museum and affiliations with regional
Ferrari clubs. The support of this community also depends upon the perception of our cars as collectibles, which we also
support through our Ferrari Classiche services, and the active resale market for our automobiles which encourages interest
over the long term.
If there is a change in collector appetite or damage to the Ferrari brand, our ties to and the support we receive from
this community may be diminished. Such a loss of enthusiasm for our cars from the automotive collectors’ community could
harm the perception of the Ferrari brand and adversely impact our sales and profitability.
Demand for luxury goods, including luxury performance cars, is volatile, which may adversely affect our operating
results.
Volatility of demand for luxury goods, in particular luxury performance cars, may adversely affect our business,
operating results and financial condition. The markets in which we sell our cars have been subject to volatility in demand in
recent periods. Demand for luxury automobiles depends to a large extent on general, economic, political and social
conditions in a given market as well as the introduction of new vehicles and technologies. As a luxury performance car
manufacturer and low volume producer, we compete with larger automobile manufacturers many of which have greater
financial resources in order to withstand changes in the market and disruptions in demand. Demand for our cars may also be
affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles, such as the
availability and cost of financing, prices of raw materials and parts and components, fuel costs and governmental regulations,
including tariffs, import regulation and other taxes, including taxes on luxury goods, resulting in limitations to the use of high
performance sports cars or luxury goods more generally. Volatility in demand may lead to lower car unit sales, which may
result in further downward price pressure and adversely affect our business, operating results and financial condition. These
effects may have a more pronounced impact on us given our low volume strategy and relatively smaller scale as compared to
large global mass-market automobile manufacturers.
Our low volume strategy may limit potential profits.
A key to the appeal of the Ferrari brand and our marketing strategy is the aura of exclusivity and the sense of
luxury which our brand conveys. A central facet to this exclusivity is the limited number of models and cars we produce and
our strategy of maintaining our car waiting lists to reach the optimal combination of exclusivity and client service. Our low
volume strategy is also an important factor in the prices that our clients are willing to pay for our cars. Regulation also affects
12
our potential for volume growth because we are eligible for certain exemptions from fuel economy and emissions
requirements provided we sell less than 10,000 road cars worldwide per year. See “—New laws, regulations, or policies of
governmental organizations regarding increased fuel economy requirements, reduced greenhouse gas or pollutant emissions,
or vehicle safety, or changes in existing laws, may have a significant effect on our costs of operation and/or how we do
business.”
While important to our current marketing strategy, our focus on maintaining low volumes and exclusivity limits
our potential sales growth and profitability. As a public company, we may from time to time face pressure to demonstrate
growth including by increasing the volume of cars we sell. Notwithstanding any such pressure, we intend to continue to
pursue a low volume strategy in order to maintain our reputation for exclusivity, while growing volume in a controlled way to
respond to growth in emerging markets and demographic changes.
Conversely, if we were to change our strategy and increase production of our cars more aggressively, we may be
unable to maintain the exclusivity of the Ferrari brand. If we are unable to balance brand exclusivity with increased
production, we may erode the desirability and ultimately the consumer demand for our cars. As a result, if we are unable to
increase car production meaningfully or introduce new car models without eroding the image of exclusivity in our brand we
may be unable to significantly increase our revenues.
Our revenues from Formula 1 activities may decline and our related expenses may grow.
Revenues from our Formula 1 activities depend principally on the income from our sponsorship agreements and on
our share of Formula 1 revenues from broadcasting and other sources. See “Overview of our Business—Formula 1
Activities.” If we are unable to renew our existing sponsorship agreements or if we enter into new or renewed sponsorship
agreements with less favorable terms, our revenues would decline. In addition, our share of Formula 1 results may decline if
either our team’s performance worsens compared to other competing teams, or if the overall Formula 1 business suffers.
Furthermore, in order to compete effectively on track we have been investing significant resources in research and
development and to competitively compensate the best available drivers and other racing team members. These expenses also
vary based on changes in Formula 1 regulations that require modification to our racing engines and cars. These expenses are
expected to continue, and may grow further, including as a result of any changes in Formula 1 regulations, which would
negatively affect our results of operations.
The small number of car models we produce and sell may result in greater volatility in our financial results.
We currently depend on the sales of six range models, one special series and one limited edition supercar to
generate our revenues. While we anticipate expanding our car offerings, we expect that a limited number of models will
continue to account for a large portion of our revenues at any given time in the foreseeable future. Therefore, our future
operating results depend upon the continued market acceptance of each model in our line-up. There can be no assurance that
our cars will continue to be successful in the market. On average it takes about 40 months (approximately 33 months for M
models) from the beginning of the development phase to start of production for a new model and the car development process
is capital intensive. As a result, we would likely be unable to replace the revenue lost from one of our main car models if it
does not achieve market acceptance. Furthermore, volatility in our revenues and profits is also affected by our “special
series” and limited edition cars that we launch from time to time and are typically priced higher than our range models. There
can be no assurance that we will be successful in developing, producing and marketing additional new cars that will sustain
sales growth in the future.
Engine production revenues are dependent on Maserati’s ability to sell its cars.
We produce V8 and V6 engines for Maserati. In particular, we have a multi-year arrangement with Maserati to
provide V6 engines in an initial production run of up to 178,000 engines in aggregate through 2020, which, based on our
discussions with Maserati, is expected to increase to up to 260,000 engines in aggregate through 2023 to cater to Maserati’s
planned expanded model range and sales volumes. While Maserati is required to compensate us for certain costs we may
incur, such as penalties from our suppliers, in the event that the sales of Maserati cars decline, or do not increase at the
expected rate, such an event would adversely affect our revenues from the sale of engines.
Our business is subject to changes in client preferences and automotive trends.
Our continued success depends in part on our ability to originate and define product and automotive trends, as well
as to anticipate and respond promptly to changing consumer demands and automotive trends in the design, styling,
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technology, production, merchandising and pricing of our products. Our products must appeal to a client base whose
preferences cannot be predicted with certainty and are subject to rapid change. Evaluating and responding to client
preferences has become even more complex in recent years, due to our expansion in new geographical markets. If we
misjudge the market for our products, we and our dealers may be faced with excess inventories for some cars and missed
opportunities with others. In addition, there can be no assurance that we will be able to produce, distribute and market new
products efficiently or that any product category that we may expand or introduce will achieve sales levels sufficient to
generate profits. Any of these outcomes could have a material adverse effect on our business, results of operations and
financial condition.
Global economic conditions may adversely affect us.
Our sales volumes and revenues may be affected by overall general economic conditions. Deteriorating general
economic conditions may affect disposable incomes and reduce consumer wealth impacting client demand, particularly for
luxury goods which may negatively impact our profitability and put downward pressure on our prices and volumes.
Furthermore, during recessionary periods, social acceptability of luxury purchases may decrease and higher taxes may be
more likely to be imposed on certain luxury goods including our cars, which may affect our sales. Adverse economic
conditions may also affect the financial health and performance of our dealers in a manner that will affect sales of our cars or
their ability to meet their commitments to us.
Many factors affect the level of consumer spending in the luxury performance car industry, including the state of
the economy as a whole, stock market performance, interest and exchange rates, inflation, political uncertainty, the
availability of consumer credit, tax rates, unemployment levels and other matters that influence consumer confidence. In
general, although our sales have historically been comparatively resilient in periods of economic turmoil, sales of luxury
goods tend to decline during recessionary periods when the level of disposable income tends to be lower or when consumer
confidence is low.
We distribute our products internationally and we may be affected by downturns in general economic conditions or
uncertainties regarding future economic prospects that may impact the countries in which we sell a significant portion of our
products. In particular, the majority of our current sales are in the EU and in the United States; if we are unable to expand in
emerging markets, a downturn in mature economies such as the EU and the United States may negatively affect our financial
performance. In the EU, in particular, despite measures taken by several governments and monetary authorities to provide
financial assistance to certain Eurozone countries and to avoid default on sovereign debt obligations, concerns persist
regarding the debt burden of several countries. These concerns, along with the significant fiscal adjustments carried out in
several countries, intended to manage actual or perceived sovereign credit risk, have led to further pressure on economic
growth and may lead to new periods of recession.
A significant decline in the EU or the global economy or in the specific economies of our markets, or in
consumers’ confidence could have a material adverse effect on our business.
New laws, regulations, or policies of governmental organizations regarding increased fuel economy requirements,
reduced greenhouse gas or pollutant emissions, or vehicle safety, or changes in existing laws, may have a significant
effect on our costs of operation and/or how we do business.
We are subject throughout the world to comprehensive and constantly evolving laws, regulations and policies. We
expect the extent of the legal and regulatory requirements affecting our business and our costs of compliance to continue to
increase significantly in the future. In Europe and the United States, for example, significant governmental regulation is
driven by environmental, fuel economy, vehicle safety and noise emission concerns. Evolving regulatory requirements could
significantly affect our product development plans and may limit the number and types of cars we sell and where we sell
them, which may affect our revenue. Governmental regulations may increase the costs we incur to design, develop and
produce our cars and may affect our product portfolio. Regulation may also result in a change in the character or performance
characteristics of our cars which may render them less appealing to our clients. We anticipate that the number and extent of
these regulations, and their effect on our cost structure and product line-up, will increase significantly in the future.
Current European legislation limits fleet average greenhouse gas emissions for new passenger cars, and new targets
have been set in 2014 with more stringent emission targets applicable to the 2017-2021 period. Due to our small volume
manufacturer (“SVM”) status we benefit from a derogation from the existing emissions requirement and we are instead
required to meet by 2016 alternative targets for our fleet of EU-registered vehicles. Therefore, in 2015, we submitted our
proposed CO2 emissions target for the 2017-2021 period to the EU Commission for approval.
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In the United States, the U.S. Environmental Protection Agency (“EPA”) and the National Highway Traffic Safety
Administration (“NHTSA”) have set the federal standards for passenger cars and light trucks to meet certain combined
average fuel economy (“CAFE”) levels and more stringent standards have been prescribed for model years 2017 through
2025. As a SVM that is able to demonstrate our operational independence from FCA, we expect to benefit from a derogation
from currently applicable standards. We have also petitioned the EPA for alternative standards for the 2017-2021 model
years, which are aligned to our technical and economic capabilities, and we expect to receive feedback on this proposal by
mid-2016. We intend to petition NHTSA for recognition as an independent manufacturer of less than 10,000 vehicles
globally, in order to be eligible for alternate CAFE standards, as permitted under the CAFE program. If our petition
qualifying for alternate CAFE standards is successful, NHTSA will determine the appropriate level of CAFE applicable to us
for future model years.
In addition, we are subject to legislation relating to the emission of other air pollutants such as, among others, the
“Tier 3” Motor Vehicle Emission and Fuel Standards issued by the EPA, and the Zero Emission Vehicle regulation in
California, which are subject to similar derogations for SVMs, as well as vehicle safety legislation. NHTSA also recently
published guidelines for driver distraction, and the associated compliance costs may be substantial.
Other governments around the world, such as those in Canada, South Korea, China and certain Middle Eastern
countries are also creating new policies to address these issues which could be even more stringent than the U.S. or European
requirements. As in the United States and Europe, these government policies if applied to us could significantly affect our
product development plans. In China, for example, Stage III fuel consumption regulations target a national average fuel
consumption of 6.9L/100km by 2015 and Stage IV targets a national average fuel consumption of 5.0L/100km by 2021. In
response to severe air quality issues in Beijing and other major Chinese cities, the Chinese government also intends to adopt
more stringent emissions standards for Mainland China beginning in 2016. It is unclear whether the new standards, if
adopted, will include exceptions for SVMs similar to those currently in place in the United States and in the EU.
We could lose our status as a SVM in the EU and/or the United States if we do not continue to meet all of the
necessary eligibility criteria under applicable regulations as they evolve. In order to meet these criteria we may need to
modify our growth plans or other operations. Furthermore, even if we continue to benefit from derogations as a SVM, we
will be subject to alternative standards that the regulators deem appropriate for our technical and economic capabilities and
such alternative standards may be significantly more stringent than those currently applicable to us.
Under these existing regulations, as well as new or stricter rules or policies, we could be subject to sizable civil
penalties or have to restrict or modify product offerings drastically to remain in compliance. We may have to incur substantial
capital expenditures and research and development expenditures to upgrade products and manufacturing facilities, which
would have an impact on our cost of production and results of operation.
Our growth strategy exposes us to risks.
Our growth strategy includes a controlled expansion of our sales and operations, including the launching of new
car models and expanding sales and dealer operations in targeted growth regions internationally. In particular, our growth
strategy requires us to expand operations in regions that we have identified as having relatively high growth potential. We
may encounter difficulties, including more significant competition in entering and establishing ourselves in these markets.
Our growth depends on the continued success of our existing cars, as well as the successful design and introduction
of new cars. Our ability to create new cars and to sustain existing car models is affected by whether we can successfully
anticipate and respond to consumer preferences and car trends. The failure to develop and launch successful new cars could
hinder the growth of our business. Also, any delay in the development or launch of a new product could result in others
bringing new products and technology to market first, which could compromise our competitive position.
Our growth strategy may expose us to new business risks that we may not have the expertise, capability or the
systems to manage. This strategy will also place significant demands on us by requiring us to continuously evolve and
improve our operational, financial and internal controls. Continued expansion also increases the challenges involved in
maintaining high levels of quality, management and client satisfaction, recruiting, training and retaining sufficient skilled
management, technical and marketing personnel. If we are unable to manage these risks or meet these demands, our growth
prospects and our business, results of operation and financial condition could be adversely affected.
We currently plan to open additional dealerships and Ferrari stores in various international markets. We do not yet
have significant experience directly operating in many of these markets, and in many of them we face established
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competitors. Many of these countries have different operational characteristics, including but not limited to employment and
labor, transportation, logistics, real estate, environmental regulations and local reporting or legal requirements.
Consumer demand and behavior, as well as tastes and purchasing trends may differ in these markets, and as a
result, sales of our products may not be successful, or the margins on those sales may not be in line with those we currently
anticipate. Furthermore, such markets will have upfront short-term investment costs that may not be accompanied by
sufficient revenues to achieve typical or expected operational and financial performance and therefore may be dilutive to us
in the short-term. In many of these countries, there is significant competition to attract and retain experienced and talented
employees.
Consequently, if our international expansion plans are unsuccessful, our business, results of operation and financial
condition could be materially adversely affected.
We face competition in the luxury performance car industry.
We face competition in all product categories and markets in which we operate. We compete with other
international luxury performance car manufacturers which own and operate well-known brands of high-quality cars, some of
which form part of larger automotive groups and may have greater financial resources and bargaining power with suppliers
than we do, particularly in light of our policy to maintain low volumes in order to preserve and enhance the exclusivity of our
cars. We believe that we compete primarily on the basis of our brand image, the performance and design of our cars and our
reputation for quality. If we are unable to compete successfully, our business, results of operations and financial condition
could be adversely affected.
Developments in emerging markets may adversely affect our business.
We operate in a number of emerging markets, both directly and through our dealers and we have experienced
increasing demand in China and the Middle East.
Our strategy contemplates expanding our sales in the Middle East and Asia regions, recognizing the increasing
personal wealth in these markets. While demand in these markets has increased in recent years due to sustained economic
growth and growth in personal income and wealth, we are unable to foresee the extent to which economic growth in these
emerging markets will be sustained. For example, recent events in Asia including market turmoil and currency devaluations,
and potential slowdowns in the rate of growth there and in other emerging markets could limit the opportunity for us to
increase unit sales and revenues in those regions in the near term.
Our exposure to emerging countries is likely to increase, as we pursue expanded sales in such countries. Economic
and political developments in emerging markets, including economic crises or political instability, have had and could have in
the future material adverse effects on our results of operations and financial condition. Further, in certain markets in which
we or our dealers operate, required government approvals may limit our ability to act quickly in making decisions on our
operations in those markets. Other government actions may also impact the market for luxury goods in these markets, such as
tax changes or the active discouragement of luxury purchases.
Maintaining and strengthening our position in these emerging markets is a key component of our global growth
strategy. However, initiatives from several global luxury automotive manufacturers have increased competitive pressures for
luxury cars in several emerging markets. As these markets continue to grow, we anticipate that additional competitors, both
international and domestic, will seek to enter these markets and that existing market participants will try to aggressively
protect or increase their market share. Increased competition may result in pricing pressures, reduced margins and our
inability to gain or hold market share, which could have a material adverse effect on our results of operations and financial
condition.
Our success depends largely on the ability of our current management team to operate and manage effectively.
Our success depends on the ability of our senior executives and other members of management to effectively
manage our business as a whole and individual areas of the business. Our management team particularly benefits from the
leadership of our CEO, Amedeo Felisa, who brings over 40 years of automotive technical experience and skill to his
leadership role and our chairman, Sergio Marchionne, who engineered the operating and financial turnaround of Fiat and
Chrysler and the global expansion of our parent company, FCA, into the seventh largest automaker in the world (based on
2014 vehicle sales worldwide). Our employees, particularly in our production facilities in and around Maranello, Italy
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include many highly skilled engineers, technicians and artisans. If we were to lose the services of any of these senior
executives or key employees, this could have a material adverse effect on our business, operating results and financial
condition. We have developed succession plans that we believe are appropriate in the circumstances, although it is difficult to
predict with any certainty that we will replace these individuals with persons of equivalent experience and capabilities. If we
are unable to find adequate replacements or to attract, retain and incentivize senior executives, other key employees or new
qualified personnel, our business, results of operations and financial condition may suffer.
We rely on our dealer network to provide sales and services.
We do not own our Ferrari dealers and virtually all of our sales are made through our network of dealerships
located throughout the world. If our dealers are unable to provide sales or service quality that our clients expect or do not
otherwise adequately project the Ferrari image and its aura of luxury and exclusivity, the Ferrari brand may be negatively
affected. We depend on the quality of our dealership network and our business, operating results and financial condition
could be adversely affected if our dealers suffer financial difficulties or otherwise are unable to perform to our expectations.
Our growth strategy also depends on our ability to attract a sufficient number of quality new dealers to sell our
products in new areas. We may face competition from other luxury performance car manufacturers in attracting quality new
dealers, based on, among other things, dealer margin, incentives and the performance of other dealers in the region. If we are
unable to attract a sufficient number of new Ferrari dealers in targeted growth areas, our prospects could be materially
adversely affected.
We depend on our suppliers, many of which are single source suppliers; and if these suppliers fail to deliver necessary raw
materials, systems, components and parts of appropriate quality in a timely manner our operations may be disrupted.
Our business depends on a significant number of suppliers, which provide the raw materials, components, parts
and systems we require to manufacture cars and parts and to operate our business. We use a variety of raw materials in our
business including aluminum, and precious metals such as palladium and rhodium. We source materials from a limited
number of suppliers. We cannot guarantee that we will be able to maintain access to these raw materials, and in some cases
this access may be affected by factors outside of our control and the control of our suppliers. In addition, prices for these raw
materials fluctuate and while we seek to manage this exposure, we may not be successful in mitigating these risks.
As with raw materials, we are also at risk for supply disruption and shortages in parts and components we purchase
for use in our cars. We source a variety of key components from third parties, including transmissions, brakes, driving-safety
systems, navigation systems, mechanical, electrical and electronic parts, plastic components as well as castings and tires,
which makes us dependent upon the suppliers of such components. While we obtain components from multiple sources
whenever possible, similar to other small volume car manufacturers, most of the key components we use in our cars are
purchased by us from single source suppliers. We generally do not qualify alternative sources for most of the single-sourced
components we use in our cars and we do not maintain long-term agreements with a number of our suppliers. Furthermore,
we have limited ability to monitor the financial stability of our suppliers.
While we believe that we may be able to establish alternate supply relationships and can obtain or engineer
replacement components for our single-sourced components, we may be unable to do so in the short term, or at all, at prices
or costs that we believe are reasonable. Qualifying alternate suppliers or developing our own replacements for certain highly
customized components of our cars may be time consuming, costly and may force us to make costly modifications to the
designs of our cars.
In the past, we have replaced certain suppliers because they have failed to provide components that met our quality
control standards. The loss of any single or limited source supplier or the disruption in the supply of components from these
suppliers could lead to delays in car deliveries to our clients, which could adversely affect our relationships with our clients
and also materially and adversely affect our operating results and financial condition. Supply of raw materials, parts and
components may also be disrupted or interrupted by natural disasters, as was the case in 2012 following the earthquake in the
Emilia Romagna region of Italy.
Changes in our supply chain have in the past resulted and may in the future result in increased costs and delays in
car production. We have also experienced cost increases from certain suppliers in order to meet our quality targets and
development timelines and because of design changes that we have made. We may experience similar cost increases in the
future. Additionally, we are negotiating with existing suppliers for cost reductions, seeking new and less expensive suppliers
for certain parts, and attempting to redesign certain parts to make them less expensive to produce. If we are unsuccessful in
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our efforts to control and reduce supplier costs while maintaining a stable source of high quality supplies, our operating
results will suffer. Additionally, cost reduction efforts may disrupt our normal production processes, thereby harming the
quality or volume of our production.
Furthermore, if our suppliers fail to provide components in a timely manner or at the level of quality necessary to
manufacture our cars, our clients may face longer waiting periods which could result in negative publicity, harm our
reputation and relationship with clients and have a material adverse effect on our business, operating results and financial
condition.
We depend on our manufacturing facilities in Maranello and Modena.
We assemble all of the cars that we sell and manufacture all of the engines we use in our cars and sell to Maserati
at our production facility in Maranello, Italy, where we also have our corporate headquarters. We manufacture all of our car
chassis in a nearby facility in Modena, Italy. Our Maranello or Modena plants could become unavailable either permanently
or temporarily for a number of reasons, including contamination, power shortage or labor unrest. Alternatively, changes in
law and regulation, including export, tax and employment laws and regulations, or economic conditions, including wage
inflation, could make it uneconomic for us to continue manufacturing our cars in Italy. In the event that we were unable to
continue production at either of these facilities or it became uneconomic for us to continue to do so, we would need to seek
alternative manufacturing arrangements which would take time and reduce our ability to produce sufficient cars to meet
demand. Moving manufacturing to other locations may also affect the perception of our brand and car quality among our
clients. Such a transfer would materially reduce our revenues and could require significant investment, which as a result
could have a material adverse effect on our business, results of operations and financial condition.
Maranello and Modena are located in the Emilia-Romagna region of Italy which has the potential for seismic
activity. For instance, in 2012 a major earthquake struck the region, causing production at our facilities to be temporarily
suspended for a day. If major disasters such as earthquakes, fires, floods, hurricanes, wars, terrorist attacks, pandemics or
other events occur, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay
production and shipment of our cars. As such damages from disasters or unpredictable events could have a material adverse
impact on our business, results from operations and financial condition.
Car sales depend in part on the availability of affordable financing.
In certain regions, financing for new car sales has been available at relatively low interest rates for several years
due to, among other things, expansive government monetary policies. To the extent that interest rates rise generally, market
rates for new car financing are expected to rise as well, which may make our cars less affordable to clients or cause
consumers to purchase less expensive cars, adversely affecting our results of operations and financial condition. Additionally,
if consumer interest rates increase substantially or if financial service providers tighten lending standards or restrict their
lending to certain classes of credit, our clients may not desire to or be able to obtain financing to purchase our cars.
We may not be able to provide adequate access to financing for our dealers and clients.
Our dealers enter into wholesale financing arrangements to purchase cars from us to hold in inventory or to use in
showrooms and facilitate retail sales, and retail clients use a variety of finance and lease programs to acquire cars.
In most markets, we rely on controlled finance companies and commercial relationships with third parties,
including third party financial institutions, to provide financing to our dealers and retail clients. Finance companies are
subject to various risks that could negatively affect their ability to provide financing services at competitive rates, including:
•
•
•
the performance of loans and leases in their portfolio, which could be materially affected by delinquencies or
defaults;
higher than expected car return rates and the residual value performance of cars they lease; and
fluctuations in interest rates and currency exchange rates.
Any financial services provider, including our controlled finance companies, will face other demands on its capital,
as well as liquidity issues relating to other investments or to developments in the credit markets. Furthermore, they may be
subject to regulatory changes that may increase their costs, which may impair their ability to provide competitive financing
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products to our dealers and retail clients. To the extent that a financial services provider is unable or unwilling to provide
sufficient financing at competitive rates to our dealers and retail clients, such dealers and retail clients may not have sufficient
access to financing to purchase or lease our cars. As a result, our car sales and market share may suffer, which would
adversely affect our results of operations and financial condition.
We rely on our licensing and franchising partners to preserve the value of our licenses and the failure to maintain such
partners could harm our business.
We currently have multi-year agreements with licensing partners for various Ferrari-branded products in the sports,
lifestyle and luxury retail segments. We also have multi-year agreements with franchising partners for our Ferrari stores and
theme park. In the future, we may enter into additional licensing or franchising arrangements. Many of the risks associated
with our own products also apply to our licensed products and franchised stores. In addition, there are unique problems that
our licensing or franchising partners may experience, including risks associated with each licensing partner’s ability to obtain
capital, manage its labor relations, maintain relationships with its suppliers, manage its credit and bankruptcy risks, and
maintain client relationships. While we maintain significant control over the products produced for us by our licensing
partners and the franchisees running our Ferrari stores and theme park, any of the foregoing risks, or the inability of any of
our licensing or franchising partners to execute on the expected design and quality of the licensed products, Ferrari stores and
theme park, or otherwise exercise operational and financial control over its business, may result in loss of revenue and
competitive harm to our operations in the product categories where we have entered into such licensing or franchising
arrangements. While we select our licensing and franchising partners with care, any negative publicity surrounding such
partners could have a negative effect on licensed products, the Ferrari stores and theme parks or the Ferrari brand. Further,
while we believe that we could replace our existing licensing or franchising partners if required, our inability to do so for any
period of time could materially adversely affect our revenues and harm our business.
