Ferrari N.V.ANNUAL REPORT2017ANNUAL REPORT 2017Ferrari N.V.Official Seat:Amsterdam, The NetherlandsDutch Trade Registration Number:64060977 Administrative Offices:Via Abetone Inferiore 4I- 41053, Maranello (MO)Italy Ferrari N.V.
ANNUAL REPORT
2017
Ferrari N.V.
Official Seat:
Amsterdam, The Netherlands
Dutch Trade Registration Number:
64060977
Administrative Offices:
Via Abetone Inferiore 4
I- 41053, Maranello (MO)
Italy
TABLE OF CONTENTS
BOARD REPORT
Board of Directors and Auditors
Letter from the Chairman and 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 2018 Outlook
Major Shareholders
Corporate Governance
Non-Financial Statement
Risk, Risk Management and Control Systems
Remuneration of Directors
FINANCIAL STATEMENTS
Consolidated Financial Statements and Notes at December 31, 2017
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 and Notes at December 31, 2017
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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ANNUAL REPORT
BOARD OF DIRECTORS
AND AUDITORS
Board of Directors
Chairman and Chief Executive Officer
Sergio Marchionne
Directors
John Elkann
Piero Ferrari
Delphine Arnault
Louis C. Camilleri
Giuseppina Capaldo
Eddy Cue
Sergio Duca
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
Independent Auditors
Ernst & Young Accountants LLP
FERRARI
THE COMPANY
“Rosso 70”, 70th Anniversary celebratory show
70th Anniversary celebrations worldwide
812 Superfast
GTC4Lusso
Ferrari Portofino
GTC4Lusso T
4
488 GTB
488 Spider
FERRARI
THE COMPANY
“Rosso 70”, 70th Anniversary celebratory show
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7
FERRARI
THE COMPANY
70th Anniversary event in New York
The Silk Road tour to celebrate 70th Anniversary in China
The Ferrari Festival of Speed to celebrate the 70th Anniversary in Indonesia
70th Anniversary event in UK
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FERRARI
GT AND SPORTS CARS
812 Superfast
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11
FERRARI
GT AND SPORTS CARS
GTC4Lusso
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13
FERRARI
GT AND SPORTS CARS
Ferrari Portofino
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15
FERRARI
GT AND SPORTS CARS
GTC4Lusso T
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17
FERRARI
GT AND SPORTS CARS
488 GTB
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19
FERRARI
GT AND SPORTS CARS
488 Spider
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FERRARI
GT AND SPORTS CARS
FXX K Evo
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LETTER FROM THE CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
Dear Shareholders,
2017 marked Ferrari’s 70th Anniversary. We were surprised and delighted by the enthusiasm and the extraordinary
turnout, with tens of thousands of clients and fans participating in the yearlong tour of celebrations all over the
world. Events were held in over 60 different countries, providing a truly vivid and unforgettable display of the
brand’s power.
We had one more reason to celebrate, as 2017 was another year of new fantastic models and a very
good, solid financial performance. We continued our growth, offering the widest range of products ever, without
compromising on our fundamental principles of exclusivity and leading technological innovation.
We launched three new cars, designed to meet the requirements of very diverse clients: the 812 Superfast,
our most powerful and fastest road model ever, the Ferrari Portofino, which tops our V8 GT range, and the FXX K
Evo, a track-only “laboratory car” unveiled at the Finali Mondiali in Mugello.
We won the International Engine of the Year award, for the second consecutive year. This is an important
acknowledgement of our leading-edge technology as it is one of the most sought-after plaudits in the car industry.
The award was won by the 3.9-litre V8 power unit from the 488 family, for the new benchmarks it set in the turbo
engine segment. We are, of course, just as determined to create equally impressive hybrid engines for the Ferraris
of the future. In 2018 we will lay the groundwork of our future strategy, which will include hybrid technology as
well as new models designed to meet the needs of a GT group of customers, which have not been fully addressed
yet. In doing so, we will stay true to our strong DNA, ensuring that, whichever technology we use, we will always
provide our customers with a unique driving experience, as Ferrari has always done.
On the financial results side, Ferrari ended 2017 with a new record. Two years on from the listing on the
U.S. and Italian stock markets, we can confirm that we have not only kept our promises but in certain instance
exceeded our own plans. Our adjusted EBITDA grew to over a billion euro, with a margin of 30.3%, two years
ahead of the IPO business plan. To mention just a couple of key figures, in 2017, we delivered 8,398 cars, an
increase of 4.8% on the previous year, while revenues rose by 10% to 3.4 billion euro.
We delivered equally important results on the sustainability front in 2017. Among our many social
and environmental achievements and milestones, I am particularly proud of the work we did to help our staff
develop their potential, as we truly believe our employees are a vital source of innovation. In 2017 we provided
our workforce with over 35,500 hours of training. That investment was rewarded by the 7,600 suggestions our
production staff submitted to help us improve our products and processes. Our commitment to sustainability
includes naturally a constant reduction of CO2 emission for our models.
Ferrari takes its role as an active member of society extremely seriously and decided to make a particular
contribution to good causes in its 70th Anniversary year. In September, we donated an exclusive LaFerrari Aperta
to Save the Children. Save the Children raised 8.3 million euro, which will be used to provide access to education
for thousands of the most vulnerable children across all five continents.
We sealed new licensing agreements in the course of the year, something we will continue to do with
great caution, as we are conscious of the importance of protecting the brand’s value. We have just started our
path and there is still a lot to do.
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Last but not least, our sports activities: we had a season with some satisfaction, but also a few regrets. On the GT
side, it proved an exceptionally rewarding year crowned by both Constructors’ and Drivers’ titles in the FIA World
Endurance Championship. The Formula 1 World Championship taught us a big lesson, we were proud to return
to the circuits as protagonists and with a single-seater well up to what seemed like an impossible challenge even
as the first grand prix approached. Unfortunately, it still was not quite enough, but we are now more determined
than ever to compete in the upcoming Championship - and many more to come - without betraying the true
essence of the sport.
I would like to conclude by thanking you - our valued shareholders - who flanked us along the way and
spurred us to grow. We reiterate to you and all our stakeholders our commitment to living up to the Ferrari
legend worldwide each and every day.
February 23, 2018
Sergio Marchionne
Chairman & Chief Executive Officer
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”.
See “Basis of Preparation of the Consolidated Financial Statements” below for additional information regarding
the financial presentation.
Note on Presentation
This Annual Report includes the consolidated financial statements of Ferrari N.V. as of December 31, 2017
and 2016, and for the years ended December 31, 2017, 2016 and 2015 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”,
on October 29, 2014, Fiat Chrysler Automobiles N.V. (“FCA”) announced its intention to separate Ferrari S.p.A.
from FCA. The separation was completed on January 3, 2016 and occurred through a series of transactions
(together defined as the “Separation”) including (i) an intra-group restructuring which resulted in the Company’s
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 the Company, (ii) the transfer of Piero Ferrari’s 10 percent shareholding in
Ferrari S.p.A. to the Company, (iii) the initial public offering of common shares of the Company on the New York
Stock Exchange, and (iv) the distribution, following the initial public offering, of FCA’s remaining interest in the
Company to FCA’s shareholders. Following the Separation Ferrari operates as an independent, publicly traded
company.
The transactions described above in (i) and (ii) (referred to collectively as the “Restructuring”) were
completed in October 2015. The Restructuring comprised: (i) a capital reorganization of the group under the
Company, which has been accounted for in the Consolidated Financial Statements as though it had occurred
effective January 1, 2015 using FCA’s basis of accounting, and (ii) the issuance of a note by the Company to
FCA (the “FCA Note”), which has been reflected in the Consolidated Financial Statements only from the date in
which it occurred.
The remaining steps of the Separation, which were completed between January 1 and January 3, 2016
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ANNUAL REPORT
CERTAIN DEFINED TERMS
AND NOTE ON PRESENTATION
SELECTED FINANCIAL
AND OTHER DATA
through two consecutive demergers followed by a merger under Dutch law, have been reflected in the Consolidated
Financial Statements only from the date in which the related transactions occurred and had no impact on the
Company’s results of operations or financial position. 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 cash pooling and financial liabilities with the FCA Group were settled and
the relevant agreements were terminated. The derivative contracts that were previously held by FCA were novated
to Ferrari S.p.A.
On January 4, 2016 the Company also completed the listing of its common shares on the Mercato
Telematico Azionario, the stock exchange managed by Borsa Italiana, under the ticker symbol RACE.
At December 31, 2017, the fully paid up share capital of the Company amounted to €2,504 thousand,
comprising common shares and special voting shares all with nominal value of €0.01 per share. At December
31, 2017, the Company had 188,953,874 common shares and 56,493,519 special voting shares issued and
outstanding.
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.
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 years ended December 31, 2014
and 2013 and the audited consolidated statement of financial position at December 31, 2015, 2014
and 2013;
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, 2013.
The following information should be read in conjunction with “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
Net profit attributable to:
Owners of the parent
Non-controlling interests
Basic earnings per common share (i) (1)
Diluted earnings per common share (€) (1) (2)
Dividend paid per share (€)
Distribution paid per common share (€) (3) (4)
For the years ended December 31,
2017
2016
2015
2014
2013
(€ million, except per share data)
3,417
3,105
2,854
2,762
2,335
775
746
537
535
2
2.83
2.82
—
0.635
595
567
400
399
1
2.11
2.11
—
0.46
444
434
290
288
2
1.52
1.52
—
—
389
398
265
261
4
1.38
1.38
—
—
364
366
246
241
5
1.27
1.27
—
—
(1) Retrospectively reflects the issuance of 188,923,499 common shares as if the Separation had occurred on January 1, 2013. See also Note 13 to the Consolidated Financial Statements.
(2) In order to calculate the diluted earnings per common share for the year ended December 31, 2017, the weighted average number of shares outstanding has been increased to take into
consideration the theoretical effect of (i) the potential common shares that would be issued under the equity incentive plan and (ii) the potential common shares that would have been issued for the
Non-Executive Directors’ compensation agreement. In order to calculate the diluted earnings per common share for the year ended December 31, 2016, the weighted average numbers of shares
outstanding has been increased to take into consideration the theoretical effect of the potential common shares that would have been issued for the Non-Executive Directors’ compensation agreement.
For the years ended December 31, 2015, 2014 and 2013 there were no potentially dilutive instruments. See Note 13 to the Consolidated Financial Statements for additional information.
(3) Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 14, 2017, a cash distribution of €0.635 per common share was
approved, corresponding to a total distribution of €120 million. The distribution was made from the share premium reserve which is a distributable reserve under Dutch law.
(4) Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 15, 2016, the Company paid a cash distribution of €0.46 per
common share in May 2016, corresponding to a total distribution of €87 million. The distribution was made from the share premium reserve which is a distributable reserve under Dutch law.
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ANNUAL REPORT
Consolidated Statement of Financial Position Data
Cash and cash equivalents
Deposits in FCA Group cash management pools (1)
Total assets
Debt
Total equity/(deficit) (2)
Equity/(Deficit) attributable to owners of the parent
Non-controlling interests
Share capital
At December 31,
2017
2016
2015
2014
2013
(€ million, except shares issued)
648
—
4,141
1,806
784
779
5
3
458
—
3,850
1,848
330
325
5
3
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
Common shares issued (in thousands of shares) (3)
188,954
188,923
188,923
188,923
188,923
(1) Deposits in FCA Group cash management pools related 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) The deficit at December 31, 2015 is a result of the effects of the Restructuring. See “Consolidated Statement of Changes in Equity” to the Consolidated
Financial Statements for additional details.
(3) The number of common shares issued retrospectively reflects the issuance of common shares (net of treasury shares), all with a nominal value of €0.01, as if
the Separation had occurred on January 1, 2013.
Other Statistical Information
Shipments (number of cars)
Average number of employees for the period
For the years ended December 31,
2017
8,398
3,336
2016
8,014
3,115
2015
7,664
2,954
2014
7,255
2,843
2013
7,000
2,774
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 32% 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 effort, 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.
The Non Financial Statement section of our 2017 Annual Report addresses those aspects of our
sustainability efforts that we have identified as being of greatest importance to our internal and external
stakeholders.
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ANNUAL REPORT
RISK 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 and, to that end, we renovate and expand
our models range. For example, the gradual expansion of hybrid engine technology will also introduce a notable
change in the overall driver experience compared to the combustion engine cars of our range models to date. 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 in part 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. We have
focused on restoring the success of our Formula 1 racing team as our most recent driver’s championship and
constructors’ championship were in 2007 and 2008, respectively. We are focused on improving our racing
results and restoring our historical position as the premier racing team. 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 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. For example, luxury performance cars will in the next few years
begin to transition to hybrid technology, albeit at a slower pace compared to mass market vehicles. See “The
introduction of hybrid cars is costly and its long term success is uncertain”.
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 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
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ANNUAL REPORT RISK FACTORS
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, and if volumes increase our brand exclusivity may be eroded.
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. This focus on maintaining exclusivity limits our potential sales growth and profitability.
On the other hand, our current growth strategy contemplates a measured but significant increase in car
sales above current levels as we target a larger customer base and modes of use, and we increase our focus on GT cars.
In pursuit of our strategy, 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.
In addition the company that owns the Formula 1 business was recently acquired by new owners and
it is uncertain whether and how the arrangements relating to the participation of Ferrari and the other teams
competing in the championship may change in the future particularly in the period following the 2020 expiration
of the current arrangements between racing teams and the operator of Formula 1. We are currently evaluating
the terms and conditions under which we may continue to participate in the Formula 1 championship after the
2020 season and we cannot be certain that we or other racing teams will be successful in negotiating acceptable
terms and conditions for continued participation. If we were to withdraw from Formula 1 this would affect
our marketing and brand strategies and we currently are unable to predict the consequences on our business,
financial condition and results of operations. See “Overview of our Business—Formula 1 Activities.” for a description
of the change in ownership of Formula 1.
The small number of car models we produce and sell may result in greater volatility in our financial results.
We depend on the sales of our range and special series models and our limited edition supercar to
generate our revenues. Our current product range consists of six range models (including three sports cars and
three GT cars), one special series car and one limited edition supercar. 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. It generally takes several years from the beginning of the development phase to the
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 quickly the revenue lost from one of our main car models if it does not achieve market
acceptance. Furthermore, our revenues and profits may also be affected by our “special series” and limited
edition cars that we launch from time to time and which 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 through 2020, which may be followed by further production runs in future
periods. In 2017 we recorded net revenues of €302 million from the sales of engines to Maserati. 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.
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Our business is subject to changes in client preferences and trends in the automotive and luxury industry.
Our continued success depends in part on our ability to originate and define product and trends
in the automotive and luxury industry, as well as to anticipate and respond promptly to changing consumer
demands and automotive trends in the design, styling, 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. The introduction of electric and hybrid
technology and the associated changes in customer preferences that may follow are also a challenge we will face
in future periods. See also “If we are unable to keep up with advances in high performance car technology, our competitive
position may suffer” and “The introduction of hybrid cars is costly and its long term success is uncertain”. 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. We will encounter this risk, for example, if we decide to expand our range to
include one or more luxury high performance utility vehicles. Furthermore this risk is particularly pronounced as
we expand in accordance with our strategy into adjacent segments of the luxury industry, where we do not have a
level of experience and market presence comparable to the one we have in the automotive industry. Any of these
risks 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. The EU economies in particular
have suffered a prolonged period of slow growth since the 2008 financial crisis. In addition, uncertainties
regarding future trade arrangements and industrial policies in various countries or regions, such as in the
United Kingdom following the referendum to leave the European Union (see further “We may be adversely affected
by the UK determination to leave the European Union (Brexit)”) create additional macroeconomic risk. In the United
States, any policy to discourage import into the United States of vehicles produced elsewhere could adversely
affect our operations. Any new policies and any steps we may take to address such new policies may have an
adverse effect on our business, financial condition and results of operations. In addition, a further economic
slowdown or changes in the economic and political situation in the Middle East region may impact the demand
for our products in that market, which may adversely impact our revenues in the relevant periods. A significant
decline in the EU, the global economy or in the specific economies of our markets, or in consumers’ confidence,
could have a material adverse effect on our business. See also “Developments in emerging markets may adversely affect
out 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 2021, alternative targets for our fleet of EU-registered
vehicles.
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 greenhouse gas (“GHG”) and 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. In September 2016 we petitioned NHTSA for recognition
as an independent manufacturer of less than 10,000 vehicles produced globally and we proposed alternative
CAFE standards for Model Years 2017, 2018 and 2019. Then, in December, 2017, we amended the petition by
proposing alternative CAFE standards for Model Years 2016, 2017 and 2018 instead, covering also the 2016
Model Year. NHTSA have not yet responded to our petition. We will need in the future to file with NHTSA a
petition for 2019-2020 and 2021 model years. If our petitions are rejected, we will not be able to benefit from
the more favorable CAFE standards levels which we have petitioned for and this may require us to purchase
additional CAFE credits in order to comply with applicable CAFE standards.
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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 IV fuel consumption
regulation targets a national average fuel consumption of 5.0L/100km by 2020.
In response to severe air quality issues in Beijing and other major Chinese cities, in 2016 the Chinese
government published a more stringent emissions program (National 6), providing two different levels of
stringency effective starting from 2020. Moreover autonomous Chinese regions and municipalities are allowed
to implement these more stringent requirements in advance of 2020. If local Chinese regions and municipalities
implement such requirements before 2020 this could lead us to revise our product development and production
plans in China, incur significant costs and change marketing strategies in China, which may affect our profits.
We could lose our status as a SVM in the EU, the United States and other countries 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.
For a description of recent fines we have paid and a summary of the regulation referred to in the paragraphs
above please see “Overview of our Business - Regulatory Matters”.
In the future, the advent of self-driving technology may result in regulatory changes that we cannot
predict but may include limitations or bans on human driving in specific areas. Similarly, driving bans on
combustion engine vehicles could be imposed, particularly in metropolitan areas, as a result of progress in
electric and hybrid technology. Any such future developments may adversely affect the demand for our cars and
our business.
In September 2017 the Chinese government issued the Administrative Measures on CAFC (Corporate
Average Fuel Consumption) and NEV (New Energy Vehicle) Credits. This regulation establishes mandatory CAFC
requirements, while providing additional flexibilities for SVMs (less than 2,000 units/year imported in China)
that achieve a certain minimum CAFC yearly improvement rate. Because our CAFC is expected to exceed the
regulatory ceiling, we will be required to purchase NEV credits. There is no assurance that an adequate market
for NEV credits will develop in China and if we are not able to secure sufficient NEV credits this may adversely
affect our business in China.
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. As part of our growth strategy, we plan to
broaden the range of our models to capture additional customer demand for different types of vehicles and
modes of utilization. For example, we are currently evaluating the development and launch of a luxury high
performance utility vehicle. In addition, we will gradually expand the use of hybrid technology in our road cars,
consistent with customer preferences and broader industry trends. While we will seek to ensure that these
changes remain fully consistent with the Ferrari car identity, we cannot be certain that they will prove profitable
and commercially successful.
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 plan to redesign our international network footprint and skill set. We also plan to open additional
retail stores in international markets. We do not yet have significant experience directly operating in many of
these markets, and in many of them we face established 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.
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The introduction of hybrid cars is costly and its long term success is uncertain.
Developments in emerging markets may adversely affect our business.
We intend to gradually introduce hybrid technology in both our sports and GT cars ranges. In
accordance with our strategy, we believe hybrid technology will be key to providing continuing performance
upgrades to our sports car customers, and will also help us capture the preferences of the urban, affluent GT cars
purchasers whom we are increasingly targeting.
While we have introduced hybrid technology in some models, such as LaFerrari and LaFerrari Aperta,
the integration of such technology more broadly into our car portfolio over time may present challenges and
costs. We expect to increase R&D spending in 2018 particularly on hybrid technology-related projects. Although
we expect to price our future hybrid cars appropriately to recoup the investments and expenditures we are making,
we cannot be certain that these expenditures will be fully recovered. In addition, this transformation of our car
technology creates risks and uncertainties such as the impact on driver experience, and the impact on the cars’
residual value over time, both of which may be met with an unfavorable market reaction. Other manufacturers of
luxury sports cars may be more successful in implementing hybrid technology. Longer term, although we believe
that combustion engines will continue to be fundamental to the Ferrari driver experience, pure electric cars may
become the prevalent technology for performance sports cars thereby displacing hybrid models. See also “If we
are unable to keep up with advances in high performance car technology, our competitive position may suffer.”
Because hybrid technology is a core component of our strategy, if the introduction of hybrid cars
proves too costly or is unsuccessful in the market, our business and results of operations could be materially
adversely affected.
Our indebtedness could adversely affect our operations and we may face difficulties in servicing or refinancing our debt.
As of December 31, 2017, our total consolidated debt was approximately €1,806 million (which
includes our financial services), including €500 million aggregate principal amount of 1.500% notes due 2023,
and €700 million aggregate principal amount of 0.250% notes due 2021, see “Operating Results - Liquidity and Capital
Resources”. Our current and long-term debt requires us to dedicate a portion of our cash flow to service interest
and principal payments and, if interest rates rise, this amount may increase. In addition, our existing debt may
limit our ability to raise further capital to execute our growth strategy or otherwise may place us at a competitive
disadvantage relative to competitors that have less debt. The agreements governing our indebtedness do not
prohibit the incurrence of additional indebtedness. To the extent we become more leveraged, the risks described
above would increase. We may also have difficulty refinancing our existing debt or incurring new debt on terms
that we would consider to be commercially reasonable, if at all.
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, our reputation for quality and the driving experience
for our customers. If we are unable to compete successfully, our business, results of operations and financial
condition could be adversely affected.
We operate in a number of emerging markets, both directly and through our dealers and we have
experienced increasing demand in China and other regions in Asia.
Our strategy contemplates expanding our sales in Asia, 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, rising geopolitical tensions 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. See also “Global economic conditions may adversely us”.
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 and Chairman, Sergio Marchionne, who engineered the
operating and financial turnaround of Fiat and Chrysler and the global expansion of FCA into the eighth largest
automaker in the world (based on 2017 vehicle sales worldwide). Our employees, particularly in our production
facilities in and around Maranello, Italy 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 a management 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
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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. Furthermore, we may experience disagreements or
disputes in the course of our relationship with our dealers or upon termination which may lead to financial costs,
disruptions and reputational harm.
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 of 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. In the future,
we will also require a greater number of batteries and other components of hybrid engines as we introduce hybrid
technology in our range model offering, and we expect producers of batteries will be called to increase the levels of
supply as the shift to hybrid or electric technology gathers pace in the industry. 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. For example, Takata Corporation (“Takata”)
is currently the principal supplier of the airbags installed in our cars. Defective airbags manufactured by Takata
have led to widespread recalls by several automotive manufacturers starting in 2015, including us (see further
“Car recalls may be costly and may harm our reputation”; see “Overview of our Business - Regulatory Matters - Vehicle Safety”.
Takata filed for bankruptcy protection in Japan and the United States in June 2017. Failure by Takata to continue
the supply of airbags may cause significant disruption to our operations.
In the past, we have replaced certain suppliers because they 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 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, and 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 stop or delay production and shipment of our cars. As such damage from disasters
or unpredictable events could have a material adverse impact on our business, results from operations and
financial condition.
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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. Recent pronouncements
of governments and central banks point to a change in the policy environment that may lead to a gradual
contraction of monetary policies in coming periods. 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 choose not to, or may not be able
to, obtain financing to purchase our cars.
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.
Our dealer and retail customer financing in Europe are mainly provided through our partnership with
FCA Bank S.p.A. (“FCA Bank”), a joint venture between FCA Italy S.p.A. and Crédit Agricole Consumer Finance
S.A. (“CACF”). If we fail to maintain our partnership with FCA Bank or in the event of a termination of the
joint venture or change of control of one of our joint venture partners, we may not be able to find a suitable
alternative partner with similar resources and experience and continue to offer financing services to support the
sales of Ferrari cars in key European markets, which could adversely affect our results of operations and financial
condition.