We depend on the strength of our trademarks and other intellectual property rights.
We believe that our trademarks and other intellectual property rights are fundamental to our success and market
position. Therefore, our business depends on our ability to protect and promote our trademarks and other intellectual property
rights. Accordingly, we devote substantial efforts to the establishment and protection of our trademarks and other intellectual
property rights such as registered designs and patents on a worldwide basis. We believe that our trademarks and other
intellectual property rights are adequately supported by applications for registrations, existing registrations and other legal
protections in our principal markets. However, we cannot exclude the possibility that our intellectual property rights may be
challenged by others, or that we may be unable to register our trademarks or otherwise adequately protect them in some
jurisdictions. If a third party were to register our trademarks, or similar trademarks, in a country where we have not
successfully registered such trademarks, it could create a barrier to our commencing trade under those marks in that country.
Third parties may claim that we infringe their intellectual property rights.
We believe that we hold all the rights required for our business operations (including intellectual property rights
and third-party licenses). However, we are exposed to potential claims from third parties alleging that we infringe their
intellectual property rights, since many competitors and suppliers also submit patent applications for their inventions and
secure patent protection or other intellectual property rights. If we are unsuccessful defending against any such claim, we
may be required to pay damages or comply with injunctions which may disrupt our operations. We may also as a result be
forced to enter into royalty or licensing agreements on unfavorable terms or to redesign products to comply with third parties’
intellectual property rights.
If our cars do not perform as expected our ability to develop, market and sell our cars could be harmed.
Our cars may contain defects in design and manufacture that may cause them not to perform as expected or that
may require repair. There can be no assurance that we will be able to detect and fix any defects in the cars prior to their sale
to consumers. Our cars may not perform in line with our clients’ evolving expectations or in a manner that equals or exceeds
the performance characteristics of other cars currently available. For example, our newer cars may not have the durability or
longevity of current cars, and may not be as easy to repair as other cars currently on the market. Any product defects or any
other failure of our performance cars to perform as expected could harm our reputation and result in adverse publicity, lost
revenue, delivery delays, product recalls, product liability claims, harm to our brand and reputation, and significant warranty
and other expenses, and could have a material adverse impact on our business, operating results and financial condition.
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Car recalls may be costly and may harm our reputation.
We have in the past and we may from time to time in the future be required to recall our products to address
performance, compliance or safety-related issues. We may incur costs for these recalls, including replacement parts and labor
to remove and replace the defective parts. For a description of recent instances of recalls, “ Overview of our Business—
Regulatory Matters—Vehicle safety”. In addition, regulatory oversight of recalls, particularly in the vehicle safety, has
increased recently. While the cost of recent recalls is not material to us, any product recalls can harm our reputation with
clients, particularly if consumers call into question the safety, reliability or performance of our cars. Any such recalls could
harm our reputation and result in adverse publicity, lost revenue, delivery delays, product liability claims and other expenses,
and could have a material adverse impact on our business, operating results and financial condition.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not
able to successfully defend or insure against such claims.
We may become subject to product liability claims, which could harm our business, operating results and financial
condition. The automobile industry experiences significant product liability claims and we have inherent risk of exposure to
claims in the event our cars do not perform as expected or malfunction resulting in personal injury or death. A successful
product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim
could generate substantial negative publicity about our cars and business, adversely affecting our reputation and inhibiting or
preventing commercialization of future cars which could have a material adverse effect on our brand, business, operating
results and financial condition. While we seek to insure against product liability risks, insurance may be insufficient to protect
against any monetary claims we may face and will not mitigate any reputational harm. Any lawsuit seeking significant
monetary damages may have a material adverse effect on our reputation, business and financial condition. We may not be
able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when
needed, particularly if we face liability for our products and are forced to make a claim under such a policy.
We are exposed to risks in connection with product warranties as well as the provision of services.
A number of our contractual and legal requirements oblige us to provide extensive warranties to our clients, dealers
and national distributors. There is a risk that, relative to the guarantees and warranties granted, the calculated product prices
and the provisions for our guarantee and warranty risks have been set or will in the future be set too low. There is also a risk
that we will be required to extend the guarantee or warranty originally granted in certain markets for legal reasons, or provide
services as a courtesy or for reasons of reputation where we are not legally obliged to do so, and for which we will generally
not be able to recover from suppliers or insurers.
If we were to lose our Authorized Economic Operator certificate, we may be required to modify our current business
practices and to incur increased costs, as well as experience shipment delays.
Because we ship and sell our cars in numerous countries, the customs regulations of various jurisdictions are
important to our business and operations. To expedite customs procedure, we applied for, and currently hold, the European
Union’s Authorized Economic Operator (AEO) certificate. The AEO certificate is granted to operators that meet certain
requirements regarding supply chain security and the safety and compliance with law of the operator’s customs controls and
procedures. Operators are audited periodically for continued compliance with the requirements. The AEO certificate allows
us to benefit from special expedited customs treatment, which significantly facilitates the shipment of our cars in the various
markets where we operate. However, if we were to lose the AEO status, including for failure to meet one of the certification’s
requirements, we would be required to change our business practices and to adopt standard customs procedures for the
shipment of our cars. This could result in increased costs and shipment delays, which, in turn, could negatively affect our
results of operations.
Labor laws and collective bargaining agreements with our labor unions could impact our ability to operate efficiently.
All of our production employees are represented by trade unions, are covered by collective bargaining agreements
and/or are protected by applicable labor relations regulations that may restrict our ability to modify operations and reduce
costs quickly in response to changes in market conditions. These regulations and the provisions in our collective bargaining
agreements may impede our ability to restructure our business successfully to compete more efficiently and effectively,
especially with those automakers whose employees are not represented by trade unions or are subject to less stringent
regulations, which could have a material adverse effect on our results of operations and financial condition.
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We are subject to risks associated with exchange rate fluctuations, interest rate changes, credit risk and other market
risks.
We operate in numerous markets worldwide and are exposed to market risks stemming from fluctuations in
currency and interest rates. The exposure to currency risk is mainly linked to the differences in geographic distribution of our
sourcing and manufacturing activities from those in our commercial activities, as a result of which our cash flows from sales
are denominated in currencies different from those connected to purchases or production activities. For example, we incur a
large portion of our capital and operating expenses in Euros while we receive the majority of our revenues in currencies other
than Euro. In addition, foreign exchange movements might also negatively affect the relative purchasing power of our clients
which could also have an adverse effect on our results of operations.
We seek to manage risks associated with fluctuations in currency through financial hedging instruments. Although
we seek to manage our foreign currency risk in order to minimize any negative effects caused by rate fluctuations, including
through hedging activities, there can be no assurance that we will be able to do so successfully, and our business, results of
operations and financial condition could nevertheless be adversely affected by fluctuations in market rates, particularly if
these conditions persist.
Our financial services activities are also subject to the risk of insolvency of dealers and retail clients, as well as
unfavorable economic conditions in markets where these activities are carried out. Despite our efforts to mitigate such risks
through the credit approval policies applied to dealers and retail clients, there can be no assurances that we will be able to
successfully mitigate such risks, particularly with respect to a general change in economic conditions.
Changes in tax, tariff or fiscal policies could adversely affect demand for our products.
Imposition of any additional taxes and levies designed to limit the use of automobiles could adversely affect the
demand for our vehicles and our results of operations. Changes in corporate and other taxation policies as well as changes in
export and other incentives given by various governments or import or tariff policies could also adversely affect our results of
operations. While we are managing our product development and production operations on a global basis to reduce costs and
lead times, unique national or regional standards can result in additional costs for product development, testing, and
manufacturing. Governments often require the implementation of new requirements during the middle of a product cycle,
which can be substantially more expensive than accommodating these requirements during the design of a new product. The
imposition of any additional taxes and levies or change in government policy designed to limit the use of high performance
sports cars or automobiles more generally could also adversely affect the demand for our cars. The occurrence of the above
may have a material adverse effect on our business, results of operations and financial condition.
We face risks associated with our international operations, including unfavorable regulatory, political, tax and labor
conditions and establishing ourselves in new markets, all of which could harm our business.
We currently have international operations and subsidiaries in various countries and jurisdictions in Europe, North
America and Asia that are subject to the legal, political, regulatory, tax and social requirements and economic conditions in
these jurisdictions. Additionally, as part of our growth strategy, we will continue to expand our sales, maintenance, and repair
services internationally. However, such expansion requires us to make significant expenditures, including the establishment
of local operating entities, hiring of local employees and establishing facilities in advance of generating any revenue. We are
subject to a number of risks associated with international business activities that may increase our costs, impact our ability to
sell our cars and require significant management attention. These risks include:
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conforming our cars to various international regulatory and safety requirements where our cars are sold, or
homologation;
difficulty in establishing, staffing and managing foreign operations;
difficulties attracting clients in new jurisdictions;
foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be
able to offset against taxes imposed upon us in Italy;
fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate
swap or other hedging activities we undertake;
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our ability to enforce our contractual and intellectual property rights, especially in those foreign countries that
do not respect and protect intellectual property rights to the same extent as do the United States, Japan and
European countries, which increases the risk of unauthorized, and uncompensated, use of our technology;
• European Union and foreign government trade restrictions, customs regulations, tariffs and price or exchange
controls;
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foreign labor laws, regulations and restrictions;
preferences of foreign nations for domestically produced cars;
changes in diplomatic and trade relationships;
political instability, natural disasters, war or events of terrorism; and
the strength of international economies.
If we fail to successfully address these risks, many of which we cannot control, our business, operating results and
financial condition could be materially harmed.
Improper conduct of employees, agents, or other representatives could adversely affect our reputation and our business,
operating results, and financial condition.
Our compliance controls, policies, and procedures may not in every instance protect us from acts committed by our
employees, agents, contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which we
operate, including employment, foreign corrupt practices, environmental, competition, and other laws and regulations. Such
improper actions could subject us to civil or criminal investigations, and monetary and injunctive penalties. In particular, our
business activities may be subject to anti-corruption laws, regulations or rules of other countries in which we operate. If we
fail to comply with any of these regulations, it could adversely impact our operating results and our financial condition. In
addition, actual or alleged violations could damage our reputation and our ability to conduct business. Furthermore, detecting,
investigating, and resolving any actual or alleged violation is expensive and can consume significant time and attention of our
executive management.
Our insurance coverage may not be adequate to protect us against all potential losses to which we may be subject, which
could have a material adverse effect on our business.
We maintain insurance coverage that we believe is adequate to cover normal risks associated with the operation of
our business. However, there can be no assurance that any claim under our insurance policies will be honored fully or timely,
our insurance coverage will be sufficient in any respect or our insurance premiums will not increase substantially.
Accordingly, to the extent that we suffer loss or damage that is not covered by insurance or which exceeds our insurance
coverage, or have to pay higher insurance premiums, our financial condition may be affected.
The requirements of being a U.S. public company may strain our resources and divert management’s attention.
As a public company, we are or will be required to comply with various corporate governance and financial
reporting requirements under the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), the Securities and Exchange Act of 1934,
as amended (the “Exchange Act”), and the rules and regulations adopted by the SEC and the Public Corporation Accounting
Oversight Board. Further, compliance with various regulatory reporting requires significant commitments of time from our
management and our directors, which reduces the time available for the performance of their other responsibilities. If we are
unable to comply with the rules and regulations or are otherwise unable to obtain necessary certifications to financial
statements or other disclosures, this may materially adversely affect our reputation, lead to additional regulatory enforcement
actions, and could adversely affect the value of our common shares.
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Failure to establish and maintain effective internal controls in accordance with Section 404 of Sarbanes-Oxley could have
a material adverse effect on our business and common share price.
As a public company, we will be required to document and test our internal control procedures in order to satisfy
the requirements of Section 404 of Sarbanes-Oxley (“Section 404”), which will require management assessments and
certifications of the effectiveness of our internal control over financial reporting, beginning with our annual report for the
year ending December 31, 2016. During the course of our testing, we may identify deficiencies that we may not be able to
remedy in time to meet our deadline for compliance with Section 404. We may not be able to conclude on an ongoing basis
that we have effective internal control over financial reporting in accordance with Section 404. In addition, under Section 404
(b) of Sarbanes-Oxley, our independent registered public accounting firm will be required to report on the effectiveness of
our internal control over financial reporting but may not be able or willing to issue an unqualified report. If we conclude that
our internal control over financial reporting is not effective, we cannot be certain as to the timing of remediation actions and
testing or their effect on our operations.
If we are unable to conclude that we have effective internal control over financial reporting, our independent
auditors are unable to provide us with an unqualified report as required by Section 404, or we are required to restate our
financial statements, we may fail to meet our public reporting obligations and investors could lose confidence in our reported
financial information, or the listing of our common shares on the NYSE could be suspended or terminated, any of which
could have a negative effect on the trading price of our common shares.
A disruption in our information technology could compromise confidential and sensitive information.
We depend on our information technology and data processing systems to operate our business, and a significant
malfunction or disruption in the operation of our systems, or a security breach that compromises the confidential and
sensitive information stored in those systems, could disrupt our business and adversely impact our ability to compete. Our
ability to keep our business operating effectively depends on the functional and efficient operation of our information, data
processing and telecommunications systems, including our car design, manufacturing, inventory tracking and billing and
payment systems. We rely on these systems to enable a number of business processes and help us make a variety of day-to-
day business decisions as well as to track transactions, billings, payments and inventory. Such systems are susceptible to
malfunctions and interruptions due to equipment damage, power outages, and a range of other hardware, software and
network problems. Those systems are also susceptible to cybercrime, or threats of intentional disruption, which are increasing
in terms of sophistication and frequency. For any of these reasons, we may experience systems malfunctions or interruptions.
Although our systems are diversified, including multiple server locations and a range of software applications for different
regions and functions, and we are currently undergoing an effort to assess and ameliorate risks to our systems, a significant or
large scale malfunction or interruption of any one of our computer or data processing systems could adversely affect our
ability to manage and keep our operations running efficiently, and damage our reputation if we are unable to track
transactions and deliver products to our dealers and clients. A malfunction that results in a wider or sustained disruption to
our business could have a material adverse effect on our business, results of operations and financial condition. In addition to
supporting our operations, we use our systems to collect and store confidential and sensitive data, including information
about our business, our clients and our employees. As our technology continues to evolve, we anticipate that we will collect
and store even more data in the future, and that our systems will increasingly use remote communication features that are
sensitive to both willful and unintentional security breaches. Much of our value is derived from our confidential business
information, including car design, proprietary technology and trade secrets, and to the extent the confidentiality of such
information is compromised, we may lose our competitive advantage and our car sales may suffer. We also collect, retain and
use certain personal information, including data we gather from clients for product development and marketing purposes, and
data we obtain from employees. In the event of a breach in security that allows third parties access to this personal
information, we are subject to a variety of ever-changing laws on a global basis that require us to provide notification to the
data owners, and that subject us to lawsuits, fines and other means of regulatory enforcement. Our reputation could suffer in
the event of such a data breach, which could cause consumers to purchase their cars from our competitors. Ultimately, any
significant compromise in the integrity of our data security could have a material adverse effect on our business.
Risks Related to our Common Shares
The market price and trading volume of our common shares may be volatile, which could result in rapid and substantial
losses for our shareholders.
The market price of our common shares may be highly volatile and could be subject to wide fluctuations. In
addition, the trading volume of our common shares may fluctuate and cause significant price variations to occur. If the
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market price of our common shares declines significantly, you may be unable to sell your common shares at or above your
purchase price, if at all. The market price of our common shares may fluctuate or decline significantly in the future. Some of
the factors that could negatively affect the price of our common shares, or result in fluctuations in the price or trading volume
of our common shares, include:
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variations in our operating results, or failure to meet the market’s earnings expectations;
publication of research reports about us or the automotive industry, or the failure of securities analysts to cover our
common shares;
departures of any members of our management team or additions or departures of other key personnel;
adverse market reaction to any indebtedness we may incur or securities we may issue in the future;
actions by shareholders;
changes in market valuations of similar companies;
changes or proposed changes in laws or regulations, or differing interpretations thereof, affecting our business, or
enforcement of these laws and regulations, or announcements relating to these matters;
adverse publicity about the automotive industry generally, or particularly scandals relating to the industry,
specifically;
litigation and governmental investigations; and
general market and economic conditions.
The loyalty voting program may affect the liquidity of our common shares and reduce our common share price.
The implementation of our loyalty voting program could reduce the trading liquidity and adversely affect the
trading prices of our common shares. The loyalty voting program was intended to reward our shareholders for maintaining
long-term share ownership by granting initial shareholders and persons holding our common shares continuously for at least
three years the option to elect to receive special voting shares. Special voting shares cannot be traded and, if common shares
participating in the loyalty voting program are sold they must be deregistered from the loyalty register and any corresponding
special voting shares transferred to us for no consideration (om niet). This loyalty voting program is designed to encourage a
stable shareholder base and, conversely, it may deter trading by shareholders that may be interested in participating in our
loyalty voting program. Therefore, the loyalty voting program may reduce liquidity in our common shares and adversely
affect their trading price.
The interests of our largest shareholders may differ from the interests of other shareholders.
Exor S.p.A. is our largest shareholder, holding approximately 23.5 percent of our common shares and
approximately 33.4 percent of our voting power. Therefore, Exor will have a significant influence over these matters
submitted to a vote of our shareholders, including matters such as adoption of the annual financial statements, declarations of
annual dividends, the election and removal of the members of our Board, capital increases and amendments to our articles of
association. In addition, Piero Ferrari, the Vice Chairman of Ferrari, holds 10 percent of our common shares and
approximately 15.4% of voting interest in us. As a result, he will also have influence in matters submitted to a vote of our
shareholders. Exor and Piero Ferrari informed us that they have entered into a shareholder agreement pursuant to which they
have undertaken to consult for the purpose of forming, where possible, a common view on the items on the agenda of
shareholders meetings. See “Major Shareholders—Shareholders’ Agreement”. The interests of Exor and Piero Ferrari may in
certain cases differ from those of other shareholders. In addition, the sale of substantial amounts of our common shares in the
public market by Piero Ferrari or the perception that such a sale could occur could adversely affect the prevailing market
price of the common shares.
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We may have potential conflicts of interest with FCA and Exor and its related companies .
Questions relating to conflicts of interest may arise between us and FCA, our former largest shareholder prior to
the Separation, in a number of areas relating to common shareholdings and management, as well as our past and ongoing
relationships. Even after the Separation overlaps remain among the directors and officers of us and FCA. For example,
Mr. Sergio Marchionne, our Chairman, is the Chief Executive Officer of FCA and Mr. Marchionne and certain of our other
directors and officers may also be directors or officers of FCA or Exor, our and FCA’s largest shareholder. These individuals
owe duties both to us and to the other companies that they serve as officers and/or directors. This may raise conflicts as, for
example, these individuals review opportunities that may be appropriate or suitable for both us and such other companies, or
we pursue business transactions in which both we and such other companies have an interest, such as our arrangement to
supply engines for Maserati cars. Exor holds approximately 23.5 percent of our common shares and approximately 33.4
percent of the voting power in us, while it holds approximately 29 percent of the common shares and 44 percent of the voting
power in FCA. Exor also owns a controlling interest in CNH Industrial N.V., which was part of the FCA group before its
spin-off several years ago. These ownership interests could create actual, perceived or potential conflicts of interest when
these parties or our common directors and officers are faced with decisions that could have different implications for us and
FCA or Exor, as applicable.
Our loyalty voting program may make it more difficult for shareholders to acquire a controlling interest in Ferrari,
change our management or strategy or otherwise exercise influence over us, which may affect the market price of our
common shares.
The provisions of our articles of association which establish the loyalty voting program may make it more difficult
for a third party to acquire, or attempt to acquire, control of our company, even if a change of control were considered
favorably by shareholders holding a majority of our common shares. As a result of the loyalty voting program, a relatively
large proportion of the voting power of Ferrari could be concentrated in a relatively small number of shareholders who would
have significant influence over us. Exor has a voting interest in Ferrari of approximately 33.4 percent. Piero Ferrari holds 10
percent of our common shares and, as a result of the loyalty voting mechanism, has approximately 15.4 percent of the voting
power in our shares. In addition, Exor and Piero Ferrari informed us that they have entered into a shareholder agreement,
summarized under “Major Shareholders—Shareholders’ Agreement”. As a result, Exor and Piero Ferrari may exercise
significant influence on matters involving our shareholders. Exor and Piero Ferrari and other shareholders participating in the
loyalty voting program may have the power effectively to prevent or delay change of control or other transactions that may
otherwise benefit our shareholders. The loyalty voting program may also prevent or discourage shareholder initiatives aimed
at changing Ferrari’s management or strategy or otherwise exerting influence over Ferrari. See “Corporate Governance—
Loyalty Voting Structure”
We are a Dutch public company with limited liability, and our shareholders may have rights different to those of
shareholders of companies organized in the United States.
The rights of our shareholders may be different from the rights of shareholders governed by the laws of U.S.
jurisdictions. We are a Dutch public company with limited liability (naamloze vennootschap). Our corporate affairs are
governed by our articles of association and by the laws governing companies incorporated in the Netherlands. The rights of
shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders
and the responsibilities of members of our board of directors in companies governed by the laws of other jurisdictions
including the United States. In the performance of its duties, our board of directors is required by Dutch law to consider our
interests and the interests of our shareholders, our employees and other stakeholders, in all cases with due observation of the
principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or
in addition to, your interests as a shareholder.
We expect to maintain our status as a “foreign private issuer” under the rules and regulations of the SEC and, thus, are
exempt from a number of rules under the Exchange Act of 1934 and are permitted to file less information with the SEC
than a company incorporated in the United States.
As a “foreign private issuer,” we are exempt from rules under the Exchange Act of 1934, as amended (“the
Exchange Act”) that impose certain disclosure and procedural requirements for proxy solicitations under Section 14 of the
Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing”
profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their
purchases and sales of our common shares. Moreover, we are not required to file periodic reports and financial statements
with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, nor are
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we required to comply with Regulation FD, which restricts the selective disclosure of material information. Accordingly,
there may be less publicly available information concerning us than there is for U.S. public companies.
Our ability to pay dividends on our common shares may be limited and the level of future dividends is subject to change.
Our current dividend policy is set forth in “Item 5. Financial Information - Dividend policy”. Our payment of
dividends on our common shares in the future will be subject to business conditions, financial conditions, earnings, cash
balances, commitments, strategic plans and other factors that our Board of Directors may deem relevant at the time it
recommends approval of the dividend. Our dividend policy is subject to change in the future based on changes in statutory
requirements, market trends, strategic developments, capital requirements and a number of other factors. In addition, under
our articles of association and Dutch law, dividends may be declared on our common shares only if the amount of equity
exceeds the paid up and called up capital plus the reserves that have to be maintained pursuant to Dutch law or the articles of
association. Further, even if we are permitted under our articles of association and Dutch law to pay cash dividends on our
common shares, we may not have sufficient cash to pay dividends in cash on our common shares.
Our maintenance of two exchange listings may adversely affect liquidity in the market for our common shares and could
result in pricing differentials of our common shares between the two exchanges.
Shortly following the completion of the Separation, we listed our common shares on the Mercato Telematico
Azionario (“MTA”). The dual listing of our common shares may split trading between the NYSE and the MTA, adversely
affect the liquidity of the shares and the development of an active trading market for our common shares in one or both
markets and may result in price differentials between the exchanges. Differences in the trading schedules, as well as volatility
in the exchange rate of the two trading currencies, among other factors, may result in different trading prices for our common
shares on the two exchanges.
It may be difficult to enforce U.S. judgments against us.
We are organized under the laws of the Netherlands, and a substantial portion of our assets are outside of the
United States. Most of our directors and senior management and our independent auditors are resident outside the United
States, and all or a substantial portion of their respective assets may be located outside the United States. As a result, it may
be difficult for U.S. investors to effect service of process within the United States upon these persons. It may also be difficult
for U.S. investors to enforce within the United States judgments against us predicated upon the civil liability provisions of the
securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether the courts outside the
United States would recognize or enforce judgments of U.S. courts obtained against us or our directors and officers
predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Therefore, it may
be difficult to enforce U.S. judgments against us, our directors and officers and our independent auditors.
Because we are a recently formed company with a limited separate operating history we need to create separate
administrative and governance functions.
Because we are a recently formed company we have not been required to maintain many of the administrative
functions attendant to a listed company of our size. These include public company financial reporting, internal control and
audit, compliance, legal and governance functions. It may take some time for us to employ the persons necessary to staff
these administrative functions internally, requiring us to engage external consultants or staff, which may be more expensive.
Further, this is a significant increase in the amount of employees we have historically employed for administrative matters,
constituting a significant new expense. As a result of this increase in administrative requirements, there may be an adverse
effect on our business, operating results and financial condition.
FCA creditors may seek to hold us liable for certain FCA obligations.
One step of our Separation from FCA included a demerger from FCA of our common shares previously held by it.
In connection with a demerger under Dutch law, the demerged company may continue to be liable for certain obligations of
the demerging company that exist at the time of the demerger, but only to the extent that the demerging company fails to
satisfy such liabilities. Based on other actions taken as part of the Separation, we do not believe we retain any liability for
obligations of FCA existing at the time of the Separation. Nevertheless, in the event that FCA fails to satisfy obligations to its
creditors existing at the time of the demerger, it is possible that those creditors may seek to recover from us, claiming that we
remain liable to satisfy such obligations. While we believe we would prevail against any such claim, litigation is inherently
costly and uncertain and could have an adverse effect. See “Overview—The Separation. ”
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Risks Related to Taxation
As a result of the demergers and the merger in connection with the Separation, we might be jointly and severally liable
with FCA for certain tax liabilities arisen in the hands of FCA.
Although the Italian tax authorities confirmed in a positive advance tax ruling issued on October 9, 2015 that the
demergers and the Merger that was carried out in connection with the Separation would be respected as tax-free, neutral
transactions from an Italian income tax perspective, under Italian tax law we may still be held jointly and severally liable, as a
result of the combined application of the rules governing the allocation of tax liabilities in case of demergers and mergers,
with FCA for taxes, penalties, interest and any other tax liability arising in the actions of FCA because of violations of its tax
obligations related to tax years prior to the two Demergers described in the section “Overview—The Separation. ”
There may be potential “Passive Foreign Investment Company” tax considerations for U.S. holders.
Shares of our stock would be stock of a “passive foreign investment company,” or a PFIC, for U.S. federal income
tax purposes with respect to a U.S. shareholder if for any taxable year in which such U.S. shareholder held shares of our
stock, after the application of applicable “look-through rules” (i) 75 percent or more of our gross income for the taxable year
consists of “passive income” (including dividends, interest, gains from the sale or exchange of investment property and rents
and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of
a trade or business, as defined in applicable Treasury Regulations), or (ii) at least 50 percent of our assets for the taxable year
(averaged over the year and determined based upon value) produce or are held for the production of “passive income.” U.S.
persons who own shares of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the
income derived by the PFIC, the dividends they receive from the PFIC, and the gain, if any, they derive from the sale or other
disposition of their shares in the PFIC.
While we believe that shares of our stock are not stock of a PFIC for U.S. federal income tax purposes, this
conclusion is based on a factual determination made annually and thus is subject to change. Moreover, our common shares
may become stock of a PFIC in future taxable years if there were to be changes in our assets, income or operations.
The consequences of the loyalty voting program are uncertain.
No statutory, judicial or administrative authority directly discusses how the receipt, ownership, or disposition of
special voting shares should be treated for Italian or U.S. tax purposes and as a result, the tax consequences in those
jurisdictions are uncertain.
The fair market value of the special voting shares, which may be relevant to the tax consequences, is a factual
determination and is not governed by any guidance that directly addresses such a situation. Because, among other things, our
special voting shares are not transferable (other than, in very limited circumstances, together with the associated common
shares) and a shareholder will receive amounts in respect of the special voting shares only if we are liquidated, we believe
and intend to take the position that the fair market value of each special voting share is minimal. However, the relevant tax
authorities could assert that the value of the special voting shares as determined by us is incorrect.
The tax treatment of the loyalty voting program is unclear and shareholders are urged to consult their tax advisors
in respect of the consequences of acquiring, owning and disposing of special voting shares.
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Overview
Ferrari is among the world’s leading luxury brands focused on the design, engineering, production and sale of the
world’s most recognizable luxury performance sports cars.
We design, engineer and produce our cars in Maranello, Italy, and sell them in over 60 markets worldwide through a
network of 176 authorized dealers operating 198 points of sale. We currently sell seven models, including four sports cars (488
GTB, 488 Spider, F12berlinetta and our special series F12 Tour de France, or F12tdf) and three GT cars (California T, FF and
our new GTC4Lusso). We also produce a limited edition supercar, LaFerrari, and very limited editions series (Fuoriserie) and
one-off cars.
In 2015, we shipped 7,664 cars, and recorded net revenues of €2,854 million, net profit of €290 million, adjusted
earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) of €748 million and earnings before interest
and taxes (EBIT) of €444 million. We divide our regional markets into EMEA, Americas, Greater China and Rest of APAC,
representing respectively 44 percent, 34 percent, 8 percent and 14 percent of units shipped in 2015.
We recently completed the separation of our business from FCA, through a series of transactions which we refer to as
the “Separation”, as summarized below.
History of the Company
Our company is named after our founder Enzo Ferrari. An Alfa Romeo driver since 1924, Enzo Ferrari founded his
own racing team, Scuderia Ferrari, in Modena in 1929 initially to race Alfa Romeo cars. In 1939 he set up his own company,
initially called Auto Avio Costruzioni. In late 1943, Enzo Ferrari moved his headquarters from Modena to Maranello, which
remains our headquarters to this day. The Fiat group acquired a 50 percent stake in Ferrari S.p.A. in 1969, which increased to
90% in 1988, after the death of Enzo Ferrari, with the remaining 10% held by Enzo Ferrari’s son, Piero Ferrari.
The Separation
On October 19, 2015 we completed a restructuring intended to facilitate the initial public offering of our shares (the
“IPO”) which resulted in the establishment of New Business Netherlands N.V., then renamed Ferrari N.V. (“Predecessor
Ferrari”) as the holding company of the Ferrari group holding a 100 percent interest in Ferrari S.p.A. Predecessor Ferrari was
originally established as a 100 percent owned subsidiary of FCA on May 24, 2013. As a result of the restructuring,
immediately prior to the IPO, FCA held approximately 90% of Predecessor Ferrari common shares and special voting shares
and Piero Ferrari, the son of our founder, held the remainder of Predecessor Ferrari common shares and special voting shares.
As part of the restructuring, Predecessor Ferrari incurred debt in order to optimize the capital structure of Predecessor Ferrari
as a public company through the issue by Predecessor Ferrari to FCA of a promissory note (the “FCA Note”).
On October 20, 2015, FCA priced an IPO of shares of Predecessor Ferrari shares representing approximately 10% of
Predecessor Ferrari’s common share capital and, on October 21, 2015, such common shares started trading on the New York
Stock Exchange under the ticker symbol “RACE”. Following completion of the IPO, FCA owned approximately 80% of
Predecessor Ferrari common shares, Piero Ferrari held approximately 10% of Predecessor Ferrari common shares and investors
in the IPO held approximately 10% of Predecessor Ferrari common shares.
On December 16, 2015, Ferrari repaid the FCA Note with the proceeds of a loan drawn under a syndicated credit facility
with a group of lenders. See “Operating Results—Liquidity and Capital Resources—Indebtedness with FCA and Refinancing
of the FCA Note.”
The remaining steps of the Separation were carried out through the following transactions, which occurred between
January 1 and January 3, 2016. Through two consecutive demergers under Dutch law (the “Demergers”), the equity interests in
Predecessor Ferrari previously held by FCA, corresponding to approximately 80% of Predecessor Ferrari common share capital,
were transferred to holders of FCA common shares and FCA mandatory convertible securities (“MCS”). Immediately after the
Demergers, Predecessor Ferrari merged with and into Ferrari, as surviving company (the “Merger”). Upon effectiveness of the
Merger, Ferrari became the holding company of the Ferrari business.
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Pursuant to the Separation, (i) holders of Predecessor Ferrari common shares received one Ferrari common share for
each Predecessor Ferrari common share and one Ferrari special voting share for each Predecessor Ferrari special voting share
held; (ii) FCA shareholders received one Ferrari common share for every 10 FCA common shares and one Ferrari special
voting share for every 10 FCA special voting shares held; and (iii) holders of MCS received 0.77369 Ferrari common shares
for each MCS unit (consisting of $100 in notional amount of MCS) held. Ferrari special voting shares held by FCA prior to
the Demergers are no longer outstanding.
On January 4, 2016, the business day following effectiveness of the Merger, Ferrari common shares began trading
on the Mercato Telematico Azionario, the stock exchange managed by Borsa Italiana.
29
Industry Overview
Luxury performance cars share several characteristics with other luxury goods such as quality, aesthetics, rarity,
exclusivity and a high degree of non-functional associations all of which leads to significantly higher pricing as compared to
mass market goods within the same category. While affected by global macroeconomic conditions, the luxury goods market
is also impacted by several more specific factors, such as, in recent years, the significant economic growth and wealth
creation in certain emerging economies and rising levels of affluence and demand from the emerging middle and upper
classes in Asia and a general trend towards urbanization. Particularly following the 2008-2009 downturn, this has led the
global luxury goods market to return to perform better than global GDP, as shown in the chart below.
Sources: Bain & Company, 2015 for Global Personal Luxury Goods Market and World Bank Data, 1995-2014 for Global GDP.
Within the luxury goods market, we define our target market for luxury performance cars as two-door cars
powered by engines producing more than 500 hp and selling at a retail price in excess of Euro 150,000 (including VAT). The
luxury performance car market historically has followed relatively closely growth patterns in the broader luxury market. The
luxury performance car market is generally affected by global macroeconomic conditions and, although we and certain other
manufacturers have proven relatively resilient, general downturns can have a disproportionate impact on sales of luxury
goods in light of the discretionary nature of consumer spending in this market. Furthermore, because of the emotional nature
of the purchasing decision, economic confidence and factors such as expectations regarding future income streams as well as
the social acceptability of luxury goods may impact sales.
Following the sharp recession of 2008-2009, the luxury performance car market has been resilient to further
economic downturns and stagnation in the broader economy, also a result of the increase of new product launches, although
the luxury performance car market has not yet returned to the pre-recession levels. A sustained period of wealth creation in
several Asian countries and, to a lesser extent, in the Americas, has led to an expanding population of potential consumers of
luxury goods. Developing consumer preferences in the Asian markets, where the newly affluent are increasingly embracing
western brands of luxury products, have also led to higher demand for cars in our segment, which are all produced by
established European manufacturers.
Additionally, the growing appetite of younger affluent purchasers for luxury performance cars has led to new
entrants, which in turn has resulted in higher sales overall in the market.
Unlike in other segments of the broader luxury market, however, in the luxury performance car market, a significant
portion of demand is driven by new product launches. The market share of individual producers fluctuates over time
reflecting the timing of product launches. New launches tend to drive sales volumes even in difficult market environments
30
because the novelty, exclusivity and excitement a new product is capable of creating and capturing its own demand from
clients.
•
•
•
Data for the Luxury Performance Car Industry include all two door GT and sports cars with power above 500hp, and retail price above Euro
150,000 (including VAT) sold by Aston Martin, Audi, Bentley, Ferrari, Lamborghini, McLaren, Mercedes Benz, Porsche and Rolls-Royce.
Ferrari data based on the 22 top countries (excluding Middle East countries) for Ferrari annual registrations and sales (which accounted for
approximately 85% of the total Ferrari shipments in 2015).
Data for the Luxury Performance Car Industry based on units registered (in USA, Brazil, Japan, Hong Kong, Taiwan, Australia, United Kingdom,
Germany, France, Switzerland, Italy, Spain, Sweden, Netherlands, Belgium and Austria) or sold (in South Korea, Thailand, China, New Zealand,
Singapore and Indonesia) in each period. Source: USA: US Maker Data Club, Brazil-ANFAVEA; Austria-OSZ; Belgium-FEBIAC; France-SIV;
Germany-KBA; UK-SMMT; Italy-UNRAE; Netherlands- VWE; Spain- TRAFICO; Sweden-BranschData; Switzerland-ASTRA; China-China
Automobile Industry Association-DataClub; Hong Kong-Hong Kong Motor Trader Association; Taiwan-Ministry of Transportation and
Communications; Australia-VFACTS-S; Japan-JAIA; Indonesia-GAIKINDO; New Zealand-VFACTS; Singapore-LTA, MTA (Land Transport
Authority, Motor Trader Associations); South Korea-KAIDA; Thailand -Department of Land Transportation
The luxury performance car market has not yet returned to pre-recession levels. However, as shown in the chart
above, our sales in recent years have proven less volatile than our competitors’. We believe this is due to our strategy of
maintaining low volumes compared to demand, as well as the higher number of models in our range and our more frequent
product launches compared to our competitors.
In 2015, our market share in the luxury performance car market was 24 percent (22.9 percent in 2014), with a 24
percent (25 percent in 2014) market share in the sports car segment and 24 percent (18.8 percent in 2014) market share in the
GT segment. The chart below set forth our market shares in all geographical markets in which we operate.
31
•
•
•
Data for the Luxury Performance Car Industry include all two door GT and sports cars with power above 500hp, and retail price above Euro
150,000 (including VAT) sold by Aston Martin, Audi, Bentley, Ferrari, Lamborghini, McLaren, Mercedes Benz, Porsche and Rolls-Royce.
Ferrari data based on the 22 top countries (excluding Middle East countries) for Ferrari annual registrations and sales (which accounted for
approximately 85% of the total Ferrari shipments in 2015).
Data for the Luxury Performance Car Industry based on units registered (in USA, Brazil, Japan, Hong Kong, Taiwan, Australia, United Kingdom,
Germany, France, Switzerland, Italy, Spain, Sweden, Netherlands, Belgium and Austria) or sold (in South Korea, Thailand, China, New Zealand,
Singapore and Indonesia) in each period. Source: USA: US Maker Data Club, Brazil-ANFAVEA; Austria-OSZ; Belgium-FEBIAC; France-SIV;
Germany-KBA; UK-SMMT; Italy-UNRAE; Netherlands- VWE; Spain- TRAFICO; Sweden-BranschData; Switzerland-ASTRA; China-China
Automobile Industry Association- DataClub; Hong Kong- Hong Kong Motor Trader Association; Taiwan-Ministry of Transportation and
Communications; Australia-VFACTS-S; Japan-JAIA; Indonesia-GAIKINDO; New Zealand-VFACTS; Singapore-LTA, MTA (Land Transport
Authority, Motor Trader Associations); South Korea-KAIDA; Thailand-Department of Land Transportation.
While we monitor our market share as an indicator of our brand appeal, we do not regard market share in the luxury
performance market as particularly relevant as compared to other segments of the automotive industry. We are not focused on
market share as a performance metric. Instead, we deliberately manage our supply relative to demand, to defend and promote
our brand exclusivity and premium pricing. In recent years, we have produced a substantially constant number of cars per
year in furtherance of that strategy, and, therefore, our market share has decreased as a result of the increase in overall market
volumes.
Competition
Competition in the luxury performance car market is concentrated in a fairly small number of producers, including
both large automotive companies as well as small producers exclusively focused on luxury cars, like us. The luxury
performance car market includes a sports car segment and a GT segment.
In the sports car segment our products, are the 488 GTB, 488 Spider, F12berlinetta and our latest special series,
F12tdf , and our principal competitors are Lamborghini (Huracán, Aventador and Aventador SV), McLaren (650S, 675LT,
570S and 540C), Porsche (911 Turbo, Turbo S and GT3 RS), Mercedes (SL 63/65 AMG), Aston Martin (Vanquish and V12
Vantage/S) and Audi (R8 V10 and R8V10 Plus). In the GT segment our products are the California T, FF and new
GTC4Lusso (which will be replacing FF in the second semester of 2016) models and our principal competitors are Rolls-
Royce (Wraith), Bentley (Continantal GT/GTC, V12 and V8, Speed and S version and GT3-R), Aston Martin (DB9) and
Mercedes (CL 63/65 AMG and S Coupé 63/65 AMG).
In recent years, the market has shifted somewhat with an increased focus on the GT segment and the lower priced
range of the sports car market, with larger automotive groups expanding their offering of premium cars to enter the luxury
performance car market.
Competition in the luxury performance car market is driven by the strength of the brand, and the appeal of the
products in terms of performance, styling, novelty and innovation as well as on the manufacturers’ ability to renew its product
offerings regularly in order to continue to stimulate customer demand. Larger automotive groups with a product offering in
32
the luxury performance car market typically have larger financial resources compared to the small luxury car producers and
therefore may have more flexibility in planning for product launches and capital spending over time.
Competition among similarly positioned luxury performance cars is also driven by price and total cost of ownership.
We believe that the resilience of the value of our cars after a period of ownership is an important competitive factor because it
decreases the total cost of ownership for our clients and promotes repeat purchases.
33
Overview of Our Business
Ferrari is among the world’s leading luxury brands focused on the design, engineering, production and sale of the
world’s most recognizable luxury performance sports cars. Our brand symbolizes exclusivity, innovation, state-of-the-art sporting
performance and Italian design and engineering heritage. Our name and history and the image enjoyed by our cars are closely
associated with our Formula 1 racing team, Scuderia Ferrari, the most successful team in Formula 1 history. From the inaugural
year of Formula 1 in 1950 through the present, Scuderia Ferrari has won 224 Grand Prix races, 16 Constructor World titles and
15 Drivers’ World titles. We believe our history of excellence, technological innovation and defining style transcends the
automotive industry, and is the foundation of the Ferrari brand and image. We design, engineer and produce our cars in Maranello,
Italy, and sell them in over 60 markets worldwide through a network of 176 authorized dealers operating 198 points of sale.
We believe our cars are the epitome of performance, luxury and styling. We currently sell seven models, including
four sports cars (488 GTB, 488 Spider, F12berlinetta and our special series F12 Tour de France, or F12tdf) and three GT cars
(California T, FF and our new GTC4Lusso). The 488 GTB and the 488 Spider were launched in 2015 to replace the 458 Italia
and 458 Spider, which we produced and sold in 2015 but are now discontinued. The F12tdf, unveiled in October 2015, is our
latest special series and follows the 458 Speciale and 458 Speciale A, which we produced and sold in 2015 but are now
discontinued. In February 2016, we unveiled the new GTC4Lusso, our latest GT car, which will replace the FF, with sales
expected to begin in the second semester of 2016. We also produce a limited edition supercar, LaFerrari, and very limited
editions series (Fuoriserie) and one-off cars.
In 2015, we shipped 7,664 cars, and recorded net revenues of €2,854 million, net profit of €290 million, adjusted
earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) of €748 million and earnings before
interest and taxes (EBIT) of €444 million. For additional information regarding Adjusted EBITDA, which is a non-GAAP
measure, including a reconciliation of Adjusted EBITDA to net profit.
We pursue a low volume production strategy in order to maintain a reputation of exclusivity and scarcity among
purchasers of our cars and deliberately monitor and maintain our production volumes and delivery wait-times to promote this
reputation. We divide our regional markets into EMEA, Americas, Greater China and Rest of APAC, representing
respectively 44 percent, 34 percent, 8 percent and 14 percent of units shipped in 2015.
We license the Ferrari brand to a selected number of producers and retailers of luxury and lifestyle goods. In
addition, we design, source and sell Ferrari-branded products through a network of 25 franchised, 12 owned Ferrari stores
and on our website. As one of the world’s most recognized premium luxury brands, we believe we are well positioned to
selectively expand the presence of the Ferrari brand in attractive and growing lifestyle categories consistent with our image,
including sportswear, watches, accessories, consumer electronics and theme parks which we believe enhance the brand
experience of our loyal following of clients and Ferrari enthusiasts.
We focus our marketing and promotion efforts in the investments we make in our racing activities, in particular
Scuderia Ferrari’s participation in the Formula 1 World Championship, which is one of the most watched annual sports series
in the world, with approximately 420 million television viewers annually. Although our most recent Formula 1 world title
was in 2008, we are enhancing our focus on Formula 1 activities with the goal of improving recent racing results and
restoring our historical position as the premier racing team in Formula 1. We believe that these activities support the strength
and awareness of our brand among motor enthusiasts, clients and the general public.
We will continue focusing our efforts on protecting and enhancing the value of our brand to preserve our strong
financial profile and participate in the premium luxury market growth. We intend to selectively pursue controlled and
profitable growth in existing and emerging markets while expanding the Ferrari brand to carefully selected lifestyle
categories.
Sports and GT Cars
Our current product range consists of seven models, including six range models and one special series, equipped with
either eight or twelve cylinder engines and divided into two classes: Sports cars and GT cars. We target end clients seeking high
performance cars with distinctive design and state of the art technology. Within these parameters, we offer different models to
meet our clients’ varying needs and to differentiate our line-up from that of other manufacturers’, ranging from the exceptional
performance of our Sports cars to the luxury and drivability of our GT cars. Our diversified product offering includes different
34
architectures (such as front-engine and mid-rear engine), engine sizes (V8 and V12), body styles (such as coupes and spiders),
and seating (2 seaters and 2+2 seaters).
Our sports cars are characterized by compact bodies, a design guided by performance and aerodynamics, and often
benefit from technologies initially developed for our Formula 1 single-seaters. They favor performance over comfort, seeking
to provide a driver with an immediate response and superior handling, leveraging state of the art vehicle dynamics components
and controls. In our sports car class, we offer three models: two of which are equipped with mid-rear V8 engines, namely the
488 GTB (with 670 hp) which, starting from the second half of 2015, has replaced the 458 Italia, the 488 Spider (with 670 hp)
which, starting from the fourth quarter of 2015, has replaced the 458 Spider; and one equipped with a front V12 engine, the
F12berlinetta (with 740 hp). Our GT cars, while maintaining the performance expected of a Ferrari, are characterized by more
refined interiors with a higher focus on comfort and quality of life on-board. In our GT class, we offer one model equipped with
our V8 engine with 560 hp, the California T, and two models equipped with our V12 engine, the FF, with 660hp (our first all-
wheel drive four seat car) and the new GTC4Lusso which will be replacing FF starting from the second semester of 2016. We
also from time to time design, engineer and produce special series cars which are based on our range models but introduce novel
product concepts. These cars are characterized by significant hardware and software mechanical modifications designed to
enhance performance and drivability. Our special series cars are particularly targeted to collectors and, from a commercial and
product development standpoint, they facilitate the transition from existing to new range models. Our current special series
model is the F12tdf, equipped with a V12 engine with 780 hp. Our 458 Speciale and the 458 Speciale Aperta special series were
discontinued in 2015.
In addition to our range models and special series described above, we also continue the longstanding Ferrari
tradition of limited edition supercars, very limited series (fuoriserie) and one-off cars. Our limited edition supercars, which
we typically launch in seven to 10 year intervals, are the highest expression of Ferrari performance and are often the
forerunners of technological innovations for the future range models, with innovative features and futuristic design. We
launched our latest supercar, LaFerrari, in 2013 with a limited production run of 499 models. Our fuoriserie cars can be based
on range or special series mechanical components, but are characterized by important exterior body modifications resulting in
an innovative product by concept or design. These exclusive cars are linked to specific events or celebrations, such as the
Sergio (named after longtime designer of Ferrari cars, Sergio Pininfarina) and the F60 America (celebrating our 60th
anniversary of sales in the United States). Our one-off cars are designed to meet the varying needs of our most loyal and
discerning clients. They reflect the exact design and specifications required by the clients, and are produced as a single,
unique vehicle. (See “—Limited Edition Supercars, Fuoriserie and One-Offs”).
The table below sets forth our unit shipments for the years ended December 31, 2015, 2014 and 2013, by geographic
market:
(Number of cars and % of total cars)
For the years ended December 31,
2015
%
2014
%
2013
%
EMEA
UK
Germany
Switzerland
Italy
France
Middle East(1)
Rest of EMEA(2)
Total EMEA
Americas(3)
Greater China(4)
Rest of APAC(5)
Total
740
595
340
285
274
456
661
3,351
2,640
610
1,063
7,664
9.7%
7.8 %
4.4 %
3.7 %
3.6 %
5.9 %
8.6 %
43.7%
34.4 %
8.0 %
13.9 %
705
616
332
243
253
521
604
3,274
2,462
675
844
9.7 %
8.5 %
4.6 %
3.3 %
3.5 %
7.2 %
8.3 %
45.1%
33.9 %
9.3 %
11.6 %
686
659
350
206
273
472
663
3,309
2,382
572
737
9.8 %
9.4 %
5.0 %
2.9 %
3.9 %
6.7 %
9.5 %
47.3%
34.0 %
8.2 %
10.5 %
100.0%
7,255
100.0%
7,000
100.0%
______________________________
(1) Middle East includes the United Arab Emirates, Saudi Arabia, Bahrain, Lebanon, Qatar, Oman and Kuwait.
(2) Rest of EMEA includes Africa and the other European markets not separately identified.
(3) Americas includes the United States of America, Canada, Mexico, the Caribbean and Central and South America.
(4) Greater China includes China, Hong Kong and Taiwan.
(5) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia and South Korea.
35
The table below sets forth our unit shipments for the years ended December 31, 2015, 2014 and 2013, with a
breakdown of Sports and GT cars:
(Number of cars)
Sports
V8(1)
V12(2)
Total Sports
GT
V8
V12
Total GT
TOTAL
For the years ended December 31,
2014
2015
2013
3,534
1,169
4,703
2,638
323
2,961
7,664
3,651
1,565
5,216
1,645
394
2,039
7,255
3,944
1,401
5,345
1,219
436
1,655
7,000
______________________________
(1) Includes 458 Speciale and 458 Speciale A for 2015 and 2014 and 458 Speciale for 2013.
(2) Includes LaFerrari starting from the fourth quarter of 2013.
We are also actively engaged in after sales activities driven, among other things, by the objective of preserving and
extending the market value of the cars we sell. We believe our cars’ performance in terms of value preservation after a period
of ownership significantly exceeds that of any other brand in the luxury car segment. High residual value is important to the
primary market because clients, when purchasing our cars, take into account the expected resale value of the car in assessing
the overall cost of ownership. Furthermore, a higher residual value potentially lowers the cost for the owner to switch to a
new model thereby supporting client loyalty and promoting repeat purchases.
Range Models and Special Series
Our products include the range models and special series described below. Our range models currently include three
sports cars, 488 GTB, 488 Spider and F12berlinetta, and three GT cars, California T, FF and GTC4Lusso.
The 488 GTB and the 488 Spider were launched in 2015 to replace the 458 Italia and 458 Spider, which we
produced and sold in 2015 but are now discontinued. In February 2016, we unveiled the new GTC4Lusso, our latest GT car,
which will be replacing the FF starting from the second semester of 2016.
We also offer special series cars based on our range models. These cars are characterized by significant hardware
and software modifications (engine, aerodynamics, and dynamics among others), designed to enhance performance and
drivability when compared to current range models. Our latest special series, unveiled in October 2015, is the F12tdf, which
is based on the F12berlinetta. The special series models 458 Speciale and 458 Speciale A, were produced and sold in 2015
but are now discontinued.
All of our range and special series models feature highly customizable interior and exterior options such as forged
rims, luxury leathers, seat style, panoramic roof, dashboard and steering wheel inserts (see “—Personalization Program and
Tailor Made Program”).