We may not be able to provide adequate access to financing for our dealers and clients, and our financial services
operations may be disrupted.
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.
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.
Furthermore, to help fund our retail and wholesale financing business, our financial services companies
also access forms of funding available from the banking system in each market, including sales or securitization of
receivables either in negotiated sales or through securitization programs. For example, in 2016, Ferrari Financial
Services Inc. carried out revolving securitizations raising an aggregate of $481 million of initial proceeds. At
December 31, 2017, an amount of $667 million was outstanding under revolving securitizations carried out by
Ferrari Financial Services Inc. See “Operating Results - Liquidity and Capital Resources”. Should we lose the ability to
access the securitization market at advantageous terms or at all, the funding of our wholesale financing business
would become more difficult and expensive and our financial condition may be adversely affected.
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 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
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 parks, 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.
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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 in 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.
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 example, in the course of 2015 and
2016, we issued a series of recalls relating to defective air bags manufactured by Takata and installed on certain
of our models. Also in light of uncertainties in our ability to recover the recall costs from Takata, which filed for
bankruptcy in June 2017, we have recorded a provision regarding this matter which amounted to €35 million as
of December 31, 2017. For a description of these and other recent recalls , see “Overview of our Business—Regulatory
Matters—Vehicle Safety”. In addition, regulatory oversight of recalls, particularly in the vehicle safety, has increased
recently. 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. The
AEO certificate is subject to mandatory audit review by May 1, 2019 according to the new European Customs
Legislation and therefore we will need to implement all necessary organization changes in order to comply with
the new requirements. 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 may be adversely affected by the UK determination to leave the European Union (Brexit).
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 Euro 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. For example, in the second half of 2016, the foreign exchange markets
had been subject to a high degree of volatility and the U.S. dollar appreciated significantly against the Euro while
the pound sterling depreciated significantly against both the U.S. dollar and the Euro. The U.S. dollar trend
was partially reversed in 2017, and in the initial months of 2018 the U.S. dollar has continued to depreciate
considerably against the Euro. If this U.S. dollar weakness persists or increases, we expect that it will adversely
impact our revenues and results of operations in 2018. Changes in exchange rates between the Euro on the one
hand and, on the other hand, the other main foreign currencies in which we operate, also affect our revenues and
results of operations. See “Operating Results”.
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. For example, the Chinese and Indian governments have recently
imposed various measures intended to curb consumption of luxury goods, including, among other things, a
tax specifically applicable to the purchase of luxury cars. 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.
In a June 23, 2016, referendum, the United Kingdom voted to terminate the UK’s membership in the
European Union (“Brexit”). As a result, negotiations are expected to take place to determine the future terms of the
UK’s relationship with the European Union, including the terms of trade between the UK and the member states in
the EU. Any effect of Brexit is expected to depend on the agreements, if any, that may be negotiated between the
UK and the EU with respect to reciprocal market access and custom arrangements, during any transitional period
and more permanently. Failure to reach appropriate agreements could adversely affect European or worldwide
economic or market conditions. Approximately 9% percent of our cars and spare parts net revenues in 2017 were
generated in the UK and we do not have any other significant operations in the UK, therefore, we do not believe
that our global operations would be affected materially by Brexit. However, any adverse effect of Brexit on us or on
global or regional economic or market conditions could adversely affect our business, results of operations and
financial condition as customers may reduce or delay spending decisions on our products.
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:
•
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;
• 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.
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, with the consequence that such cyber incidents may remain undetected
for long periods of time. For any of these reasons, we may experience system 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. To an increasing extent, the functionality and
controls of our cars depend on in-vehicle information technology. Furthermore, such technology is capable of
storing an increasing amount of personal information belonging to our customers. Any unauthorized access to
in-vehicle IT systems may compromise the car security or the privacy of our customers’ information and expose
us to claims as well as reputational damage. 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 market price of our common shares declines significantly, a shareholder may be unable to sell
their common shares at or above their 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:
•
variations in our operating results, or failure to meet the market’s earnings expectations;
• publication of research reports about us, the automotive industry or the luxury industry, or the
failure of securities analysts to cover our common shares;
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• 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 or the luxury industry generally, or particularly
scandals relating to those industries, 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 is 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 N.V. (“Exor”) is our largest shareholder, holding approximately 23.5 percent of our outstanding
common shares and approximately 33.4 percent of our voting power. Therefore, Exor has 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 of Directors, capital increases and amendments to our articles of association. In addition,
Piero Ferrari, the Vice Chairman of Ferrari, holds approximately 10 percent of our outstanding common
shares and approximately 15.4 percent of voting interest in us. As a result, he also has 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.
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 and Chief Executive Officer,
is the Chief Executive Officer of FCA. 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, including Mr. John Elkann, who is
one of our Vice-Chairmen, the Chairman of FCA and the Chairman and Chief Executive Officer of Exor. 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 outstanding common shares and approximately 33.4 percent of the voting
power in us, while it holds approximately 29.2 percent of the outstanding common shares and approximately
43.1 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 approximately
23.5 percent of our outstanding common shares and a voting interest in Ferrari of approximately 33.4 percent.
Piero Ferrari holds approximately 10 percent of our outstanding 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”.
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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 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 Securities 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 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 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.
Our shares are listed on both the NYSE and 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.
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 - History of the Company”.
Risks Related to Taxation
Changes to taxation or the interpretation or application of tax laws could have an adverse impact on our results of
operations and financial condition.
Our business is subject to various taxes in different jurisdictions (mainly Italy), which include, among
others, the Italian corporate income tax (“IRES”), regional trade tax (“IRAP”), value added tax (“VAT”), excise
duty, registration tax and other indirect taxes. We are exposed to the risk that our overall tax burden may increase
in the future.
Changes in tax laws or regulations or in the position of the relevant Italian and non-Italian authorities
regarding the application, administration or interpretation of these laws or regulations, particularly if applied
retrospectively, could have negative effects on our current business model and have a material adverse effect on
our business, operating results and financial condition.
In order to reduce future potential disputes with tax authorities, we seek advance agreements with tax
54
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ANNUAL REPORT RISK FACTORS
authorities on significant matters. In particular we filed a ruling application for advance pricing agreement (APA)
on transfer pricing and a so called “interpello nuovi investimenti” (tax ruling on new investments) regarding tax
credit on R&D expenses to confirm our interpretation and application of the law.
In addition, tax laws are complex and subject to subjective valuations and interpretive decisions, and
we will periodically be subject to tax audits aimed at assessing our compliance with direct and indirect taxes.
The tax authorities may not agree with our interpretations of, or the positions we have taken or intend to take
on, tax laws applicable to our ordinary activities and extraordinary transactions. In case of challenges by the
tax authorities to our interpretations, we could face long tax proceedings that could result in the payment of
penalties and have a material adverse effect on our operating results, business and financial condition.
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 - History of the Company.”
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. holder if for any taxable year in which such U.S. holder 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.
We currently benefit or seek to benefit from certain special tax regimes, which may not be available in the future.
We currently calculate taxes due in Italy based, among other things, on certain tax breaks recognized
by Italian Tax regulations for R&D expenses (available until fiscal year 2021 according to current regulations)
and for the investments on manufacturing equipment (available until fiscal year 2018 according to current
regulations), which result in a significant tax saving. A change in regulations or interpretation might adversely
affect the availability of such exemptions and result in higher tax charges.
Italian Law No. 190 of December 2014, as subsequently amended and supplemented (Finance Act
2015) introduced an optional patent box regime in the Italian tax system. The patent box regime is a tax exemption
related to, inter alia, the use of intellectual property assets. Business income derived from the use of each qualified
intangible asset is partially exempted from taxation for both IRES and IRAP purposes. The application of such
patent box regime may reduce our tax expenses and we are currently seeking to avail ourselves of such regime.
However, this exemption is subject to a mandatory ruling by the Italian tax authorities and the outcome of the
ruling procedure is not certain. We have filed a ruling application, but we are currently awaiting a response from
the Italian tax authorities. In the event of a negative response from the Italian tax authorities, we will not be able
to benefit from such exemption.
56
57
ANNUAL REPORT
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. 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 229 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 164 authorized dealers operating 185 points of sale.
We believe our cars are the epitome of performance, luxury and styling. Our current product range
consists of six range models, including three sports cars (488 GTB, 488 Spider and 812 Superfast) and three
GT cars (GTC4Lusso, GTC4Lusso T and California T), one special series car (F12tdf) and one limited edition
supercar (LaFerrari Aperta). We also produce very limited editions series (fuori serie) and one-off cars. The 812
Superfast was launched in February 2017 and the Ferrari Portofino, which is the successor of the California T
(which is being phased out), was unveiled in September 2017 with shipments expected to begin in the second
quarter of 2018. The LaFerrari Aperta was unveiled in September 2016 to celebrate our 70th anniversary in 2017.
In 2017, we shipped 8,398 cars and recorded net revenues of €3,417 million, EBIT of €775 million, net
profit of €537 million, and earnings before interest, taxes, depreciation, and amortization (EBITDA) of €1,036
million. For additional information regarding EBITDA, which is a non-GAAP measure, including a reconciliation
of EBITDA to net profit, see “Operating Results—Non-GAAP Financial Measures.”
We divide our regional markets into EMEA, Americas, China, Hong Kong and Taiwan (on a combined
basis) and Rest of APAC, representing respectively 44.5 percent, 33.5 percent, 7.3 percent and 14.7 percent of
units shipped in 2017.
History of the Company
Ferrari was incorporated as a public limited liability company (naamloze vennootschap) under the laws
of the Netherlands on September 4, 2015 with an indefinite duration. Our corporate seat (statutaire zetel) is in
Amsterdam, the Netherlands, and our registered office and principal place of business is located at Via Abetone
Inferiore n. 4, I-41053 Maranello (MO), Italy. Ferrari is registered with the Dutch Trade Register of the Chamber
of Commerce under number 64060977. Its telephone number is +39-0536-949111. The name and address of
the Company’s agent in the United States is: Ferrari North America, Inc., 50 Sylvan Avenue, Englewood Cliffs, NJ
07632. Its telephone number is +1 (201) 816 2600.
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.
In 1947, we produced our first racing car, the 125 S. The 125 S’s powerful 12 cylinder engine would go
on to become synonymous with the Ferrari brand. In 1948, the first road car, the Ferrari 166 Inter, was produced.
Styling quickly became an integral part of the Ferrari brand.
In 1950, we began our participation in the Formula 1 World Championship, racing in the world’s
second Grand Prix in Monaco, which makes Scuderia Ferrari the longest running Formula 1 team. We won our
first Constructor World Title in 1952. Our success on the world’s tracks and roads extends beyond Formula 1,
including victories in some of the most important car races such as the 24 Hours of Le Mans, the world’s oldest
endurance automobile race, and the 24 Hours of Daytona.
The Fiat group acquired a 50 percent stake in Ferrari S.p.A. in 1969, which increased to 90 percent in
1988, after the death of Enzo Ferrari, with the remaining 10 percent held by Enzo Ferrari’s son, Piero Ferrari.
On October 29, 2014, FCA announced the intention to separate Ferrari S.p.A. from FCA (the
“Separation”). The Separation was completed on January 3, 2016 through a series of transactions which are
summarized below.
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 percent 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 percent 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 percent of Predecessor Ferrari common shares, Piero Ferrari held
approximately 10 percent of Predecessor Ferrari common shares and investors in the IPO held approximately 10
percent 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.
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 percent 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. On January 4, 2016 the Company also completed the listing of its
common shares on the Mercato Telematico Azionario, the stock exchange managed by Borsa Italiana, under the
ticker symbol RACE.
58
59
ANNUAL REPORT
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 outperform global GDP.
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Global Personal-Luxury-Goods Market
Global GDP
Source: Bain & Company
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. 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 because the novelty, exclusivity and excitement of a new product is capable of
creating and capturing its own demand from clients.
UNITS
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FERRARI
LUXURY PERFORMANCE CAR INDUSTRY
Y
R
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•
•
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, Ford, Honda/Acura, 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 2017).
• Data for the Luxury Performance Car Industry based on units registered (in Brazil, Japan, Taiwan, United Kingdom, Germany, France,
Switzerland, Italy, Spain, Sweden, Netherlands, Belgium and Austria) or sold (in USA, South Korea, Thailand, China, Hong Kong,
Australia, New Zealand, Singapore and Indonesia). Source: USA: US Maker Data Club, Brazil-JATO; Austria-OSZ; Belgium-FEBIAC;
France-SIV; Germany-KBA; UKSMMT; 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 now exceeded pre-crisis levels. As shown in the chart above, our
volumes 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 2017, our volumes in the largest 22 markets were substantially in line with 2016, primarily driven by
contribution from our range models. We had a market share of 20 percent in the luxury performance car market;
with a 22 percent of market share in the sports car segment and 16 percent of market share in the GT segment.
The chart below sets forth our market shares in 2017 in our largest 22 markets by geographical area.
60
61
ANNUAL REPORT
successor of the California T which is being phased out), the GTC4Lusso and the GTC4Lusso T models and our
principal competitors are Rolls-Royce (Wraith and Dawn), Bentley (Continental GT/GTC, V12 and V8, Speed
and S version, GT3-R and Supersports), Aston Martin (DB11 Coupé and Spider, V8 and V12) and Mercedes (S
Coupé and Convertible 63/65 AMG, AMG ATC Coupé and Spider and AMG GTR).
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 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.
INDUSTRY
OVERVIEW
TOP22 MKTs
EUROPE
AMERICAS
CHINA, HONG KONG
AND TAIWAN (on a
combined basis)
REST OF APAC
20%
23%
18%
19%
26%
25%
80%
82%
81%
74%
75%
Ferrari market leader in
Belgium, France, Italy
and Switzerland
Ferrari market leader in
USA
Ferrari market leader in
China, Hong Kong
and Taiwan
(on a combined basis)
Ferrari market leader in
Japan, Australia,
Indonesia, Singapore,
Thailand
20%
80%
18%
82%
19%
81%
26%
74%
25%
75%
• 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, Ford, 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 2017).
• Data for the Luxury Performance Car Industry based on units registered (Brazil, Japan, Taiwan, United Kingdom, Germany, France, Switzerland, Italy,
Spain, Sweden, Netherlands, Belgium and Austria) or sold (in USA, South Korea, Thailand, China, Hong Kong, Australia, New Zealand, Singapore
and Indonesia). Source: USA: US Maker Data Club, Brazil-JATO; 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.
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, 812 Superfast and our latest special
series, the F12tdf, and our principal competitors are Lamborghini (Huracán 4WD/2WD, Aventador, Aventador
SV, in each case Coupé and Spider, and Huracán Performante), McLaren (570S/GT, 540C, 720S Coupé and
Spider), Ford (GT), Honda (NSX), Porsche (911 Turbo, Turbo S, both Coupé and Spider), Mercedes (SL 63/65
AMG), Aston Martin (Vanquish and V12 Vantage/S, both Coupé and Spider), Audi (R8 V10 Coupé and Spider,
R8V10 Plus and R8V10 RWS). In the GT segment our products are the California T, the Ferrari Portofino (the
62
63
ANNUAL REPORT
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 229 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 164 authorized dealers
operating 185 points of sale.
We believe our cars are the epitome of performance, luxury and styling. Our current product range
consists of six range models, including three sports cars (488 GTB, 488 Spider and 812 Superfast) and three
GT cars (GTC4Lusso, GTC4Lusso T and California T), one special series car (F12tdf) and one limited edition
supercar (LaFerrari Aperta). We also produce very limited editions series (fuoriserie) and one-off cars. The 812
Superfast was launched in February 2017 and the Ferrari Portofino, which is the successor of the California T
(which is being phased out), was unveiled in September 2017 with shipments expected to begin in the second
quarter of 2018. The LaFerrari Aperta was unveiled in September 2016 to celebrate our 70th anniversary in 2017.
In 2017, we shipped 8,398 cars and recorded net revenues of €3,417 million, EBIT of €775 million, net
profit of €537 million, and earnings before interest, taxes, depreciation, and amortization (EBITDA) of €1,036
million. For additional information regarding EBITDA, which is a non-GAAP measure, including a reconciliation
of EBITDA to net profit, see “Operating Results—Non-GAAP Financial Measures.”
We pursue a low volume production strategy whilst broadening our product portfolio to target a larger
customer base in order to maintain a reputation of exclusivity and scarcity among purchasers of our cars and
carefully manage our production volumes and delivery waiting lists to promote this reputation. We divide our
regional markets into EMEA, Americas, China, Hong Kong and Taiwan (on a combined basis) and Rest of APAC,
representing respectively 44.5 percent, 33.5 percent, 7.3 percent and 14.7 percent of units shipped in 2017.
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 18 Ferrari-owned
stores and 30 franchised stores (including 8 Ferrari Store Junior), as well as 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 over 350 million television viewers in 2017 (Source: FOM/Kantar
Media 2017). 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 includes 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 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, 2+2 seaters and 4 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) and the 488 Spider (with 670 hp);
and one equipped with a front V12 engine, the 812 Superfast (with 800 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 two models equipped with our V8 engine, the California
T (with 560 hp) and the GTC4Lusso T (with 610 hp), the first Ferrari 4 seater equipped with a V8 turbo engine.
We also offer one GT model equipped with our V12 engine, the GTC4Lusso (with 690 hp), our sport-luxury 4
seater and 4 wheel drive. The Ferrari Portofino (with 600 hp), the replacement of the California T, was unveiled
in September 2017 and shipments are expected to begin in the second quarter of 2018.
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.
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 (fuori serie) 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. At the Mondial de l’Automobile 2016 show in Paris we introduced an open top version
of the LaFerrari, LaFerrari Aperta, to celebrate the 70th anniversary of Ferrari in 2017. Our fuori serie 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 F60 America (celebrating our 60th anniversary of sales in the United States)
and the J50 (celebrating our 50th anniversary of sales in Japan). Our one-off cars are designed to meet the varying
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needs of our most loyal and discerning clients. They reflect the exact design and specifications required by our
clients and are produced as a single, unique vehicle. (See “-Limited Edition Supercars, Fuori Serie and One-Offs”).
The table below sets forth our unit shipments for the years ended December 31, 2017, 2016 and 2015,
by geographic market:
(Number of cars and % of total cars)
EMEA
UK
Germany
Italy
France
Switzerland
Middle East (1)
Other EMEA(2)
Total EMEA
Americas(3)
China, Hong Kong and Taiwan
(on a combined basis)
Rest of APAC(4)
Total
2017
843
710
417
346
339
331
751
3,737
2,811
617
1,233
8,398
For the years ended December 31,
%
2016
%
10.0%
8.5%
5.0%
4.1%
4.0%
3.9%
9.0%
44.5%
33.5%
7.3%
14.7%
100.0%
769
675
364
306
333
439
724
3,610
2,687
619
1,098
8,014
9.6%
8.4%
4.5%
3.8%
4.2%
5.5%
9.1%
45.1%
33.5%
7.7%
13.7%
100.0%
2015
%
740
595
285
274
340
456
661
3,351
2,640
610
1,063
7,664
9.7%
7.8%
3.7%
3.6%
4.4%
5.9%
8.6%
43.7%
34.4%
8.0%
13.9%
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) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia and South Korea.
The table below sets forth our unit shipments for the years ended December 31, 2017, 2016 and 2015,
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,
2017
2016
2015
4,845
998
5,843
1,619
936
2,555
8,398
4,221
1,152
5,373
2,247
394
2,641
8,014
3,534
1,169
4,703
2,638
323
2,961
7,664
(1)
(2)
Includes 458 Speciale and 458 Speciale A for 2015.
Includes the F12berlinetta for all periods presented, the LaFerrari until 2016, and from the third quarter of 2016 the LaFerrari Aperta.
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
consist of six models, including three sports cars, the 488 GTB, the 488 Spider and the 812 Superfast, and three
GT cars, the California T, the GTC4Lusso and the GTC4Lusso T. The Ferrari Portofino will replace the California
T, with shipments expected to begin in the second quarter of 2018.
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.
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”).
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 the 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
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instrument panel heightens the sense that the cockpit is completely tailored around the driver, leading to an ex-
tremely sporty yet comfortable ambiance. The 488 GTB has 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
Unveiled at the Geneva Motor Show in 2017, the 812 Superfast is equipped with a 800 hp V12 engine.
Built around highly evolved transaxle architecture and equipped with leading-edge components and controls, it
boasts a striking design and aerodynamics as well as uniquely smooth handling. It ushers in a new generation of
Ferrari 12-cylinders and we believe it is the new benchmark for mid-front-engined sports cars. This is a model that
will deliver a riveting, rewarding driving experience on both road and track, thanks to its superb handling and ride
comfort on longer trips. The 812 Superfast incorporates several innovations such as EPS (Electric Power Steering)
for pure exhilarating fun, PCV system (Passo Corto Virtuale - four wheel steering system), an evolution of Side Slip
Control (SSC) and innovative aerodynamics content.
F12tdf
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 exceptional dynamic behavior, with
close to no turbo lag and response time of just 0.8 seconds.
812 Superfast
The F12tdf was unveiled in October 2015 and has finished its limited series run in 2017. The F12tdf is our
latest special series sports car (based on the F12berlinetta), which pays tribute to the Tour de France, the legen-
dary 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 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 wider front tires and
other vehicle dynamic control systems provides 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.
California T
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The California T, which is being phased out, followed the great success of our 2008 California model and
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, was launched at the Geneva Motor Show in March 2016.
Ferrari Portofino
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 690 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. Shipments of the
GTC4Lusso began in the third quarter of 2016.
GTC4Lusso T
Unveiled in September 2017 at the Frankfurt Motorshow, the Ferrari Portofino is the successor of the
California T in the Ferrari GT range. The model is set to lead its segment thanks to a combination of outright
performance and versatility in addition to a level of driving pleasure and on-board comfort that we believe
is unparalleled on the market. The car is 80 kg lighter than the California T thanks to the adoption of new
components featuring innovative designs made possible by the use of advanced production techniques. This,
combined with a 40 cv higher output than the California T, has resulted in a significant hike in performance and
a corresponding drop in emissions. The Ferrari Portofino is capable of unleashing 600 cv and sprinting from 0 to
200 km/h in just 10.8 seconds. It combines the advantages of a retractable hard top, a roomy boot and generous
cockpit space, complete with two rear seats suitable for short trips. The new car, which takes its name, Portofino,
from the renowned village on the Italian Riviera, an eponym for stylish elegance, is a Ferrari designed to be driven
every day delivering a unique Ferrari sound and superb driving pleasure even in day-to-day situations.
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Ferrari further broadened its range at the Mondial de l’Automobile 2016 in Paris with the world premiere
of the new GTC4Lusso T, Maranello’s first ever full 4-seater to be powered by a V8, combining sportiness and
versatility with day-to-day drivability.
The GTC4Lusso T is equipped with the latest evolution of the “International Engine of the Year 2016”
V8 turbo family. The 3.9-liter engine produces a maximum of 610 cv at 7,500 rpm, delivering instant throttle
response and smooth progressive pick-up across the rev range. This impressive performance is matched by fuel
consumption figures that yield an excellent range, making the car ideal for both city driving and longer journeys.
Adding four-wheel steering and specific calibration of the dynamic control systems to the mix has
produced an extremely agile and responsive car. Production of the GTC4Lusso T started in December 2016 and
shipments started in the second quarter of 2017.
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, panoramic roof option, 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. 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).
Tailor Made 70th Anniversary Collection
As part of activities to mark the 70th anniversary of the company, Ferrari Tailor Made, together with the
designers of the Ferrari Design Center have put a modern twist on the stylistic features that distinguished 70 iconic
Ferraris of the past interpreted in a contemporary way on five of our range models for a total of 350 special edition
liveries. All the cars are distinguished by the commemorative logo of the 70th anniversary along with an ID plaque
with the name of the model that inspired it. The project was unveiled at the Paris Motor Show in September 2016.