36
488 GTB
The 488 GTB is a two seater berlinetta with a 670 hp mid-rear mounted V8 engine. It was launched in March 2015,
40 years after we unveiled our first ever mid-rear-engined V8 model (the 308 GTB). The model’s exterior and interior design
was developed entirely by Ferrari Design Centre. Its large signature air intake scallop evokes the original 308 GTB and is
divided into two sections by a splitter. Designed for track-level performance, the 488 GTB can also provide enjoyment to
non-professional drivers for everyday use. Accelerating from 0-200 km/h in only 8.3 seconds, its new 3902 cc V8 turbo
engine is at top of the class for power output, torque and response times. In the cabin, the seamless integration of the new
satellite control clusters, angled air vents and instrument panel heightens the sense that the cockpit is completely tailored
around the driver, leading to an extremely sporty yet comfortable ambiance. The 488 GTB has already collected various
accolades including: Autocar (UK) - 2015 ‘Best Driver’s Car’. Sport Auto (Germany) - 2015 Best Brands Awards - “Best
Coupé over €150,000” and Middle East Car of the Year (MECOTY) - ‘Best Supercar 2015’.
488 Spider
Our latest sports car, the 488 Spider, launched in September 2015, is a two seat coupe with a 670 hp mid-rear
mounted V8 engine. Its retractable hard top, which saves approximately 25 kg on a soft top, unfolds and retracts in 14
seconds and can also be raised or lowered while the car is moving. If offers the full experience of sports car driving,
especially on mixed and challenging surfaces, but aims to cater to those who do not need to constantly push their car to the
limit on the track. Styled entirely in-house at Ferrari Design Centre and designed around the retractable hard top concept, the
488 Spider combines the prowess of the 488 GTB coupe’s mid-rear V8 with innovations in aerodynamics, including a new
Ferrari-patented blown spoiler, which allows air to enter an intake at the base of the rear screen and exit via the bumper and
reduces drag. The 488 Spider accelerates from 0 to 100 km/h in 3.0 seconds and from 0 to 200 km/h in 8.7 seconds and offers
37
exceptional dynamic behavior, with close to no turbo lag and response time of just 0.8 seconds. Shipments of the first 488
Spider models started in the fourth quarter of 2015.
F12berlinetta
Launched in 2012, the F12berlinetta is equipped with a 740 hp V12 engine. Built around evolved transaxle
architecture with cutting-edge components and control systems, it sets a new standard in aerodynamics and handling. Though
conceived as a performance automobile, the F12berlinetta is capable of both high speed and long-distance driving. In 2013 it
won the International Engine of the Year Award in both the Best Performance category and Best Engine above 4.0 liters
category. The F12berlinetta is the first model launched since the creation of Ferrari’s in-house styling studio and was awarded
the Compasso d’Oro (Golden Compass) award in 2014, the first Ferrari model to receive this distinction.
F12tdf
Unveiled in October 2015, the F12tdf is our latest special series sports car (based on the F12berlinetta), which pays
tribute to the Tour de France, the legendary endurance road race that Ferrari dominated in the 1950s and 1960s. Designed
entirely in-house at Ferrari Design Centre, the F12tdf is a two seat coupe equipped with a 6262cc 65° V12 engine with a
maximum power of 780 hp (compared to the 740 hp of F12berlinetta) at 8,500 rpm. The F12tdf is the most powerful high
performance Ferrari sports car ever built. Its engine’s sporty response is assured by a maximum torque of 705 Nm (up from
690 Nm) at 6,750 rpm with 80% of such force already available at 2,500 rpm. The F12tdf is equipped with a new Ferrari
innovative rear-wheel steering system, known as the Virtual Short Wheelbase (or Passo Corto Virtuale), which together with
other vehicle dynamic control systems guarantees the steering wheel response times and turn-in of a competition car while
increasing stability at high speed. These factors combine to produce an outstanding acceleration: 0-100 km/h in 2.9 seconds
and 0-200 km/h in 7.9 seconds.
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California T
The California T, which followed the great success of our 2008 California model, is equipped with a 560 hp V8
turbo engine. Launched in 2014, it is the only GT car in the segment to combine a retractable hard top, rear seats and a ski
passage to the spacious trunk. Its new turbocharged V8 engine comes with a variable boost management system. This makes
it the only turbo engine in the world with close to no turbo lag. It also features a revised rear and interior design and a 15
percent reduction in fuel consumption compared to its predecessor. Its lines, penned by Ferrari Design Centre in collaboration
with Pininfarina, were awarded the 2015 Red Dot Design Award. In January 2016, we announced the introduction of the
Handling Speciale Package (“HSP”) on the California T. The HSP, designed to ensure increased performance, handling and
response for a more sporty driving experience, will be presented at the Geneva Motor Show in March 2016.
FF
Launched in 2011, the FF, our first four-wheel drive model, is equipped with a 660 hp V12 engine. Among its main
innovations, the FF features the patented lightweight 4RM system, which transmits torque to all four wheels, thus allowing a
50 percent saving in weight compared to a traditional four-wheel drive system and a lower center of gravity to be maintained.
Part of our GT class, the Pininfarina-styled FF features an elegant two door, four seat sporting layout, and the best cabin and
luggage space and occupant comfort in its class.
39
GTC4Lusso
Unveiled in February 2016, the GTC4Lusso is our latest four-seater four-wheel drive Grand Tourer model. Its name
recalls historic Ferrari models, such as the 330GT 2+2 and the 250 GT Berlinetta Lusso, renowned for their combination of
elegance and performance. The Ferrari Design-penned GTC4Lusso adds a further refinement to the shooting brake coupe
style to produce a streamlined, tapered silhouette. The GTC4Lusso is equipped with a 6262cc 65° V12 engine with a
maximum power of 680 hp, maximum speed of 335/Km/h and acceleration of 0-100 km/h in 3.4 seconds The Ferrari-
patented integrated four wheel drive and steering system allows the driver to effortlessly handle the exceptional torque in a
variety of road conditions. Production of the GTC4Lusso is expected to start in the second quarter of 2016, and shipments are
expected to start in the third quarter of 2016.
Personalization Program and Tailor Made Program
All of our models feature highly customizable interior and exterior options, which together comprise our personalization
catalogue. Some of these options include custom shop wheels, alternate brake caliper colors, parking cameras, magneride dual
mode suspension, sport exhaust systems, different panoramic roof options, various door configurations, steering wheel inserts
and state of the art custom high fidelity sound systems.
With our “Special Equipment” program, we offer clients additional customization choices for their car. Our specialists
are able to guide clients in creating a very customized car through a wide catalog of special items such as different types of rare
leathers, custom stitching, special paints, special carbon fiber, and personalized luggage sets designed to match the car’s interior.
The “Atelier” and “Tailor Made” programs provide two additional levels of personalization in accordance with the
expectations of our clients. Both programs benefit from the Maranello factory environment that inspires clients’ special requests.
In particular, in the “Tailor Made” program a dedicated Ferrari designer assists clients in selecting and applying virtually any
specific design element chosen by the client. Our clients benefit from a large choice of finishes and accessories in an array of
different materials (ranging from cashmere to denim), treatments and hues. To assist our clients’ choice we also offer three
collections inspired by Ferrari’s own tradition: Scuderia (taking its lead from our sporting history), Classica (bringing a modern
twist to the styling cues of our signature GT models) and Inedita (showcasing more experimental and innovation-led
personalization).
Limited Edition Supercars, Fuoriserie and One-Offs
In line with our tradition of supercars starting with the 288GTO in 1984 through to the Enzo, which we launched in
2002, we also produce limited edition supercars. These are the highest expression of Ferrari road car performance at the time
and are often the forerunners of technological innovations for future range models, with innovative features and futuristic design.
Furthermore, in connection with certain events or celebrations, we also launch very limited edition cars (our fuoriserie). These
models can be offered globally, or may be limited to specific local markets. Based on an exotic product concept not available
40
on the standard Ferrari model range, these cars feature completely unique design and specifications compared to our other
models.
LaFerrari
Launched in 2013, LaFerrari is the latest in our line of supercars. Planned for a total production run of just 499 cars,
LaFerrari is our first car with hybrid technology. Alongside its powerful rear-wheel drive layout V12 engine (which generates
800 hp), the hybrid system comprises two electric motors and a special battery consisting of cells developed by the Scuderia
Ferrari where the F138 KERS technology was pioneered. Because the battery generates an additional 163 hp, LaFerrari has a
combined total of 963 hp. LaFerrari’s HY-KERS system is designed to achieve seamless integration and rapid
communication between the V12 and electric motor, thus blending extreme performance with maximum efficiency. Thanks to
the hybrid technology, LaFerrari generates almost 50 percent more horsepower than the Enzo, its predecessor, and 220 hp
more than the F12, our most powerful car to date. LaFerrari is the first Ferrari road car to have been entirely styled in house
by Ferrari Design Centre. It was granted the 2014 Red Dot Design Award and the Design of the Year Award at the 2014
AutoDesign Awards.
F60 America
The F60 America, a V12 open air roadster, celebrates our 60 years in the United States and is available to U.S. clients
only. It combines two of our American clients’ great passions-the modified V12 engine and open-top driving. The exterior is
finished in North American Racing Team livery, with special 60th anniversary prancing horse badges adorning the wheel arches.
Inside, the F60America features bespoke cabin trim, with the driver’s side finished in red and the passenger side in black-a nod
to our historic competition cars. We have pre-sold ten F60s. Production started in the second half of 2015 and the first car was
delivered in January 2016.
One-Offs
Finally, in order to meet the varying needs of our most loyal and discerning clients, we also from time to time
produce one-off models. While based on the chassis and equipped with engines of one of the current range models for
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registration purposes, these cars reflect the exact exterior and interior design and specifications required by the clients, and
are produced as a single, unique car. One of the most iconic models to have emerged from our One-Off program are the SP12
EC and the F12 TRS, a radical two-seat roadster created on the platform of the F12berlinetta in 2014. The program is set to
expand due to increasing demand.
Non-Registered Racing Cars
Based on our Sports and GT cars, we also develop and manufacture special racing cars. These cars are not registered
for use on the road and may only be used on track. Clients and private teams purchase these cars for the purpose of participating
in our non-competitive and competitive client events, such as Corse Clienti (see “—Client Relations”), or competing in other
GT racing competitions, such as the GT2, GT3 and Grand-Am.
In 2015, we produced a total of 26 458 Challenge cars, which are reserved for owners competing in our mono-brand
Ferrari Challenge championship. In 2015, we also produced a total of seven 458 GT cars aimed at drivers participating in
Grand Tourism competitions worldwide. In 2015 we also started the development and production of the new 488 GT cars,
shipments of which will commence at the beginning of 2016.
Since 2005, we have also operated our XX Program, a non-competitive “owner-test drivers” program organized at
some of the best known race tracks in Europe, Asia and North America. Through the XX Program, we test advanced solutions
and technological innovations by providing a select group of clients the opportunity to drive cars enhanced with superior
power and performance characteristics. As part of this program, we have developed the FXX K, based on LaFerrari,
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shipments of which started in the second quarter of 2015: we shipped a total of 20 cars in 2015. Although conceived as a
track-only model, the FXX K was specially styled by Ferrari Design Centre working closely with the aerodynamics
engineers. The FXX K received the Red Dot “Best of the Best” Design Award in 2015, one of the most recognized design
awards in the world.
Sales and After-Sales
Our commercial team, which includes 211 employees at December 31, 2015, is organized in four geographic areas
covering our principal regional end markets: (i) EMEA, which is also responsible for South Africa and India, (ii) Americas,
(iii) Greater China (which includes The People’s Republic of China, Taiwan and Hong Kong), and (iv) Rest of APAC (which
includes the rest of Asia and Oceania).
Dealer network
We sell our cars exclusively through a network of authorized dealers (with the exception of one-offs which we sell
directly to end clients). In our larger markets we act as importer either through wholly owned subsidiaries or, in China, through
a subsidiary partly owned by a local partner, and we sell the cars to dealers for resale to end clients. In smaller markets we
generally sell the cars to a single importer. At December 31, 2015, our network comprised 176 dealers operating 198 points of
sale.
We do not own dealerships and, while our strategy does not contemplate owning dealerships, we retain flexibility to
consider all market requirements from time to time.
We believe that our careful and strict selection of the dealers that sell our cars is a key factor for promoting the integrity
and success of our brand. Our selection criteria are based on the candidates’ reputation, financial solidity and track record. We
are also mindful to select dealers who are able to provide an in-store experience and to market and promote our cars in a manner
intended to preserve the Ferrari brand integrity and to ensure the highest level of client satisfaction.
While dealers may hold multiple franchises, we enjoy a high degree of prominence and level of representation at each
point of sale, where most of the client interface and retail experience is exclusive to Ferrari. Our network and business development
team works directly with individual dealers to ensure various standards are met. All dealers must conform to our rigorous design,
layout and corporate identity guidelines ensuring uniformity of the image and client interface. Through the Ferrari Academy we
provide training to dealers for sales, after sales and technical activities to ensure our dealer network delivers a consistent level
of market leading standards across diverse cultural environments. We train and monitor dealers intensively and we collect and
observe data relating to their profitability and financial health in order to prevent or mitigate any adverse experience for clients
arising from a dealer ceasing to do business or experiencing financial difficulties. Our representatives visit dealerships regularly
to measure compliance with our operating standards. We have the right to terminate dealer relationships in a variety of
circumstances including failure to meet performance or financial standards, or failure to comply with our guidelines.
We provide a suggested retail price or a maximum retail price for all of our cars, but each dealer is free to negotiate
different prices with clients and to provide financing. Although many of our clients in certain markets purchase our cars from
dealers without financing, we provide direct or indirect finance and leasing services to retail clients and to dealers. (See “—
Financial Services”).
The total number of our dealers has been relatively stable in recent years and the number of dealers as well as their
geographical distribution tends to reflect closely the development or expected development of sales volumes to end clients in
our various markets over time. Dealer turnover is relatively low, reflecting the strength of the franchise and our selection processes,
but is sufficient to guarantee an orderly renewal over time and to stimulate the network’s health and performance.
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The chart below sets forth the geographic distribution of our 198 points of sale at December 31, 2015:
Our sales are diversified across our dealer network, with the largest dealer representing approximately 2.4 percent of
sales, and our 15 largest dealers representing 24 percent of sales.
As part of our supply and demand management, we determine allocations based on various metrics including expected
developments in the relevant market, the number of cars sold historically by the various dealers, current order book of dealers
and the average waiting time of the end client in the relevant market. We have recently introduced an enhanced order reporting
system which allows us to collect and monitor information regarding end client orders and assists us in production planning,
production allocation and dealer management.
Parts
We supply parts for current and older models of Ferrari to our authorized dealer network. In addition to substitution
of spare parts during the life of the car, sales are driven by clients’ demand for parts to customize their cars and maximize
performance, particularly after a change in ownership and to compete in the Ferrari Challenge and other client races. We also
supply parts to Ferrari models currently out of production, with stocks dating back to 1995. The stock of parts for even older
models is currently owned and managed by a third party which in some cases also manufactures out-of-stock parts based on our
design. The sale of parts is a profitable component of our product mix and it is expected to benefit from the increase in the
number of Ferrari cars in circulation.
After Sales
Dealers provide after sale services to clients, either at facilities adjacent to showrooms, or in stand-alone service points
across 240 facilities worldwide. After sales activities are very important for our business to ensure the client’s continued enjoyment
of the car and the experience. Therefore, we enforce a strict quality control on our dealers’ services activities and we provide
continued training and support to the dealers’ service personnel. This includes our team of “flying doctors,” Ferrari engineers
who regularly travel to service centers to address difficult technical issues for our clients.
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We also sell certain cars together with a scheduled program of recommended maintenance services in order to ensure
that these cars are maintained to the highest standards to meet our strict requirements for performance and safety.
While we do not have any direct involvement in pre-owned car sales, we seek to support a healthy secondary market
in order to promote the value of our brand, benefit our clients and facilitate sales of new cars. Our dealers provide an inspection
service for clients seeking to sell their car which involves detailed checks on the car and a certification on which the client can
rely, covering, among other things, the authenticity of the car, the conformity to original technical specifications, and the state
of repair. Furthermore, we offer owners of classic Ferrari cars maintenance and restoration services.
Client Relations
Our clients are the backbone of our business together with our brand and our technology. We do not promote our brand
or our cars through general advertising. Our main brand marketing and promotional activities have two principal targets.
Firstly, we target the general public. Our most significant effort in this respect is centered on our racing activities and
the resonance of Scuderia Ferrari (see “—Formula 1 Activities”). We also engage in other brand-promotional activities, including
participation in motor shows and other public events.
Secondly, we target existing and prospective clients, seeking to promote clients’ knowledge of our products, and their
enjoyment of our cars both on road and on track, and to foster long term relationships with our clients, which is key to our
success. In 2015, approximately 59.5 percent of our new cars were sold to Ferrari owners.
By purchasing our cars, clients become part of a select community sharing a primary association with the Ferrari image
and we foster this sense of fellowship with a number of initiatives. We strive to maximize the experience of our clients throughout
their period of interaction with Ferrari - from first contact, through purchasing decision process, to waiting-time management
and ownership.
Client events
We organize a number of client events at Maranello and elsewhere.
Our factory in Maranello is the core of our client engagement strategy and a symbolic hub attracting clients and prospects
worldwide. Upon invitation, clients and prospects can visit the factory, witness some of its workings and experience several
Ferrari core values such as heritage, exclusivity and customization. At the factory, clients have the opportunity to configure their
cars through our personalization and bespoke program (see “—Personalization”).
Clients are also invited to celebrations and other events that we organize in various markets. Some recent examples
include the celebrations of the “Year of the Horse” in China and the Finali Mondiali in Mugello, Italy, which attracted over
50,000 fans during the racing days.
Every new model launch is carefully staged and selected clients and prospects have preferential access to the new car.
The new model presentation begins with the release of images providing a preliminary, often partial view of its design. Clients
are then invited to a preview or world premiere. A public model presentation generally follows at motor shows where clients
are provided access to the Ferrari stand. Further country and regional events follow before delivery of the first cars to dealers.
Driving events
Driving events serve the dual objective of allowing clients to experience at their best the emotion of driving a Ferrari
car, and to foster client loyalty and repeat purchases by creating superior car-usage occasions. Track and sporty driving activities
are mainly targeted to clients with a preference for sports models.
In addition to several track day activities, organized by local sales departments and dealers to allow clients to use their
cars on ad-hoc rented tracks, Ferrari has a central department responsible for professionally organizing races and racing courses,
Corse Clienti. The Corse Clienti activities take place on some of the world’s most famous race tracks, and include both competitive
races, such as the Ferrari Challenge Championships, and non-competitive events, such as with XX and F1 Programme. The XX
and F1 Programme is a highly selective initiative dedicated to a restricted group of clients who own non-homologated GT race
cars and F1 cars previously used in the Formula 1 Championship. Ferrari Challenge and XX/Formula 1 events are sometimes
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accompanied by so-called Ferrari Racing Days. These events are open to non-competing clients and prospects and a wider
audience, and they offer the opportunity for important client gatherings.
In addition to on-track racing, we organize various on-the-road driving events, including both proprietary formats
(Ferrari Cavalcade) or with a branded presence within an established driving event. For example, in the Ferrari Tribute to Mille
Miglia and the Ferrari Tribute to Targa Florio modern Ferrari cars participate in their own regularity rally taking place shortly
before the start of the classic Mille Miglia and Targa Florio races.
We see nurturing our clients’ passion for driving as a key asset for our future commercial success, particularly in markets
where racing traditions are less pronounced. We offer to our prospective and existing clients interested in new Ferrari models
our Esperienza Ferrari initiative, which consists of driving sessions designed to allow participants to experience the pleasure
of driving a Ferrari with a team of highly qualified and skilled Ferrari instructors and technicians professionally trained in high-
performance driving. In addition we also offer on-track driving courses to our clients, catering to different levels of skill and
experience and teaching essential driving skills for high performance cars. In our newer markets, such as China, we also offer
complimentary driving courses on track to any new car buyer.
Ferrari Classiche
Through our “Ferrari Classiche” service, we offer specialized maintenance and restoration services to owners of Ferraris
older than 20 years. We use either original components and spare parts or replicas based on the original specifications and our
restoration service offers our clients the opportunity to reinstate any classic Ferrari to its pristine, original conditions. Each year
Ferrari Classiche carries out maintenance works on approximately 40 cars and performs approximately 10 full restorations.
Ferrari Classiche also issues certificates of authenticity to Ferrari models older than 20 years and to all Ferrari racing
cars, including Formula 1 single-seaters of any age, to attest the authenticity of the cars and of their components. Each certified
car undergoes a thorough technical inspection, at the Ferrari Classiche workshop in Maranello or at certain of our authorized
dealers worldwide, to verify that the car’s chassis, engine, gearbox, transmission, suspension, brakes, wheels, bodywork and
interior are original, or otherwise comply with, the car’s original specifications. If the inspection is successful, our committee
of experts, chaired by Piero Ferrari, our Vice Chairman, grants the certification. In recent years Ferrari Classiche has on average
granted approximately 400 certificates of authenticity per year.
Formula 1 Activities
Our participation in the Formula 1 world championship with Scuderia Ferrari is the core element of our marketing
effort and an important source of technological innovation for the engineering, development and production of our Sports and
GT cars. The Formula 1 world championship is the highest class for single-seat auto races, attracting the best drivers, engineers
and designers. Importantly, with over 420 million television viewers in 2015 (Source: Repucom, 2015), it is the most watched
annual sport series in the world.
Formula 1 cars rely on advanced technology, powerful engines and cutting edge aerodynamics, making them the
most advanced racing vehicles in motorsports. Single seater Formula 1 racing cars can reach speeds of up to 360 km/h (220
mph). While Europe is the sport’s traditional base, Formula 1’s reach has expanded significantly and an increasing number of
Grand Prix are held in non-European countries, such as China, Bahrain, United Arab Emirates, Singapore, Australia, Brazil,
Canada, Japan, Mexico and the United States. This provides participants in the world championship exceptional visibility on
the world stage, as also evidenced by the growing volume of dedicated media to the events, including websites, blogs,
magazines and other publications.
Our Scuderia Ferrari has participated in the Formula 1 world championship since its beginning in 1950, and won our
first Grand Prix in 1951. Since our debut, we have participated continuously in the world championship and we are the oldest
and most successful team in the history of Formula 1, with 224 Grand Prix won. On August 23, 2015, at the Spa-Francorchamps
circuit in Belgium, we competed in our 900th Grand Prix race. In the 64 years of our racing history, we have won 15 drivers
championships and 16 constructors championships, more than any other team. Many of the best known drivers in the sport’s
history have raced in Scuderia Ferrari’s distinctive red single-seaters including Alberto Ascari, Juan-Manuel Fangio, Niki Lauda,
Gilles Villeneuve, Alain Prost and Michael Schumacher. Our main drivers for the 2015 Formula 1 world championship are
Sebastian Vettel, currently in his second season with Scuderia Ferrari and winner of four of the most recent six drivers’
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championship titles, and Kimi Raikkonen, who won our most recent drivers’ championship in 2007. The two drivers have won
a combined 62 Grand Prix races.
Our Formula 1 racing performance has been less successful over the past several years as our most recent driver's
championship and constructors' championship were in 2007 and 2008, respectively. To address this, we have recently enhanced
our focus on Formula 1 activities with the goal of improving racing results and restoring our historical position as the premier
racing team in Formula 1. In addition to increasing our research and development activity to improve car performance, these
efforts have included adding to the racing team in 2015 Sebastian Vettel, one of the most successful drivers in recent years, and
Maurizio Arrivabene as team principal.
Participation in the world championship is regulated by bilateral Team Agreements entered into between Formula One
World Championship Limited (FOWC), the Formula 1’s commercial rights holder, and each competing Formula 1 racing team
(including Ferrari) and by regulations issued by the Federation Internationale de l’Automobile (FIA), the motor sport’s governing
body. The Team Agreements cover the 2013-2020 racing seasons and govern the terms by which the racing teams take their
share of commercial profits. The FIA regulations, regulate how the cars are manufactured and the teams compete in races and
include technical regulations governing aspects ranging from tyres, weight, to ignition, fueling and throttle requirements, and
sporting regulations covering scoring and racing procedures. In return for their participation in Formula 1 races the teams receive
a share of a prize fund based on the profits earned from Formula 1 related commercial activities managed by FOWC, including
in particular television broadcasting royalties and other sources, such as racetrack owners’ fees. Shares in a prize fund equal to
approximately 60 percent of earnings before interest, tax, depreciation and amortization from commercial activities and
broadcasting rights are paid to the teams, largely based on the relative ranking of each team in the championship. We use our
share of these payments to defray part of the costs associated with Scuderia Ferrari, including the costs of designing and producing
a set of single-seaters each year and the costs associated with managing a racing team including earnings of drivers, who generally
are among the most highly paid athletes in the world.
Improvements in technology and, sometimes, changes in regulation, require the design and production of a new racing
car every year. Therefore, we begin designing our single-seaters each year in April in anticipation of the start of the racing season
the following March. While the chassis we build each year are designed to be used throughout the racing season, the majority
of other components mounted on our cars are adjusted from race to race depending on the characteristics of the circuits.
To maximize the performance, efficiency and safety of our single-seaters, while complying with the strict technical
rules and restrictions set out by the FIA, our research and development team plays a key role in the development of our engines
and cars. We often transfer technologies initially developed for racing to our road cars. Examples include traction control systems,
gear shifting steering wheels, and the use and development of carbon fiber, which makes cars lighter and faster. Our road cars
(especially our sports car models) have benefited from the know-how acquired in the wind tunnel by our racing car development
teams, enjoying greater stability as they reach high speeds on and off the track. Our research and development team focused on
combining minimal lap times with maximum efficiency, leading to advances in kinetic energy recovery system, or KERS,
technology. KERS recovers a moving vehicle’s kinetic energy while braking, storing it in a reservoir. Building on our racing
team’s expertise, we developed a hybrid KERS system, for our LaFerrari road car.