Limited Edition Supercars, Fuori Serie and One-Offs
In line with our tradition of supercars starting with the 288GTO in 1984 through to the Enzo in 2002 and
the LaFerrari Aperta, our latest supercar which we launched in 2016, 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 fuori serie). These
models can be offered globally, or may be limited to specific local markets. Based on an exotic product concept
not available on the standard Ferrari model range, these cars feature completely unique design and specifications
compared to our other models.
LaFerrari Aperta
LaFerrari Aperta is the open top version of the LaFerrari, the latest in our line of supercars. Like its coupé
sibling, the LaFerrari Aperta is equipped 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 Aperta has a combined total of 963 hp. LaFerrari Aperta’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 Aperta generates almost 50 percent more horsepower than the Enzo, its predecessor, and 220 hp more
than the F12, our most powerful car to date. Production and shipments started in the third quarter of 2016 and
are expected to end in 2018.
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Ferrari J50
The J50 is a two-seater, mid-rear-engined roadster that marks a return to the targa body style evocative
of several well-loved Ferrari road cars of the 1970s and 1980s. It was introduced during a celebration held at
the National Art Center in Tokyo to commemorate the 50th anniversary of Ferrari in Japan in December 2016.
Designed by the Ferrari Styling Centre team in Maranello, just 10 examples of the J50 will be built and, in the spirit
of Ferrari’s fuori serie tradition, each one will be tailored specifically to the customer’s requirements. Based on the
488 Spider, the J50 is powered by a specific 690 cv version of the 3.9-liter V8 that won the overall International
Engine of the Year Award this year. The bodywork is all new and heralds a radical and futuristic design language,
with a highly distinctive personality that suits the tastes of a clientele seeking the utmost in innovative styling.
Production started during 2017 and all deliveries will take place in 2018.
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 homologation and registration purposes, these cars reflect the exact exterior and interior design
specifications requested by the clients, and are produced as a single, unique car. Some of the most iconic models
to have emerged from our One-Off program include the SP12 EC, the F12 TRS (a radical two-seat roadster
created on the platform of the F12berlinetta in 2014) and the 458MM Speciale. The program is expanding 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 in competitive and non-competitive race events.
This activity is managed by the Attività Sportive GT Department which includes: Competizioni GT (taking care of
the GT racing) and Corse Clienti (taking care of the Ferrari Challenge one-make series, The Corso Pilota driving
courses, the XX Programmes and the F1 Clienti activity).
488 GTR/GTLM and 488 GT3/GTD
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They are sold to clients and private teams as racing cars specifically developed for professional racing
with the aim to compete in the FIA World Endurance Championship, in several GT International series and also
historical races like Daytona 24 Hours, Le Mans 24 Hours.
F1 Clienti
In 2016, its first year of competition, the 488 GTE won the FIA World Cup for GT Manufacturers and the
488 GT3 special car won several other competitions such as the GTD class of the IMSA SportsCar Championship
and the GT class of the Asian Le Mans Series.
In 2017, the 488 GTE was even more successful gaining the FIA World Title for GT Manufacturers, the
Drivers Title and Team Cup and the European Le Mans Series. The 488 GT3/D also doubled the victory, winning
once again the IMSA SportsCar Championship.
XX Programme
Introduced in 2003, the F1 Clienti program allows a limited number of exclusive Ferrari lovers to both
purchase previously-used Scuderia Ferrari Formula 1 cars and experience them in full. Formula 1 cars that we
sell as part of this program include recent cars of the 21st century, such as those driven by Kimi Raikkonen and
Felipe Massa, and cars from decades ago, such as the 412 T2 of 1995, the last Formula 1 car to be powered by
a 12-cylinder engine which is now back on the racetrack thanks to F1 Clienti.
Owners can focus exclusively on the driving experience, while the F1 Clienti program can arrange for the
cars to be kept at Maranello for safekeeping, where F1 technicians and mechanics perform regular maintenance
of the cars. The F1 Clienti program includes a series of events throughout the year that enable customers to
experience the pleasure of driving on prestigious tracks in front of a live crowd.
Ferrari Challenge Trofeo Pirelli - 488 Challenge
Since 2005, we have been operating our XX Programme, 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
Programme, 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, shipments of which started in the second quarter of
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. The FXX K Evo was launched in October 2017 at
the Finali Mondiali in Mugello.
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Ferrari Challenge is the biggest one-make series in the world. The series was established in 1993 and the
events are FIA approved, thus ensuring very high safety standards and dependable organization. The championship
was an immediate success: the formula for the event ensures that cars are very closely matched, thus putting the
focus on the drivers. There are three series: Europe, which is the oldest, North America and Asia-Pacific.
The 488 Challenge marks the 25th anniversary of the Ferrari Challenge and was launched in December
2016 at the Finali Mondiali in Daytona. The 488 Challenge is the first equipped with a turbo engine to get on track
in the Ferrari one-make series. It is the most powerful car in the Challenge history thanks to 670 hp from the V8
3.9-liter engine derived from the 488 GTB. Ferrari’s patented Slip Slip Angle Control software is installed for the
first time on a Challenge car, improving the longitudinal acceleration through bends by 4.2 percent. Production
started in 2017.
Corso Pilota Driving Courses
Initiated in 1993, Corso Pilota driving courses enable Ferrari customers to experience and appreciate the
full formidable performance of the Ferrari models in a safe environment. It provides an opportunity to attend
various, increasingly technical and complex courses that begin with the Sport, Advance, and Evolution levels,
and culminate with the Challenge course. Led by professional instructors with years of Ferrari driving experience,
the courses are designed to progressively develop participants’ driving style and skills so that they will obtain
sufficient mastery to compete safely in real Challenge Championship races. The selection and preparation of the
Ferrari cars used for the courses is of fundamental importance and the current fleet consists of 488 GTB, 812
Superfast and 488 Challenge models.
Sales and After-Sales
Our commercial team, which includes 234 employees at December 31, 2017, 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) China, Hong Kong and Taiwan (on a combined basis), 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. We regularly assess
the composition of our dealer network in order to maintain the highest level of quality. The dealer assessment
and selection process may cause a variation of the number of dealers from time to time. Following our decision
to terminate the distributor in Hong Kong in 2016, we now import cars into Hong Kong directly and have
appointed a new dealer which became fully operational during the third quarter of 2017. Moreover, we decided
to establish a fully-owned subsidiary aimed to be closer to the market and enhance the brand visibility in this
market. At December 31, 2017, our network comprised 164 dealers operating 185 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 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.
The chart below sets forth the geographic distribution of our 185 points of sale at December 31, 2017:
FERRARI
Maranello
Americas
50 POS
U.S.A.
38 POS
Canada
5 POS
EMEA
91 POS
North eeurope
18 POS
Central Europe
20 POS
Latin America
7 POS
East West Europe & Africa
25 POS
South Europe
16 POS
Middle East
12 POS
China, Hong
Kong, Taiwan
22 POS
China
18 POS
Taiwan
3 POS
Hong Kong
1 POS
Rest of APAC
22 POS
North East Asia
11 POS
South East Asia
5 POS
Australasia
6 POS
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Our sales are diversified across our dealer network, with the largest dealer representing approximately
2.2 percent of sales, and our 15 largest dealers representing 21.7 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. Our
order reporting system allows us to collect and monitor information regarding end client orders and is able to
assist us in production planning, 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 sales services to clients, either at facilities adjacent to showrooms, or in stand-
alone service points across 231 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.
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 2017, more than 65 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 Program and Tailor Made Program”).
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.
During 2017, to celebrate our 70th anniversary, over 60 nations hosted Ferrari events crafted to treat
clients and enthusiasts to a string of unique experiences as part of the “Driven by Emotion” concept. Thus March
12, 2017 marked the start of the anniversary events, with Australasia opening the program.
The anniversary celebrations were flanked by many initiatives paying homage to the Cavallino Rampante
heritage, not least two exclusive tours through Tuscany: the Cavalcade Classiche in May devoted to the cars that
have made the history of Ferrari, and the 250 GTO rally, dedicated to one of the best known and admired Ferraris
of all time.
On September 7 and 8, moreover, clients were invited to a two day World Premiere of the Ferrari Portofino,
the new GT convertible with a 600 hp V8 engine, at the famous former fishing village whose name it bears.
The festivities for the 70th anniversary culminated in Maranello on the weekend of September 9 and 10,
when Ferrari hosted over 4,000 clients and almost 1,000 cars from all over the world at its Fiorano track.
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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 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, also including the International Edition) 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
The Ferrari Classiche department aims to provide Ferrari customers with a point of reference for
managing their historic Ferrari vehicles with the objective of keeping as many of these classic cars on the road
as possible. Services include the certification of the authenticity of classic Ferrari cars and vehicles of particular
historical relevance, the management of Ferrari restoration and repair activities, as well as the management of
Ferrari spare parts, including when these are no longer available on the market. The department also provides
advice on repair operations carried out on Ferrari Classiche cars within its network.
Ferrari Classiche aims to create a platform of information and technical expertise to preserve and
enhance over time the awareness and value of Ferrari’s heritage and brand. We view the surviving Ferrari vehicles
of historical value as the tangible legacy and incarnation of our brand. The Ferrari Classiche department also
supports and encourages the direct participation of clients in strategic historical events.
The Ferrari Classiche department in Maranello consists of an office of specialists and a workshop in
which historic cars are restored and repaired. In addition, in order to provide an enhanced service to owners
away from the proximity of the main workshop in Maranello, starting in 2017 Ferrari Classiche has authorized
a new service network with 48 new “Officina Ferrari Classiche” workshops, primarily for vehicle repairs and the
certifications’ inspections or revalidation, and the network is expected to expand in future periods.
The originality of the car with respect to the initial specifications is checked via a technical inspection,
performed either at the Ferrari Classiche facility in Maranello or at an authorized Officina Ferrari Classiche, and
benefits from a comprehensive archive containing drawings of each of the individual chassis details of historical
components. Based on the evidence gathered during this inspection, the car is then presented to an expert
committee, chaired by the founder’s son, Piero Ferrari, for the certification. In recent years, Ferrari has certified
approximately 400 cars each year.
At the Maranello workshop, Ferrari Classiche carries out approximately 10 full restorations every year,
along with 20 partial restorations. We use either original components and spare parts or replicas manufactured
in accordance with the original specifications, and our restoration service offers our clients the opportunity to
reinstate any classic Ferrari to its original pristine conditions.
Formula 1 Activities
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 pinnacle of motorsports
with over 350 million television viewers in 2017 (Source: FOM/Kantar Media 2017), which make it one of the most
watched annual sport series in the world.
Formula 1 cars rely on advanced technology, powerful hybrid engines and cutting edge aerodynamics,
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
Formula 1 World Championship exceptional visibility on the world stage, and coverage now extends well beyond
the range of conventional media with growing exposure on social networks.
Scuderia Ferrari has been racing in the Formula 1 World Championship since the series launched in
1950, and won its first Grand Prix in 1951. We are the only team that has competed in each season since launch
and the oldest and most successful in the history of Formula 1, with 229 Grand Prix wins. Throughout 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 drivers’ line-up currently comprises four-time World Champion Sebastian Vettel, who joined
Ferrari at the beginning of 2015, and Kimi Raikkonen, now in his second term with the Scuderia Ferrari, for which
he won the World Drivers title in 2007. Together, the two drivers have won a total of 67 Grands Prix.
The 2017 Formula 1 season was our most successful in the last seven years, with our team achieving five
Grands Prix victories and five pole positions. In the Constructors’ Championship we achieved our best result
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since the current point system was implemented in 2010. Reorganization of the team and continuous research
are part of an ongoing process aimed at further improving team performance in the future.
Participation in the Formula 1 World Championship is regulated by bilateral Team Agreements entered
into between Formula 1 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.
On January 23, 2017, Liberty Media Corporation completed the acquisition of all the shares of Delta
Topco Limited, the holding company of FOWC. The bilateral Team Agreements will remain unaffected by the
change of control. As a consequence of the change of control, Ferrari exercised the options it was granted
pursuant to the Team Agreement and in February 2017 received approximately $11.4 million in cash (including
$2.7 million of previously undistributed dividends), 145 thousand Liberty Media Corporation shares (“Liberty
Shares”) and $911 thousand of Liberty Media exchangeable notes. The Liberty Media exchangeable notes were
subsequently converted to Liberty Media shares in November 2017.
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 how the
teams compete in races and include technical regulations governing aspects ranging from tires, 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 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. The terms under which racing teams may continue to participate in racing
seasons following expiration of the current Team Agreements in 2020 are under discussion with the new owners of
Formula 1 business. See “Risk Factors - Our revenues from Formula 1 activities may decline and our related expenses may grow.”
Improvements in technology and sometimes, changes in regulation, require the design and production of
a new racing car every year. Therefore, in addition to our long-term research and development efforts, we begin
designing our single-seaters each year in the Spring, 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 fitted 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 steering wheel paddles for gearshifting, the use and development of composite materials,
which makes cars lighter and faster, and technology related to hybrid propulsion.
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 ERS, technology. Current advanced ERS
feature two electric motor/generator units in every car, which allow the driver to recover, store and deploy energy
generated both by the vehicle during braking and by the exhaust gases through a turbocharger. Building on our
racing team’s expertise, we developed a hybrid ERS system for our LaFerrari and LaFerrari Aperta road cars.
The high brand visibility we achieve through participation in the Formula 1 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) remain
our principal official sponsors. Banco Santander was also one of our official sponsors from 2008 until the end
of 2017. Other official sponsors include Alfa Romeo, UPS, Kaspersky lab, Weichai, Hublot and Ray-Ban. Our
official suppliers include, among others, Pirelli, Puma, Ray-Ban, 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 use 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 or collection.
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 industry, would
otherwise incur.
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 what we believe to be
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 racetrack.
We promote the Mugello circuit to event organizers who regularly rent the circuit to host leading car
and motorbike races, including the MotoGP World Championship since 1992. In 2017, almost 93,000 people
attended the MotoGP World Championship at Mugello, a great attendance for the show.
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 stores, licensed theme parks and the development of a line of apparel and accessories sold
exclusively in our monobrand stores and on our website www.store.ferrari.com.
Ferrari owns and manages two museums, one in Maranello and one in Modena, which attracted more
than 530,000 visitors in 2017.
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Licensing and Theme Parks
Retail and E-Commerce
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
Fragrances
Sportswear
Theme Parks
Toys
Video games
Watches
Principal Licensees
o Luxottica (sunglasses)
o Tod’s (shoes and leather goods)
o Various
o Perfume Holding
o Puma
o Ferrari World, Abu Dhabi
o Ferrari Land, 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)
Other (including collectors’ models, kid apparels, and
accessories, stationary and credit cards)
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 (13 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. 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, Formula Rossa, which reaches speeds of 240 km/h
and simulates the breathtaking adrenaline rush of a Ferrari single-seater. New attractions like the roller-coaster
Flying Aces, the children’s ride Benno’s Great Race and the Turbo Track vertical climbing accelerator have been
opened in 2016 and 2017.
Our second theme park, Ferrari Land Portaventura, opened in April 2017 near Barcelona, and includes
Red Force, the tallest and fastest roller-coaster in Europe. 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.
Through our network of stores (franchised or directly managed), we offer a wide range of Scuderia
Ferrari branded products, including a line of apparel and accessories exclusively sold in our stores and on our
website. All products sold in our stores and on our website are either directly sourced from our selected network
of suppliers or manufactured by our licensees.
At December 31, 2017, there were a total of 48 retail Ferrari stores, including those in Maranello, Milan,
Rome, Macau, New York, Miami, Los Angeles, Johannesburg, Dubai and Abu Dhabi, of which 30 franchised
stores (including 8 Ferrari Store Junior) and 18 stores owned and operated by us.
We require all franchisees to operate our monobrand 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, e-commerce has proved to be an increasingly valuable sales channel, with over 490,000
registered users in more than 190 countries and translations in seven languages.
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
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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 Italian coachbuilders such as Carrozzeria
Touring, Vignale, Scaglietti and especially Pininfarina. The privileged partnership with Pininfarina, spanning over
six decades, has helped define Ferrari’s design language and has established Ferrari at the forefront of design
advance and excellence. Throughout the years this has been recognized repeatedly by a long series of awards
being bestowed upon Ferrari road cars.
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. The name and logo “Ferrari Design” denotes all concepts and works from
Ferrari Design Centre (see “-Intellectual Property”). Ferrari Design handles all aspects of automotive styling for the
Ferrari road cars product range, encompassing the styling of all bodywork, external components and interior trim,
applied to series production models for the GT and Sports car range special editions, limited editions, one-off
models, concept cars and some track-only models. Ferrari Design also includes a color & 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 90 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 FXX K Evo, the Ferrari Portofino,
the 812 Superfast, and also the GTC4Lusso, the GTC4Lusso T, the F12tdf, the 488 Spider, the 488 GTB, the
488 Challenge, the FXX K, the LaFerrari, the LaFerrari Aperta and the limited-series J50, 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 fuori serie, we expect that the design and
development of most of our future models will be carried out primarily by Ferrari Design Centre.
During the 8 years of activity of the Ferrari Design Centre, our cars have been granted several renowned
design awards, including, among the most recent:
• 812 Superfast: Chicago Good Design Award (2017)
• J50: Red Dot Best of the Best (2017); Chicago Good Design Award (2017)
• LaFerrari Aperta: Honourable Mention - Sport, Performance and Innovation, International Compasso
d’Oro Award (2017); Red Dot Design Award (2017)
• GTC4Lusso: iF Gold Design Award (2017); Red Dot Design Award (2017); Most Beautiful Supercar of
the Year - International Automobile Festival Paris (2017); Chicago Good Design Award (2017)
• 458 MM Speciale: iF Design Award (2017); Red Dot Design Award (2017)
• 488 GTB: Red Dot Best of the Best (2016); iF Design Award (2016)
• 488 Spider: iF Design Award (2016); Autonis Design Award (Auto Motor und Sport, D) - Beste Design
- Neuheit: Cabrios (2016); Chicago Good Design Award (2016)
• F12tdf: Chicago Good Design Award (2016)
• FXX K: Red Dot Best of the Best (2015), iF Gold Award (2016); Compasso d’Oro ADI (2016)
• LaFerrari: Red Dot Design Award (2015); Best Cars - Coupé Category, Motor Presse Iberia Design of
the Year (2015)
• California T: Red Dot Design Award (2015)
The new Ferrari Design Centre will be completed in Maranello in the first half of 2018. Sitting at the heart
of the industrial complex, the new facility will cover more than 5,600 square meters distributed over four levels
housing the main design office, a fully-equipped model making studio and a vast indoor/outdoor presentation
space on the top floor. Additionally, the new building will host the Atelier and Tailor Made department to engage
clients with Ferrari’s rich personalization services.
The architectural concept of the building aims to reflect the symbolic value of Ferrari’s advanced design
process, drawing upon the interaction between digital technologies and the best Italian handmade craftsmanship
tradition.
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 750 engineers and technicians
at December 31, 2017. 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,
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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.
Until 2017, we applied a development cycle for our range models which included “modified” or “M”
models that incorporated certain elements of their predecessor models with relevant modifications not only for
aesthetic updates but also for key technological improvements. As a result of the progressive implementation of
a broadened and hybridized product portfolio we are converging our models into common platforms that will
provide additional flexibility to manage propulsion systems and their subsequent evolution and will be aimed
at targeting multiple elements such as weight reduction, increased performance, contents and technological
adaptations in connection with market regulations.
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. We have also been producing engines exclusively for
Maserati. In 2011 we started the production of the F160 3.0-liter V6 Turbo, and since 2016 we also produce the
F161 V6. In 2017, we produced approximately 46,000 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, 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, 2017, the purchases from our ten largest suppliers by value accounted
for approximately 20 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 “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 “Overview of our Business—
Properties”). Our production processes include supply chain management, production and distribution logistics
of cars in our range models and special series, as well as assembly of prototypes and avanseries.
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. 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, 2017, our production processes employed over 1,350 engineers, technicians and other
personnel (approximately 1,230 blue collar employees including approximately 320 temporary production
employees and approximately 120 white collar employees). We have a flexible production organization, 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 to address
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special peaks in demand. 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.
and give the bodies their final finish. In 2017 we substituted the robot which applies the base coat with a new
generation robot to improve quality and technical efficiency.
Assembly Line and Final Checks
The final assembly of our cars takes place in our body-shop, built in 2008. We have two different lines
placed at ground level and the first floor of the building. For each model, the initial assembly operations take
place simultaneously on different lines and sections to maximize efficiency so while the body is assembled on the
main line, the powertrain, as well as the cockpit and the doors, are prepared on a specific sub-line.
Engine Production
Personalization and Road Tests
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. At the 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 2017 we produced an
average of approximately 240 engines per day, including approximately 12 V12, 41 V8 (including 2 V8 turbo and
12 V8 aspirated for Maserati) and 187 V6 engines for Maserati (see “—Manufacturing of Engines for Maserati”).
Body Assembly
In parallel with the assembly of our engines, we prepare our body-shells at our panel shop Carrozzeria
Scaglietti in Modena. The main components of body-shells are not manufactured internally but are sourced
from manufacturers such as Officine Meccaniche Rezzatesi for chassis and Fontana Group and SuperForm for
bodies. At Carrozzeria Scaglietti we have two different production lines dedicated to the assembly of our V8 and
V12 aluminium bodies. 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 eliminate any imperfections by either filing or panel beating. In our Scaglietti plant
we also have a dedicated line for the assembly of a special carbon fiber body for our supercar “LaFerrari Aperta”.
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, the bodies are 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. All body-shells are cleaned with automatic
pressure blowers (to avoid the electrostatic effect) and carefully brushed with emu feathers (because of their
natural electrostatic properties) to clean off any dirt particles or impurities before painting. The painting process
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
During the process of assembly of our cars we manage the fitting of all bespoke interiors, components and
special equipment options that our clients choose as part of our personalization program (see “—Personalization
Program and Tailor Made Program”). After the assembly 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, Ghibli and Levante (turbo engines), and 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
2017, we sold approximately 340 V8 turbo engines and approximately 2,530 V8 aspirated engines to Maserati. In 2011
we began producing a family of engines exclusively for Maserati, in much larger production volumes to be installed on
the Quattroporte and Ghibli (mainly the F160 3.0-liter V6 Turbo engines), and from 2016 we started the production
of F161 engines to be installed on the Levante, Maserati’s SUV. We have a multi-year arrangement with Maserati to
provide V6 engines, up to 2020. 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 2017, we sold approximately 43,000 V6 engines to Maserati in four different
versions, ranging from 330 hp to 430 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 F160 V6 and F161 V6
engines also differs from the strategy applicable to the production of 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 €302 million in 2017.
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Financial Services
We offer retail client financing for the purchase of our cars through Ferrari Financial Services (FFS)
in our major markets, including the United States, as well as certain European markets through our associate
Ferrari Financial Services GmbH (“FFS GmbH”). We also offer dealer financing through FFS in the United States.
Until December 2014 we offered dealer financing in the 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
current) 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 FCA
Bank), a 50/50 joint venture between FCA Italy S.p.A. and Crédit Agricole Consumer Finance S.A.; through this
partnership financial services are provided to Ferrari dealers and customers in certain European countries. FCA
Bank operates in 17 countries.
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, 2017, 2016 and 2015:
Research and development costs expensed during the period
Amortization of capitalized development costs
Total research and development costs
For the years ended December 31,
2017
2016
2015
556,617
100,502
657,119
(€ thousand)
509,580
104,055
613,635
446,726
114,856
561,582
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.
In May 2015, we entered into a partnership with JACCS Co., Ltd to support sales volume growth in the
Japanese market with a full scale customer and dealer finance arrangement.
Vehicle Concept
In light of our partnership with FCA Bank and JACCS Co., Ltd, and also due to changes to the banking
and financial laws in Italy, we requested and obtained the cancellation of FFS from the list of regulated financial
intermediaries in 2016.
In November 2016, FCA Bank acquired a majority stake in FFS GmbH for a total purchase price of
€18.6 million. As a result of the transaction, FFS and FCA Bank will continue the operations of FFS GmbH as
shareholders, supporting the sales of Ferrari cars in Germany, Great Britain and Switzerland and certain other
European countries by offering innovative vehicle financing solutions to Ferrari customers. The funding of FFS
GmbH has been provided by FCA Bank, which is also the consolidating entity.
At December 31, 2017, FFS’s portfolio of financial receivables was €733 million in aggregate, almost
entirely in the Americas.
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, 2017, included approximately
450 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 €185 million in 2017, €141 million in 2016, and €154 million in 2015.
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 competitive with 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.
Engines
Our V12 engines’ output ranges from 690 hp (in the GTC4 Lusso), to 780 hp (in the F12tdf), and up
to 800 hp (in the LaFerrari Aperta). 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 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.
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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.
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, which have also been equipped on the F12tdf and we plan to introduce such
brakes on our future sports cars.
Aerodynamics
We are constantly seeking to improve the aerodynamics of our models, working specifically on drag
resistance and downforce.
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 and DC/DC charger. The battery 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).
We are undertaking an important program to understand the potential of hybrid technology and we
are researching how to improve the performance and driving experience of our cars without losing fuel efficiency
advantages.
We are working intensively to develop an efficient package introducing new electrified components.
While maintaining the compactness of the car, we are also seeking to lower the weight as a low center of gravity
is crucial not only to performance but also for maximizing the overall driving experience. In our research program
we are also considering new technologies outside powertrain.
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.
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 460
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 own a total
of approximately 4,500 applications/registrations in more than 128 countries, in most of the main classes for
goods and services:
“Ferrari” (word)
“Ferrari” logotype:
the “Prancing Horse” (figurative):
•
•
•
•
•
•
•
•
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•
the trademark (figurative):
•
the racing shield (figurative):
• 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 “Overview of our Business—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 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 “Overview of our Business—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, 2017 was €710,260 thousand.
Employees
Human capital is a crucial factor in our success, 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 a dedicated welfare program, Formula Uomo, which includes, among
other programs, Formula Benessere Program (offering medical assistance to employees and their families) and
Formula Estate Junior (offering Summer Campus to the children of employees).
At December 31, 2017, we had a total of 3,380 employees, including 92 executives. Of these, approximately
3,196 were based at our Maranello facility, and approximately 184 in offices around the world (including 8
executives), mostly in North America and China.
White collar employees
Italy
Rest of the world
Blue collar employees
Italy
Rest of the world
Executives
Total
At December 31,
2017
2016
2015
1,531
1,358
173
1,757
1,754
3
92
1,407
1,216
191
1,751
1,748
3
90
1,304
1,143
161
1,607
1,604
3
87
3,380
3,248
2,998
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The increase in employees in recent periods principally related to a strengthening of technical
competencies, particularly within our GT cars development 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 253 workers, who are currently on agency
contracts. These workers are not included in the total Ferrari employee head count referenced above.
Approximately 11 percent of the employees were trade union members in 2017. 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 March
2, 2016 and in effect through December 31, 2017. 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 will expire on December 31, 2018, and by a Ferrari Enterprise Bargaining Agreement signed on June 22,
2016 by Ferrari and FIM, UILM and FISMIC, which will expire on December 31, 2019. This collective bargaining
contract provides, among other things, for the payment of bonuses linked to performance up to a maximum of
approximately €5,720 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. In 2015
we exceeded our alternative target and therefore we were required to pay a penalty of €411 thousand.
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 to the EU Commission our proposed CO2 emissions target levels
for the 2017-2021 period and the EU Commission approved our derogation in October 2016. Pursuant to that
derogation, we are required to meet certain CO2 emissions target levels in the 2017-2021 period, reaching a
target of 277 grams per kilometer in 2021 for our fleet of EU-registered cars that year.
In the United States, both Corporate Average Fuel Economy (“CAFE”) standards and greenhouse gas
emissions (“GHG”) 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 2025, targeting an estimated combined average emissions level of 163 grams per mile in 2025, which is
equivalent to 54.5 miles per gallon.
In November 2016, the EPA determined that the model years 2022-2025 standards, adopted by EPA in
the 2012 final rule establishing the model year 2017-2025 standards, remain appropriate. In March 2017, EPA
announced its intention to reconsider this decision, extending the review period for GHG standards definition.
In July 2017, the NHTSA published a notice of intent to prepare an Environmental Impact Statement
(“EIS”) for Model Year 2022-2025 Corporate Average Fuel Economy standards, inviting stakeholders to provide
comments. The EIS purpose is to define the potential environmental impacts of the Model Year 2022-2025 Fuel
Economy standards and represents the first step of the rulemaking process relating to those model years.
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.
In September 2016, we petitioned NHTSA for recognition as an independent manufacturer of less than
10,000 vehicles produced globally, and we proposed alternative CAFE standards, for Model Year 2017, 2018 and
2019. In December, 2017, we amended the petition by proposing alternative CAFE standards for Model Year
2016, 2017 and 2018, covering also the 2016 Model Year. NHTSA have not yet responded to our petition. We will
need in the future to file with NHTSA a petition for 2019-2020 and 2021 model years. If our petitions are rejected,
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we will not be able to benefit from the more favorable CAFE standards levels which we have petitioned for and
this may require us to purchase additional CAFE credits in order to comply with applicable CAFE standards.
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).
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. In 2017 CARB performed a technical assessment
regarding greenhouse gas standards for 2022 through 2025 Model Years, in parallel with EPA and NHTSA, the
purpose of which is to verify whether the standards defined in 2012 can be still considered appropriate.
While Europe and the United States lead the implementation of these fuel consumption/CO2
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 targeted 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 2020. In September 2017 the Chinese government issued the Administrative Measures on CAFC (Corporate
Average Fuel Consumption) and NEV (New Energy Vehicle) Credits. This regulation establishes mandatory CAFC
requirements, while providing additional flexibility for SVMs (less than 2,000 units/year imported in China)
that achieve a certain minimum CAFC yearly improvement rate. Manufactures that exceed the CAFC regulatory
ceiling are required to purchase NEV credits.
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 2016, the European Union established that Euro 6 limits shall be evaluated
through Real Driving Emissions (RDE) measurement procedure and a new test-cycle more representative of
normal conditions of use (Worldwide Light Vehicles Test Procedure). These requirements became effective
starting in 2017. SVMs (with a worldwide annual production lower than 10,000 units) are required to be
compliant to RDE standards starting from 2020.
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 GHG 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.
In response to severe air quality issues in Beijing and other major Chinese cities, in 2016 the Chinese
government published a more stringent emissions program (National 6), providing two different level of stringency
effective starting from 2020. Moreover autonomous regions and municipalities are allowed to implement in
advance this more stringent requirement.
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 EU or by individual
Member States. In 2009, the EU 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 EU 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-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. The framework is reviewed periodically, and a revised version of the
General Safety Regulation is currently under discussion. As revised, the regulation would mandate new model
cars to be compliant, among other things, with to Advanced Driver Assistance Systems (ADAS), pole side impact
protection, full overlap frontal crash, small overlap crash requirements. In 2017 the EU published technical
requirements for the Emergency Call (eCall) system, mandatory for new model cars starting from 2018.
Under U.S. federal law, all vehicles sold in the United States must comply with Federal Motor Vehicle
Safety Standards (“FMVSS”) promulgated by the 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 the NHTSA. In 2014 we paid
a $3.5 million civil penalty to the NHTSA for reporting failures related to the period 2011-2014 and for failure
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OPERATING
RESULTS
to comply with early warning reporting requirements in connection with three fatalities. We have upgraded our
procedures for compliance.
Results of Operations
Consolidated Results of Operations – 2017 compared to 2016 and 2016 compared to 2015
The following is a discussion of the results of operations for the year ended December 31, 2017 as
compared to the year ended December 31, 2016, and for the year ended December 31, 2016 as compared to the
year ended December 31, 2015. The presentation includes 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,
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2015
Percentage
of net
revenues
100.0%
48.3%
9.6%
19.2%
0.2%
0.1%
22.7%
0.9%
21.9%
6.1%
15.8%
(€ million, except percentages)
3,105
1,580
295
614
24
3
595
28
567
167
400
100.0%
50.9%
9.5%
19.8%
0.8%
0.2%
19.2%
0.9%
18.3%
5.4%
12.9%
3,417
1,651
329
657
7
2
775
29
746
209
537
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%
Net revenues
Cost of sales
Selling, general and administrative costs
Research and development costs
Other expenses, net
Result from investments
EBIT
Net financial expenses
Profit before taxes
Income tax expense
Net profit
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 addition, Ferrari
cars were included within the NHTSA Consent Order Amendment dated May 4, 2016 with Takata (the “Amended
Consent Order”) due to a defect which may arise in the non-desiccated Takata passenger airbag inflators mounted
on certain Ferrari cars. As a result of such Amended Consent Order, Ferrari filed a Part 573 Defect Information
Report on May 23, 2016 with the NHTSA and has initiated a global recall relating to certain cars produced
between 2008 and 2011. In December 2016, the NHTSA issued a Third Amendment to the Coordinated Remedy
Order (“ACRO”) which included the list of Ferrari vehicles sold in the United States up to model year 2017 to
be recalled. As a consequence of the ACRO, Ferrari has decided to extend the Takata global recall campaign to
all vehicles worldwide mounting non-desiccated Takata passenger airbag inflators. In January 2017 Ferrari, in
accordance with the Amended Consent Order and the ACRO, filed with the NHTSA a Part 573 Defect Information
Report to include Model Year 2012 Zone A vehicles. In January 2018, Ferrari, in accordance with the Amended
Consent Order and the ACRO, also filed with the NHTSA a Part 573 Defect Information Report to include Model
Year 2013 Zone A vehicles. As a result of the ACRO and the decision to extend the worldwide Takata airbag inflator
recall, Ferrari increased its provisions for the estimated charges for Takata airbag inflators recalls to €37 million
in the year ended December 31, 2016 to cover the cost of the worldwide global Takata recall due to uncertainty of
recoverability of the costs from Takata. At December 31, 2017 the provision amounted to €35 million.
In December 2015, we issued two safety calls reports with the 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 119 488 GTB vehicles sold in the United States and 65 California
T Vehicles and 199 488 GTB 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.
In 2016, the NHTSA published Phase II draft guidelines for driver distraction, for portable and aftermarket
devices, and the associated compliance costs may be substantial. These guidelines, together with previously
published Phase I provisions 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 their potential impact on our results of operations and financial position and determining
what steps and/or countermeasures, if any, we will need to make.
In 2017 Chinese authorities published the updated version of the current General Safety Regulation,
becoming the driver market for the Event Data Recorder mandatory installation starting from 2021. Technical
requirements will be defined through a dedicated standard within 2018.
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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)
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2015
Percentage
of net
revenues
2017 vs. 2016
2016 vs. 2015
(€ million, except percentages)
Cars and spare parts (1)
Engines (2)
Sponsorship,
commercial and brand (3)
Other (4)
Total net revenues
2,456
373
71.9% 2,180
338
10.9%
70.2% 2,080
219
10.9%
72.9%
7.7%
276
35
12.7%
10.5%
100
119
4.8%
54.5%
494
14.5%
488
15.7%
441
15.5%
6
1.1%
47
10.7%
94
3,417
2.7%
99
100.0% 3,105
3.2%
114
100.0% 2,854
3.9%
100.0%
(5)
312
(5.1)%
10.0%
(15) (13.8)%
8.8%
251
(1) Includes net revenues generated from shipments of our cars, including any personalization net revenues generated on these cars and sales of spare parts.
(2) Includes net revenues generated from the sale of engines to Maserati for use in their cars and net revenues generated from the rental of engines to other
Formula 1 racing teams.
(3) Includes 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.
(4) Primarily includes interest income generated by the Ferrari Financial Services entities and net revenues from the management of the racetrack.
2017 compared to 2016
Net revenues for 2017 were €3,417 million, an increase of €312 million, or 10.0 percent (an increase of
11.2 percent on a constant currency basis), from €3,105 million for 2016.
The increase in net revenues, including the positive impact of foreign currency hedging instruments, was
attributable to the combination of (i) a €276 million increase in cars and spare parts net revenues, (ii) a €35
million increase in engines net revenues and (iii) a €6 million increase in sponsorship, commercial and brand net
revenues, partially offset by (iv) a €5 million decrease in other net revenues.
Cars and spare parts
Cars and spare parts net revenues were €2,456 million for 2017, an increase of €276 million, or 12.7
percent, from €2,180 million for 2016. The increase was primarily attributable to a €249 million increase in net
revenues from range and special series cars and spare parts, as well as a €27 million increase in net revenues from
supercars and limited edition cars.
The €249 million increase in net revenues from range and special series cars and spare parts was
principally attributable to an increase in shipments of approximately 360 cars (excluding the LaFerrari and the
LaFerrari Aperta) and positive mix, along with a greater contribution from personalization programs and pricing
increases. Shipments of V12 range and special series models increased by approximately 25 percent, primarily
attributable to an increase in shipments of the GTC4Lusso and our first shipments of the newly launched 812
Superfast which is now being sold in most of our markets, partially offset by the phase-outs of the F12berlinetta
and the FF, as well as the F12tdf, which finished its limited series run. Shipments of V8 range models were in line
with 2016, as increases in shipments of the 488 family and the GTC4Lusso T were substantially offset by the
phase-out of the California T.
The €249 million increase in net revenues from range and special series cars and spare parts reflects
increases in all four of our major geographical markets, including (i) a €146 million increase in EMEA, (ii) a €40
million increase in Americas, (iii) a €36 million increase in Rest of APAC, and (iv) a €27 million increase in
China, Hong Kong and Taiwan (on a combined basis).
The €146 million increase in EMEA net revenues was primarily attributable to an increase in shipments
and a greater contribution from personalization programs. The increase in shipments was driven by double-
digit growth in shipments in Italy, France, and the UK, as well as mid-single digit growth in Germany, Switzerland
and Other EMEA. The increase in shipments was primarily related to the 488 and GTC4Lusso families, as well
as our first shipments of the newly launched 812 Superfast, which commenced in EMEA in the third quarter of
2017. This increase was partially offset by the phase-outs of the California T and F12berlinetta, as well as the
F12tdf. A decrease in net revenues in the Middle East was primarily due to a reallocation of shipments into
different markets triggered by difficult market conditions in the Middle East.
The €40 million increase in Americas net revenues was primarily attributable to positive volume and
mix, along with a greater contribution from our personalization programs, partially offset by negative foreign
exchange impact. In particular, the positive volume was driven by the 488 family and the GTC4Lusso, as well as
the entry of the GTC4Lusso T and the 812 Superfast on the market in the fourth quarter of 2017, partially offset
by the phase-outs of the California T and F12berlinetta, as well as the F12tdf.
The €36 million increase in Rest of APAC net revenues was primarily attributable to increases in Japan
and other Rest of APAC, and to a lesser extent in Australia. The increase in Japan was driven by single-digit
growth in shipments, primarily due to the GTC4Lusso family, partially offset by the phase-outs of the California
T and F12berlinetta as well as negative foreign currency exchange impact. Double-digit growth in shipments was
achieved in Australia and Rest of APAC, supported by the 488 and the GTC4Lusso families.
The €27 million increase in China, Hong Kong and Taiwan (on a combined basis) net revenues was
primarily attributable to a positive mix, driven by the GTC4Lusso family and other V12 models, particularly in
China, partially offset by a slowdown in Hong Kong due to our decision to terminate the distributor in 2016 and
the new dealership only becoming fully operational in the third quarter of 2017.
The €27 million increase in net revenues from supercars and limited edition cars was attributable to
shipments of LaFerrari Aperta, partially offset by the phase out of the LaFerrari shipments, which ended in 2016,
as well as the non-registered racing car FXX K and the strictly limited edition F60 America completing their
limited series run in 2016.
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Engines
Net revenues generated from engines were €373 million for 2017, an increase of €35 million, or 10.5
percent, from €338 million for 2016. The €35 million increase was mainly attributable to an increase in net
revenues generated from the sale of engines to Maserati, driven by a 25 percent increase in the volume of engines
shipped, partially offset by a decrease in net revenues from the rental of engines to Formula 1 racing teams due
to the termination of the rental agreement with one of the Formula 1 teams.
Sponsorship, commercial and brand
Net revenues generated from sponsorship, commercial agreements and brand management activities
were €494 million for 2017, an increase of €6 million, or 1.1 percent, from €488 million for 2016. The increase
was primarily related to an increase in net revenues from sponsorship and brand activities, partially offset by a
decrease in Formula 1 net revenues due to our lower ranking in the World Constructors’ Championship in 2016
compared to 2015.
Other
which was in its 5th year of commercialization, and the phase-out of the FF. Shipments of V8 models increased by
4.8 percent, driven by the 488 GTB and the 488 Spider, which were launched in the first quarter of 2015 and the
third quarter of 2015, respectively, partially offset by the phase-out of the 458 family in 2015.
The €270 million increase in net revenues from range and special series cars and spare parts reflected
increases in all four of our major geographical markets, including (i) €137 million in EMEA, (ii) €89 million in
Americas, (iii) €43 million in Rest of APAC and (iv) €1 million in China, Hong Kong and Taiwan (on a combined
basis).
The €137 million increase in EMEA net revenues was attributable to increases of €60 million in Italy, €23
million in Other EMEA, €21 million in Germany, €11 million in Switzerland, €11 million in France, €8 million in
the Middle East and €3 million in the UK. Such increases were primarily attributable to positive effects from
volume, our personalization programs and positive mix. In particular, Italy, Other EMEA, Germany and France
experienced double-digit growth in shipments, primarily driven by the 488 GTB, the 488 Spider, the F12tdf and
the GTC4Lusso, partially offset by the phase-out of the 458 family in 2015. The positive mix effect in EMEA was
driven by the F12tdf and the GTC4Lusso.
Other net revenues were €94 million for 2017, a decrease of €5 million, or 5.1 percent, from €99 million
for 2016. The €5 million decrease in other net revenues was primarily driven by the deconsolidation of the
financial services business in Europe since November 2016 following the sale of a majority stake in FFS GmbH to
FCA Bank.
The €89 million increase in Americas net revenues was primarily attributable to positive effects from
volume and mix, our personalization programs, the sale of spare parts and favorable foreign currency exchange.
Positive volumes were driven by shipments of the 488 GTB, the 488 Spider and the F12tdf, partially offset by the
phase-outs of the 458 family and the FF, while positive mix was driven by strong performance from the F12tdf.
2016 compared to 2015
Net revenues for 2016 were €3,105 million, an increase of €251 million, or 8.8 percent (an increase of
9.4 percent on a constant currency basis), from €2,854 million for 2015.
The increase in net revenues, including the positive impact of foreign currency hedging instruments, was
attributable to the combination of (i) a €100 million increase in cars and spare parts net revenues, (ii) a €119
million increase in engines net revenues and (iii) a €47 million increase in sponsorship, commercial and brand
net revenues, partially offset by (iv) a €15 million decrease in other net revenues.
Cars and spare parts
Cars and spare parts net revenues were €2,180 million for 2016, an increase of €100 million, or 4.8
percent, from €2,080 million for 2015. The increase was attributable to a €270 million increase in net revenues
from range and special series cars and spare parts, which was partially offset by a decrease in net revenues from
supercars and limited edition cars.
The €270 million increase in net revenues from range and special series cars and spare parts was primarily
attributable to an increase in shipments of approximately 540 cars (excluding the LaFerrari and LaFerrari Aperta),
positive contribution from our personalization programs and a price increase on certain models starting from
the fourth quarter of 2016. Shipments of V12 models increased by 20.2 percent, primarily attributable to
shipments of the F12tdf and the GTC4Lusso, which commenced in the fourth quarter of 2015 and the third
quarter of 2016, respectively. These effects were partially offset by a decrease in shipments of the F12berlinetta,
The €43 million increase in Rest of APAC net revenues was attributable to increases of €30 million in
Japan, €11 million in Australia and €2 million in other Rest of APAC. The €30 million increase in Japan was
mainly attributable to positive effects from favorable foreign currency exchange, an increase in shipments and
our personalization programs. The €11 million increase in Australia was primarily attributable to a double-digit
increase in shipments, driven by the 488 GTB, the 488 Spider and the F12tdf, partially offset by a decrease in
shipments of the 458 family.
The €1 million increase in China, Hong Kong and Taiwan (on a combined basis) net revenues was
attributable to increases of €5 million in Taiwan and €4 million in mainland China, partially offset by an €8
million decrease in Hong Kong. The increases in Taiwan and mainland China were primarily attributable to
increases in shipments that were driven by the 488 GTB and the 488 Spider. The decrease in Hong Kong was
primarily related to our decision to terminate the distributor in Hong Kong.
The decrease in net revenues from supercars and limited edition cars was primarily driven by the LaFerrari
which finished its limited series production run, partially offset by shipments of our latest limited edition supercar,
the LaFerrari Aperta, which was launched in the third quarter of 2016 and celebrated our 70th anniversary in
2017, as well as shipments of the non-registered racing car FXX K and the F60 America, our limited edition V12
open air roadster that commemorated 60 years in the United States.
Engines
Net revenues generated from engines were €338 million for 2016, an increase of €119 million, or 54.5
percent, from €219 million for 2015. The €119 million increase was mainly attributable to a €68 million increase
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ANNUAL REPORT
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in net revenues generated from the sale of engines to Maserati, driven by a 47.2 percent increase in the volume of
engines shipped, as well as an increase in net revenues generated from the rental of power units to other Formula
1 teams, primarily as a result of renting power units to three Formula 1 teams for the 2016 season compared with
two Formula 1 teams for the 2015 season.
Sponsorship, commercial and brand
Net revenues generated from sponsorship, commercial agreements and brand management activities
were €488 million for 2016, an increase of €47 million, or 10.7 percent, from €441 million for 2015. The increase
was primarily related to our participation in the Formula 1 World Championship and in particular as a result of
our improved ranking in the World Constructors’ Championship in 2015 compared to 2014, as well as an
increase in net revenues from sponsorship and brand related activities.
Other
Other net revenues were €99 million for 2016, a decrease of €15 million, or 13.8 percent, from €114
million for 2015. The €15 million decrease in other net revenues was primarily driven by other supporting activities,
including the deconsolidation of the financial services business in Europe following the sale of a majority stake in
FFS GmbH to FCA Bank on November 7, 2016.
Cost of sales
For the years ended December 31,
Increase/(Decrease)
2016 compared to 2015
Cost of sales for 2016 was €1,580 million, an increase of €81 million, or 5.4 percent, from €1,499
million for 2015. As a percentage of net revenues, cost of sales decreased from 52.5 percent in 2015 to 50.9
percent in 2016.
The increase in cost of sales was primarily attributable to (i) an increase in costs of €59 million related
to increased volumes and our personalization programs, (ii) an increase in costs of €65 million related to the
production of engines for Maserati, engines rented to other Formula 1 racing teams, and other supporting
activities, and (iii) charges for Takata airbag inflator recalls of €37 million, partially offset by (i) a decrease in
costs of €61 million related to product mix and (ii) a decrease in production costs of €19 million, including direct
materials savings and amortization and depreciation.