The high brand visibility we achieve through success in the world championship has historically enabled us to benefit
from significant sponsorships. Philip Morris International has been Scuderia Ferrari’s official sponsor for over forty years and,
together with Shell (our official sponsor since 1996) and Banco Santander (our official sponsor since 2008) remain our principal
official sponsors. Other official sponsors include TNT (Energy Drink), Alfa Romeo, UPS, Kaspersky lab, Weichai, Hublot and
Claro. Our official suppliers include, among others, Pirelli, Puma, Oakley, IVECO, Mahle, NGK, Magneti Marelli and OMR.
Visibility and placement of a sponsor’s logo reflects the level of sponsorship fees. Historically, our sponsors have sought
advertising opportunities on the chassis of our cars, on clothes worn by our team members and drivers, and in the right to mention
Ferrari in their marketing materials.
We utilize the platform provided by Formula 1 for a number of associated marketing initiatives, such as the hosting of
clients and other key partners in the Scuderia Ferrari paddock to watch Grand Prix races, and our Formula 1 drivers participation
in various promotional activities for our road cars. We often sell older single-seaters to clients for use in amateur racing.
More generally, Formula 1 Racing allows us to promote and market our brand and technology to a global audience
without resorting to traditional advertising activities, therefore preserving the aura of exclusivity around our brand and limiting
the marketing costs that we, as a company operating in the luxury space, would otherwise incur.
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The Mugello Circuit
We acquired the international Mugello circuit in Scarperia, near Florence, in 1988. We have renovated its buildings,
5.2 km race track and other testing and racing facilities, making Mugello, we believe, one of the world’s finest circuits of its
type, with FIA Grade 1 and FIM Grade A certifications, the highest level of homologation for a track- race.
We perform promotional activities in order to rent the Mugello circuit to event organizers who regularly host leading
car and motorbike races at the circuit, including the MotoGP World Championship since 1992. Many Formula 1 constructors
have also used our Mugello circuit for their development tests.
In 2011, the Mugello circuit won its fifth “Best Grand Prix” award, the highest honor given by the motor sport world
for MotoGP organizers. The Mugello circuit is the only track race to have received this award five times.
Brand Activities
Ferrari is one of the world’s leading luxury brands. We engage in brand development and protection activities
through licensing contracts with selected partners, retail activities through a chain of franchised or directly managed Ferrari
stores, licensed theme park and the development of a line of products sold exclusively in our Ferrari stores and on our
website www.store.ferrari.com.
Licensing and Theme Park
We enter into license agreements with a number of licensees for the design, development and production of Ferrari
branded products.
We carefully select our licensees through a rigorous process and we contractually seek to ensure that our brand and
intellectual property are protected and that the products which will eventually bear our brand are of adequate quality, appearance
and market positioning.
The table below sets forth our current licensing mix.
Category
Accessories
Consumer electronics
Sportswear
Theme Parks
Toys
Video games
Watches
Other (including collectors' models, kid apparels, and accessories,
stationary and credit cards)
Principal Licensees
o Oakley (sunglasses)
o Tod’s (shoes and leather goods)
o Various
o Puma
o Ferrari World, Abu Dhabi
o Ferrariland, Port Aventura
o Bburago (play-set)
o Lego (Lego toys)
o Electronic Arts
o Microsoft
o Sony Polyphony
o Ubisoft
o Hublot (co-branded high-luxury watches)
o Movado (Scuderia Ferrari Watches)
o Various
A significant portion of our revenues from licensing activities consists of royalties we receive in connection with Ferrari World,
our theme park in Abu Dhabi (11 percent of royalties generated by licensing activities). Ferrari World opened on Yas Island -
on the North East side of Abu Dhabi’s mainland in 2010 and it is currently the only operating Ferrari theme park. Ferrari World’s
iconic sleek red roof is directly inspired by the classic double curve side profile of the Ferrari GT body, spanning 200,000 square
meters and carrying the largest Ferrari logo ever created. Ferrari World Abu Dhabi offers an all-around Ferrari experience to
children and adults alike. The attractions include futuristic 4D rides such as the child-friendly Speed of Magic and the world’s
fastest roller-coaster which reaches speeds of 240 km/h and simulates the breathtaking adrenaline rush of a Ferrari single-seater.
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In the G-Force experience, visitors are launched 62 meters upwards and over the roof of the Park before being pulled back to
earth.
In 2014 we reached an agreement with PortAventura Entertainment S.A.U. to open Ferrari’s first European theme park
at the PortAventura resort near Barcelona in Spain. PortAventura Entertainment S.A.U. has announced a planned investment of
€100 million and the park is expected to open in 2017. In the long-term we aim to open one theme park in each of the main
geographic areas where we operate, including North America and Asia.
Retail and E-Commerce
Through our network of Ferrari stores (franchised or directly managed), we offer a wide range of Ferrari branded
products, including a line of products exclusively sold in our Ferrari stores and on our website. All Ferrari branded product we
sell in our stores and on our website are either manufactured by our licensees, or directly sourced from our selected network of
suppliers.
At December 31, 2015, there were a total of 37 retail Ferrari stores, including those in Maranello, Milan, Macau, New
York, Las Vegas, Miami and Los Angeles (United States), Johannesburg (South Africa), Dubai and Abu Dhabi (UAE), including
25 franchised stores and 12 stores owned and operated by us.
We require all franchisees to operate Ferrari stores according to our standards. Stores are designed, decorated, furnished
and stocked according to our directions and specifications.
We use multiple criteria to select our franchisees, including know-how, financial condition, sales network and
market access. Generally, we require that applicants meet certain minimum working capital requirements and have the
requisite business facilities and resources. We typically enter into a standard franchising agreement with our franchisees.
Pursuant to this agreement, the franchisee is authorized to sell our products exclusively at a suggested retail price. In
exchange, we provide them with our products, the benefit of our marketing platform and association with our corporate
identity.
.
In recent years, our website has proved to be an increasingly valuable sales channel, with over 400.000 registered users
in more than 190 countries and translations in seven languages.
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Design, Development and Manufacturing
Design
The design of our cars is an essential and distinctive component of our products and our brand. Our designers, modelers
and engineers work together to create car bodies that incorporate the most innovative aerodynamic solutions in the sleek and
powerful lines typical of our cars. The interiors of our cars seek to balance functionality, aesthetics and comfort. Our cockpits
are designed to maximize the driving experience, more sporty or more comfortable, depending on the model through an ergonomic
layout of all main controls clustered on the steering wheel, and our cars’ interiors boast elegant and sophisticated trims and
details. A guiding principle of our design is that each new model represents a clear departure from prior models and introduces
new and distinctive aesthetic elements, delivering constant innovation within the furrow of tradition.
For the design of our cars we have relied historically on our highly successful collaboration with the Italian car
design firm Pininfarina. During over 60 years of collaboration with Pininfarina, our cars have been granted several renowned
design awards, including: 458 Italia (Best in Show assigned by Autoweek magazine, 2009, Car of the Year and Supercar of
the Year assigned by BBC Top Gear Magazine, 2009 and “Chi È” Cars of the Year 2010), California (Best Buy and
Recommended Awards 2009 assigned by Chinese magazine Auto World Magazine and Oriental Award for Best Design,
2009), Enzo (“Best in Show” 2002-Paris Motor Show 2002).
In 2010 we established the Ferrari Design Centre, our in-house design department, in order to improve our control
over the design process and ensure long-term continuity of the Ferrari style. Its mission is to define and evolve the stylistic
direction of the marque, imprinting all new products with a modern stamp, according to a futuristic, uncompromised vision.
All concepts and works from Ferrari Design Centre are marked with our logo “Ferrari Design” (see “—Intellectual
Property”). Ferrari Design Centre handles all aspects of automotive styling for the Ferrari road cars product range, including
the styling of all external bodywork and components, series production models for the GT and Sports car models, special
editions, limited editions, one-off models and concept cars. Ferrari Design also includes a colour & trim team which handles
the choice of materials and finishes for both exterior and interior trim and, in addition, is responsible for the Tailor Made
program in conjunction with the product marketing department. Ferrari Design is also regularly involved with the styling and
conceptual definition of Ferrari branded products produced by our licensees (see “—Brand Activities”).
The department is organized as an integrated automotive design studio, employing a total workforce of approximately
70 people (both full-time workers and external contractors) including designers, 3D surfacing operators, physical modelers and
graphic artists. It operates a modeling studio fully equipped with 5-axis milling machines with the capacity to develop various
full-scale models (interior and exterior) in parallel.
Ferrari Design Centre entirely designed our most recent cars, such as the GTC4Lusso, F12tdf, the 488 Spider, the 488
GTB, the LaFerrari and the FXX K, while it designed other current range models, such as the F12berlinetta, in collaboration
with Pininfarina. Although our collaboration with Pininfarina is still active with regard to certain special models and fuoriserie
(see “—Sports and GT Cars—Limited Edition Supercars, Fuoriserie and One-Offs”), we expect that the design and development
of most of our future models will be carried out primarily by our Ferrari Design Centre.
During the 5 years of activity of the Ferrari Design Centre, our cars have been granted several renowned design awards.
Among the recent ones are the following:
• FXX K: Red Dot: “Best of the Best” award for top design quality and ground-breaking design (2015).
• F12berlinetta: “Compasso d’Oro 2014” (ADI); “Car of the Year 2014” (Robb Report); “Supercar of the Year
2013” (GQ); “Best Coupé 2013” (L’Automobile Magazine); “Design Award, 2012” (Auto Bild); “Goldenes Lenkrad
2012” (Auto Bild); “Supercar of the Year 2012” (Top Gear).
•
LaFerrari: Red Dot design award for high design quality (2015); “Design Award” (AutoScout24 -11th Internet
Auto Awards); “Design of the Year 2014” (AutoDesign & Styling Awards); “Best Super Sportscar 2014” (Auto
Zeitung); “2014 James May’s Car of the Year” (Top Gear); “Best Cars 2015 -Coupé Category” (Motor Presse
Iberia).
• California T: Red Dot design award for high design quality (2015); “The Most Beautiful Automobile Award
2014” (Car & Driver China); “Most Stylish Car 2014” (Schweizer Illustrierte).
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•
458 Speciale: “Supercar of the Year 2013” (Top Gear -UK); “2014 Car of the Year” (Evo -UK); “James May’s Car
of the Year 2013” (Top Gear -UK); “Supercar of the Year 2013” (Evo Middle East); “2014 Britain’s Best Driver’s
Car” (Autocar -UK).
•
458 Speciale A: “Convertible of the Year 2014” (Top Gear UK).
Product Development
Our product development process is highly structured with the aim of allowing us to respond quickly to market demand
and technological breakthroughs and to maintain our position at the top end of the market for car performance and luxury. Our
technology team is comprised of approximately 590 engineers and technicians at December 31, 2015. All of our cars are designed
and engineered in Italy, at our factories in Maranello and Modena (Carrozzeria Scaglietti).
Our product development includes innovation programs, components programs and car programs, with regular
management reviews and detailed cycle milestones. Our components programs are intended to ensure technological innovation
and support the development of future models rather than to create an “off the shelf” catalog of available components.
All our cars are designed and manufactured based on two highly modular architectures incorporating front and mid-
rear engines respectively. This allows for flexible manufacturing at low volumes and easy adaptation to different models with
limited additional investment. Our architectures utilize a number of common structures, reducing tooling investment for new
model production. When developing a new platform, we focus on innovation, leveraging on our collaboration with the select
research centers and universities, and flexibility, allowing us to respond efficiently to potentially varied market demand. The
flexibility of our platforms enables us to introduce our highly innovative contents on a wide range of models while, at the same
time, reducing the fixed costs connected to the use of multiple platforms.
Consistent with our mission to develop cutting edge sports and GT cars, our product development efforts continually
focus on improving core components, such as the powertrain, car dynamics, and the use of materials such as special aluminum
alloys and carbon fiber (see “—Design, Development and Manufacturing—Production Process”).
The expertise we acquired in these fields has recently guided our efforts to combine improved performance with
reductions in CO2 emissions. In recent years, calls for CO2 emissions reductions have come from regulatory initiatives as well
as market demand. LaFerrari is an example of such efforts, and we believe it shows our ability to apply our core mechanical
know-how to new and expanding fields such as hybrid technology.
The design and development process for a new model currently takes approximately 40 months, depending on the
modifications (approximately 33 months for M models), measured from the beginning of the development project to the start
of production. We believe this fast development is made possible by our dedicated and concentrated development team as well
as by the clarity and focus of the product marketing objectives. Our product marketing team is integrally involved in the entire
development process, beginning with the initial product brief and, thereafter, through systematic interaction.
The cadence of production launches is designed to maintain our product portfolio’s leading position in the industry
segment and optimize the length of the model lifecycle relative to demand, while limiting research and development spend to
maximize its productivity.
Generally, we plan for a four to five year life cycle for our range models. After four to five years, we typically launch
a “modified” or “M” model based on the same platform but featuring significant aesthetic updates and technological
improvements. This is, for example, the case of the California T, launched in 2014, which replaced and updated the earlier
California, featuring new sheet-metal, new interior, a revised chassis and a new turbocharged powertrain. Typically, four years
after the launch of the M-model, we start production of an entirely new model based on an completely new or overhauled
platform. Therefore, the cumulative life cycle of each of our models is approximately eight to nine years, and typically we have
launched one new model every year while keeping four or more range models in production at any time. The actual life cycles
of our models vary depending on various factors including market response. Special series have different, typically shorter,
lifecycles. We usually utilize additional platforms for production of our supercars, such as LaFerrari.
51
We also run specific programs for our most critical components, independently from the development of new car models.
This is the case of our engines, which we manufacture according to cycle milestones not necessarily connected with the release
of a new car model. Since 2011, we have also been producing the new F160 3.0-litre V6 Turbo engine exclusively for Maserati.
In 2015, we produced approximately 21,500 F160 engines for Maserati. (See “—Manufacturing of Engines for Maserati”).
Many of our components, such as those relating to transmission, power steering, navigation systems and the instrument cluster,
are co-designed by us and our suppliers based on our specifications.
Our research and development operations constantly focus on innovating our cars’ concept and package, on powertrains
design, car architecture and components development. (See “—Research and Development”).
Procurement
We source a variety of components (including transmissions, brakes, driving-safety systems, navigation systems,
mechanical, electrical and electronic, plastic components as well as castings and tires), raw materials (aluminum, and precious
metals including palladium and rhodium), supplies, utilities, logistics and other services from numerous suppliers.
Our focus on excellence, in terms of luxury and performance, require us to select suppliers and partners that are able
to meet our high standards. For the sourcing of certain key components with highly technological specifications, we have
developed strongly synergic relationships with some of our suppliers, which we consider “key strategic innovation partners.”
We currently rely on 14 key strategic innovation partners, including GETRAG and Brembo for the supply of transmissions and
brakes respectively. We have also developed strong relationships with other industrial partners for bodyworks and chassis
manufacturing and for powertrain and transmissions, among other things. Pursuant to our make-or-buy strategy, we generally
retain production in-house whenever we have an interest in preserving or developing technological know-how or when we
believe that outsourcing would impair the efficiency and flexibility of our production process. Therefore, we continue to invest
in the skills and processes required for low-volume production of components that we believe improve product quality.
For the year ended December 31, 2015, the purchases from our five largest suppliers by value accounted for
approximately 25 percent of total procurement costs, and no supplier accounted for more than ten percent of our total
procurement costs.
We recognize the contribution of our suppliers to our success through various initiatives, including Podio Ferrari and
Key Innovation Partners, events devoted to Ferrari’s suppliers who displayed particular excellence or innovative flair.
Production Process
Our production facilities are located in Maranello and in Modena, Italy (see “—Properties”). Our production processes
include supply chain management, production and distribution logistics.
Notwithstanding the low volumes of cars produced, our production process requires a great variety of inputs -over
40,000 product identifier codes sourced from approximately 1,000 total suppliers -entailing a complex supply chain management
to ensure continuity of production. Our stock of supplies is warehoused in Ubersetto, near Maranello, and its management is
outsourced to the logistics company Kuehne & Nagel.
Most of the manufacturing process takes place in Maranello, including aluminum alloy casting in our foundry, engine
construction, mechanical machining, painting, car assembly, and bench testing; at our second plant in Modena (Carrozzeria
Scaglietti) we manufacture our cars’ aluminum bodyworks and chassis. All parts and components not produced in house at
Ferrari are sourced from our panel of suppliers (see “—Procurement”).
In recent years we have made significant investments in our manufacturing facilities, and between 2002 and 2012 the
plants housing our production processes were entirely renovated or rebuilt. We plan our investment activities based on an
estimated plant useful life of approximately 20 years. Equipment, on the other hand, may require substantial investment with
the introduction of new models, particularly in the case of shell tools for the foundry, tools for machining, feature tools for body
welding and special mounting equipment for the assembly.
At December 31, 2015, our production processes employed over 1,250 engineers, technicians and other personnel
(approximately 1,150 engineering and production employees and approximately 100 white collar employees). Furthermore, in
2015 we employed additional 232 temporary engineers and production employees. We have a flexible production organization,
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which allows us to adjust production capacity to accommodate our expected production requirements. This is primarily due to
the low volume of cars we produce per year and to our highly skilled and flexible employee base that can be deployed across
various production areas. In addition, we can adjust our make-or-buy strategies to address fluctuations in the level of demand
on our internal production resources. Our facilities can accommodate a meaningful increase in production compared to current
output with the increase of weekend shifts or, to address special peaks in demand, temporary employees. Production could be
increased even further with the introduction of a second shift on car assembly lines compared to the single shift currently operated.
We constantly work to increase the utilization rate and reduce the internal scrap rate and we closely monitor an index of our
production efficiency. In the past few years we have reduced our cycle time by approximately three percent per year. We are
also committed to improve the reliability of our cars, reduce their defects, and optimize their finishing.
Unlike most low volume car producers, we operate our own foundry and machining department producing several of
the main components of our engines, such as engine blocks, cylinders heads and crankshafts. We believe this accelerates product
development and results in components that meet our specifications more closely.
Engine Production
Our engines are produced according to a vertical structure, from the casting of aluminum in our foundry up to the final
assembly and testing of the engine. Several of the main components of our engines, such as blocks and cylinders heads are
produced at our foundry in Maranello. For this purpose, we use a special aluminum alloy that includes seven percent silicon and
a trace of iron, which improves mechanical integrity, and our own shell and sand casting molds. Once all components are ready,
engines are assembled, on different lines for our V8 engines, V12 engines and for the V6 engines we manufacture for Maserati.
The assembly process is a combination of automatic and manual operations. Since start of the assembly process, each engine is
identified with a barcode and operations are recorded electronically. Every engine then goes to the test benches where its power
and torque output are measured to ensure it delivers the expected performance. In 2015 we produced an average of approximately
147 engines per day, including approximately seven V12, 43 V8 (including two V8 turbo and 13 V8 aspirated for Maserati) and
97 V6 engines for Maserati (see “—Manufacturing of Engines for Maserati”).
Chassis and Body Assembly
In parallel with the assembly of our engines, we prepare our body-shells and chassis at our panel shop Carrozzeria
Scaglietti in Modena. The main components of body-shells and chassis are not manufactured internally but are sourced from
manufacturers such as Officine Meccaniche Rezzatesi for chassis and Fontana Group for bodies. At Carrozzeria Scaglietti we
have two different production lines dedicated to the assembly of our V8 and V12 cars. We carefully check the alignment of the
various parts -most importantly the engine cover and the wings -with electronic templates and gauges. Our highly trained
specialists also perform surface controls to the aluminum panels and work any imperfections on it by either filing or panel
beating.
Painting
Our paint shop was inaugurated in 2004 with what we believe to be state-of-the-art technology. When transferred to
our paint shop, all body-shells are cleaned with automatic pressure blowers (to avoid the electrostatic effect) and carefully
brushed with emu feathers (because of their natural anti-electrostatic properties) to clean off any dirt particles or impurities. The
bodies are then mounted on a loading bay, immersed in the cataphoresis tanks and subsequently transferred to a fixing gas fired
oven at 140 degrees. Primers are then applied and fixed at 190 degrees until the completely grey body-shell is ready for painting.
Painting is automated for the larger surfaces, while it is done by hand for some other localized areas. The whole car is painted
at the same time to ensure color harmony. The bodies are finally polished with lacquer to fix the paint and give the bodies their
final finish.
Assembly Line and Final Checks
The final assembly of our cars takes place in our new body-shop built in 2008. Assembly of our eight and 12 cylinder
cars are carried out separately. For each model, the initial assembly operations take place simultaneously on different lines and
sections to maximize efficiency.
53
Personalization and Road Tests
The final stage of our car production is the fitting of all bespoke interiors, components and special equipment options
that our clients choose as part of our personalization program (see “—Sports and GT Cars—Range Models and Special Series
—Personalization Program and Tailor Made Program”). After the personalization phase, every car completes a 40-kilometer
road test-drive.
Finishing and Cleaning
After the road test all cars go to the finishing department. There, we thoroughly clean interior and exterior, check the
whole car, polish and finish the bodies to give them their final appearance.
Manufacturing of Engines for Maserati
We have been producing engines for Maserati since 2003. The V8 engines that we historically produced and continue
to produce for Maserati are variants of Ferrari families of engines and are mounted on Maserati’s highest performing models,
such as the Quattroporte (turbo engines), the Granturismo and the Grancabrio (aspirated engines). All of the V8 engines that we
sell to Maserati are manufactured and assembled according to the same production processes we adopt for the V8s equipped on
our cars (see “—Production Process”). In 2015, we sold approximately 379 V8 turbo engines and approximately 2,921 V8
aspirated engines to Maserati. In 2011 we began producing a family of engines exclusively for Maserati, namely the F160 3.0-
litre V6 Turbo engines, in much larger production volumes. Our arrangement with Maserati is currently governed by a framework
agreement entered into in December 2014. Pursuant to this agreement, the initial production run consists of up to 178,000 engines
in aggregate through 2020. Based on our discussions with Maserati, we expect the production run to increase to up to 260,000
engines in aggregate through 2023 to cater to Maserati’s planned expanded model range and sales. Volumes and pricing are
adjusted from time to time to reflect Maserati’s changing requirements. Under the framework agreement, Maserati is required
to compensate us for certain costs we may incur, such as penalties from our suppliers, if there is a shortfall in the annual volume
of engines actually purchased by Maserati in that year. In 2015, we sold approximately 21,500 V6 engines to Maserati in four
different versions, ranging from 330 hp to 410 hp.
In order to meet the V6 volumes and specifications requirements, we built a dedicated assembly facility at Maranello
with a much higher level of industrialization compared to production of our V12 and V8 engines. Due to the larger volumes and
product specifications, our make-or-buy strategy for the production of V6 F160 engines also differs from the one applicable to
Ferrari engines. The vast majority of the engine components are sourced externally from our panel of suppliers (see “—
Procurement”) and then assembled in Maranello on our highly automatized V6 assembly line.
From the sale of engines to Maserati, we recorded net revenues of approximately €177 million in 2015.
Financial Services
We offer retail client financing for the purchase of our cars through Ferrari Financial Services S.p.A. (“FFS”). FFS,
together with its subsidiaries, operates in our major markets, including UK, Germany and the United States. We also offer dealer
financing through FFS in the United States. Until December 2014 we offered dealer financing in UK, Germany, Belgium and
Switzerland and until May 2015 in Japan.
Through FFS, we offer a range of flexible, bespoke financial and ancillary services to clients (both new and
recurrent) interested in purchasing a wide range of cars, from our current product range of Sports and GT Cars, to older pre-
owned models, to classic models, special series and competition cars, including retired Formula 1 single-seaters. FFS also
provides special financing arrangements to a selected group of our most valuable and loyal customers.
In December 2014, we entered into a partnership with FGA Capital S.p.A. (now FCA Bank S.p.A. or FCAB), a
50/50 joint venture between FCA Italy S.p.A. and Crédit Agricole Consumer Finance S.A. FCAB operates in 16 European
countries and we believe that our partnership with FCAB will enable us to extend the reach of our dealer and retail financing
services to a larger number of markets in which we operate. Our relationship with FCAB is not expected to change following
the Separation.
54
In May 2015, we entered into a partnership with JACCS Co., Ltd to promote sales volume growth in the Japanese
market with a full scale customer and dealer finance arrangement.
In light of our recent partnership with FCAB and JACCS Co., Ltd, and also due to recent changes to the banking
and financial laws in Italy, we requested and obtained the cancellation of FFS from the list of regulated financial
intermediaries. We are working on expanding our partnerships in additional markets.
At December 31, 2015, FFS’s portfolio of financial receivables was €1,171 million in aggregate, including €668
million in the Americas (57 percent of total) and €503 million in EMEA (43 percent of total).
Research and Development
We engage in research and development activities aimed at improving the design, performance, safety, efficiency
and reliability of our cars.
Our research and development center is in Maranello and, at December 31, 2015, included approximately 320
employees who are part of our broader technology team. Our personnel support product development efforts and have
expertise in a number of disciplines, including mechanical, electrical, materials, computer science and chemical engineering.
We capitalized development costs of €154 million in 2015, €145 million in 2014, and €93 million in 2013.
Research and development costs expensed during each period mainly include the research and development incurred
for the Formula 1 racing activities to support the development of the sports and GT car models and prototypes, which are
expensed as incurred. The following table summarizes our research and development expenditures in the years ended
December 31, 2015, 2014 and 2013:
Amortization of capitalized development costs
Research and development costs expensed during the period
Total research and development costs
2015
For the years ended December 31,
2014
(€ thousand)
2013
114,856
446,726
561,582
125,497
415,336
540,833
120,444
358,850
479,294
We transfer technologies developed by our racing team to our Sports and GT models across all core vehicle
development areas, such as aerodynamics, powertrain, and car dynamics. To that end, we also transfer research and
development personnel between the Formula 1 team and the sports and GT cars team, and the two teams regularly join forces
for ad-hoc projects in areas such as combustion engine, new materials or computational fluid dynamics for aerodynamic
performance.