The €59 million increase in cost of sales related to volumes and personalization programs was driven by
the 488 GTB, the 488 Spider, the F12tdf and the GTC4Lusso. The €65 million increase in cost of sales related to
the production of engines for Maserati, engines rented to other Formula 1 racing teams and other supporting
activities was driven by a 47.2 percent increase in the volume of engines shipped to Maserati and the rental of
power units to three Formula 1 teams for the 2016 season compared with two Formula 1 teams for the 2015
season. The €61 million decrease in costs related to product mix was driven by a decrease in shipments of the
LaFerrari, which finished its limited series production run, partially offset by shipments of the LaFerrari Aperta,
the F60 America and an increase in the proportion of shipments of V12 models compared to V8 models in our
range and special series cars, driven by shipments of the F12tdf and the GTC4Lusso. The €19 million decrease in
production costs was driven by the LaFerrari, the phase-out of the 458 family and direct material savings.
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2015
Percentage
of net
revenues
(€ million, except percentages)
2017 vs. 2016 2016 vs. 2015
Selling, general and administrative costs
Cost of sales
1,651
48.3% 1,580
50.9% 1,499
52.5%
71
4.5%
81
5.4%
2017 compared to 2016
Cost of sales for 2017 was €1,651 million, an increase of €71 million, or 4.5 percent, from €1,580 million
for 2016. As a percentage of net revenues, cost of sales decreased from 50.9 percent in 2016 to 48.3 percent in
2017.
The increase in cost of sales was primarily attributable to (i) increased costs of €58 million driven by an
increase in volumes and personalization programs, (ii) increased costs of €46 million driven by an increase in
production volumes of engines for Maserati and costs for supporting activities and (iii) an increase in production
costs, including amortization and depreciation, of €4 million, partially offset by (iv) the effect of charges in 2016
for Takata airbag inflator recalls of €37 million.
The €58 million increase in cost of sales related to volumes and personalization programs was driven by
the 488 family, the GTC4Lusso and the 812 Superfast. The €46 million increase in cost of sales related to the
production of engines for Maserati and supporting activities was driven by a 25 percent increase in the volume
of engines shipped to Maserati.
For the years ended December 31,
Increase/(Decrease)
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2015
Percentage
of net
revenues
2017 vs. 2016
2016 vs. 2015
(€ million, except percentages)
329
9.6%
295
9.5%
339
11.9%
34
11.5%
(44)
(12.8)%
Selling, general and
administrative costs
2017 compared to 2016
Selling, general and administrative costs for 2017 were €329 million, an increase of €34 million, or 11.5
percent, from €295 million for 2016. As a percentage of net revenues, selling, general and administrative costs
were substantially unchanged.
The increase in selling, general and administrative costs was primarily attributable to (i) share-based
compensation expense related to the equity incentive plan, (ii) costs related to initiatives for Ferrari’s 70th
anniversary, and (iii) costs related to new directly operated Ferrari stores, partially offset by (iv) the costs of the
former CEO’s retirement package recognized in 2016 and (v) a decrease in costs due to the deconsolidation of
FFS GmbH since November 2016.
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2016 compared to 2015
Selling, general and administrative costs for 2016 were €295 million, a decrease of €44 million, or 12.8
percent, from €339 million for 2015. As a percentage of net revenues, selling, general and administrative costs
decreased from 11.9 percent in 2015 to 9.5 percent for 2016.
The decrease in selling, general and administrative costs was mainly attributable to (i) advisory costs
incurred in 2015 in relation to the initial public offering of €16 million, (ii) a decrease in allowance for doubtful
accounts, primarily related to the effects of a provision recorded in 2015 in relation to a former commercial
partner of our Formula 1 activities, (iii) a decrease in costs driven by a different ranking in Formula 1 racing, and
(iv) the deconsolidation of FFS GmbH, which were partially offset by (i) the costs of the former CEO’s retirement
package, (ii) costs related to new directly operated stores, (iii) costs related to the launch of new models and (iv)
corporate costs.
Research and development costs
For the years ended December 31,
Increase/(Decrease)
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2015
Percentage
of net
revenues
2017 vs. 2016 2016 vs. 2015
(€ million, except percentages)
556
16.3%
510
16.4%
447
15.7%
46
9.2%
63 14.1%
from €562 million for 2015. As a percentage of net revenues, research and development costs were 19.8 percent
in 2016 compared to 19.7 percent in 2015.
The increase in research and development costs was attributable to an increase of €63 million in research
and development costs expensed during the year, partially offset by a decrease of €11 million in amortization of
capitalized development costs.
The €63 million increase in research and development costs expensed during the year was primarily
driven by Formula 1 activities and in particular, our efforts related to power unit projects and chassis area, and
to a lesser extent, research and development costs on sports and GT cars.
The €11 million decrease in amortization of capitalized development costs was primarily attributable to
the completion of the LaFerrari limited series production run and the phase-out of the 458 family, partially offset
by amortization of capitalized development costs related to our newer model.
Other expenses, net
For the years ended December 31,
Increase/(Decrease)
2017
2016
2015
2017 vs. 2016
2016 vs. 2015
(€ million, except percentages)
Other expenses, net
7
24
10
(17)
(72.0)%
14
122.0%
Research and development
costs expensed during the
year
Amortization of capitalized
development costs
Research and development
costs
2017 compared to 2016
101
2.9%
104
3.4%
115
4.0%
(3) (3.4)%
(11) (9.4)%
657
19.2%
614
19.8%
562
19.7%
43
7.1%
52
9.3%
2017 compared to 2016
Other expenses, net for 2017 amounted to net other expenses of €7 million, a decrease of €17 million,
or 72.0 percent, compared to net other expenses of €24 million for 2016.
Research and development costs for 2017 were €657 million, an increase of €43 million, or 7.1 percent,
from €614 million for 2016. As a percentage of net revenues, research and development costs were 19.2 percent
in 2017 compared to 19.8 percent in 2016.
For 2017, other expenses, net included other expenses of €12 million, which mainly related to indirect
taxes and miscellaneous expenses, partially offset by other income of €5 million, which mainly related to gains
on disposals of property, plant and equipment, rental income and miscellaneous income.
The increase in research and development costs was attributable to an increase of €46 million in research
and development costs expensed, partially offset by a decrease of €3 million in amortization of capitalized
development costs.
The €46 million increase in research and development costs expensed during the year was primarily
driven by research and development to support the innovation of our product range and components, in
particular in relation to hybrid technology, partially offset by a decrease in research and development expenses
for Formula 1 activities.
2016 compared to 2015
Research and development costs for 2016 were €614 million, an increase of €52 million, or 9.3 percent,
For 2016, other expenses, net included other expenses of €30 million, which mainly related to provisions
(primarily due to disputes with a distributor), indirect taxes and miscellaneous expenses, partially offset by other
income of €6 million, which mainly related to gains on the disposal of property plant and equipment, rental
income and miscellaneous income.
2016 compared to 2015
Other expenses, net for 2016 amounted to net other expenses of €24 million, an increase of €14 million,
or 122.0 percent, compared to net other expenses of €10 million for 2015.
For 2016, other expenses, net included other expenses of €30 million, which mainly related to provisions
(primarily due to disputes with a distributor), indirect taxes and miscellaneous expenses, partially offset by other
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income of €6 million, which mainly related to gains on the disposal of property plant and equipment, rental
income and miscellaneous income.
For 2015, other expenses, net included other expenses of €32 million, which mainly related to provisions,
indirect taxes and miscellaneous expenses, partially offset by other income of €22 million, including a €6 million
gain on disposal of assets and liabilities related to investment properties and €6 million related to the release of
provisions previously recorded in other expenses, as well as rental income and miscellaneous income.
Result from investments
For the years ended December 31,
Increase/(Decrease)
2017
2016
2015
2017 vs. 2016
2016 vs. 2015
(€ million, except percentages)
Result from investments
2
3
—
(1)
(20.5)%
3
n.m.
2017 compared to 2016
revenues from the weakening of foreign currencies against the Euro) and (iv) a decrease of €57 million in other
supporting costs, including the effect of charges in 2016 for Takata airbag inflator recalls of €37 million, partially
offset by (v) an increase in research and development costs of €43 million and (vi) an increase in selling, general
and administrative costs of €34 million.
The positive volume impact was attributable to an increase in shipments of approximately 360 cars
(excluding the LaFerrari and LaFerrari Aperta), driven by the GTC4Lusso and the 488 families, as well as our first
shipments of the newly launched 812 Superfast, together with positive contribution from our personalization
programs. These positive effects on volume were partially offset by the phase-outs of the California T and the
F12berlinetta, as well as the F12tdf, which finished its limited series run in 2017. The favorable mix impact of €80
million was primarily attributable to an increase in shipments of the LaFerrari Aperta, as well as an increase in
shipments of our V12 range and special series models and pricing increases. These positive effects on mix were
partially offset by the end of the LaFerrari lifecycle in 2016, as well as the non-registered racing car FXX K and the
strictly limited edition F60 America completing their limited series runs in 2016.
The increase in EBIT as a percentage of net revenues from 19.2 percent in 2016 to 22.7 percent in 2017
was primarily attributable to the combination of the previously mentioned effects on EBIT above and a decrease
in cost of sales as a percentage of net revenues from 50.9 percent in 2016 to 48.3 percent in 2017.
Result from investments of €2 million relates to the Group’s proportionate share of FFS GmbH’s net
2016 compared to 2015
profit.
2016 compared to 2015
Result from investments of €3 million in 2016 includes i) the gain on the sale of a majority stake in FFS
GmbH to FCA Bank on November 7, 2016, ii) the gain on the fair value measurement of the non-controlling
interest retained in FFS GmbH, and iii) the Group’s proportionate share of FFS GmbH’s net profit subsequent to
the sale in accordance with the equity method of accounting.
EBIT
For the years e nded December 31,
Increase/(Decrease)
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2015
Percentage
of net
revenues
2017 vs. 2016 2016 vs. 2015
(€ million, except percentages)
EBIT
775
22.7%
595
19.2%
444
15.6%
180 30.3%
151 33.9%
2017 compared to 2016
EBIT for 2017 was €775 million, an increase of €180 million, or 30.3 percent, from €595 million for
2016. As a percentage of net revenues, EBIT increased from 19.2 percent in 2016 to 22.7 percent in 2017.
EBIT for 2016 was €595 million, an increase of €151 million, or 33.9 percent, from €444 million for
2015. As a percentage of net revenues, EBIT increased from 15.6 percent in 2015 to 19.2 percent in 2016.
The increase in EBIT was primarily attributable to (i) positive volume impact of €69 million, (ii) positive
net foreign currency exchange impact of €64 million (including positive €71 million relating to foreign currency
hedging instruments), (iii) positive contribution of €54 million related to an increase in engine shipments to
Maserati, engines rented to other Formula 1 racing teams and other supporting activities, including sponsorship,
commercial and brand activities, and (iv) a decrease in selling, general and administrative costs of €44 million,
which were partially offset by (i) unfavorable product mix of €28 million, and (ii) an increase in research and
development costs of €52 million.
The positive volume impact of €69 million was attributable to an increase in shipments of approximately
540 cars (excluding the LaFerrari and LaFerrari Aperta), driven by the 488 GTB, the 488 Spider, the F12tdf (all of
which were launched in 2015) and the GTC4Lusso (which commenced in the third quarter of 2016), as well as a
positive contribution from our personalization programs. The unfavorable product mix of €28 million was
primarily attributable to the completion of the LaFerrari limited series production run, the F12berlinetta, which
is in its 5th year of commercialization, and the phase-out of the FF, partially offset by the F12tdf, the launch of the
LaFerrari Aperta in the third quarter of 2016, shipments of the non-registered racing car FXX K and the F60
America, our limited edition V12 open air roadster that commemorates 60 years in the United States, and a price
increase on certain models from the fourth quarter of 2016.
The increase in EBIT was primarily attributable to (i) positive volume impact of €67 million, (ii) favorable
mix impact of €80 million, (iii) positive net foreign currency exchange impact of €53 million (resulting from
positive €101 million relating to foreign currency hedging instruments, partially offset by an adverse impact on
The increase in EBIT as a percentage of net revenues from 15.6 percent in 2015 to 19.2 percent in 2016,
was primarily attributable to the combination of the previously mentioned effects on EBIT above and a decrease
in cost of sales as a percentage of net revenues from 52.5 percent in 2015 to 50.9 percent in 2016.
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Net financial expenses
to the Tax Cuts and Jobs Act (the “Tax Act”), which was enacted into law in the U.S. on December 22, 2017.
For the years ended December 31,
Increase/(Decrease)
2017
2016
2015
2017 vs. 2016
2016 vs. 2015
(€ million, except percentages)
Net financial expenses
29
28
10
1
5.5%
18
n.m.
2017 compared to 2016
Net financial expenses for 2017 were €29 million compared to €28 million for 2016, representing an
increase of €1 million.
An increase in (i) net foreign exchange losses and (ii) interest expenses on bonds was substantially offset
by (iii) a decrease in interest expenses on bank borrowings, primarily related to the Term Loan and the Bridge
Loan which were fully repaid in November 2017 and March 2016, respectively, (iv) financial income related to the
Delta Topco option and (v) a gain on the fair value measurement of the Series C Liberty Formula One shares
(“Liberty Shares”) subsequent to initial recognition at cost.
2016 compared to 2015
Net financial expenses for 2016 were €28 million compared to €10 million for 2015, representing an
increase of €18 million.
The increase in net financial expenses was primarily attributable to interest expenses on debt incurred,
directly or indirectly, as a result of the Restructuring which took place in October 2015, and in particular, interest
expenses relating to the Term Loan, the Bridge Loan (which was fully repaid in March 2016), which were primarily
used to repay a portion of the FCA Note and interest expenses, as well as interest expenses on the 2023 Bond.
Net financial expenses also included interest expenses on other bank borrowings.
Income tax expense
For the years ended December 31,
Increase/(Decrease)
2017
2016
2015
2017 vs. 2016
2016 vs. 2015
(€ million, except percentages)
Income tax expense
209
167
144
42
24.5%
23
16.3%
2017 compared to 2016
Income tax expense for 2017 was €209 million, an increase of €42 million, or 24.5%, from €167 million
for 2016. The increase in income tax expense was primarily attributable to an increase in profit before taxes from
€567 million in 2016 to €746 million in 2017, partially offset by a decrease in the effective tax rate net of IRAP
from 25.8 percent in 2016 to 24.2 percent in 2017. The decrease in the effective tax rate net of IRAP was primarily
attributable to the combined effects of a reduction in the corporate income tax rate from 27.5 percent to 24.0
percent (effective from 2017), deductions related to eligible research and development costs and depreciation of
fixed assets in accordance with tax regulations in Italy, partially offset by a decrease in net deferred tax assets due
The Tax Act includes various changes to the tax law, including a reduction in the corporate income tax
rate from 35% to 21% effective January 1, 2018. We recognized the effects of the changes in the tax rate and laws
resulting from the Tax Act in 2017, which resulted in a €4.7 million decrease in net deferred tax assets.
2016 compared to 2015
Income tax expense for 2016 was €167 million, an increase of €23 million, or 16.3 percent, from €144
million for 2015. The increase in income tax expense was primarily attributable an increase in profit before taxes
from €434 million in 2015 to €567 million for 2016, partially offset by a decrease in the effective tax rate net of
IRAP from 30.0 percent in 2015 to 25.8 percent in 2016. The decrease in the effective tax rate net of IRAP was
primarily attributable to the combined effects of adjustments to deferred taxes assets and liabilities due to a
change in Italian tax law to reduce the corporate income tax rate from 27.5 percent to 24.0 percent (effective
from 2017) and additional tax deductions in 2016 on eligible research and development costs and on investments
and other expenses, in accordance with Italian tax regulations.
Recent Developments
See “Subsequent Events and 2018 Outlook”.
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 2018 is expected to be
approximately €550 million, primarily to support continuous product range renewal and research and development
expenditure to transition our product portfolio to hybrid technology. We plan to fund our capital expenditure
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. Prior to the Separation, which was completed on January 3, 2016, we managed
our liquidity through participation in cash management and funding services provided by the treasury functions
of the FCA Group. Following the Separation, we terminated such arrangements and we now centrally manage our
operating cash management, liquidity and cash flow requirements on a standalone basis with the objective of
ensuring effective and efficient management of our funds. 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.
See “Net Debt and Net Industrial Debt” below for additional details relating to the our liquidity.
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Cyclical Nature of our Cash Flows
Operating Activities — Year Ended December 31, 2017
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 payment of taxes also affects our working capital. In 2016 our tax payments were higher as it was our
first year as a standalone tax group. We paid the first tax advance in relation to 2016 taxes at the end of the second
quarter of 2016 and the second advance in the fourth quarter of 2016. Also in 2016, we settled our 2015 tax balance
from the FCA Group tax consolidation. In the second quarter of 2017, we paid the remaining balance of 2016 taxes
as well as the first advance in relation to 2017 taxes, and we paid the second advance in the fourth quarter of 2017.
Our capital expenditure requirements are, among other things, 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. Going forward, our capital expenditure will also be influenced
by research and development expenditure to support product range expansion. In 2018 and future periods we
expect that our levels of capital expenditure will increase as we continue our investment in hybrid technology.
Capital expenditure is also influenced by the timing of research and developments costs for our Formula 1
activities, for which expenditure is generally higher in the first and last quarter of the year.
We generally receive payment for cars between 30 and 40 days after the car is shipped (except when we
provide dealer financing or sell invoices to a factor) while we tend to pay most suppliers between 90 and 105 days
after we receive the raw materials or components. Additionally, we also receive advance payments from our
customers, mainly for our supercars and limited edition cars. 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 45 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.
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, 2017, 2016 and 2015. For additional details 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
2016
2017
663
(379)
(85)
(9)
190
(€ million)
1,005
(379)
(411)
1
275
707
(317)
(351)
10
49
For the year ended December 31, 2017, our cash flows from operating activities were €663 million,
primarily the result of:
(i) profit before tax of €746 million, adjusted to add back €261 million of depreciation and amortization
expense, €39 million of other non-cash expenses and income (including net gains on disposals of
property, plant and equipment and intangible assets as well as non-cash result from investments),
€29 million of net finance costs and €13 million in provisions accrued. Other non-cash expenses
were primarily attributable to share-based compensation expense under the equity incentive plan
and equity-settled Non-Executive Directors’ compensation.
These cash inflows were partially offset by:
(i) €73 million related to cash absorbed by the change in other operating assets and liabilities, primarily
attributable to a decrease in advances for the LaFerrari Aperta in 2017, partially offset by advances
received for the Ferrari J50;
(ii) €61 million related to cash absorbed by the net change in inventories, trade payables and trade
receivables. In particular, the movement was attributable to (a) cash absorbed by inventory of €88
million driven by projected volume growth in line with our 2018 production outlook, and (b) cash
absorbed by trade receivables of €2 million, partially offset by (c) cash generated from trade payables
of €29 million, driven by an increase in volumes;
(iii) €44 million related to cash absorbed from receivables from financing activities driven by an increase
in the financial services portfolio in the United States;
(iv) €32 million of net finance costs paid; and
(v) income tax paid of €215 million, primarily related to the payment of the remaining balance of 2016
taxes and advances of 2017 taxes.
Operating Activities — Year Ended December 31, 2016
For the year ended December 31, 2016, our cash flows from operating activities were €1,005 million,
primarily the result of:
(i) profit before tax of €567 million, adjusted to add back €248 million of depreciation and amortization
expense, €82 million in provisions and €28 million of net finance costs, partially offset by €41 million
related to other non-cash expenses and income and net gains on disposal of property, plant and
equipment and intangible assets, as well as €3 million non-cash result from investments. The €82
million in provisions accrued was primarily attributable to (a) a warranty and recall campaigns
provision of €60 million, of which €37 million related to the Takata airbag inflator recalls and the
remainder primarily related to an increase in volumes, and (b) other risks of €22 million, primarily
related to disputes with a distributor;
(ii) €405 million related to cash generated by a decrease in receivables from financing activities, primarily
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attributable to a cash payment of €432 million received in November 2016 following the sale by the
Group of the majority stake in FFS GmbH to FCA Bank, as a result of which FFS GmbH was
deconsolidated by the Group and the funding of FFS GmbH is being directly provided by FCA Bank
(see Note 17 to the Consolidated Financial Statements), partially offset by an increase in the financial
services portfolio in the United States; and
(iii) €7 million relating to cash generated by other operating assets and liabilities, which benefited by
approximately €69 million from advances received, mainly related to the LaFerrari Aperta.
These cash inflows were partially offset by:
(i) €20 million in net finance costs paid;
(ii) €16 million related to cash absorbed by the net change in inventories, trade payables and trade
receivables. In particular, the movement was attributable to (a) cash absorbed by inventory of €33
million, (b) cash absorbed by trade receivables of €89 million, partially offset by (c) cash generated
from trade payables of €106 million, all of which were driven by an increase in volumes and Maserati
engines; and
(iii) income tax paid of €252 million, primarily related to payments of tax advances on 2016 taxes and the
settlement of the 2015 tax balance from the FCA Group tax consolidation.
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, €32 million related to other non-cash expenses and income
and net gains on disposal of property, plant and equipment and intangible assets, and €10 million of
net finance costs. 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 €32 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;
(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.
These cash inflows were partially offset by:
receivables. In particular, the movement was driven by (a) cash absorbed by 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 the first
quarter of 2016, (b) cash absorbed by inventories of €3 million, consistent with increased volumes,
partially offset by (c) cash generated from trade receivables of €16 million mainly due to collections
of related party receivables;
(ii) €25 million relating to cash absorbed by other operating cash flows, primarily attributable to the
net change in other operating assets and liabilities;
(iii) €13 million in net finance costs paid; and
(iv) income tax paid of €145 million.
Investing Activities — Year Ended December 31, 2017
For the year ended December 31, 2017, our net cash used in investing activities was €379 million,
primarily the result of:
(i) €392 million of capital expenditures, mainly including €189 million related to additions to property,
plant and equipment and €203 million relating to intangible assets. For a detailed analysis of
additions to property, plant and equipment and intangible assets see “—Capital Expenditures” below.
These cash outflows were partially offset by:
(i) €8 million of proceeds from exercising the Delta Topco option;
(ii) €5 million of proceeds from the sale of property, plant and equipment and intangible assets.
Investing Activities — Year Ended December 31, 2016
For the year ended December 31, 2016, our net cash used in investing activities was €320 million,
primarily the result of:
(i) €342 million of capital expenditures, including €176 million related to additions to property, plant
and equipment and €166 million relating to additions to intangible assets. For a detailed analysis of
additions to property, plant and equipment and intangible assets see “—Capital Expenditures” below;
These cash outflows were partially offset by:
(i) €19 million of proceeds from the sale of a majority stake in FFS GmbH to FCA Bank; and
(ii) €3 million proceeds from the sale of property, plant and equipment and intangible assets.
Investing Activities — Year Ended December 31, 2015
For the year ended December 31, 2015, our net cash used in investing activities was €317 million, primarily
(i) €33 million related to cash absorbed by the net change in inventories, trade payables and trade
the result of:
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(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 see “—Capital Expenditures” below;
(iii) €212 million related to net repayments of other bank borrowings;
(iv) €87 million cash distribution of reserves to holders of our common shares; and
These cash outflows were partially offset by:
(v) €17 million of dividends paid to non-controlling interests in our Chinese distributor, Ferrari
(ii) €37 million of proceeds from the disposal of assets and liabilities related to investment properties; and
(iii) €2 million of proceeds from the sale of property, plant and equipment and intangible assets and the
net change in investments and other financial assets.
International Cars Trading (Shanghai) Co. Ltd;
These cash outflows were partially offset by:
(i) €491 million of net proceeds related to the issuance of the 2023 Bond (see “Bonds” below);
Financing Activities — Year Ended December 31, 2017
(ii) €463 million of proceeds net of repayments related to revolving securitization programs in the USA;
For the year ended December 31, 2017, our net cash used in financing activities was €85 million, primarily
(iii) €135 million in net proceeds from the settlement of the deposits in FCA Group cash management
the result of:
(i) €795 million related to the full repayment of the Term Loan, including €100 million of mandatory
scheduled payments in June 2017 and €695 million for the full repayment of the remaining balance
in November 2017, primarily with the proceeds of the 2021 Bond;
(ii) €120 million related to a cash distribution of reserves to holders of our common shares;
(iii) €8 million related to the net change in other debt; and
pools and liabilities with FCA;
(iv) €16 million related to net change in other debt; and
(v) €1 million of proceeds from the share premium contribution made by FCA in connection with the
Restructuring.
Financing Activities — Year Ended December 31, 2015
For the year ended December 31, 2015, net cash used in financing activities was €351 million, primarily
(iv) €1 million of dividends paid to non-controlling interests in our Chinese distributor, Ferrari
the result of:
International Cars Trading (Shanghai) Co. Ltd.
These cash outflows were partially offset by:
(i) €3,211 million related to net repayments of financial liabilities with FCA, including repayment of the
FCA Note for €2,800 million;
(i) €694 million of net proceeds related to the issuance of the 2021 Bond (see “Bonds” below), which
were used, together with additional cash held, for the full repayment of the Term Loan;
(ii) €54 million related to dividends paid to non-controlling interests in our Chinese distributor, Ferrari
International Cars Trading (Shanghai) Co. Ltd;
(ii) €141 million of proceeds net of repayments related to our revolving securitization programs in the
(iii) €11 million related to net repayments of other debt; and
USA; and
(iii) €4 million of net proceeds of other bank borrowings.
Financing Activities — Year Ended December 31, 2016
For the year ended December 31, 2016, net cash used in financing activities was €411 million, primarily
the result of:
(i) €701 million related to principal repayments of the Term Loan, including voluntary prepayments of
€600 million (€300 million in September 2016 and €300 million in December 2016) and mandatory
scheduled repayments of €92 million and $9 million in December 2016;
(ii) €500 million related to the full repayment of the Bridge Loan;
(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) €2,119 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.
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Net Debt and Net Industrial Debt
Net Industrial Debt is the primary measure used by us to analyze our financial leverage and capital
structure, and is one of the key indicators, together with Net Debt, we use to measure our financial position.
These measures are presented by management to aid investors in their analysis of the Group’s financial position
and financial performance and to compare the Group’s financial position and financial performance with that
of other companies. Net Industrial Debt is defined as total debt less cash and cash equivalents (Net Debt),
further adjusted to exclude the funded portion of the self-liquidating financial receivables portfolio, which is the
portion of our receivables from financing activities that we fund with external debt or intercompany loans. The
following table sets forth a reconciliation of Net Debt and Net Industrial Debt at December 31, 2017 and 2016.
Cash and cash equivalents
Total liquidity
Bonds
Securitizations
Borrowings from banks
Term Loan
Other debt
Total debt
Net Debt
Funded portion of the self-liquidating financial receivables portfolio
Net Industrial Debt
Cash and cash equivalents
At December 31,
2017
2016
(€ million)
648
648
(1,194)
(556)
(38)
—
(18)
(1,806)
(1,158)
685
(473)
458
458
(498)
(486)
(37)
(800)
(27)
(1,848)
(1,390)
737
(653)
Cash and cash equivalents were €648 million at December 31, 2017 compared to €458 million at December
31, 2016. The increase in cash and cash equivalents was primarily driven by €284 million of Free Cash Flow, partially
offset by €85 million of cash flows used in financing activities. See “Cash Flows” above for further details.
Approximately 67% percent of our cash and cash equivalents were denominated in Euro at December 31,
2017. Our cash and cash equivalents denominated in currencies other than the Euro are available mostly to
Ferrari S.p.A. and 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, which amounted to €66 million at December 31, 2017 (€48 million at
December 31, 2016), is subject to certain repatriation restrictions and may only be repatriated as dividends.
Based on our review, we do not currently believe that such transfer restrictions have an adverse impact on our
ability to meet our liquidity requirements.
Cash collected from the settlement of receivables or lines of credit pledged as collateral is subject to
certain restrictions regarding its use and is principally applied to repay principal and interest of the funding. Such
cash amounted to €28.2 million and €19.4 million at December 31, 2017 and 2016, respectively.
The following table sets forth an analysis of the currencies in which our cash and cash equivalents were
denominated at the dates presented:
Euro
U.S. Dollar
Chinese Yuan
Japanese Yen
Other currencies
Total
Total Available Liquidity
At December 31,
2017
2016
(€ million)
435
88
62
26
37
648
318
16
58
37
29
458
Our total available liquidity (defined as cash and cash equivalents plus undrawn committed credit lines)
at December 31, 2017 was €1,148 million (€958 million at December 31, 2016).
The following table summarizes our total available liquidity:
Cash and cash equivalents
Undrawn committed credit lines
Total available liquidity
At December 31,
2017
2016
(€ million)
648
500
1,148
458
500
958
The undrawn committed credit lines relate to a revolving credit facility. See “The Facility” below for further
details.
Borrowings from banks
Borrowings from banks at December 31, 2017 mainly relate to financial liabilities of FFS Inc to support
the financial services operations, and in particular (i) €29 million (€24 million at December 31, 2016) relating
to a U.S. Dollar denominated credit facility for up to $50 million (drawn down for $35 million at December 31,
2017) and bearing interest at LIBOR plus a range of between 65 and 75 basis points; (ii) other borrowings from
banks of €9 million (€13 million at December 31, 2016) relating to various short and medium term credit
facilities.
124
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ANNUAL REPORT
OPERATING
RESULTS
Borrowings from banks at December 31, 2016 also included €800 million relating to the Term Loan,
which was fully repaid in 2017, primarily with proceeds from the 2021 Bond issued in November 2017. See “The
Facility” 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 banks (the “Facility”). At inception,
the Facility comprised a bridge loan of €500 million (the “Bridge Loan”), a term loan of €1,500 million (the
“Term Loan”) and a revolving credit facility of €500 million (the “RCF”).
pledge clauses which require that, in case any security interest upon assets of Ferrari is granted in connection
with other notes or debt securities with the consent of Ferrari are, or are intended to be, listed, such security
should be equally and ratably extended to the outstanding notes, subject to certain permitted exceptions; (ii)
pari passu clauses, under which the notes rank and will rank pari passu with all other present and future
unsubordinated and unsecured obligations of Ferrari; (iii) events of default for failure to pay principal or interest
or comply with other obligations under the notes with specified cure periods or in the event of a payment default
or acceleration of indebtedness or in the case of certain bankruptcy events; and (iv) other clauses that are
customarily applicable to debt securities of issuers with a similar credit standing. A breach of these covenants
may require the early repayment of the notes. As of December 31, 2017 and 2016, Ferrari was in compliance with
the covenants of the notes.
In December 2015 the Bridge Loan and Term Loan were fully drawn down for the purposes of repaying
Securitizations
financial liabilities with FCA, including the FCA Note that originated as a result of the Restructuring.
In March 2016, the Bridge Loan was fully repaid, primarily using the proceeds from the 2023 Bond (see
“Bonds” below).
In 2016 and 2017 the Company made scheduled payments and voluntary prepayments, funded in part
with the proceeds of the 2021 Bond described under “Bonds” below, to fully repay the Term Loan.
At December 31, 2017 and 2016 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 RCF has a maturity of five years from
inception of the Facility.
Bonds
2023 Bond
On March 16, 2016, the Company issued 1.5 percent coupon notes due March 2023, having a principal
of €500 million. The bond was issued at a discount for an issue price of 98.977 percent, resulting in net proceeds
of €490.7 million after the debt discount and issuance costs. The net proceeds were used, together with additional
cash held by the Company, to fully repay the €500 million Bridge Loan under the Facility. The bond is unrated
and was admitted to trading on the regulated market of the Irish Stock Exchange. The amount outstanding at
December 31, 2017 of €498.9 million includes accrued interest of €5.9 million.
2021 Bond
On November 16, 2017, the Company issued 0.25 percent coupon notes due January 2021, having a
principal of €700 million. The bond was issued at a discount for an issue price of 99.557 percent, resulting in
net proceeds of €694.2 million after the debt discount and issuance costs. The net proceeds were primarily used
to repay the Term Loan. The bond is unrated and was admitted to trading on the regulated market of the Irish
Stock Exchange. The amount outstanding at December 31, 2017 of €694.6 million includes accrued interest of
€0.2 million.
The notes for both the 2023 Bond and the 2021 Bond impose covenants on Ferrari including: (i) negative
In 2016 and 2017 FFS Inc has pursued a strategy of self-financing, further reducing dependency on
intercompany funding and increasing the portion of self-liquidating debt with various securitization transactions.
On January 19, 2016, FFS Inc entered into a revolving securitization program for funding of up to $250
million by pledging retail financial receivables in the United States as collateral. In 2016, proceeds from the first
sale of financial receivables were $242 million and were primarily used to repay intercompany loans. The funding
limit of the program has been progressively increased over time, including to $275 million on December 16,
2016, to $325 million on July 14, 2017, and to $350 million on December 15, 2017. The notes bear interest at a
rate per annum equal to the aggregate of LIBOR plus a margin of 65 basis points. As of December 31, 2017 total
proceeds from the sales of financial receivables under the program were $325 million. The securitization
agreement requires the maintenance of an interest rate cap.
On October 20, 2016, FFS Inc entered into a revolving securitization program for funding of up to $200
million by pledging leasing financial receivables in the United States as collateral. In 2016, proceeds from the first
sale of financial receivables were $175 million and were primarily used to repay U.S. Dollar denominated bank
borrowings. On April 21, 2017 the funding limit of the program was increased to $225 million and this amount
remained unchanged in the renewal of the program in September 2017. The notes bear interest at a rate per
annum equal to the aggregate of LIBOR plus a margin of 65 basis points. As of December 31, 2017, total proceeds
from the sales of financial receivables under the program were $222 million.The securitization agreement requires
the maintenance of an interest rate cap.
On December 28, 2016, FFS Inc entered into a revolving securitization program for funding of up to $120
million by pledging credit lines to Ferrari customers secured by personal vehicle collections and personal guarantees
in the United States as collateral. In 2016, proceeds from the first sale of financial receivables were $64 million
and were primarily used to repay U.S. Dollar denominated bank borrowings. On December 20, 2017, the funding
limit was increased to $135 million. The notes bear interest at a rate per annum equal to the aggregate of LIBOR
plus a margin of 120 basis points. As of December 31, 2017 total proceeds from the sales of financial receivables
under the program were $120 million. The securitization agreement does not require an interest rate cap.
Cash collected from the settlement of receivables or lines of credit pledged as collateral is subject to
certain restrictions regarding its use and is principally applied to repay principal and interest of the funding. Such
cash amounted to €28.2 million and €19.4 million at December 31, 2017 and 2016, respectively.
126
127
ANNUAL REPORT
OPERATING
RESULTS
Other debt
Other debt primarily relates to funding for operating activities of our U.S. subsidiaries.
Free Cash Flow and Free Cash Flow from Industrial Activities
Free Cash Flow and Free Cash Flow from Industrial Activities are two of our primary key performance
indicators to measure the Group’s performance. These measures are presented by management to aid investors
in their analysis of the Group’s financial performance and to compare the Group’s financial performance with
that of other companies. Free Cash Flow is defined as cash flows from operating activities less cash flows used in
investing activities. Free Cash Flow from Industrial Activities is defined as Free Cash Flow adjusted for the change
in the self-liquidating financial receivables portfolio, which is the change in our receivables from financing
activities. The following table sets forth our Free Cash Flow and Free Cash Flow from Industrial Activities for the
years ended December 31, 2017, 2016 and 2015.
For the years ended December 31,
2017
2016
(€ million)
2015
Cash flows from operating activities
Cash flows used in investing activities
Free Cash Flow
Change in the self-liquidating financial receivables
portfolio
Free Cash Flow from Industrial Activities
663
(379)
284
44
328
1,005
(320)
685
(405)
280
707
(317)
390
39
429
Free Cash Flow for the year ended December 31, 2017 was €284 million compared to €685 million for
the year ended December 31, 2016. For an explanation of the drivers in Free Cash Flow see “Cash Flows” above.
Free Cash Flow from Industrial Activities for the year ended December 31, 2017 was €328 million compared
to €280 million for the year ended December 31, 2016. The increase was primarily attributable to an increase in
EBITDA and a decrease in tax payments (primarily due to the fact that in 2016 we made payments to settle the 2015
tax balance from the FCA Group tax consolidation) partially offset by an increase in capital expenditures, advances
no longer being received for the LaFerrari Aperta and cash absorbed from an increase in net working capital.
Free Cash Flow for the year ended December 31, 2016 was €685 million compared to €390 million for
the year ended December 31, 2015. For an explanation of the drivers in Free Cash Flow see “Cash Flows” above.
Free Cash Flow from Industrial Activities for the year ended December 31, 2016 was €280 million
compared to €429 million for the year ended December 31, 2015. The decrease was primarily attributable to the
impact in 2015 of (i) the one-time reimbursement of the financing of inventory related to the establishment of
the Maserati standalone business in China of €160 million and (ii) proceeds of €37 million from Maserati S.p.A.
for the disposal of assets and liabilities relating to investment properties.
128
Excluding these one-time effects in 2015, Free Cash Flow from Industrial Activities of €280 million in
2016 represented an increase of €48 million compared to €232 million of Free Cash Flow from Industrial Activities
in 2015. Such increase is mainly attributable to an increase in Adjusted EBITDA from €748 million in 2015 to
€880 million in 2016, as well as a positive change in net working capital in 2016 compared to 2015 and advances
received for LaFerrari Aperta, which were partially offset by an increase in income taxes paid, primarily attributable
to payments of 2016 tax advances and settlement of the 2015 tax balance.
Non-GAAP Financial Measures
We monitor and evaluate our operating and financial performance using several non-GAAP financial
measures including: EBITDA, Adjusted EBITDA, Adjusted EBIT, Adjusted Net Profit, Adjusted Basic and Diluted
Earnings per Common Share, Net Debt, Net Industrial Debt, Free Cash Flow and Free Cash Flow from Industrial
Activities, as well as a number of financial metrics measured on a constant currency basis. We believe that these
non-GAAP financial measures provide useful and relevant information regarding our performance and our ability
to assess our financial performance and financial position. They also provide us with comparable measures that
facilitate management’s ability to identify operational trends, as well as make decisions regarding future spending,
resource allocations and other operational decisions. While similar measures are widely used in the industry in
which we operate, the financial measures we use may not be comparable to other similarly titled measures used
by other companies nor are they intended to be substitutes for measures of financial performance or financial
position as prepared in accordance with IFRS.
EBITDA and Adjusted EBITDA
EBITDA is defined as net profit before income tax expense, net financial expenses and amortization and
depreciation. Adjusted EBITDA is defined as EBITDA as adjusted for income and costs that are significant in nature
but expected to occur infrequently. The following table sets forth the calculation of EBITDA and Adjusted EBITDA
for the years ended December 31, 2017, 2016 and 2015, and provides a reconciliation of these non-GAAP measures
to net profit. EBITDA is presented by management to aid investors in their analysis of the performance of the Group
and to assist investors in the comparison of the Group’s performance with that of other companies. Adjusted
EBITDA is presented to demonstrate how the underlying business has performed prior to the impact of the adjusted
items which may obscure underlying performance and impair comparability of results between periods.
For the years ended December 31,
2017
2016
(€ million)
2015
Net profit
Income tax expense
Net financial expenses
Amortization and depreciation
EBITDA
Charges for Takata airbag inflator recalls
Expenses incurred in relation to the IPO
Employees extra bonus
Gain recognized on disposal of investment property
assets and liabilities
Adjusted EBITDA
537
209
29
261
1,036
—
—
—
—
1,036
400
167
28
248
843
37
—
—
—
880
290
144
10
275
719
—
16
19
(6)
748
129
ANNUAL REPORT
OPERATING
RESULTS
Adjusted EBIT
Adjusted EBIT represents EBIT as adjusted for income and costs that are significant in nature but
expected to occur infrequently. We present such information in order to present how the underlying business has
performed prior to the impact of such items, which may obscure underlying performance and impair comparability
of results between the periods. The following table sets forth the calculation of Adjusted EBIT for the years ended
December 31, 2017, 2016 and 2015.
EBIT
Charges for Takata airbag inflator recalls
Expenses incurred in relation to the IPO
Employees extra bonus
Gain recognized on disposal of investment property
assets and liabilities
Adjusted EBIT
Adjusted Net Profit
For the years ended December 31,
2017
2016
(€ million)
2015
775
—
—
—
—
775
595
37
—
—
—
632
444
—
16
19
(6)
473
Adjusted Net Profit represents net profit as adjusted for income and costs (net of tax effect), which are
significant in nature, but expected to occur infrequently. The tax effect is calculated by applying the corporate tax
rate in Italy, which was 24.0% for the year ended December 31, 2017 and 27.5% for the years ended December
31, 2016 and 2015, and the Italian Regional Income Tax (“IRAP”), which was 3.9% for the periods presented. We
present such information in order to present how the underlying business has performed prior to the impact of
such items, which may obscure underlying performance and impair comparability of results between the periods.
The following table sets forth the calculation of Adjusted Net Profit for the years ended December 31, 2017, 2016
and 2015.
For the years ended December 31,
2017
2016
(€ million)
2015
Net profit
Charges for Takata airbag inflator recalls
(net of tax effect)
Expenses incurred in relation to the IPO
(net of tax effect)
Employees extra bonus (net of tax effect)
Gain recognized on disposal of investment property
assets and liabilities (net of tax effect)
Adjusted Net Profit
537
—
—
—
—
537
400
25
—
—
—
425
290
—
11
13
(4)
310
Adjusted Basic and Diluted Earnings per Common Share
Adjusted Basic and Diluted Earnings per Common Share represents earnings per share, as adjusted for
income and costs (net of tax effect), which are significant in nature, but expected to occur infrequently. The tax
effect is calculated by applying the corporate tax rate in Italy, which was 24.0% for the year ended December 31,
2017 and 27.5% for the years ended December 31, 2016 and 2015, and the Italian Regional Income Tax (“IRAP”),
which was 3.9% for the periods presented. We present such information in order to present how the underlying
business has performed prior to the impact of such items, which may obscure underlying performance and
impair comparability of results between the periods. The following table sets forth the calculation of Adjusted
Basic and Diluted Earnings per Common Share for the years ended December 31, 2017, 2016 and 2015.
For the years ended December 31,
2017
2016
2015
Net profit attributable to owners of the Company
€ million
535
Charges for Takata airbag inflator recalls
(net of tax effect)
Expenses incurred in relation to the IPO
(net of tax effect)
Employees extra bonus (net of tax effect)
Gain recognized on disposal of investment property
assets and liabilities (net of tax effect)
Adjusted profit attributable to owners of the
Company
€ million
€ million
€ million
€ million
—
—
—
—
€ million
535
424
399
25
—
—
—
288
—
11
13
(4)
308
Weighted average number of common shares
thousand
Adjusted basic earnings per common share
€
188,951
2.83
Weighted average number of common shares
for diluted earnings per common share
thousand
189,759
Adjusted diluted earnings per common share (1)
€
2.82
188,923
2.25
188,946
2.24
188,923
1.63
188,923
1.63
(1) For the year ended December 31, 2015 there were no potentially dilutive instruments. For the year ended December 31, 2016 the weighted average number
of common shares for diluted earnings per share was increased to take into consideration the theoretical effect of the potential common shares that would be
issued for the Non-Executive Directors’ compensation agreement. For the year ended December 31, 2017 the weighted average number of common shares
for diluted earnings per share was increased to take into consideration the theoretical effect of (i) the potential common shares that would be issued for the
Non-Executive Directors’ compensation agreement and (ii) the potential common shares that would be issued for the equity incentive program.
Net Debt and Net Industrial Debt
Net Industrial Debt is the primary measure used by us to analyze our financial leverage and capital
structure, and is one of the key indicators, together with Net Debt, we use to measure our financial position.
These measures are presented by management to aid investors in their analysis of the Group’s financial position
and financial performance and to compare the Group’s financial position and financial performance with that
of other companies. Net Industrial Debt is defined as total debt less cash and cash equivalents (Net Debt),
130
131
ANNUAL REPORT
OPERATING
RESULTS
further adjusted to exclude the funded portion of the self-liquidating financial receivables portfolio, which is the
portion of our receivables from financing activities that we fund with external debt or intercompany loans.
Constant Currency Information
The “Results of Operations” discussion below includes information about our net revenues on a constant
currency basis. We use this information to assess how the underlying business has performed independent of
fluctuations in foreign currency exchange rates. We calculate constant currency by applying the prior-period
average foreign currency exchange rates to current period financial data expressed in local currency in which the
relevant financial statements are denominated, in order to eliminate the impact of foreign currency exchange rate
fluctuations (see Note 2 “Significant Accounting Policies” to the Consolidated Financial Statements, included in
this Annual Report, for information on the foreign currency exchange rates applied). Although we do not believe
that these measures are a substitute for GAAP measures, we do believe that such results excluding the impact of
currency fluctuations year-on-year provide additional useful information to investors regarding the operating
performance on a local currency basis.
In particular, the U.S. Dollar experienced moderate fluctuations compared to the Euro in 2017 compared
to 2016. For example, if a U.S. entity with U.S. Dollar functional currency recorded net revenues of U.S. $100
million for 2017 and 2016, we would have reported €88.5 million in net revenues for 2017 (using the 2017
average exchange rate of 1.1297), a €1.8 million decrease over the €90.3 million reported for 2016 (using the
2016 average exchange rate of 1.1069). The constant currency presentation translates the 2017 net revenues
using the 2016 foreign currency exchange rates, and therefore indicates that the underlying net revenues on a
constant currency basis were unchanged year-on-year.
The U.S. Dollar did not experience significant fluctuations compared to the Euro in 2016 compared to
2015. For example, the effect of translating net revenues of $100 million for 2016 using the 2015 average exchange
rate of 1.1094 would have been a decrease of €0.2 million.
The following table sets forth a reconciliation of Net Debt and Net Industrial Debt at December 31,
2017, and 2016:
Cash and cash equivalents
Debt
Net Debt
Funded portion of the self-liquidating financial receivables portfolio
Net Industrial Debt
Free Cash Flow and Free Cash Flow from Industrial Activities
At December 31,
2017
2016
(€ million)
648
(1,806)
(1,158)
685
(473)
458
(1,848)
(1,390)
737
(653)
Free Cash Flow and Free Cash Flow from Industrial Activities are two of our primary key performance
indicators to measure the Group’s performance. These measures are presented by management to aid investors
in their analysis of the Group’s financial performance and to compare the Group’s financial performance with
that of other companies. Free Cash Flow is defined as cash flows from operating activities less cash flows used in
investing activities. Free Cash Flow from Industrial Activities is defined as Free Cash Flow adjusted for the change
in the self-liquidating financial receivables portfolio, which is the change in our receivables from financing
activities. The following table sets forth our Free Cash Flow and Free Cash Flow from Industrial Activities for the
years ended December 31, 2017, 2016 and 2015.
Cash flows from operating activities
Cash flows used in investing activities
Free Cash Flow
Change in the self-liquidating financial receivables portfolio
Free Cash Flow from Industrial Activities
For the years ended December 31,
2017
2016
(€ million)
2015
663
(379)
284
44
328
1,005
(320)
685
(405)
280
707
(317)
390
39
429
The change in the self-liquidating financial receivables portfolio in 2016 primarily relates to the
deconsolidation of FFS GmbH following the sale of a majority stake in FFS GmbH to FCA Bank on November 7,
2016.
132
133
ANNUAL REPORT
SUBSEQUENT EVENTS
AND 2018 OUTLOOK
Subsequent events
On February 9, 2018 the Company announced its intention to launch a share buyback program. The
Company expects the program to involve the repurchase from time to time of up to €100 million in common
shares. The program is intended to optimize the capital structure of the Company. Shares repurchased may
be used to meet the Company’s obligations arising from the equity incentive plan approved in 2017. Under the
program, as of February 20, 2018 the Company purchased an aggregate of 190,600 common shares on the
New York Stock Exchange (NYSE) for an aggregate consideration of $22,838,301. As of February 20, 2018 the
Company held 5,160,225 common shares in treasury, and in total the Company held 2.06 percent of the total
issued share capital in treasury, including the common shares and the special voting shares.
On February 20, 2018, the Company announced that Scuderia Ferrari has extended its partnership
agreement with Philip Morris International, continuing a collaboration of nearly five decades.
On February 21, 2018, the Group announced that it has selected the 88th edition of the Geneva
International Motor Show for the world premiere of the Ferrari 488 Pista, the Group’s successor to Ferrari’s V8-
engined special series. The Ferrari 488 Pista marks a significant step forward from the previous special series in
terms of both sporty dynamics and for the level of technological carryover from racing.
On February 22, 2018, the Company presented the new car for the 2018 Formula 1 World Championship.
On February 23, 2018, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders
that the Company declare a dividend of €0.71 per common share, totaling approximately €134 million. The
proposal is subject to the approval of the Company’s shareholders at the AGM to be held on April 13, 2018.
2018 Outlook
The Group indicates the following guidance for 2018:
• Shipments: > 9,000 including supercars
• Net revenues > Euro 3.4 billion
• Adjusted EBITDA ≥ Euro 1.1 billion
• Net Industrial Debt < Euro 400 million including a dividend distribution to the holders of common
shares and excluding potential share repurchases.
• Capital Expenditures: ~Euro 550 million
February 23, 2018
Sergio Marchionne
John Elkann
Piero Ferrari
Delphine Arnault
Louis C. Camilleri
Giuseppina Capaldo
Eddy Cue
Sergio Duca
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
134
MAJOR
SHAREHOLDERS
Exor is the largest shareholder of Ferrari through its approximately 23.5 percent shareholding interest
in our outstanding common shares (as of February 19, 2018). See “Overview - History of the Company.” As a
result of the loyalty voting mechanism, Exor’s voting power is approximately 33.4 percent. In addition, Mr. Piero
Ferrari holds approximately 10 percent of our outstanding common shares and, as a result of the loyalty voting
mechanism, his voting power is approximately 15.4 percent.
Exor and Mr. Piero Ferrari informed us that they have entered into a shareholder agreement, summarized
below under “Shareholders’ Agreement”.
Exor resulted from a cross-border merger of its predecessor entity, Exor S.p.A. with and into Exor N.V. As
a result of that merger, which was completed on December 11, 2016, all activities of Exor S.p.A. are continued by
Exor under universal succession, including with respect to the holding of our shares. Exor is controlled by Giovanni
Agnelli B.V., (“G.A.”) which holds 52.99 percent of its share capital. G.A. is a Dutch private company with limited
liability (besloten venootschap met beperkte aansprakelijkheid) with interests represented by shares, founded by Giovanni
Agnelli and currently held by members of the Agnelli and Nasi families, descendants of Giovanni Agnelli, founder
of Fiat. Its present principal business activity is to purchase, administer and dispose of equity interests in public
and private entities and, in particular, to ensure the cohesion and continuity of the administration of its controlling
equity interests. The managing directors of G.A. are John Elkann, Jeroen Preller, Florence Hinnen, Tiberto Brandolini
d’Adda, Alessandro Nasi, Andrea Agnelli, Luca Ferrero de’ Gubernatis Ventimiglia and Eduardo Teodorani-Fabbri.
Based on the information in Ferrari’s shareholder register, regulatory filings with the Netherlands
Authority for the Financial Markets (stichting Autoriteit Financiële Markten, the “AFM”) and the SEC and other
sources available to us, the following persons owned, directly or indirectly, in excess of three percent of the
common shares holding voting rights of Ferrari, as of February 19, 2018:
Shareholder
Exor N.V.(2)
Piero Ferrari (2)
T. Rowe Price Associates, Inc.(3)
Blackrock, Inc.(4)
Other public shareholders
Number of common shares
Percentage owned (1)
44,435,280
18,894,295
9,410,267
6,763,273
109,450,759
23.5%
10.0%
5.0%
3.6%
57.9%
(1) The percentages of share capital set out in this table are calculated as the ratio of (i) the aggregate number of outstanding common
shares beneficially owned by the shareholder to (ii) the total number of outstanding common shares (net of treasury shares) of
Ferrari. These percentages may slightly differ from the percentages of share capital included in the public register held by the AFM of
all notifications made pursuant to the disclosure obligations under chapter 5.3 of the Dutch Act on financial supervision (Wet op het
financieel toezicht; the “AFS”), such, inter alia, because any shares held in treasury by Ferrari are included in the relevant denominators
for purposes of the AFS disclosure obligations.
(2) Each of Exor and Piero Ferrari participate in the loyalty voting program of Ferrari and therefore, as discussed above in this section, their
voting power in Ferrari is higher than the percentage of common shares beneficially held as presented in this table.
(3) Based on filings with the SEC, T. Rowe Price Associates, Inc. is an investment adviser registered under Section 203 of the U.S. Investment
Advisers Act of 1940 and, out of the common shares beneficially owned as set forth in the table, it has sole voting power over 3,143,852
common shares.
(4) Holdings as of December 7th, 2017 based on latest filings with the AFM.
Based on the information in Ferrari’s shareholder register and other sources available to us, as of February
16, 2018, approximately 39.3 million Ferrari common shares, or 20.8 percent of the outstanding Ferrari common
shares, were held in the United States. As of the same date, approximately 1,200 record holders had registered
addresses in the United States.
135
ANNUAL REPORT
The Shareholders’ Agreement shall terminate and cease to have any effect as a result of the transfer of
all the common shares owned by either Exor or Piero Ferrari to a third party.
Governing law and jurisdiction
The Shareholders’ Agreement is governed by and must be interpreted according to the laws of the
Netherlands. Any disputes arising out of or in connection with the Shareholders’ Agreement are subject to the
exclusive jurisdiction of the competent court in Amsterdam, the Netherlands, without prejudice to the right of
appeal and appeal to the Supreme Court.
MAJOR
SHAREHOLDERS
Shareholders’ Agreement
On December 23, 2015, Exor and Piero Ferrari entered into a Shareholders’ Agreement, which became
effective at the completion of the Separation on January 3, 2016 (the “Shareholders’ Agreement”) and prior to
the admission to listing and trading of the common shares of Ferrari on the MTA. Ferrari is not a party to the
Shareholders’ Agreement and does not have any rights or obligations thereunder. Below is a summary of the
principal provisions of the Shareholders’ Agreement based on regulatory filings made by Exor and Piero Ferrari.
Consultation
For the purposes of forming and exercising, to the extent possible, a common view on the items on the
agenda of any General Meeting of shareholders of Ferrari, Exor and Piero Ferrari will consult with each other
prior to each General Meeting. For the purposes of this consultation right and duties, representatives of each of
Exor and Piero Ferrari shall meet in order to discuss in good faith whether they have or can find a common view
as to the matters on the agenda of the immediately following General Meeting. This consultation right does not
include an obligation to vote in any certain way nor does it constitute a veto right in favor of Piero Ferrari.
Pre-emption right in favor of Exor and right of first offer of Piero Ferrari
In the event that Piero Ferrari intends to transfer (in whole or in part) his Ferrari common shares or
receives a third party offer for the acquisition of all or part of his Ferrari common shares, Exor will have the right
to purchase all (but not less than all) of the common shares Piero Ferrari intends to transfer on the terms of the
original proposed transfer by Piero Ferrari or, in case the original proposed transfer was for no consideration, at
market prices determined pursuant to the agreement.
In the event Exor intends to transfer (in whole or in part) its common shares to a third party, either
solicited or unsolicited, Piero Ferrari will have the right to make a binding, unconditional and irrevocable all cash
offer for the purchase of such common shares.
The foregoing will not apply in the case of transfers of Ferrari common shares: (i) by any party to the
Shareholders’ Agreement, to a party that qualifies as a “Loyalty Transferee” (as defined in the Ferrari Articles
of Association) of such party, (ii) by Exor, to any affiliate of Giovanni Agnelli B.V., to a successor in business of
Giovanni Agnelli B.V. and to any affiliate of a successor in business of Giovanni Agnelli e B.V., and (iii) by any
party to the Shareholders’ Agreement that is an individual, to an entity wholly owned and controlled by that
same party. In addition, the provisions regarding the pre-emption right in favor of Exor and right of first offer of
Piero Ferrari shall not apply in relation to, and Piero Ferrari shall be free and allowed to carry out, market sales
to third parties of his Ferrari common shares which in the aggregate do not exceed, during the whole period of
validity of the Shareholders Agreement, 0.5 percent of the number of common shares owned by Piero Ferrari
upon completion of the Separation.
Term
The Shareholders’ Agreement entered into force upon completion of the Separation on January 3, 2016
and shall remain in force until the fifth anniversary of the effective date of the Separation, provided that if neither
of the parties to the Shareholders’ Agreement terminates the Shareholders’ Agreement within six months before the
end of the initial term, then the Shareholders’ Agreement shall be renewed automatically for another five year term.
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Introduction
Ferrari N.V. (the “Company”) is a public limited liability company, incorporated under the laws of the
Netherlands. The Company is the holding company of the Ferrari group following the separation of the Ferrari
business from Fiat Chrysler Automobiles N.V. (“FCA”), through a series of transactions (the “Separation”)
described under “Overview-The Separation”. In this section, the “Company” also refers to Ferrari N.V. predecessor,
formerly known as New Business Netherlands N.V., as the context may require. Such predecessor of Ferrari N.V.
was the holding of the Ferrari group following completion of the restructuring intended to facilitate Ferrari’s
IPO. When in this section reference is made to Ferrari N.V., it solely relates to the current Ferrari N.V. (previously
known as FE New N.V.), which acquired Ferrari N.V. predecessor under universal title through a merger under
Dutch law. The Company qualifies as a foreign private issuer under the New York Stock Exchange (“NYSE”) listing
standards and its common shares are listed on the NYSE and on the Mercato Telematico Azionario managed by
Borsa Italiana S.p.A. (“MTA”).
In accordance with the NYSE Listed Company Manual, the Company is permitted to follow its home
country practice with regard to certain corporate governance standards. The Company has adopted, except
as discussed below, the best practice provisions of the revised Dutch corporate governance code issued by the
Corporate Governance Code Monitoring Committee, which entered into force on January 1, 2018 (the “Dutch
Corporate Governance Code”) and is applicable as from financial year 2017. The Dutch Corporate Governance
Code contains principles and best practice provisions that regulate relations inter alia between the board of
directors of a company and its committees and the relationship with the general meeting of shareholders.
In this report the Company addresses its overall corporate governance structure. The Company discloses,
and intends to disclose any material departure from the best practice provisions of the Dutch Corporate
Governance Code in its future annual reports.
Due to the revised Dutch Corporate Governance Code becoming applicable with regard to the financial
year 2017, the non-executive Directors and the members of the Governance and Sustainability Committee assessed
the required amendments and arranged for the various corporate governance documents of the Company to be
updated in order to align with the requirements of the current Dutch Corporate Governance Code.
Board of Directors
Pursuant to the Company’s articles of association (the “Articles of Association”), its board of directors
(the “Board of Directors”) may have three or more directors (the “Directors”). With a shareholders’ resolution
adopted on April 15, 2016 the number of the Directors was set at thirteen and the current slate of Directors was
appointed on April 14, 2017. The term of office of the current Board of Directors will expire on the next annual
shareholders general meeting, currently scheduled on April 13, 2018, and the Company’s general meeting of
shareholders is expected to elect a new Board of Directors for approximately a one-year term. Each Director may
be reappointed at any subsequent annual general meeting of shareholders.
The Board of Directors as a whole is responsible for the strategy of the Company. The Board of Directors is
composed of one executive Director (i.e., Mr. Marchionne, Chairman and Chief Executive Officer) and twelve non-
executive Directors, who do not have day-to-day responsibility within the Company or the Group. Mr. Amedeo
Felisa, the Company’s Chief Executive Officer until May 2, 2016, was an executive director until April 2017 and
currently serves as a non-executive director. Pursuant to Article 17 of the Articles of Association, the general
authority to represent the Company shall be vested in the Board of Directors and the Chief Executive Officer.
The Board of Directors appointed the following internal committees: (i) an Audit Committee, (ii) a
Governance and Sustainability Committee, and (iii) a Compensation Committee.
Nine directors currently qualify as independent (representing a majority) for purposes of NYSE rules,
Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and eight Directors qualify
as independent (representing a majority) for purposes of the Dutch Corporate Governance Code.
The non-executive directors of the Company met to discuss the functioning of the Board and its
committees, the functioning of the executive directors as a corporate body of the company, or the corporate
strategy and the main risks of the business, pursuant to best practice provisions 2.2.6, 2.2.7 and 1.1.2 of the
Dutch Corporate Governance Code.
The Board of Directors has resolved to grant the following titles:
•
•
•
•
Sergio Marchionne: Chairman and Chief Executive Officer;
John Elkann: Vice-Chairman;
Piero Ferrari: Vice-Chairman; and
Louis C. Camilleri: Senior Non-Executive Director.
The Board of Directors has also resolved to appoint Louis C. Camilleri as chairman of the Board, as
referred to in the Dutch Civil Code, who will in such capacity have the title Chair (Voorzitter).
The following members are independent within the meaning of the Dutch Corporate Governance Code:
•
•
•
•
•
•
•
•
Louis C. Camilleri
Delphine Arnault;
Giuseppina Capaldo;
Eddy Cue;
Sergio Duca;
Maria Patrizia Grieco;
Adam Keswick; and
Elena Zambon.
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Directors are expected to prepare themselves for and to attend all Board of Directors meetings, the
annual general meeting of shareholders and the meetings of the committees on which they serve, with the
understanding that, on occasion, a Director may be unable to attend a meeting.
From January 1, 2017 to the year-end there were three meetings of the Board of Directors. The attendance
rate at these meetings was 94.87 percent.
The current composition of the Board of Directors is the following:
Sergio Marchionne (Chairman and executive director) - Mr. Marchionne is the Chairman and Chief
Executive Officer of Ferrari N.V.. Mr. Marchionne is also the Chairman of Ferrari S.p.A. since October 2014
and the Chief Executive Officer since June 2016. Mr. Marchionne currently serves as Chief Executive Officer
of FCA, and Chairman and Chief Executive Officer of FCA U.S.. Mr. Marchionne leads FCA’s Group Executive
Council and has been Chief Operating Officer of its NAFTA region since September 2011. He also serves as
Chairman of CNH Industrial N.V. (“CNHI”). He was the chairman of Fiat Industrial and CNH Global N.V. until
the integration of these companies into CNHI in 2013. Prior to joining FCA, Mr. Marchionne served as Chief
Executive Officer of SGS SA, Chief Executive Officer of the Lonza Group Ltd. and Chief Executive Officer of
Alusuisse Lonza (Algroup). He also served as Vice President of Legal and Corporate Development and Chief
Financial Officer of the Lawson Group after serving as Vice President of Finance and Chief Financial Officer of
Acklands Ltd. and Executive Vice President of Glenex Industries. Mr. Marchionne holds a Bachelor of Laws from
Osgoode Hall Law School at York University in Toronto, Canada and a Master of Business Administration from
the University of Windsor, Canada. Mr. Marchionne also holds a Bachelor of Arts with a major in Philosophy
and minor in Economics from the University of Toronto. Mr. Marchionne serves on the Board of Directors of
Philip Morris International Inc. and as Executive Chairman of SGS SA headquartered in Geneva. Additionally,
Mr. Marchionne is non-executive Vice Chairman of Exor N.V.. Mr. Marchionne is a member of the Board of
Directors of ACEA (European Automobile Manufacturers Association). He previously served as appointed non-
executive Vice Chairman and Senior Independent Director of UBS AG.
Born in 1952, Canadian and Italian citizenship.
John Elkann (Vice Chairman and non-executive director) - Mr. John Elkann is Vice Chairman of Ferrari
N.V., Chairman and Chief Executive Officer of EXOR and Chairman of Fiat Chrysler Automobiles N.V.. Born in
New York in 1976, Mr. Elkann obtained a scientific baccalaureate from the Lycée Victor Duruy in Paris and grad-
uated in Engineering from Politecnico, the Engineering University of Turin. While at university, he gained work
experience in various companies of the Fiat Group in the UK and Poland (manufacturing) as well as in France
(sales and marketing). He started his professional career in 2001 at General Electric as a member of the Cor-
porate Audit Staff, with assignments in Asia, the USA and Europe. John Elkann is Chairman of Giovanni Agnelli
B.V. and of PartnerRe. He is Vice Chairman of Ferrari S.p.A. and a board member of The Economist Group and
of GEDI Gruppo Editoriale S.p.A.. Mr. Elkann is a trustee of MoMA. He also serves as Vice Chairman of the Ital-
ian Aspen Institute and of the Giovanni Agnelli Foundation. Mr. John Elkann is the brother of Mr. Lapo Elkann
(non-executive director).
Born in 1976, Italian citizenship.
Piero Ferrari (Vice Chairman and non-executive director) - Mr. Piero Ferrari is Vice Chairman of
Ferrari N.V. and he has been Vice Chairman of Ferrari S.p.A. since 1988. He also serves as Chairman of HPE-
COXA, is a board member of Ferretti Group and a board member and Vice President of CRN Ancona (Ferretti
Group). He was President of Piaggio Aero Industries S.p.A. from 1998 to 2014 and served as Chairman of
the Italian Motor Sport Commission (CSAI) from 1998 to 2001 and BA SERVICE from 2000 to 2015. He was
also a board member and Vice President of Banca Popolare dell’Emilia Romagna in Modena from 2002 to
2011 and from 2001 to 2014 respectively. The son of Ferrari’s founder Enzo Ferrari, Mr. Piero Ferrari covered
a variety of management positions in the motor sport division of Ferrari from 1970 to 1988 with increasing
responsibilities. His first position with Ferrari dates back to 1965 working on the production of the Dino 206
Competizione racing car. Mr. Piero Ferrari received an honorary degree in Aerospace Engineering from the
University of Naples Federico II in 2004 and an Honorary Degree in Mechanical Engineering from the University
of Modena and Reggio Emilia in 2005. In 2004, Mr. Piero Ferrari was awarded the title of Cavaliere del Lavoro.
Born in 1945, Italian citizenship.
Delphine Arnault (non-executive director) - Born on April 4th 1975, Ms. Delphine Arnault graduated
from the EDHEC Business School and the London School of Economics. She began her career at McKinsey &
Company, the global management consultancy firm, where she was a Consultant for two years. In 2001, she
joined the Executive Committee of Christian Dior Couture where she directed several product lines. She was
appointed Deputy General Manager of Christian Dior Couture in 2008 and in September 2013 Deputy General
Manager of Louis Vuitton Malletier. She has been a main board director of LVMH Moët Hennessy Louis Vuitton
SA since 2003. Delphine was appointed to the board of Château Cheval Blanc, the Saint-Emilion premier grand
cru classé, and, until 2017, sat on the supervisory board of Les Echos, the leading French business daily. In 2002
she joined the board of Loewe, the celebrated Spanish leather goods company, and was appointed to Pucci’s
Board of Directors in 2007. She was appointed to the boards of Céline in December 2011, Christian Dior SE
in April 2012 and 21st Century Fox in June 2013. In December 2015 she joined the board of the Italian jeweler
Repossi, in which LVMH is a shareholder. Delphine Arnault has also been a member of the supervisory board of
M6 Group since November 2009 and of Havas since May 2013.
Born in 1975, French citizenship.
Louis C. Camilleri (non-executive director) - Mr. Camilleri is Senior Non-Executive Director and
Chairman of the Board of Directors of Ferrari N.V.. Mr. Camilleri currently serves as Non-Executive Chairman
of the Board of Philip Morris International Inc. (“PMI”). From March 2008 to May 2013, he served as Chairman
and Chief Executive Officer of PMI. From April 2002 and August 2002 until March 2008, he was Chief Executive
Officer and Chairman of Altria Group, Inc., respectively. From November 1996 to April 2002, he served as
Senior Vice President and Chief Financial Officer of Altria Group, Inc. He had been employed continuously
by Altria Group, Inc. and its subsidiaries (including PMI) in various capacities since 1978. Mr. Camilleri was
appointed to the Board of Directors of América Móvil, S.A.B. de C.V. in April 2011, and previously served on
the Board of Telmex International SAB from December 2009. Mr. Camilleri was a director of Kraft Foods Inc.
(“Kraft”) from March 2001 to December 2007 and was Kraft’s Chairman from September 2002 to March
2007. Mr. Camilleri received a degree in Economics and Business Administration from HEC Lausanne, the
Faculty of Business & Economics of the University of Lausanne (Switzerland).
Born in 1955, British citizenship.
Giuseppina Capaldo (non-executive director) - Ms. Capaldo is Full Professor of Private Law, at “La
Sapienza” University of Rome. She is an independent member of the Board of Directors of Salini Impregilo
S.p.A. (2012-present) and Banca Monte dei Paschi S.p.A. (2017-present). She was an independent member of
the Board of Directors of Exor S.p.A. from 2012 to 2015 and Credito Fondiario S.p.A. (2014-2017). She was
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a member of the Board of Directors of Ariscom S.p.A. (an Italian insurance company) from 2012-2015 and
A.D.I.R. - Assicurazioni di Roma (2006-2010). She collaborated with the Macchi di Cellere Gangemi law firm in
the Banking and Finance, Corporate and M&A sectors (2004-2007). She has been Deputy Rector for Resource
Planning and Assets (since 2014) at La Sapienza University; Director of LLM “Financial Markets Law” (since
2009). Previously, she served as Deputy Rector for Strategic Planning (2008-2014); Head of Department of
“Law and Business” (2007-2013); and Director of PhD “Contract Law and Business” (2007-2011). Ms. Capaldo
has a degree in Economics and a degree in Law from “La Sapienza” University of Rome, has been a licensed
certified public accountant since 1992 and is listed in the Register of Independent Auditors (since 1999). In
addition, Ms. Capaldo has been qualified to practice law in Italy since 2003. She authored several publications
in the areas of contract law, insurance law, financial law and market legal theory.
and gaining experience as assistant to Henry Kissinger, Lapo emerged as Worldwide Brand Promotion Director
for Fiat Group where he successfully carried out several projects in below-the-line marketing and participated
in the relaunch of the Fiat 500. In 2007 he undertook the entrepreneurial path founding the lifestyle brand
“Italia Independent”, the creative factory “Independent Ideas” and the Holding “Italia Independent Group”,
which was listed on the Italian Stock Exchange in June 2013. In 2011 he started a collaboration with Ferrari to
create the Tailor Made Unit. In March 2015 he founded Garage Italia Customs, a customization service for the
motion industry. In July 2013 he was inducted in the Automotive Hall of Fame, the American institution dedicated
to preserving and celebrating outstanding automotive achievement. Lapo Elkann also serves on the Board of
Directors of Pinacoteca Giovanni e Marella Agnelli. Mr. Lapo Elkann is the brother of Mr. John Elkann (Vice
Chairman and non-executive director).
Born in 1969, Italian citizenship.
Born in 1977, Italian citizenship.
Eddy Cue (non-executive director) - Mr. Cue currently serves as Apple Inc.’s Senior Vice President of
Internet Software and Services. He joined Apple in 1989 and oversees Apple’s industry-leading content stores
including the iTunes Store, the App Store and the iBooks Store, as well as Apple Pay, Siri, Maps, iAd, the iCloud
services, and Apple’s productivity and creativity apps. Mr. Cue earned a bachelor’s degree in Computer Science
and Economics from Duke University. He was recognized by renowned cancer research center City of Hope with
their 2014 Spirit of Life Award, honoring an individual whose work has fundamentally impacted the music, film
and entertainment industry.
Born in 1964, American citizenship.