Vehicle Concept
Achieving the most efficient combination of lightweight materials and optimal weight distribution gives our cars
their superior longitudinal and lateral driving dynamics. We employ a range of technologies to reduce car weight. For our
range models we are currently developing an aluminum lightweight chassis and body, which is lighter than a carbon fiber
chassis. For LaFerrari we are currently using state of the art carbon fiber technologies, which we developed in conjunction
with our Formula 1 research and development team. We are currently developing a new architecture, aimed at further
reducing car weight and increasing performance, and thus improving stiffness and reducing noise, vibration and harshness
(NVH), among other things.
Powertrain
The powertrain is a core area of our research and development. As with other research and development areas,
powertrain research benefits from a constant exchange between the Formula 1 team and designers of our Sports and GT cars.
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Engines
Our V12 engines’ output ranges from 660 hp (in the FF), to 780 hp (in the F12tdf), and up to 800 hp (in the
LaFerrari). This range highlights our versatility in developing V12 aspirated engines, as there are no other carmakers which
currently boast such specific high power ratios. With the new California T and the 488 GTB, we transitioned from aspirated
V8 engines to turbo charged engines. This allowed us to increase specific engine power more than 20 percent, while reducing
emissions by up to eight percent. All Ferrari turbo engines are designed to have the same throttle response delivered by a
naturally aspirated car. To achieve this goal we are investing in cutting edge turbo charging technologies (such as aluminum-
titanium-alloys and ball bearings), with our strategic partner IHI.
To further improve efficiency with respect to emissions and performance we continuously improve on our engines,
researching new materials with higher specifications for friction, thermal and mechanical stress. We are also investing in
technologies that improve the combustion process, with research focusing on high pressure injection and tumble flaps.
Transmissions
Our 7-shift double clutch gearbox is a core element of Ferrari powertrains. The architecture of the gearbox,
combined with the shifting technologies developed by Ferrari, allow for one of the fastest and most performance orientated
shifts on the market. The 488 GTB demonstrates the potential of this gearbox, reaching the 4th gear limiter in full
acceleration in six seconds.
Vehicle dynamics
Suspension, braking systems and tires are key elements of vehicle dynamics. Our vehicle suspensions allow for a
very rigid and direct force transmission which increases the response of the car, and we combine those with
magnetorheological ride dampers. We continuously collaborate with our strategic partners in our effort to increase damper
dynamics.
All Ferraris are equipped with carbon ceramic brakes, renowned for superior breaking performance. With the 458
Speciale we introduced a new generation of carbon ceramic brakes with even higher breaking performance and reduced
weight. We plan on equipping future vehicles with these brakes.
Aerodynamics
We are constantly seeking to improve the aerodynamics of our models, working specifically on drag resistance and
downforce. The new 488 GTB has an aerodynamic efficiency of 1.67 due to its specially designed front and its rear spoiler.
We also use passive and active spoiler systems. Thanks to our collaboration with the racing team, who assist with calculations
and testing, we believe we are able to develop innovative solutions in shorter timeframes.
Hybrid technology
With LaFerrari we developed not only a supercar with cutting edge engine performance and driving dynamics, but
also a highly sophisticated hybrid car. In conjunction with our partner Magneti Marelli, we developed a compact electric
power unit (120KW) and DC/DC charger. The battery (120KW/2,3KWH) was developed in conjunction with our Formula 1
team, who has extensive know-how in high performance powertrains.
The LaFerrari project greatly expanded our knowledge of powertrain electrification (and its implications on
performance and efficiency). We actively work to improve performance and efficiency of electric powertrains and to extend
the range of electric components in our cars (e.g. electric power steering).
Intellectual Property
We own a number of design and utility patents and registered designs. We expect the number to grow as we continue
to pursue technological innovations and to develop our design and brand activities.
56
We file patent applications in Europe, and around the world (including in the United States) to protect technology
and improvements considered important to our business. No single patent is material to our business as a whole.
We also own a number of registered trademarks, designs and patents, including approximately 430 trademarks (word
or figurative), registered in several countries and across a number classes. In particular, we ensure that the maximum level of
protection is given to the following iconic trademarks, for which we filed a total of 4,789 registrations in 129 countries, in
most of the main classes for goods and services:
•
•
“Ferrari” (word)
“Ferrari” logotype:
•
the “Prancing Horse” (figurative):
•
the trademark (figurative):
•
the racing shield (figurative):
57
•
Scuderia Ferrari (word and figurative):
Our Sports and GT car models and Formula 1 single-seater models are also registered as trademarks (and logotypes)
and we also register their designs and domain names.
The protection of intellectual property is also increasingly important in connection with our design and brand
activities. Therefore, we adopt and follow internal processes and procedures to ensure both that all necessary protection is
given to our intellectual property rights and that no third party rights are infringed by us. In addition, we are particularly
active in seeking to limit any counterfeiting activities regarding our Ferrari branded products around the world. To reach this
goal we closely monitor trademark applications and domain names worldwide, actively interact with national and local
authorities and customs and avail ourselves of a network of experienced outside counsels.
Properties
Our principal manufacturing facility is located in Maranello (Modena), Italy. It has an aggregate covered area of
approximately 630 thousand square meters. Our Maranello plant hosts our corporate offices and most of the facilities we operate
for the design, development and production of our Sports and GT cars, as well as of our Formula 1 single-seaters. (See “—
Design, Development and Manufacturing—Production Process”). Except for some leased technical equipment, we own all of
our facilities and equipment in Maranello.
Between 2003 and 2008 most of the buildings in Maranello, including the paint shop building and the production
building, were either rebuilt or renovated. In 2015 we have completed construction of the new building entirely dedicated to
our Formula 1 team and racing activities, as well as the new wind tunnel 4WD.
Adjacent to the plant is our approximately 3,000 meter Fiorano track, built in 1972 and remodeled in 1996. The track
also houses the Formula 1 logistics offices. Additional facilities in Maranello include a product development center, a hospitality
area and the Ferrari museum.
We also own the Mugello racing circuit in Scarperia, near Florence, which we rent to racing events organizers. (See
“—Formula 1 Activities—The Mugello Circuit”).
We own a second plant in Modena, named Carrozzeria Scaglietti. At this approximately 26 thousand square meter plant
we manufacture aluminum bodyworks and chassis for our regular range, special series and prototype cars.
The total carrying value of our property, plant and equipment at December 31, 2015 was €626,130 thousand.
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Employees
Human capital is a crucial factor in our success, in terms of building on our position as a global leader in the luxury
performance car sector and creating long-term, sustainable value. To recognize excellence, encourage professional development
and create equal opportunities, we adopt a number of initiatives, such as our Graduates Project, aimed at identifying and recruiting
graduates from the world’s best universities; our appraisal system to assess our manager, professional and white collar employees,
through performance management metrics; our talent management and succession planning; training and skill-building
initiatives; employee satisfaction and engagement surveys, including our so-called “Pit Stop” and “Pole Position” programs;
and flexible work arrangements, commuting programs and dedicated wellness programs, including our Formula Uomo program
and Formula Benessere program (which offer medical assistance to employees and their families).
At December 31, 2015, we had a total of 2,998 employees, including 87 executives. Of these, approximately 2,834
were based at our Maranello facility, and approximately 164 in offices around the world, mostly in North America and China.
White collar employees
Italy
Rest of the world
Blue collar employees
Italy
Rest of the world
Executives
Total
For the years ended December 31,
2015
2014
2013
1,304
1,143
161
1,607
1,604
3
87
2,998
1,177
1,045
132
1,603
1,600
3
78
2,858
1,088
968
120
1,619
1,615
4
80
2,787
The following table shows the average number of employees of the Group for the years ended December 31, 2015,
2014 and 2013:
Average number of employees
For the years ended December 31,
2015
2014
2013
2,954
2,843
2,774
All employees of the Group worked outside the Netherlands for the years presented. We do not expect a significant
change in the number of our employees during 2016.
Personnel costs are as follows:
Salaries and wages
Pension and social contributions costs
Total personnel costs
For the years ended December 31,
2015
2014
(€ thousand)
2013
230,643
54,304
284,947
220,814
58,866
279,680
195,049
51,158
246,207
The increase in employees in recent periods principally related to a strengthening of technical competencies, particularly
within our Formula 1 activities. Furthermore, in 2012, we began producing engines for the new Maserati cars. The planned
production volumes required adoption of innovative work organization mechanisms, in terms of number of shifts and hours,
thus enabling effective management of a varying production demand. The new activity required the addition of 232 workers,
who are currently on agency contracts. These workers are not included in the total Ferrari employee head count referenced above.
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Approximately 12% percent of the employees at our Maranello and Modena facilities were trade union members in
2015. Our employees’ principal trade unions are Federazione Italiana Metalmeccanici (FIM-CISL), Federazione Italiana
Sindacati Metalmeccanici e Industrie Collegate (FISMIC), Unione Italiana Lavoratori Metalmeccanici (UILM-UIL) and
Federazione Impiegati Operai Metallurgici (FIOM-CGIL).
All of our employees are covered by collective bargaining agreements. Our managers are represented by the Italian
trade union, Federmanager, and are subject to a collective bargaining agreement renewed on July 30, 2014 and in effect
through December 31, 2015 which we expect will be renewed in the coming months. Our other employees are covered by the
collective bargaining agreement entered into by FCA and FIM-CISL, UILM-IUL, FISMIC, UGL and Associazione Quadri e
Capi FIAT, which has been recently renewed until December 31, 2018, and by a Ferrari Enterprise Bargaining Agreement
signed by us and FIM, UILM and FISMIC which expired on December 31, 2015, which we expect will be renewed in the
coming months. This collective bargaining contract provides, among other things, for the payment of bonuses linked to
performance up to a maximum of approximately €5,060 gross per year payable in three installments.
In addition to the collective agreements, we have individually negotiated agreements with several of our managers
and other key employees providing for long-term incentives, exclusivity and non-compete provisions.
Regulatory Matters
We manufacture and sell our cars around the world and our operations are therefore subject to a variety of laws and
regulations relating to environmental, health and safety and other matters. These laws regulate our cars, including their emissions,
fuel consumption and safety, as well as our manufacturing facilities and operations, setting strict requirements on emissions,
treatment and disposal of waste, water and hazardous materials and prohibitions on environmental contamination. Our vehicles,
together with the engines that power them, must comply with extensive regional, national and local laws and regulations, and
industry self-regulations (including those that regulate vehicle safety). However, we currently benefit from certain regulatory
exemptions, because we qualify as a SVM or similar designation in most of the jurisdictions where we sell cars (including the
United States). As outlined below, these exemptions provide a range of benefits, from less stringent emissions caps and compliance
date extensions, to exemptions from zero emission vehicle production requirements.
We are in substantial compliance with the relevant regulatory requirements affecting our facilities and products around
the world. We constantly monitor such requirements and adjust our operations as necessary to remain in compliance.
Greenhouse gas/CO2/fuel economy legislation
Current European legislation limits fleet average greenhouse gas emissions for new passenger cars to 130 grams of
CO2 per kilometer. This target, implemented gradually between 2012 and 2015, calls for 65 percent of the manufacturer’s newly
registered cars to comply with the 130 grams limit in 2012, rising to 75 percent in 2013, 80 percent in 2014, and 100 percent
from 2015 onwards.
Due to our SVM status we benefit from a derogation from the 130 grams per kilometer emissions requirement available
to small volume and niche manufacturers. Pursuant to that derogation, we are instead required to meet yearly CO2 emissions
targets, beginning in 2012, reaching a target level of 290 grams per kilometer in 2016 for our fleet of EU-registered vehicles
that year. Ferrari has recently introduced two models featuring smaller engines which are expected to contribute to our efforts
to meet the target.
In 2014, the European Union set new 2020 emissions targets, calling for 95 percent of a manufacturer’s full fleet of
new passenger cars registered in the EU in 2020 to average 95 grams of CO2 per kilometer, rising to 100 percent of the fleet in
2021. The 2014 regulation extends the small volume and niche manufacturers derogation. Therefore, in December 2015, we
submitted our proposed CO2 emissions target for the 2017-2021 period to the E.U. Commission for approval.
In the United States, both Corporate Average Fuel Economy (CAFE) standards and greenhouse gas emissions standards
are imposed on manufacturers of passenger cars. Because the control of fuel economy is closely correlated with the control of
GHG emissions, the United States Environmental Protection Agency (EPA) and the National Highway Traffic Safety
Administration (NHTSA) have sought to harmonize fuel economy regulations with the regulation of GHG vehicle emissions
(primarily CO2). These agencies have set the federal standards for passenger cars and light trucks to meet an estimated combined
average fuel economy (CAFE) level that is equivalent to 35.5 miles per U.S. gallon for 2016 model year vehicles (250 grams
CO2 per mile). In August 2012, these agencies extended this program to cars and light trucks for model years 2017 through
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2025, targeting an estimated combined average emissions level of 163 grams per mile in 2025, which is equivalent to 54.5 miles
per gallon.
However, for model years 2017-2025, the EPA allows a SVM, defined as manufacturers with less than 5,000 yearly
unit sales in the United States, to petition for a less stringent standard. Based on our operational independence from FCA, the
EPA has granted us SVM status. We have therefore petitioned the EPA for alternative standards for the 2017-2021 model years,
which are aligned to our technical and economic capabilities. We expect to receive feedback on this proposal by mid 2016.
We intend to petition NHTSA for recognition as an independent manufacturer of less than 10,000 vehicles globally, in
order to be eligible for alternate CAFE standards, as permitted under the CAFE program. If our petition qualifying for alternate
CAFE standards is successful, NHTSA will determine the appropriate level of CAFE applicable to us for future model years.
In February 2010, the California Air Resources Board (CARB) enacted regulations that deem manufacturers of vehicles
for model years 2012-2016 which are in compliance with the EPA greenhouse gas emissions regulations to also be in compliance
with California’s greenhouse gas emission regulations. In November 2012, the CARB extended these rules to include model
years 2017-2025.
While Europe and the United States lead the implementation of these emissions programs, other jurisdictions typically
follow on with adoption of similar regulations within a few years thereafter. In China, for example, Stage III fuel consumption
regulations target a national average fuel consumption of 6.9L/100km by 2015 and Stage IV targets a national average fuel
consumption of 5.0L/100km by 2021. In response to severe air quality issues in Beijing and other major Chinese cities, the
Chinese government also intends to adopt more stringent emissions standards beginning in 2016.
Exhaust and evaporative emissions requirements
In 2007, the European Union adopted the latest in a series of more-stringent standards for emissions of other air pollutants
from passenger and light commercial vehicles, such as nitrogen oxides, carbon monoxide, hydrocarbons and particulates. These
standards were phased in from September 2009 (Euro 5) and September 2014 (Euro 6) for passenger cars.
In April 2014, the “Tier 3” Motor Vehicle Emission and Fuel Standards issued by the EPA were finalized. With Tier 3,
the EPA has established more stringent vehicle emission standards, requiring significant reductions in both tailpipe and
evaporative emissions, including nitrogen oxides, volatile organic compounds, carbon monoxide and particulate matter.
Beginning in 2017, the emission standards will be phased in and the requirement on fuel producers to reduce sulfur in gasoline
will be effective. The new standards are intended to harmonize with California’s standards for 2015-2025 model years (so called
“LEV3”) and will be implemented over the same timeframe as the U.S. federal CAFE and greenhouse gas emissions standards
for cars and light trucks described above. Because of our status as an operationally independent SVM, Ferrari obtained a longer,
more flexible schedule for compliance with these standards under both the EPA and California Program.
In addition, California is moving forward with other stringent emission regulations for vehicles, including the Zero
Emission Vehicle regulation (ZEV). The ZEV regulation requires manufacturers to increase their sales of zero emissions vehicles
year on year, up to an industry average of approximately 15 percent of vehicles sold in the state by 2025. Because we currently
sell fewer than 4,500 units in California, we are exempt from these requirements.
Additional stringency of evaporative emissions also requires more-advanced materials and joints solutions to eliminate
fuel evaporative losses, all for much longer warranty periods (up to 150,000 miles in the United States).
To comply with current and future environmental rules related to both fuel economy and pollutant emissions, we may
have to incur substantial capital expenditure and research and development expenditure to upgrade products and manufacturing
facilities, which would have an impact on our cost of production and results of operation.
Vehicle safety
Vehicles sold in Europe are subject to vehicle safety regulations established by the E.U. or by individual Member States.
In 2009, the E.U. established a simplified framework for vehicle safety, repealing more than 50 directives and replacing them
with a single regulation aimed at incorporating relevant United Nations standards. This incorporation process began in 2012.
With respect to regulations on advanced safety systems, the E.U. now requires new model cars from 2011 on to have electronic
stability control systems and tire pressure monitoring systems (beginning in 2012). Also introduced were regulations on low-
61
rolling resistance tires. From April 2009, the criteria for whole vehicle type approval were extended to cover all new road
vehicles, to be phased in over five years depending on the vehicle category.
Under U.S. federal law, all vehicles sold in the United States must comply with Federal Motor Vehicle Safety Standards
(FMVSS) promulgated by NHTSA. Manufacturers need to provide certification that all vehicles are in compliance with those
standards. In addition, if a vehicle contains a defect that is related to motor vehicle safety or does not comply with an applicable
FMVSS, the manufacturer must notify vehicle owners and provide a remedy at no cost to the consumer. Moreover, the
Transportation Recall Enhancement, Accountability, and Documentation Act requires manufacturers to report certain information
related to claims and lawsuits involving fatalities and injuries in the United States if alleged to be caused by their vehicles, and
other information related to client complaints, warranty claims, and field reports in the United States, as well as information
about fatalities and recalls outside the United States Several new or amended FMVSSs will take effect during the next few years
in certain instances under phase-in schedules that require only a portion of a manufacturer’s fleet to comply in the early years
of the phase-in.These include an amendment to the side impact protection requirements that added several new tests and
performance requirements (FMVSS No. 214), an amendment to roof crush resistance requirements (FMVSS No. 216), and a
new rule for ejection mitigation requirements (FMVSS No. 226). Because of our status as SVM, Ferrari is required to be compliant
at the end of the phase-in period. Under the Transportation Recall Enhancement, Accountability, and Documentation Act
(TREAD), we must log certain information, including incidents involving death or injury, with NHTSA. In 2014 we paid a $3.5
million civil penalty to NHTSA for reporting failures related to the period 2011-2014 and for failure to comply with early warning
reporting requirements in connection with three fatalities. We have upgraded our procedures for compliance.
On July 14, 2015, we issued a safety recall report with the NHTSA, after being notified by Takata Corporation that
certain driver’s side airbags manufactured by Takata, installed in certain model year 2015 cars, were defective. The recall
impacts 814 of our model year 2015 cars sold in the United States and also relates to up to an additional 1,600 model year
2015 cars in other regions. The defect, caused by pre-assembled airbags supplied by Takata, relates to insufficient gluing of
the airbag cover and a possible incorrect installation of the driver’s airbag cushion. The replacement component has been
produced with improved gluing methods as well as improved airbag assembly measures. We have implemented a recall to
remedy this safety defect.
In December 2015 we issued two safety calls reports with NHTSA, after learning that certain low pressure fuel
lines manufactured and supplied by Dytech - Dynamic Flued Technologies S.p.A. were defective. The recall impacts 185
California T vehicles and 119 488GTB vehicles sold in the United States and 65 California T Vehicles and 199 488GTB
vehicles sold in other regions. The defect was due to an improper coating treatment made by the supplier Dytech on the
metallic part of the fuel pipe where it connects to the fuel pump. The replacement component has been produced with the
proper coating. We have implemented a separate recall on each model to remedy this safety defect.
NHTSA recently published guidelines for driver distraction, and the associated compliance costs may be
substantial. These guidelines focus, among other things, on the need to modify the design of car devices and other driver
interfaces to minimize driver distraction. Compliance with these new requirements, as well as other possible future NHTSA
requirements, is likely to be difficult and/or costly. We are in the process of evaluating these guidelines and determining what
steps, if any, we will need to take to comply with the new requirements.
62
Operating Results
Results of Operations
Consolidated Results of Operations – 2015 compared to 2014 and 2014 compared to 2013
The following is a discussion of the results of operations for the year ended December 31, 2015 as compared to the
year ended December 31, 2014, and for the year ended December 31, 2014 as compared to the year ended December 31, 2013.
The discussion of certain line items (cost of sales, selling, general and administrative costs and research and development costs)
includes a presentation of such line items as a percentage of net revenues for the respective periods presented, to facilitate year-
over-year comparisons.
For the years ended December 31,
Percentage
of net
revenues
2014
Percentage
of net
revenues
2013
Percentage
of net
revenues
2015
(€ million, except percentages)
2,854
1,499
339
562
10
444
(10)
434
144
290
100.0 %
52.5 %
11.9 %
19.7 %
0.4 %
15.6 %
(0.4)%
15.2 %
5.0 %
10.2 %
2,762
1,506
300
541
26
389
9
398
133
265
100.0 %
54.5 %
10.9 %
19.6 %
0.9 %
14.1%
0.3 %
14.4%
4.8 %
9.6%
2,335
1,235
260
479
(3)
364
2
366
120
246
100.0 %
52.9 %
11.1 %
20.5 %
(0.1)%
15.6 %
0.1 %
15.7 %
5.1 %
10.5 %
Net revenues
Cost of sales
Selling, general and administrative costs
Research and development costs
Other expenses/(income), net
EBIT
Net financial income/(expenses)
Profit before taxes
Income tax expense
Net profit
Net Revenues
The following table sets forth an analysis of our net revenues for the periods indicated:
For the years ended December 31,
Increase/(Decrease)
2015
Percentage
of net
revenues
2014
Percentage
of net
revenues
2013
Percentage
of net
revenues
2015 vs. 2014
2014 vs. 2013
(€ million, except percentages)
Cars and spare parts (1)
Engines (2)
Sponsorship, commercial
and brand (3)
Other (4)
Total net revenues
2,080
219
441
114
72.9 %
7.7 %
15.5 %
3.9 %
1,944
311
417
90
70.4 %
11.3 %
15.1 %
3.3 %
1,655
188
412
80
2,854
100.0%
2,762
100.0%
2,335
70.9 %
8.1 %
17.6 %
3.4 %
100.0%
136
(92)
7.0 %
(29.6)%
24
24
92
5.8 %
26.7 %
3.3 %
289
123
5
10
427
17.5 %
65.4 %
1.2 %
12.5 %
18.3%
______________________________
(1)
Includes the net revenues generated from shipments of our cars, including any personalization revenue generated on these cars and sales of spare
parts.
Includes the net revenues generated from the sale of engines to Maserati for use in their cars, and the revenues generated from the rental of engines to
other Formula 1 racing teams.
Includes the net revenues earned by our Formula 1 racing team through sponsorship agreements and our share of the Formula 1 World Championship
commercial revenues and net revenues generated through the Ferrari brand, including merchandising, licensing and royalty income.
(2)
(3)
(4) Primarily includes interest income generated by the Ferrari Financial Services group and net revenues from the management of the racetrack.
63
2015 compared to 2014
Net revenues for 2015 were €2,854 million, an increase of €92 million, or 3.3 percent (a decrease of 2.9 percent on a
constant currency basis), from €2,762 million for 2014.
The increase in net revenues was attributable to the combination of (i) a €136 million increase in net revenues generated
from cars and spare parts, (ii) a €24 million increase in sponsorship, commercial and brand net revenues, and (iii) a €24 million
increase in other net revenues, partially offset by (iv) a €92 million decrease in net revenues generated from engines.
Cars and spare parts
Net revenues generated from cars and spare parts were €2,080 million for 2015, an increase of €136 million, or 7.0
percent, from €1,944 million for 2014. The increase was attributable to an €83 million increase in net revenues from supercars
and limited edition cars and a €53 million increase in net revenues from range and special series cars and spare parts.
The €83 million increase in net revenues from supercars and limited edition cars was primarily driven by an increase
in shipments of the LaFerrari, as well as shipments of the FXX K, which commenced in the second quarter of 2015. In particular,
the increase was composed of (i) a €1 17 million increase in Americas net revenues and (ii) a €12 million increase in Rest of
APAC net revenues, partially offset by (iii) a €32 million decrease in EMEA net revenues and (iv) a €14 million decrease in
Greater China net revenues.
The €53 million increase in net revenues from range and special series cars and spare parts was primarily driven by
higher shipments of V8 models, partially offset by an unfavorable shift in product mix. In particular, shipments of V8 models
increased by 16.5 percent, principally related to the California T, the 458 Speciale A, the 488 GTB and the 488 Spider, partially
offset by decreases in shipments of the 458 Italia and the 458 Spider, which were phased out during 2015. The proportion of
V12 models shipped decreased from 24.3 percent in 2014 to 16.3 percent in 2015, primarily driven by decreases in shipments
of the FF and the F12berlinetta, reflecting our typical model lifecycle as these models have been on the market since 2011 and
2012, respectively, and clients tend to focus on more recently introduced cars.
The €53 million increase in net revenues from range and special series cars and spare parts was composed of (i) a €1 11
million increase in Americas net revenues and (ii) a €37 million increase in Rest of APAC net revenues, partially offset by (iii)
a €77 million decrease in EMEA net revenues and (iv) a €18 million decrease in Greater China net revenues.
The €1 11 million increase in Americas net revenues was primarily attributable to (i) favorable volume impact of €14
million, primarily driven by the California T, 458 Speciale A and 488 GTB, partially offset by a decrease in shipments of the
458 Italia and 458 Spider, and (ii) favorable foreign exchange impact of €107 million primarily attributable to the weakening
of the Euro against the U.S. Dollar, partially offset by (iii) unfavorable product mix impact, attributable to a decrease in the
proportion of shipments represented by V12 models, from 21.0 percent in 2014 to 17.2 percent in 2015, and (iv) a decrease of
€4 million of net revenues from our personalization program and the sale of spare parts.
The €37 million increase in Rest of APAC net revenues was attributable to a €23 million increase in Japan net
revenues, a €12 million increase in Australia net revenues and a €2 million increase in other Rest of APAC net revenues. The
€23 million increase in Japan net revenues and €12 million increase in Australia net revenues were mainly driven by
increases in shipments of 30.2 percent and 47.5 percent, respectively. Such increases in shipments were mainly related to the
California T and 458 Speciale A, partially offset by a decrease in shipments of the 458 Spider.
The €77 million decrease in EMEA net revenues was primarily attributable to unfavorable mix, mainly due to the
trend towards a higher proportion of V8 models compared to V12 models, unfavorable foreign currency exchange impact and
the performance of certain markets within the region. In particular, Germany experienced a slowdown and the Middle East
was impacted by a decrease in shipments of 9.6 percent.
The €18 million decrease in Greater China net revenues was primarily attributable to a €32 million decrease in
mainland China net revenues, partially offset by a €1 1 million increase in Hong Kong net revenues and a €3 million increase
in Taiwan net revenues. The decrease of €32 million in mainland China net revenues was primarily attributable to (i)
unfavorable volume impact of €36 million due to a decrease in shipments of 20.9 percent, driven by the 458 Italia, 458 Spider
and F12berlinetta, not yet compensated by the 488 GTB, which arrived in this market in Q3 2015, (ii) unfavorable product
64
mix impact of €19 million and (iii) a €1 million decrease in net revenues generated by our personalization program, partially
offset by (iv) favorable foreign exchange impact of €24 million.
Engines
Net revenues generated from engines were €219 million for 2015, a decrease of €92 million, or 29.6 percent, from €31 1
million for 2014. The €92 million decrease was mainly attributable to an €81 million decrease in net revenues generated from
the sale of engines to Maserati, driven by a 31.3 percent decrease in the volume of engines shipped in accordance with planned
orders received from Maserati, and an €1 1 million decrease in net revenues generated from the rental of power units to other
Formula 1 teams.
Sponsorship, commercial and brand
Net revenues generated from sponsorship, commercial agreements and brand management activities were €441 million
for 2015, an increase of €24 million, or 5.8 percent, from €417 million for 2014. The €24 million increase in sponsorship,
commercial and brand net revenues was mainly driven by sponsorship and commercial net revenues, primarily related to our
participation in the Formula 1 World Championship, which benefited from the impact of the weakening of the Euro against the
U.S. Dollar and brand net revenues.
Other
Other net revenues were €1 14 million for 2015, an increase of €24 million, or 26.7 percent, from €90 million for 2014.
The €24 million increase in other net revenues was primarily driven by other supporting activities, including an increase in
interest income due to the increase in our financial services portfolio.
2014 compared to 2013
Net revenues for 2014 were €2,762 million, an increase of €427 million, or 18.3 percent 3.3 percent (18.9 percent on
a constant currency basis), from €2,335 million for 2013.
The increase in net revenues was attributable to the combination of (i) a €289 million increase in net revenues generated
from the cars and spare parts, (ii) a €123 million increase in net revenues generated from engines, (iii) a €10 million increase
in other net revenues and (iv) a €5 million increase in sponsorship, commercial and brand net revenues.
Cars and spare parts
Net revenues generated from cars and spare parts were €1,944 million for 2014, an increase of €289 million, or 17.5
percent, from €1,655 million for 2013. The increase was attributable to a €255 million increase in net revenues from supercars
and limited edition cars, primarily attributable to shipments of LaFerrari, and a €34 million increase in net revenues from range
and special series cars and spare parts.
Shipments of LaFerrari commenced in November 2013, accordingly, our net revenues for 2014 benefited from a full
year of shipments. Shipments of LaFerrari impacted net revenues positively, as these cars are generally sold at a higher price
point (in excess of €1 million per unit) than other cars in our product offering, reflecting the advanced technological and design
content as well as the exclusive nature of the offering.
Of the €255 million increase in net revenues generated from supercars and limited edition cars, €147 million was
attributable to EMEA shipments, €56 million was attributable to Americas shipments, €36 million was attributable to China
shipments and €16 million was attributable to Rest of APAC shipments.
The €34 million increase in net revenues from range and special series cars and spare parts was primarily driven by an
increase in net revenues generated by the sale of spare parts and our personalization program, which were partially offset by
unfavorable change in mix. In particular, our mix was impacted by an increase in the proportion of V8 models shipped from
74.0 percent of total shipments for 2013, to 75.7 percent for 2014, primarily driven by increased shipments of the 458 VS and
California T. Shipments of range and special series cars were substantially unchanged.
65
The €34 million increase in net revenues from range and special series cars and spare parts was composed of (i) a €34
million increase in Americas net revenues, (ii) a €24 million increase in Greater China net revenues and (iii) a €17 million
increase in Rest of APAC net revenues, which were partially offset by (iv) a €41 million decrease in EMEA net revenues.
The €34 million increase in Americas net revenues was attributable to (i) an increase of €19 million mainly driven by
our personalization program and the sale of spare parts, (ii) positive mix impact of €10 million and (iii) positive volume impact
of €5 million. The positive mix impact was attributable to an increase in the proportion of total shipments represented by V12
models, from 16.2 percent in 2013 to 20.9 percent in 2014, primarily driven by the F12berlinetta, which also supported the
positive volume impact of €5 million.
The €24 million increase in Greater China net revenues was mainly attributable to a €29 million increase in mainland
China net revenues, driven by (i) positive volume impact of €48 million, which was partially offset by (ii) a decrease in net
revenues generated by our personalization program and the sale of spare parts of €12 million, and (iii) unfavorable mix impact
of €7 million. In particular, the 32.9 percent increase in volumes, which benefited net revenues by €48 million, was primarily
supported by the California T and the 458 VS, shipments of which commenced in mainland China in late 2013 and 2014,
respectively. Increases in shipments of these V8 models resulted in the unfavorable mix impact of €7 million, as the proportion
of total shipments represented by V8 models increased from 70.8 percent in 2013 to 76.3 percent in 2014.
The €17 million increase in Rest of APAC net revenues was mainly driven by increases in Japan and Australia net
revenues, both of which were primarily driven by an increase in shipments. In particular, Japan net revenues were impacted
positively by an 18.4 percent increase in shipments, largely due to the 458 VS. The increase in Australia net revenues was
supported by an increase in shipments, driven by our new Australian dealer which commenced operations in the fourth quarter
of 2013.
The €41 million decrease in EMEA net revenues was primarily attributable to a decrease in shipments. In particular,
Germany net revenues decreased by €17 million driven by an 11.6 percent decrease in shipments, Switzerland net revenues
decreased by €9 million driven by a 12.6 percent decrease in shipments and Rest of EMEA net revenues decreased by €21 million
driven by a 12.4 percent decrease in shipments. Such decreases were partially offset by increases in UK net revenues, mainly
attributable to favorable foreign currency fluctuations and Middle East net revenues, which was supported by an increase in
shipments.
Engines
Net revenues generated from engines were €31 1 million for 2014, an increase of €123 million, or 65.4 percent, from
€188 million for 2013. The €123 million increase was mainly attributable to an increase in the volume of engines sold to Maserati,
and to a lesser extent, driven by an increase in net revenues generated by the rental of engines to other Formula 1 racing teams.
In particular, the significant increase in volumes of Maserati engines was due to the start of production of new generation V6
engines in the fourth quarter of 2013. Accordingly, net revenues for 2014 benefited from a full year of production. The increase
in net revenues generated from the rental of engines to other Formula 1 racing teams was driven by higher pricing. During 2013,
we rented V8 engines to other Formula 1 racing teams. During 2014, the World Championship regulations introduced the use
of the V6 turbo engines including energy recovery systems. Furthermore, during 2014, we not only rented the engine but also
the gearbox (which are collectively referred to as the “power unit”) to other Formula 1 racing teams. Accordingly the increased
pricing reflected the increased technology of the engines and the additional hardware rented as compared to 2013.
Sponsorship, commercial and brand
Net revenues generated from sponsorship, commercial agreements and brand management activities were €417 million
for 2014, an increase of €5 million, or 1.2 percent, from €412 million for 2013. The €5 million increase in sponsorship, commercial
and brand net revenues was mainly driven by new sponsorship contracts entered into by our Formula 1 racing team during 2014.
Other
Other net revenues were €90 million for 2014, an increase of €10 million, or 12.5 percent, from €80 million for 2013.
The €10 million increase in other net revenues was primarily driven by an increase in interest income generated by our financial
services activities due to increased volumes.
66
Cost of sales
For the years ended December 31,
Increase/(Decrease)
Percentage
of net
revenues
2014
Percentage
of net
revenues
2013
Percentage
of net
revenues
2015
(€ million, except percentages)
2015 vs. 2014
2014 vs. 2013
Cost of sales
1,499
52.5%
1,506
54.5%
1,235
52.9%
(7)
(0.5)%
271
21.9%
2015 compared to 2014
Cost of sales for 2015 was €1,499 million, a decrease of €7 million, or 0.5 percent, from €1,506 million for 2014. As
a percentage of net revenues, cost of sales was 52.5 percent in 2015 compared to 54.5 percent in 2014.
The decrease in cost of sales was attributable to a combination of (i) decreased costs of €79 million related to lower
Maserati engine shipments and (ii) a decrease in amortization and depreciation of €6 million, partially offset by (iii) increased
costs of €54 million related to increased volumes and different product mix, (iv) increased costs related to other supporting
activities of €15 million, and (v) unfavorable foreign currency exchange impact of €9 million.
The €79 million decrease in cost of sales related to the sale of engines to Maserati was driven by the 31.3 percent
decrease volume of engines shipped in accordance with planned orders received from Maserati. The decrease in amortization
and depreciation of €6 million was primarily related to the phase out of several 458 models in 2015, not fully compensated by
amortization and depreciation of the new models 488 GTB and 488 Spider. The increased costs of €54 million related to increased
volumes and product mix was primarily driven by an increase of 5.5% in shipments of range and special series cars, as well as
higher sales of the LaFerrari and the FXX K, which have higher costs per unit than other cars in our product portfolio. Such
effect was only partially offset by an increase in the proportion of V8 models shipped, which in general have a lower cost of
sales per unit.
The decrease in cost of sales as a percentage of net revenues was driven by the decrease in Maserati engines shipments
as Maserati engines generate lower margins than the sale of cars and spare parts. Therefore, a decrease in Maserati engines
shipments results in a positive impact on our margins.
2014 compared to 2013
Cost of sales for 2014 was €1,506 million, an increase of €271 million, or 21.9 percent, from €1,235 million for 2013.
As a percentage of net revenues, cost of sales was 54.5 percent in 2014 compared to 52.9 percent in 2013.
The increase in cost of sales was due to the combination of (i) increased costs of €156 million related to mix, (ii)
increased costs of €83 million primarily related to Maserati engine volumes, (iii) increases in other cost of sales of €33 million,
(iv) increases in depreciation and amortization of €14 million and (v) increased costs of €7 million driven by an increase in car
shipments and the personalization program, the effects of which were partially offset by (vi) a decrease of €19 million driven
by technical and commercial savings achieved and (vii) a decrease due to favorable currency translation impact of €3 million.
The increase in cost related to mix was attributable to the launch and production of the LaFerrari, which has a higher
cost per unit than other cars in the Ferrari portfolio, while the increased costs related to the sale of engines to Maserati, was
driven by higher volumes. The €33 million increase in other cost of sales was mainly driven by an increase in cost of sales related
to Formula 1 activities, and in particular related to the increased technology of the engines and the additional hardware rented
to other Formula 1 teams. The €14 million increases in depreciation and amortization was mainly related to the investments
associated with recent product launches including the LaFerrari, the California T and the 458 VS. The decrease in cost of sales
of €19 million driven by technical and commercial savings achieved was principally attributable to direct cost savings achieved
as a result of management efforts in negotiations with suppliers.
The increase in cost of sales as a percentage of net revenues was attributable to the increase in Maserati engine volumes
and an increase in cost of sales related to our Formula 1 activities. The sale of engines to Maserati generates lower profit margins
than the sale of cars. The increase in costs related to our Formula 1 activities was mainly driven by the rental of engine units to
other Formula 1 racing teams, due to the increased technological content of the engine units rented.
67
Selling, general and administrative costs
For the years ended December 31,
Increase/(Decrease)
Percentage
of net
revenues
2014
Percentage
of net
revenues
2013
Percentage
of net
revenues
2015
(€ million, except percentages)
2015 vs. 2014
2014 vs. 2013
339
11.9%
300
10.9%
260
11.1%
39
13.0%
40
15.4%
Selling, general and
administrative costs
2015 compared to 2014
Selling, general and administrative costs for 2015 were €339 million, an increase of €39 million, or 13.0 percent, from
€300 million for 2014. As a percentage of net revenues, selling, general and administrative costs were 11.9 percent in 2015
compared to 10.9 percent in 2014.
In particular, the increase in selling, general and administrative costs was mainly attributable to (i) a one-time extra
bonus paid to employees for €19 million in connection with the initial public offering and in recognition of financial performance,
(ii) advisory costs incurred in relation to the initial public offering amounting to €16 million, (iii) unfavorable foreign currency
exchange impact of €8 million, (iv) an increase in the allowance for doubtful accounts of €7 million, primarily related to a
commercial partner of the Formula 1 activities, and (v) higher costs of €4 million related to launches of the 488 GTB and 488
Spider, corporate events and directly operated stores, partially offset by (vi) the impact of expenses related to the resignation of
the former Chairman of €15 million that were incurred in 2014.
2014 compared to 2013
Selling, general and administrative costs for 2014 were €300 million, an increase of €40 million, or 15.4 percent, from
€260 million for 2013. As a percentage of net revenues, selling, general and administrative costs were 10.9 percent in 2014
compared to 11.1 percent for 2013.
In particular, the increase in selling, general and administrative costs was attributable to the combined effect of (i) €15
million related to the compensation costs associated with the resignation of our former Chairman, (ii) €8 million related to an
increase in marketing and event expenses, primarily driven by a series of special events in celebration of our 60 years in the
United States, (iii) €6 million related to an increase in personnel costs and (iv) €1 1 million related to an increase in legal provisions
resulting from ongoing disputes with a former commercial partner previously responsible for operating certain Ferrari stores in
Italy. In particular, the increase in personnel costs was in part driven by a 2.5 percent increase in average headcount from 2,774
for 2013, to 2,843 for 2014, due to an increase in our Italian workforce, to support the growth of the Group’s operations, and,
to a lesser extent, attributable to increases in personnel expenses incurred by Ferrari Financial Services AG.
Research and development costs
For the years ended December 31,
Increase/(Decrease)
Percentage
of net
revenues
2014
Percentage
of net
revenues
2013
Percentage
of net
revenues
2015
(€ million, except percentages)
2015 vs. 2014
2014 vs. 2013
Amortization of capitalized
development costs
Research and development
costs expensed during the year
Research and development
costs
115
447
562
4.0 %
15.7 %
19.7%
126
415
541
4.6 %
15.0 %
19.6%
120
359
479
5.1 %
(11)
(8.7)%
15.4 %
20.5%
32
21
7.7 %
3.9 %
6
56
62
5.0 %
15.6 %
12.9%
68
2015 compared to 2014
Research and development costs for 2015 were €562 million, an increase of €21 million, or 3.9 percent, from €541
million for 2014. As a percentage of net revenues, research and development costs were 19.7 percent in 2015 compared to 19.6
percent in 2014.
The increase in research and development costs was attributable to an increase of 32 million in research and development
costs expensed during the year, partially offset by a decrease of €1 1 million in amortization of capitalized development costs.
The €32 million increase in research and development costs expensed during the year was primarily driven by Formula
1 activities and in particular, the Group's efforts related to power unit projects, and to a lesser extent, research and development
costs on sports and GT cars.
The €1 1 million decrease in amortization of capitalized development costs was primarily due to the completion of
amortization of capitalized development costs related to the 458 Italia and 458 Spider, which were phased out in 2015.
2014 compared to 2013
Research and development costs for 2014 were €541 million, an increase of €62 million, or 12.9 percent, from €479
million for 2013. As a percentage of net revenues, research and development costs was 19.6 percent in 2014 compared to 20.5
percent in 2013.
The increase in research and development costs was attributable to an increase in investment in research and development
expensed during the year of €56 million and an increase of €6 million in amortization of capitalized development costs.
The total €56 million increase in research and development costs expensed during the year was driven by the Group’s
efforts related to the continued development of the Formula 1 car, which included initiatives to maximize the performance,
efficiency and safety of the car.
The increase in amortization of capitalized development costs was largely attributable to new product launches. In
particular, in April 2014, we started production of the California T and in July 2013, the 458 Spider, triggering the commencement
of amortization of the development costs capitalized in relation to these models.
Other expenses/(income), net
For the years ended December 31,
Increase/(Decrease)
2015
2014
2013
2015 vs. 2014
2014 vs. 2013
(€ million, except percentages)
Other expenses/(income), net
10
26
(3)
(16)
(61.5)%
29
n.m.
2015 compared to 2014
Other expenses/(income), net for 2015 amounted to net other expenses of €10 million, compared to net other expenses
of €26 million million for 2014.
For 2015, other expenses/(income), net included other expenses of €32 million, mainly composed of €13 million
related to provisions, €7 million related to indirect taxes and €12 million related to miscellaneous expenses, partially of
other income of €22 million, including a €6 million gain on disposal of assets and liabilities related to investment properties,
€6 million related to the release of provisions previously recorded in other expenses, €3 million related to rental income and
€7 million related to miscellaneous income.
fset by
For 2014, other expenses/(income), net included other expenses of €39 million, mainly composed of €21 million related
to provisions, €6 million related to indirect taxes, and €12 million in miscellaneous expenses, partially offset by other income
69
of €13 million, including €4 million related to the release of provisions previously recorded in other expenses, €3 million related
to rental income and €6 million related to miscellaneous income.
The provisions recognized in other expenses in 2015 include €9 million related to legal proceedings and disputes
and €4 million related to other risks, primarily related to disputes with suppliers, employees and other parties. The provisions
recognized within other expenses in 2014 include €13 million related to legal proceedings and disputes and €8 million
attributable to other risks, primarily related to disputes with suppliers, employees and other parties. The most significant
accruals to the provision for legal proceedings and disputes recognized in 2014 related to litigation with a former distributor.
2014 compared to 2013
Other expenses/(income), net for 2014 amounted to net other expenses of €26 million, compared to net other income
of €3 million for 2013.
For 2014, other expenses/(income), net included other expenses of €39 million, mainly composed of €21 million related
to provisions, €6 million related to indirect taxes, and €12 million in miscellaneous expenses, partially offset by other income
of €13 million, including €4 million related to the release of provisions previously recorded in other expenses, €3 million related
to rental income and €6 million related to miscellaneous income.
The provisions recognized within other expenses include €13 million related to legal proceedings and disputes and €8
million attributable to other risks, primarily related to disputes with suppliers, employees and other parties. The most significant
accruals to the provision for legal proceedings and disputes recognized in 2014 related to litigation with a former distributor.
For 2013, other expenses/(income), net included other expenses of €15 million, mainly composed of €3 million related
to provisions, €5 million related to indirect taxes and €7 million in miscellaneous expenses, which was more than offset by other
income of €18 million, primarily attributable to €6 million related to the release of provisions for legal proceedings and disputes
and other risks provisions, €3 million related to rental income and €9 million related to miscellaneous income.
EBIT
For the years ended December 31,
Increase/(Decrease)
2015
Percentage of net
revenues
2014
Percentage of net
revenues
2013
Percentage of
net revenues
2015 vs. 2014
2014 vs. 2013
(€ million, except percentages)
EBIT
444
15.6%
389
14.1%
364
15.6%
55
14.1%
25
6.9%
2015 compared to 2014
EBIT for 2015 was €444 million, an increase of €55 million, or 14.1 percent, from €389 million for 2014.
The increase in EBIT was mainly attributable to (i) favorable volume impact of €45 million, (ii) positive foreign currency
exchange impact of €41 million, (iii) a gain on disposal of assets and liabilities related to investment properties of €6 million,
and (iv) a decrease in costs related to other supporting activities of €29 million, partially offset by (v) an increase in selling,
general and administrative costs of €39 million, (vii) an increase in research and development costs of €21 million, and (viii)
unfavorable mix impact of €6 million.
The favorable volume impact of €45 million was due to a 5.5 percent increase in shipments of range and special series
cars, driven by V8 models, which increased by 16.5 percent, and in particular, the California T, the 458 Speciale A and the newly
launched 488 GTB and 488 Spider. The positive foreign currency exchange impact was primarily driven by the strengthening
of the U.S. Dollar and Pound Sterling against the Euro. The decreased costs related to other supporting activities were primarily
attributable to a decrease in financial services costs, brand costs, production efficiencies and to a lesser extent, Formula 1 related
costs.
As a percentage of net revenues, EBIT increased from 14.1 percent in 2014 to 15.6 percent in 2015, mainly due to the
combination of the previously mentioned impacts and lower cost of sales, which as a percentage of net revenues was 52.5 percent
in 2015 compared to 54.5 percent in 2014.
70
2014 compared to 2013
EBIT for 2014 was €389 million, an increase of €25 million, or 6.9 percent, from €364 million for 2013.
The increase in EBIT was mainly due to (i) favorable mix impact of €85 million, (ii) cost savings of €19 million
primarily driven by technical and commercial efficiencies, (iii) decreases in costs related to supporting activities of €14 million,
(iv) favorable volume impact of €9 million, which were partially offset by (v) an increase in research and development costs of
€62 million, and (vi) an increase in selling, general and administrative costs of €40 million.
In particular, the favorable mix impact was primarily driven by the LaFerrari for which we only had two months of
shipments in 2013, compared to a full year for 2014. The increase in shipments of LaFerrari more than offset the unfavorable
impact of the increase in the proportion of V8 shipments, from 74.0 percent of total shipments for 2013, to 75.7 percent for
2014.
As a percentage of net revenues, EBIT decreased to 14.1 percent in 2014, from 15.6 percent in 2013, mainly due the
increase in cost of sales, which as a percentage of net revenues were 54.5 percent in 2014, compared to 52.9 percent in 2013.
Net financial income/(expenses)
For the years ended December 31,
Increase/(Decrease)
2015
2014
2013
2015 vs. 2014
2014 vs. 2013
(€ million, except percentages)
Net financial income/(expenses)
(10)
9
2
(19)
n.m.
7
n.m.
2015 compared to 2014
Net financial expenses for 2015 were 10 million compared to net financial income of 9 million for 2014, representing
a change of 19 million.
The change from net financial income to net financial expenses was driven by an increase of €12 million in interest
costs, principally due to interest expenses on the FCA Note and the subsequent refinancing. Additionally, foreign currency
exchange losses increased by €6 million in 2015. Our financial expenses in future periods are expected to be significantly higher,
reflecting our higher net debt position following the Separation.
2014 compared to 2013
Net financial income for 2014 was 9 million, an increase of 7 million from 2 million for 2013.
The increase in net financial income was mainly due to a €5 million increase in financial income and a €2 million
decrease in financial expenses. In particular, the €5 million increase in financial income was driven by a €4 million increase in
other interest income and financial income and a €1 million increase in interest income from banks deposits, attributable to the
increase in our average cash balances.
Income tax expense
For the years ended December 31,
Increase/(Decrease)
2015
2014
2013
2015 vs. 2014
2014 vs. 2013
(€ million, except percentages)
Income tax expense
144
133
120
11
8.3%
13
10.8%
2015 compared to 2014
Income tax expense for 2015 was €144 million, an increase of €1 1 million, or 8.3%, from €133 million for the year
ended December 31, 2014. The increase in income tax expense was attributable to the combined effect of an increase in
71
profit before taxes from €398 million for 2014 to €434 million for 2015, and an increase in the ef
from 28.6 percent in 2014 to 30.0 percent in 2015. During 2015 a change in Italian tax law approved a reduction in the
corporate income tax rate, from 27.5% to 24.0%, which will be effective from January 2017. As a result we have adjusted
deferred tax assets and liabilities that we expect will be reversed in and subsequent to 2017. In addition to the change in tax
law, the effective tax rate net of IRAP increased due to the effect of interest expense related to the Restructuring which is non
deductible.
fective tax rate net of IRAP,
2014 compared to 2013
Income tax expense for 2014 was 133 million, an increase of 13 million, or 10.8%, from 120 million for 2013. The
increase in income tax expense was attributable to the combined effect of an 8.7% increase in profit before taxes from €366
million for 2013, to €398 million for 2014, and an increase in the effective tax rate net of IRAP from 28.1 percent for 2013 to
28.6 percent for 2014, primarily due to the geographical distribution of income before tax and the difference in local tax rates.
Recent Developments
In February 2016 we unveiled our latest four-seater four-wheel drive GT model, the GTC4Lusso, which is equipped
with a V12 engine and will replace the FF. Production of the GTC4Lusso is expected to start in the second quarter of 2016
and shipments are expected to start in the third quarter of 2016. The unveiling was held at Villa Erba on Lake Como, Italy,
and precedes the official public premiere at the upcoming Geneva Auto Show in March 2016. (See "Item 4.B. Business
Overview-Sports and GT Cars-Range Models and Special Series").
Also in February 2016, we presented our new car for the 2016 Formula 1 World Championship, through a broadcast
on live streaming on our website.
Liquidity and Capital Resources
Liquidity Overview
We require liquidity in order to meet our obligations and fund our business. Short-term liquidity is required to purchase
raw materials, parts and components for car production, and to fund selling, administrative, research and development, and other
expenses. In addition to our general working capital and operational needs, we expect to use cash for capital expenditures to
support our existing and future products. We make capital investments mainly in Italy, for initiatives to introduce new products,
enhance manufacturing efficiency, improve capacity, and for maintenance and environmental compliance. Our capital
expenditure in 2016 is expected to be between €320 million to €370 million, which we plan to fund primarily with cash from
our operating activities.