Sergio Duca (non-executive director) - Mr. Duca is the Chairman of the Board of Statutory Auditors
of Enel S.p.A. since April 2010 and a member of the Statutory Auditors of BasicNet S.p.A. since 2017. He also
serves as Chairman of the Board of Auditors of the Fondazione per la Scuola of Compagnia di San Paolo and ISPI
(Institute for the Study of International Politics), as well as a member of the board of auditors of the Intesa San
Paolo Foundation Onlus. Mr. Duca has previously served as Chairman of the Board of Directors of Orizzonte
SGR S.p.A. from 2008 until 2016, Chairman of the Board of Statutory Auditors of Exor S.p.A. until May 2015,
Chairman of the Board of Statutory Auditors and effective auditor of GTech until April 2015, a member of the
Board of ASTM S.p.A. and Chairman of the Audit Committee of ASTM S.p.A. from 2010 until 2013, Chairman
of the Board of Statutory Auditors of Tosetti Value SIM and an independent director of Sella Gestione SGR
until April 2010. From 1997 until July 2007, Mr. Duca was the Chairman of PricewaterhouseCoopers S.p.A..
In addition, he has previously served as Chairman of the Board of Auditors of the Silvio Tronchetti Provera
Foundation, Chairman of the board of auditors of Compagnia di San Paolo until May 2016, member of the
Edison Foundation’s advisory board and the University Bocconi in Milan’s development committee, as well as
Chairman of the Bocconi’s Alumni Association’s Board of Auditors and a member of the Board of Auditors of
the ANDAF (Italian Association of Chief Financial Officers). As a certified chartered accountant and auditor, he
acquired broad experience through the PricewaterhouseCoopers network as the external auditor of a number of
significant Italian listed companies. Mr. Duca graduated with honors in Economics and Business from University
Bocconi in Milan.
Born in 1947, Italian citizenship.
Lapo Elkann (non-executive director) - Mr. Lapo Edovard Elkann is Chairman and Founder of Italia
Independent Group and of Garage Italia Customs. Born in New York in 1977, after studying in France and England
Amedeo Felisa (non-executive director) - Mr. Felisa, who joined Ferrari in 1990, was the CEO of Ferrari
S.p.A. from 2008 until June 2016. From 2006 to 2008 he served as General Manager and Deputy General
Manager. From 1996 to 2004 he was the General Manager of the GT department, coordinating the product
development, powertrains and vehicle departments of both Ferrari and Maserati with respect to the market
positioning of the two brands. In the 1990s, as a Technical Senior Vice President, Mr. Felisa oversaw the planning,
coordination and management of the entire technical department, including defining new business model
plans, supervising the development of both innovation and products and managing the product development
teams, including ensuring employee growth. Prior to joining Ferrari, he was a product development team leader
at Alfa Romeo S.p.A.. Mr. Felisa holds a degree in mechanic engineering from the Milan Politecnico.
Born in 1946, Italian citizenship.
Maria Patrizia Grieco (non-executive director) - Mrs. Maria Patrizia Grieco has been the Chairman of
the Board of Directors of Enel since May 2014. After graduating in law at the University of Milan, she started
her career in 1977 at Italtel, where in 1994 she became Chief of the Legal and General Affairs directorate. In
1999, she was appointed General Manager to re-organize and reposition the company, and in 2002 she became
Chief Executive Officer. Subsequently, she held the positions of Chief Executive Officer of Siemens Informatica,
Partner of Value Partners and Chief Executive Officer of the Group Value Team (today NTT Data). From 2008
to 2013, she was Chief Executive Officer of Olivetti, where she also held the role of Chairman from 2011. She has
been a director of Fiat Industrial and she is currently on the boards of Anima Holding, Ferrari, Amplifon, CIR
and Bocconi University. Mrs. Grieco is also a member of the steering committee of Assonime. Maria Patrizia
Grieco was appointed Chairman of the Italian Corporate Governance Committee in 2017. The purpose of the
Committee is the promotion of good corporate governance practices of Italian listed companies.
Born in 1952, Italian citizenship.
Adam Keswick (non-executive director) - Mr. Adam Keswick was appointed Non-Executive Director of
Jardine Matheson in 2016. He first joined the Jardine Matheson Group in 2001 before being appointed to the
Board of Jardine Matheson in 2007. He was Deputy Managing Director of Jardine Matheson from 2012 to 2016
and became Chairman of Matheson & Co. in August 2016. Mr. Keswick is also Deputy Chairman of Jardine
Lloyd Thompson and a director of Dairy Farm, Hongkong Land, Jardine Strategic and Mandarin Oriental. He
is also a supervisory board member of Rothschild & Co..
Born in 1973, British citizenship.
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Elena Zambon (non-executive director) - Ms. Zambon is President of Zambon S.p.A., a multinational
pharmaceutical company founded in Vicenza in 1906, Vice President of ZaCh - Zambon Chemicals and
member of the Board of Zambon Company S.p.A., holding company of the group. Ms. Zambon is the founder
of Secofind, the multi-family office of the Zambon family, and President of the Foundation Zoé - Zambon
Open Education. Ms. Zambon is a member of the Board of Unicredit and a member of the Board of IIT -
Istituto Italiano di Tecnologia (Italian Institute of Technology). Furthermore, Ms. Zambon is President of AIdAF,
the Italian Association of Family Businesses, a board member of FBN, Family Business Network, and Vice
President of Aspen Institute Italia. In June 2017, Elena Zambon was appointed Vice President of Assolombarda
for Research, Open Innovation, Life Sciences, EMA and Technopole. In June 2014 she was nominated “Cavaliere
del Lavoro” by the President of the Italian Republic and has received the award “Imprenditore Olivettiano
2010” and “Marisa Belisario 2010”, annually assigned to women who have distinguished themselves in the
business world. From 1989 to 1994, Ms. Zambon worked for Citibank. Ms. Zambon was born in Vicenza in
1964, and received a bachelor degree in Business Administration at the University “Bocconi” in Milan.
Born in 1964, Italian citizenship.
Composition of the Board of Directors
Pursuant to Dutch law, as from the financial year 2017 Ferrari should strive to achieve that its Board
of Directors contain at least 30% male and at least 30% female board members, and it should disclose in its
annual report if this requirement is not met. Four of our current thirteen Directors are female, and therefore
the Board of Directors complies with the above mentioned standard. The Company envisages to continue
achieving sufficient diversity of views and the expertise needed for a good understanding of current affairs and
longer-term risks and opportunities relating to the Company’s business and therefore the Board of Directors
adopted a Diversity Policy effective as of 31 December 2017, which stipulates that one of the targets is that “at
least 30% of the seats of the Board of Directors are occupied by women and at least 30% by men”.
Board Regulations
The current regulations of the Board of Directors address matters that concern the Board of Directors,
its committees and its relationship with the general meeting of shareholders and employee participation bodies.
The regulations contain provisions concerning the manner in which meetings of the Board of Directors
are called and held, including the decision-making process. The regulations provide that meetings may be held by
telephone conference or video-conference, provided that all participating Directors can follow the proceedings
and participate in real time discussion of the items on the agenda.
The Board of Directors can only adopt valid resolutions when the majority of the Directors in office shall
be present at the meeting or be represented thereat.
The Board of Directors shall be authorized to adopt resolutions without convening a meeting if all
Directors shall have expressed their opinions in writing, unless one or more Directors shall object in writing to
the resolution being adopted in this way prior to the adoption of the resolution.
The Audit Committee
The Audit Committee is responsible, inter alia, for assisting and advising the Board of Directors’
oversight of:
(i) the integrity of the Company’s financial statements, (ii) the Company’s policy on tax planning, (iii) the
Company’s financing, (iv) the Company’s applications of information and communication technology, (v) the
systems of internal controls that management and the Board of Directors have established, (vi) the Company’s
compliance with legal and regulatory requirements, (vii) the Company’s compliance with recommendations and
observations of internal and independent auditors, (viii) the Company’s policies and procedures for addressing
certain actual or perceived conflicts of interest, (ix) the review and approval of related party transactions,
(x) the independent auditors’ qualifications, independence, remuneration and any non-audit services for the
Company, (xi) the performance of the Company’s internal auditors and of the independent auditors, (xii) risk
management guidelines and policies, and (xiii) the implementation and effectiveness of the Company’s ethics
and compliance program.
The Audit Committee currently consists of Mr. Duca (Chairperson), Ms. Capaldo and Ms. Grieco,
each of whom is independent within the meaning of the Dutch Corporate Governance Code. The Audit
Committee is elected by the Board of Directors and is comprised of at least three non-executive Directors.
Audit Committee members are also required (i) not to have any material relationship with the Company or to
serve as auditors or accountants for the Company, (ii) to be “independent”, for purposes of NYSE rules, Rule
10A-3 of the Exchange Act and the Dutch Corporate Governance Code, and (iii) to be “financially literate”
and have “accounting or selected financial management expertise” (as determined by the Board of Directors).
At least one member of the Audit Committee shall be a “financial expert” as defined by the Sarbanes-Oxley
Act and the rules of the U.S. Securities and Exchange Commission and section 2(3) of the Dutch Decree
on the Establishment of an audit committee. No Audit Committee member may serve on more than four
audit committees for other public companies, absent a waiver from the Board of Directors. Unless decided
otherwise by the Audit Committee, the independent auditors of the Company are required to attend the Audit
Committee meetings, while the Chief Executive Officer and Chief Financial Officer are free, but not required,
to attend the meetings.
In 2017 the Audit Committee met nine times and the average attendance rate was 100 percent. At
these meetings several matters were discussed, including the audit committee role and responsibilities, the
Company’s financial control and risk framework, risk assessment, internal control over financial reporting
pursuant to the applicable rules, and a financial overview of operating results.
A Director may only be represented by another Director authorized in writing. A Director may not act as
a proxy for more than one other Director.
The Compensation Committee
All resolutions shall be adopted by the favorable vote of the majority of the Directors present or
represented at the meeting, provided that the regulations may contain specific provisions in this respect. Each
Director shall have one vote.
The Compensation Committee is responsible for, among other things, assisting and advising the Board
of Directors in: (i) determining executive compensation consistent with the Company’s remuneration policy,
(ii) reviewing and approving the remuneration structure for the executive Directors, (iii) administering equity
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incentive plans and deferred compensation benefit plans, (iv) discussing with management the Company’s
policies and practices related to compensation and issuing recommendations thereon, and (v) to prepare the
remuneration report.
The Compensation Committee currently consists of Mr. Camilleri (Chairperson), Mr. John Elkann and
Ms. Zambon. The Compensation Committee is elected by the Board of Directors and is comprised of at least
three non-executive Directors. Unless decided otherwise by the Compensation Committee, the Head of Human
Resources of the Company attends its meetings.
In 2017 the Compensation Committee met once. The Compensation Committee reviewed the
remuneration report and the implementation of the Remuneration Policy and proposed amendments to the
Remuneration Policy, which were adopted by the general meeting of the shareholders held on April 14, 2017.
Further information on the activities of the Compensation Committee are included in the remuneration
report.
officers, former directors, former officers and any person who may have served at its request as a director or
officer of another company in which it owns shares or of which it is a creditor, who were or are made a party
or are threatened to be made a party to or are involved in, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative (each a “Proceeding”), or
any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, against
any and all liabilities, damages, reasonable and documented expenses (including reasonably incurred and
substantiated attorneys’ fees), financial effects of judgments, fines, penalties (including excise and similar taxes
and punitive damages) and amounts paid in settlement in connection with such Proceeding by any of them.
Such indemnification shall not be deemed exclusive of any other rights to which those indemnified may be
entitled otherwise. Notwithstanding the above, no indemnification shall be made in respect of any claim, issue
or matter as to which any of the above-mentioned indemnified persons shall be adjudged to be liable for gross
negligence or willful misconduct in the performance of such person’s duty to Ferrari. Ferrari has purchased
directors’ and officers’ liability insurance for the members of the Board of Directors and certain other officers,
substantially in line with that purchased by similarly situated companies.
The Governance and Sustainability Committee
Conflict of Interest
The Governance and Sustainability Committee is responsible for, among other things, assisting
and advising the Board of Directors with: (i) the identification of the criteria, professional and personal
qualifications for candidates to serve as Directors, (ii) periodical assessment of the size and composition of
the Board of Directors, (iii) periodical assessment of the functioning of individual Directors and reporting on
this to the Board of Directors, (iv) proposals for appointment of executive and non-executive Directors, (v)
supervision of the selection criteria and appointment procedure for senior management, (vi) monitoring and
evaluating reports on the Group’s sustainable development policies and practices, management standards,
strategy, performance and governance globally, and (vii) reviewing, assessing and making recommendations as
to strategic guidelines for sustainability-related issues, and reviewing the annual Sustainability Report.
The Governance and Sustainability Committee currently consists of Mr. John Elkann (Chairperson),
Mr. Cue, Mr. Duca and Mr. Ferrari. The Governance and Sustainability Committee is elected by the Board of
Directors and is comprised of at least three Directors. No more than two members may be non-independent,
and at most one of the members may be an executive Director.
In 2017 the Governance and Sustainability Committee met once. The Committee reviewed the Board’s
and Committee’s assessments, the Sustainability achievement and objectives, and the recommendations for
Directors’ election.
In addition, as described above, the charters of the Audit Committee, Compensation Committee
and Governance and Sustainability Committee set forth independence requirements for their members for
purposes of the Dutch Corporate Governance Code. Audit Committee members are also required to qualify as
independent for purposes of NYSE rules and Rule 10A-3 of the Exchange Act.
Indemnification of Directors
Under Dutch law, indemnification provisions may be included in a company’s articles of association.
Under the Company’s Articles of Association, the Company is required to indemnify any and all of its directors,
A Director shall not participate in discussions and decision making of the Board of Directors with
respect to a matter in relation to which he or she has a direct or indirect personal interest that is in conflict with
the interests of the Company and the business associated with the Company (“Conflict of Interest”).
In addition, the Board of Directors as a whole may, on an ad hoc basis, resolve that there is such a
strong appearance of a Conflict of Interest of an individual Director in relation to a specific matter, that it is
deemed in the best interest of a proper decision making process that such individual Director be excused from
participation in the decision making process with respect to such matter even though such Director may not
have an actual Conflict of Interest.
At least annually, each Director shall assess in good faith whether (i) he or she is independent under
(A) best practice provision 2.1.8 of the Dutch Corporate Governance Code, (B) the requirements of Rule 10A-
3 under the Exchange Act, and (C) Section 303A of the NYSE Listed Company Manual; and (ii) he or she
would have a Conflict of Interest in connection with any transactions between the Company and a significant
shareholder or related party of the Company, including affiliates of a significant shareholder (such conflict,
a “Related-Party Conflict”), it being understood that currently Exor N.V. (“Exor”) would be considered a
significant shareholder.
The Directors shall inform the Board of Directors through the Senior Non-executive Director or the
Secretary of the Board of Directors as to all material information regarding any circumstances or relationships
that may impact their characterization as “independent,” or impact the assessment of their interests, including
by responding promptly to the annual D&O questionnaires circulated by or on behalf of the Secretary that are
designed to elicit relevant information regarding business and other relationships.
Based on each Director’s assessment described above, the Board of Directors shall make a determination
at least annually regarding such Director’s independence and such Director’s Related-Party Conflict. These
annual determinations shall be conclusive, absent a change in circumstances from those disclosed to the Board
of Directors, that necessitates a change in such determination.
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Mr. Marchionne is Chief Executive Officer of FCA and a director of Exor, our and FCA’s largest
shareholder. FCA, Exor and a number of companies in the FCA and Exor groups are related parties to Ferrari,
see “Risk Factors - We may have potential conflicts of interest with FCA and Exor and its related companies”
and Note 29 “Related Party Transactions” to our Consolidated Financial Statements. Finally, Mr. Ferrari
controls COXA S.p.A, from which Ferrari purchases components for Formula 1 racing cars, and HPE S.r.l.,
which provides consultancy services to Ferrari, see Note 29 to our Consolidated Financial Statements.
Loyalty Voting Structure
In connection with the Separation, Ferrari issued special voting shares with a nominal value of one Euro
cent (€0.01) per share, to FCA, Piero Ferrari and FCA shareholders holding FCA special voting shares prior to
the Separation including Exor, in addition to Ferrari common shares.
After the Separation Exor holds approximately 23.5 percent of our outstanding common shares and
approximately 33.4 percent of the voting power in us, Piero Ferrari holds approximately 10 percent of our
outstanding common shares and approximately 15.4 percent of the voting power in us and public shareholders
hold approximately 51.2 percent of the voting power in us. For more information on the Separation, see
“Overview - The Separation”.
Subject to meeting certain conditions, our common shares can be registered in our loyalty register
(the “Loyalty Register”) and all such common shares may qualify as qualifying common shares (“Qualifying
Common Shares”). The holder of Qualifying Common Shares is entitled to receive without consideration one
special voting share in respect of each such Qualifying Common Share. Pursuant to the Terms and Conditions,
and for so long as the Ferrari common shares remain in the Loyalty Register, such Ferrari common shares
shall not be sold, disposed of, transferred, except in very limited circumstances (i.e., transfers to affiliates or
to relatives through succession, donation or other transfers (defined in the Terms and Conditions as “Loyalty
Transferee”), but a shareholder may create or permit to exist any pledge, lien, fixed or floating charge or other
encumbrance over such Ferrari common shares, provided that the voting rights in respect of such Ferrari
common shares and any corresponding special voting shares remain with such shareholder at all times. Ferrari’s
shareholders who want to directly or indirectly sell, dispose of, trade or transfer such Ferrari common shares
or otherwise grant any right or interest therein, or create or permit to exist any pledge, lien, fixed or floating
charge or other encumbrance over such Ferrari common shares with a potential transfer of voting rights
relating to such encumbrances will need to submit a de-registration request as referred to in the Terms and
Conditions, in order to transfer the relevant Ferrari common shares to the regular trading system (the “Regular
Trading System”) except that a Ferrari shareholder may transfer Ferrari common shares included in the Loyalty
Register to a Loyalty Transferee (as defined in the Terms and Conditions) of such Ferrari shareholder without
transferring such shares from the Loyalty Register to the Regular Trading System.
Ferrari’s shareholders who seek to qualify to receive special voting shares can also request to have their
Ferrari common shares registered in the Loyalty Register. Upon registration in the Loyalty Register such shares
will be eligible to be treated as Qualifying Common Shares, provided they meet the conditions.
Notwithstanding the fact that Article 13 of the Ferrari Articles of Association permits the Board of
Directors of Ferrari to approve transfers of special voting shares, the special voting shares cannot be traded and
are transferable only in very limited circumstances (i.e., to a Loyalty Transferee described above, or to Ferrari for
no consideration (om niet)).
Pursuant to Article 23 of the Ferrari Articles of Association, Ferrari shall maintain a special capital
reserve to be credited against the share premium exclusively for the purpose of facilitating any issuance or
cancellation of special voting shares. The special voting shares shall be issued and paid up against this special
capital reserve.
The special voting shares have immaterial economic entitlements. Such economic entitlements are
designed to comply with Dutch law but are immaterial for investors. The special voting shares carry the same
voting rights as Ferrari common shares.
Section 10 of the Terms and Conditions include liquidated damages provisions intended to deter any
attempt by holders to circumvent the terms of the special voting shares. Such liquidated damages provisions may
be enforced by Ferrari by means of a legal action brought by Ferrari before competent courts of Amsterdam,
the Netherlands. In particular, a violation of the provisions of the Terms and Conditions concerning the transfer
of special voting shares, Electing Common Shares (common shares registered in the Loyalty Register for the
purpose of becoming Qualifying Common Shares in accordance with the Ferrari Articles of Association)
and Qualifying Common Shares may lead to the imposition of liquidated damages. Because we expect the
restrictions on transfers of the special voting shares to be effective in practice we do not expect the liquidated
damages provisions to be used.
Pursuant to Section 12 of the Terms and Conditions, any amendment to the Terms and Conditions
(other than merely technical, non-material amendments and unless such amendment is required to ensure
compliance with applicable law or regulations or the listing rules of any securities exchange on which the Ferrari
common shares are listed) may only be made with the approval of the general meeting of shareholders of
Ferrari.
At any time, a holder of Qualifying Common Shares or Electing Common Shares may request the
de-registration of such shares from the Loyalty Register to enable free trading thereof in the Regular Trading
System. Upon the de-registration from the Loyalty Register, such shares will cease to be Electing Common
Shares or Qualifying Common Shares as the case may be and will be freely tradable and voting rights attached
to the corresponding special voting shares will be suspended with immediate effect and such special voting
shares shall be transferred to Ferrari for no consideration (om niet).
A shareholder who is a holder of Qualifying Common Shares or Electing Common Shares must promptly
notify the Agent and Ferrari upon the occurrence of a “change of control” as defined in the Ferrari Articles of
Association, as described below. The change of control will trigger the de-registration of the relevant Electing
Common Shares or Qualifying Common Shares or the relevant Ferrari common shares in the Loyalty Register.
The voting rights attached to the special voting shares issued and allocated in respect of the relevant Qualified
Common Shares will be suspended upon a direct or indirect change of control in respect of the relevant holder
of such Qualifying Common Shares that are registered in the Loyalty Register.
For the purposes of this section a “change of control” shall mean, in respect of any Ferrari shareholder
that is not an individual (natuurlijk persoon), any direct or indirect transfer in one or a series of related transactions
as a result of which (i) a majority of the voting rights of such shareholder, (ii) the de facto ability to direct the
casting of a majority of the votes exercisable at general meetings of shareholders of such shareholder and/or
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(iii) the ability to appoint or remove a majority of the directors, executive directors or board members or
executive officers of such shareholder or to direct the casting of a majority or more of the voting rights at
meetings of the board of directors, governing body or executive committee of such shareholder has been
transferred to a new owner, provided that no change of control shall be deemed to have occurred if (a) the
transfer of ownership and/or control is an intra-group transfer under the same parent company, (b) the transfer
of ownership and /or control is the result of the succession or the liquidation of assets between spouses or the
inheritance, inter vivos donation or other transfer to a spouse or a relative up to and including the fourth degree
or (c) the fair market value of the Qualifying Common Shares held by such shareholder represents less than
twenty percent (20 percent) of the total assets of the Transferred Group at the time of the transfer and the
Qualifying Common Shares held by such shareholder, in the sole judgment of the Company, are not otherwise
material to the Transferred Group or the change of control transaction. “Transferred Group” shall mean the
relevant shareholder together with its affiliates, if any, over which control was transferred as part of the same
change of control transaction within the meaning of the definition of change of control.
If Ferrari is dissolved and liquidated, whatever remains of Ferrari’s equity after all its debts have been
discharged shall first be applied to distribute the aggregate balance of share premium reserves and other reserves
(other than the special dividend reserve), to holders of Ferrari common shares in proportion to the aggregate
nominal value of the Ferrari common shares held by each holder; secondly, from any balance remaining, an
amount equal to the aggregate amount of the nominal value of the Ferrari common shares will be distributed to
the holders of Ferrari common shares in proportion to the aggregate nominal value of Ferrari common shares
held by each of them; thirdly, from any balance remaining, an amount equal to the aggregate amount of the
special voting shares dividend reserve will be distributed to the holders of special voting shares in proportion
to the aggregate nominal value of the special voting shares held by each of them; fourthly, from any balance
remaining, the aggregate amount of the nominal value of the special voting shares will be distributed to the
holders of special voting shares in proportion to the aggregate nominal value of the special voting shares held
by each of them; and, lastly, any balance remaining will be distributed to the holders of Ferrari common shares
in proportion to the aggregate nominal value of Ferrari common shares held by each of them.
Disclosures pursuant to Decree Article 10 EU-Directive on Takeovers
In accordance with the Dutch Besluit artikel 10 overnamerichtlijn (the Decree), the Company makes the
following disclosures:
a. For information on the capital structure of the Company, the composition of the issued
share capital and the existence of the two classes of shares, please refer to Note 14 to