Our business and results of operations depend on our ability to achieve certain minimum car shipment volumes. We
have significant fixed costs and therefore, changes in our car shipment volumes can have a significant effect on profitability and
liquidity. We have historically managed our liquidity through participating in cash management and funding services provided
by the treasury functions of the FCA Group. Following the Separation on January 3, 2016, we terminated such arrangements
and manage our liquidity and cash flow requirements on a standalone basis. We believe that our cash generation together with
our current liquidity will be sufficient to meet our obligations and fund our business and capital expenditures.
Cyclical Nature of Our Cash Flows
Our working capital is subject to month to month fluctuations due to, among others, production volumes, activity of
our financial services portfolio, timing of tax payments and capital expenditure. In particular, our inventory levels increase in
the periods leading up to launches of new models, during the phase out of prior models and at the end of the second quarter
when our inventory levels are higher to support the summer plant shutdown. The expansion of our financial services portfolio,
particularly in the United States, has increased our working capital requirements. The payment of taxes also affects our working
capital. Historically, as part of the FCA Group tax consolidation, a substantial portion of our taxes were paid in the fourth quarter
of the year and a smaller portion in the third quarter. In 2016 our tax payments will be higher as it will be our first year as a
standalone tax group. We settle our taxes in two instalments, in 2016 the most substantial payment will be made in the fourth
quarter and we have the option to make the other payment either at the end of the second quarter or the beginning of the third
quarter. From 2017 we expect to pay the taxes in equal instalments in the fourth quarter and either the end of the second quarter
72
or the beginning of the third quarter. Finally, our capital expenditure requirements are, among others, influenced by the timing
of the launch of new models and, in particular, our development costs peak in periods when we develop a significant number
of new models to renew or refresh our product range.
We tend to generally receive payment for cars (other than those for which we provide dealer financing) between 30
and 40 days after the car is shipped while we tend to pay most suppliers between 90 and 105 days after we receive the raw
materials or components. We maintain sufficient inventory of raw materials and components to ensure continuity of our production
lines but delivery of most raw materials and components takes place monthly or more frequently in order to minimize inventories.
The manufacture of one of our cars typically takes between 30 and 42 days, depending on the level of automation of the relevant
production line, and the car is generally shipped to our dealers three to six days following the completion of production, although
to ensure prompt deliveries in certain regions we may warehouse cars in local markets for longer periods of time. As a result,
we tend to receive payment for cars shipped before we are required to make payment for the raw material and components used
in manufacturing the cars.
Indebtedness with FCA and Refinancing of the FCA Note
In connection with the Restructuring and in order to optimize our capital structure as a public company, we entered
into the FCA Note on October 17, 2015 for a principal amount of €2.8 billion. On November 30, 2015, we entered into a new
€2.5 billion facility for the purposes of refinancing the FCA Note and indebtedness with FCA. In particular, on December 16,
2015 we used €1 billion of the deposits in FCA Group cash management pools to partially repay the FCA Note, whilst the
remainder, together with certain other financial liabilities with FCA, were repaid with proceeds from the €2.5 billion facility.
Interest on the FCA Note amounted to €9 million for the year ended December 31, 2015. Additionally, on November 17, 2015
we entered into a new $100 million term loan with a third party bank, the proceeds of which were used to repay financial liabilities
with FCA in the United States. See “—The Facility” description in this section for further information.
Cash Flows
The following table summarizes the cash flows from/(used in) operating, investing and financing activities for each of
the years ended December 31, 2015, 2014 and 2013. For a complete discussion of our cash flows, see our Consolidated Financial
Statements included elsewhere in this Annual Report.
Cash flows from operating activities
Cash flows used in investing activities
Cash flows used in financing activities
Translation exchange differences
Total change in cash and cash equivalents
For the years ended December 31,
2015
2014
(€ million)
2013
707
(317)
(351)
10
49
426
(290)
(122)
6
20
454
(267)
(163)
(10)
14
Operating Activities — Year Ended December 31, 2015
For the year ended December 31, 2015, our cash flows from operating activities were €707 million, primarily the result
of:
(i) profit before tax of €434 million, adjusted to add back €275 million of depreciation and amortization expense, €51
million in provisions accrued and €29 million related to other non-cash expenses and income and net gains on
disposal of property, plant and equipment and intangible assets. The €51 million in provisions accrued was composed
of (a) warranty provision of €33 million, primarily related to the increase in cars shipped, and to a lesser extent, a
change in mix driven by increased shipments of the LaFerrari and the FXX K, which have higher warranty costs
compared to range and special series cars, (b) legal proceedings and disputes of €9 million, and (c) other risks and
charges of €9 million. The €29 million related to other non-cash expenses and income and net gains on disposal
of property, plant and equipment and intangible assets primarily related to the allowances for doubtful accounts
of trade and financial receivables and the inventory provision;
73
(ii) €121 million related to cash generated by a decrease in receivables from financing activities, primarily attributable
to the full reimbursement of the financing of inventory related to the establishment of the Maserati standalone
business in China, which at December 31, 2014 was equal to €147 million, and the sale of the financial assets
portfolios of Ferrari Financial Services S.p.A. and Ferrari Financial Services Japan KK, partially offset by an
increase of the financial services portfolio in the USA;
(iii) €33 million related to cash absorbed from the net change in inventories, trade payables and trade receivables. In
particular, the movement was driven by (a) a decrease in trade payables of €46 million, mainly due to the full
production of the LaFerrari in 2014 while at the end of 2015 the product lifecycle was nearing completion and
shipments are planned to be completed in Q1 2016, (b) an increase in inventories of €3 million, consistent with
increased volumes, partially offset by (c) a decrease in trade receivables of €16 million mainly due to collections
of related party receivables;
(iv) €25 million relating to cash absorbed by other operating cash flows, primarily attributable to the net change in
other operating assets and liabilities; and
(v) income tax paid of €145 million.
Operating Activities — Year Ended December 31, 2014
of:
of:
For the year ended December 31, 2014, our cash flows from operating activities were €426 million, primarily the result
(i) profit before taxes of €398 million adjusted to add back €289 million for depreciation and amortization expense,
€66 million in provisions recognized, and €53 million related to other non-cash expenses and income, relating
primarily to the accruals to the allowances for doubtful accounts related to trading and financing activities. In
particular, the €66 million accruals to provision was composed of (a) increases in the warranty provision of €27
million due to an increase in cars delivered, and to a lesser extent a reassessment of the estimated cost assumptions
used to determine the provision, (b) increases in the provision for legal proceedings and disputes of €24 million,
and (c) provisions to cover other risks and charges for €15 million;
(ii) €15 million relating to cash generated by other operating cash flows, primarily attributable to the net change in
other operating assets and liabilities;
(iii) €52 million related to cash absorbed from the net change in inventories, trade payables and trade receivables,
primarily driven by (a) an increase in inventories of €66 million, due to increased finished cars at December 31,
2014 as compared to December 31, 2013, and mainly related to inventories of the LaFerrari to be shipped during
2015, partially offset by (b) a €13 million increase in trade payables and (c) a €1 million decrease in trade receivables,
driven by management efforts to improve collection rates;
(iv) €202 million related to cash absorbed by an increase in receivables from financing activities, mainly driven by an
increase in business volumes of Ferrari Financial Services Inc., and in particular due to an increase in the contracts
relating to the sale of vintage cars, and to a lesser extent, an increase in the number of contracts relating to new
cars; and
(v) income tax paid of €141 million.
Operating Activities — Year Ended December 31, 2013
For the year ended December 31, 2013, our cash flows from operating activities were €454 million, primarily the result
(i) profit before taxes of €366 million adjusted to add back €270 million for depreciation and amortization expense,
€24 million in provisions recognized and other non-cash items of €32 million. In particular, the €24 million increase
in provisions was mainly composed of (a) increases to the warranty provision of €14 million, and (b) increases to
the provision for legal proceedings and disputes of €6 million;
74
(ii) €44 million related to cash generated by other operating cash flows, primarily attributable to cash generated by
the change in other operating assets and liabilities;
(iii) €87 million related to cash absorbed from the net change in inventories, trade payables and trade receivables,
primarily driven by (a) a €81 million increase in trade receivables mainly driven by the increase in volumes of
Maserati engine sales and (b) a €20 million increase in inventories, which were partially offset by (c) a €14 million
increase in trade payables;
(iv) €56 million related to cash absorbed by an increase in receivables from financing activities, largely due to increased
business volumes of financial services operations in the United States; and
(v) income tax paid of €139 million.
Investing Activities — Year Ended December 31, 2015
of:
of:
of:
For the year ended December 31, 2015, our net cash used in investing activities was €317 million, primarily the result
(i)
€356 million of capital expenditures, including €185 related to additions to property, plant and equipment and €171
million relating to additions to intangible assets. For a detailed analysis of additions to property, plant and equipment
and intangible assets;
These cash outflows were partially offset by:
(i)
€37 million of proceeds from the disposal of assets and liabilities related to investment properties; and
(ii) €2 million proceeds from the sale of property, plant and equipment and intangible assets and the net change in
investments and other financial assets.
Investing Activities — Year Ended December 31, 2014
For the year ended December 31, 2014, our net cash used in investing activities was €290 million, primarily the result
(i)
€330 million of capital expenditures, including €169 million related to additions to property, plant and equipment
and €161 million relating to additions to intangible assets. For a detailed analysis of additions to property, plant
and equipment and intangible assets;
(ii) €39 million related to cash acquired on transactions with the non-controlling interests in Ferrari International Cars
Trading (Shanghai) Co. L.t.d.; and
(iii) €1 million proceeds from the sale of property, plant and equipment and intangible assets and the net change in
investments and other financial assets.
Investing Activities — Year Ended December 31, 2013
For the year ended December 31, 2013, our net cash used in investing activities was €267 million, primarily the result
(i)
€271 million of capital expenditures, including €162 million related to additions to property, plant and equipment
and €109 million relating to additions to intangible assets. For a detailed analysis of additions to property, plant
and equipment and intangible assets; and
(ii) €4 million proceeds from the sale of property, plant and equipment and intangible assets and the net change in
investments and other financial assets.
75
Financing Activities — Year Ended December 31, 2015
For the year ended December 31, 2015, our net cash used in financing activities was €351 million, primarily the result
of:
(i)
€3,21 1 million related to net repayments of financial liabilities with FCA, including repayment of the FCA Note
for €2,800 million;
(ii) €54 million related to dividends paid to non-controlling interests in our Chinese distributor, Ferrari International
Cars Trading (Shanghai) Co. Ltd;
(iii) €1 1 million related to net repayments of other debt; and
(iv) €8 million related to the acquisition of non-controlling interests of the subsidiary Ferrari Financial Services S.p.A.
These cash outflows were partially offset by:
(i) €2,1 19 million related to net proceeds from third-party financial liabilities, including €2,000 million from the new
syndicated credit facility, of which €1,500 million under the Term Loan and €500 million under the Bridge Loan
were used to repay financial liabilities with FCA, including a portion of the FCA Note, and
(ii) €814 million related to the net change in deposits in FCA Group cash management pools, mainly used to repay a
portion of the FCA Note.
Financing Activities — Year Ended December 31, 2014
For the year ended December 31, 2014, net cash used in financing activities was €122 million, primarily the result of:
(i)
€247 million related to the increase in deposits in FCA’s cash management pools;
(ii) €30 million related to net repayments of bank borrowings and other debt; and
(iii) €15 million related to dividends paid to non-controlling interest in our Chinese distributor, Ferrari International
Cars Trading (Shanghai) Co. L.t.d.
These cash outflows were partially offset by:
(i) €89 million related to net proceeds from the change in financial liabilities with FCA; and
(ii) €81 million related to proceeds from third party financial liabilities, driven largely by an increase in borrowings
from banks.
Financing Activities — Year Ended December 31, 2013
For the year ended December 31, 2013, net cash used in financing activities was €163 million, primarily the result of:
(i)
€227 million related to the increase in deposits in FCA’s cash management pools, and
(ii) €10 million of cash used for the repayment of bank borrowings.
These cash outflows were partially offset by:
(i)
€51 million related to net proceeds from the net change in financial liabilities with FCA;
(ii) €15 million related to proceeds from bank borrowings, driven largely by an increase in borrowings from banks,
and in particular due to financing obtained by Ferrari Financial Services Japan KK to fund its financing portfolio;
and
76
(iii) €8 million in net proceeds of other debt.
Net Cash/(Net Debt) and Net Industrial Cash/(Debt)
Net Cash/(Net Debt) is the primary measure which we use to analyze our financial leverage and capital structure, and
is one of the key indicators used to measure our financial position. We also monitor Net Industrial Cash/(Debt), which adjusts
for the impact of the funded portion of the self-liquidating financial receivables portfolio. The following table sets forth a
reconciliation of Net Cash/(Net Debt) and Net Industrial Cash/(Debt) at December 31, 2015 and 2014, using information derived
from the consolidated statement of financial position at December 31, 2015, included elsewhere in this Annual Report.
Cash and cash equivalents
Deposits in FCA Group cash management pools
Total liquidity
Financial liabilities with FCA Group
Financial liabilities with third parties
Net Cash/(Net Debt)
Funded portion of the self-liquidating financial receivables portfolio
Net Industrial Cash/(Debt)
Cash and cash equivalents
At December 31,
2015
2014
(€ million)
183
139
322
(3)
(2,257)
(1,938)
1,141
(797)
134
942
1,076
(379)
(131)
566
1,061
1,627
Cash and cash equivalents of €183 million at December 31, 2015 (€134 million at December 31, 2014) are denominated
in various currencies and available to certain subsidiaries which operate in areas other than the United States and Europe. Cash
held in such countries may be subject to transfer restrictions depending on the jurisdictions in which these subsidiaries operate.
In particular, cash held in China amounting to €106 million at December 31, 2015, is subject to certain repatriation restrictions
(and may only be repatriated as dividends). Based on our review, we do not believe such transfer restrictions have an adverse
impact on our ability to meet our liquidity requirements at the dates represented above. During 2015, Maserati fully settled the
receivable, which at December 31, 2014 amounted to €147 million, deriving from the financing of inventory related to the
establishment of the Maserati standalone business in China, resulting in an increase in cash and cash equivalents denominated
in Chinese Yuan.
The following table sets forth an analysis of the currencies in which our cash and cash equivalents were denominated
at the dates presented:
Chinese Yuan
Japanese Yen
Euro
U.S. Dollar
Other currencies
Total
At December 31,
2015
2014
(€ million)
106
41
22
1
13
183
74
27
10
14
9
134
77
Deposits in FCA Group cash management pools
Deposits in FCA Group cash management pools relate to our participation in a group-wide cash management system
at FCA prior to the Separation, where the operating cash management, main funding operations and liquidity investment of the
Group were centrally coordinated by dedicated treasury companies with the objective of ensuring effective and efficient
management of our funds. We accessed funds deposited in these accounts on a daily basis and had the contractual right to
withdraw our funds on demand and terminate the cash management arrangements depending on FCA's ability to pay at the
relevant time. The carrying value of deposits in FCA Group cash management pools approximates fair value based on the short
maturity of these investments. Of the total €139 million of deposits in FCA Group cash management pools at December 31,
2015 (€942 million at December 31, 2014), €1 19 million was denominated in Euro and €20 million in U.S. Dollars (at December
31, 2014, €844 million was in denominated in Euro and €98 million in U.S. Dollars). These arrangements were terminated in
connection with the Separation, which was completed on January 3, 2016, and amounts on deposit were paid back to Ferrari in
January 2016.
Total Liquidity
Total liquidity (defined as cash and cash equivalents plus deposits in FCA Group cash management pools) at December
31, 2015 was €322 million, of which 43.8 percent was denominated in Euro, 32.9 percent in Chinese Yuan, 12.7 percent in
Japanese Yen, 6.5 percent in U.S. Dollars and 4.1 percent in other currencies. Total liquidity at December 31, 2014 was €1,076
million, of which 82.6 percent was denominated in Euro, 8.3 percent in Chinese Yuan, 4.6 percent in U.S. Dollars and 4.5 percent
in other currencies.
Total Available Liquidity
Total available liquidity (defined as cash and cash equivalents plus deposits in FCA Group cash management pools
plus undrawn committed credit lines) at December 31, 2015 was €822 million (€1,076 million at December 31, 2014).
The following table summarizes our total available liquidity:
Cash and cash equivalents
Deposits in FCA Group cash management pools
Undrawn committed credit lines
Total available liquidity
At December 31,
2015
2014
(€ million)
183
139
500
822
134
942
—
1,076
The decrease in total available liquidity reflects a decrease in deposits in FCA Group cash management pools, partially
offset by an increase in cash and cash equivalents and a new credit line. The decrease in deposits in FCA Group cash management
pools reflects the effects of the Restructuring and the Separation. These arrangements were terminated in connection with the
Separation, which was completed on January 3, 2016, and amounts on deposit were paid back to Ferrari in January 2016. See
"—Available Lines of Credit" below for details regarding the new credit line.
Financial liabilities with FCA Group
Financial liabilities with FCA Group at December 31, 2015 were €3 million (€379 million at December 31, 2014).
Such balance was fully settled following the Separation.
Financial liabilities with FCA Group at December 31, 2014 primarily related to a credit line held with Fiat Chrysler
Finance North America, the purpose of which was to finance the activities of our financial services portfolio in the Americas.
78
Financial liabilities with third parties
Financial liabilities with third parties at December 31, 2015 were €2,257 million (€131 million at December 31, 2014).
Financial liabilities at December 31, 2015 included (i) €1,995 million (nil at December 31, 2014) relating to the Term Loan and
Bridge Loan and (ii) €262 million relating to other financial liabilities (€131 million at December 31, 2014).
Financial liabilities with third parties at December 31, 2015 were €2,257 million (€131 million at December 31,
2014). Financial liabilities at December 31, 2015 included (i) €1,995 million (nil at December 31, 2014) relating to the Term
Loan and Bridge Loan and (ii) €262 million relating to other financial liabilities (€131 million at December 31, 2014).
Term Loan and Bridge Loan
For a description of the Term Loan and Bridge Loan see “—The Facility” described below.
Other Financial Liabilities
Other financial liabilities mainly relate to financial liabilities of Ferrari Financial Services Inc, to support the financial
services operations and in particular (i) a $150 million U.S. Dollar denominated credit facility, which bears interest at a variable
rate of LIBOR plus a spread of 110 basis points. The facility was renewed in January 2016 for a further 18 months; (ii) a new
$100 million term loan that was entered into on November 17, 2015, the proceeds of which were used to repay financial liabilities
with FCA in the United States. This facility bears interest at a fixed rate and matures in December 2016. Other financial liabilities
also includes €20 million relating to various short and medium-term credit facilities.
Available Lines of Credit
See "—The Facility" section below.
The Facility
On November 30, 2015, the Company, as borrower and guarantor, and certain other members of the Group, as
borrowers, entered into a €2.5 billion facility with a syndicate of ten banks (the “Facility”). The Facility comprises a bridge
loan of €500 million (the “Bridge Loan”), a term loan of €1,500 million (the “T erm Loan”) and a revolving credit facility of
€500 million (the “RCF”).
The Bridge Loan has a 12 month maturity with an option for the Company to extend once for a six-month period.
The Bridge Loan bears interest at a rate per annum equal to the aggregate of EURIBOR plus a margin increasing from 40
basis points to 145 basis points depending on the number of months elapsed from first drawdown. The Term Loan and the
RCF each have a maturity of five years. The Term Loan bears interest at a rate per annum equal to the aggregate of
EURIBOR, plus a margin ranging from 50 basis points to 105 basis points depending on the applicable Consolidated Total
Net Debt to Consolidated Adjusted EBITDA ratio, calculated in accordance with the terms of the Facility. The RCF bears
interest at a rate per annum equal to the aggregate of EURIBOR with respect to loans denominated in Euro, or LIBOR with
respect to loans denominated in other currencies, plus a margin ranging from 35 basis points to 90 basis points depending on
the applicable Consolidated Total Net Debt to Consolidated Adjusted EBITDA ratio, calculated in accordance with the terms
of the Facility. Loans under the RCF may be drawn in Euro or an alternative currency at our option.
As of December 31, 2015, the proceeds of the Bridge Loan and the Term Loan were fully drawn down for the
purposes of repaying financial liabilities with FCA. The Bridge Loan was fully drawn down by the Company, whilst €1,425
million of the Term Loan was drawn down by the Company and the remaining €75 million was drawn down by Ferrari
Financial Services Inc. The Company intends to refinance the Bridge Loan prior to its maturity with longer term debt,
including through capital markets or other financing transactions. As of December 31, 2015, the RCF was undrawn.
Proceeds of the RCF may be used from time to time for general corporate and working capital purposes of the Group.
The Facility is unsecured and provides for mandatory prepayments, affirmative and negative covenants and events
of default in a form customary for bank financings of investment grade borrowers in the European syndicated loan market.
The Facility has no financial maintenance covenants. Mandatory prepayments are required, subject to certain exceptions, in
the event of a change of control, as well as, with respect to the Bridge Loan only, (i) issuance of debt securities in capital
markets transactions, and (ii) certain relevant disposals. Subject to various exceptions and qualifications, negative covenants
include (i) limitations on our ability to provide security for other financial indebtedness, (ii) restrictions on the financial
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indebtedness that our subsidiaries may incur or have outstanding, and (iii) restrictions on our ability to make certain disposals
of assets. Events of default include (i) failure to make payments when due, (ii) other breaches under the Facility not remedied
within a 30-day grace period, (iii) breaches of representations and warranties, (iv) attachment by creditors of, or distress,
execution, sequestration or other process enforced upon, the whole or any material part of the Group’s assets, (v) cross-
payment default or cross-acceleration with certain other financial indebtedness, (vi) cessation of business, (vii) seizure,
nationalization or expropriation of material assets; or (viii) bankruptcy or other insolvency proceedings.
As of December 31, 2015 the Company was in compliance with all covenants under the Facility.
The Facility is limited in recourse to the Company and the other members of the Group which borrow under the
Facility.
Free Cash Flow
Free Cash Flow is one of management’s primary key indicators to measure the Group’s performance and is defined as
net cash generated from operations less cash flows used in investing activities. The following table sets forth our Free Cash
Flow for the years ended December 31, 2015, 2014 and 2013, using information derived from our consolidated statement of
cash flows:
Cash flows from operating activities
Cash flows used in investing activities
Free Cash Flow
For the years ended December 31,
2015
2014
(€ million)
2013
707
(317)
390
426
(290)
136
454
(267)
187
Free Cash Flow for the 2015 was €390 million, an increase from €136 million for 2014. The increase in Free Cash
Flow was primarily attributable to an increase in cash from operating activities, driven by one-time cash inflows as well as
Adjusted EBITDA. Free Cash Flow included the following one-time cash inflows: (i) proceeds from the disposal of assets and
liabilities related to investment properties of €37 million; (ii) the reimbursement of the financing of inventory related to the
establishment of the Maserati standalone business in China of €147 million; and (iii) proceeds from the sale of the financial
assets portfolios of FFS S.p.A. and FFS KK of €57 million; partially offset by the following one-time cash outflow: (i) the
amount relating to the Ferrari employees extra bonus that was paid in 2015 of €15 million.
Free Cash Flow for 2014 was €136 million, a decrease from €187 million for 2013. The decrease in Free Cash Flow
was attributable to an increase in cash used in investing activities and in particular by investments in intangible assets, mainly
due to investments in development costs for new models and enhancements to existing models.
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Subsequent Events and 2016 Outlook
Subsequent events
The Group has evaluated subsequent events through February 25, 2016, which is the date the Consolidated and Company
Financial Statements were authorized for issuance. The following subsequent events have been identified:
The Separation
As explained in the Consolidated and Company Financial Statements, the Restructuring transactions were completed
in October 2015. The remaining steps of the Separation were completed between January 1 and January 3, 2016 and were
performed through two consecutive demergers followed by a merger under Dutch law. As part of the Separation a new entity,
FE New N.V., was created. Pursuant to the demergers the shares in the Company held by FCA were ultimately transferred to
FE New N.V., with FE New N.V. issuing shares in its capital to the shareholders of FCA. In connection with the demergers, the
mandatory convertible security holders of FCA also received shares in FE New N.V. On completion of the Separation the
Company was merged with and into FE New N.V. and FE New N.V. was renamed Ferrari N.V.
Following the Separation, the share capital of Ferrari N.V. amounted to €2.5 million, comprising 193,923,499 common
shares and 56,497,618 special voting shares all with nominal value of €0.01 per share. Ferrari N.V. has 5,000,000 common
shares held in treasury.
Following the Separation, the cash pooling and financial liabilities with the FCA Group were settled and the relevant
agreements were terminated. The derivative contracts which were previously held by FCA were novated to Ferrari S.p.A.
The Separation had no impact on the Company’s results of operations or financial position.
Finally, on January 4, 2016 the Company also completed the listing of its common shares on the Mercato Telematico
Azionario (“MTA”), the stock exchange managed by Borsa Italiana, under the ticker symbol RACE.
Distribution of Reserves
On February 19, 2016, the Board of Directors approved a distribution of €0.46 per share, amounting to a total distribution
of €87 million. The distribution will be made from the share premium reserve which is a distributable reserve under Dutch law.
These financial statements do not reflect this distribution.
Securitization
On January 19, 2016, Ferrari Financial Services Inc. performed its first securitization program of retail financial
receivables in the United States.
2016 Outlook
The Group indicates the following guidance for 2016:
Shipments: ˜7,900 including supercars
•
• Net revenues: >Euro 2.9 billion
• Adjusted EBITDA: >Euro 770 million
• Net Debt: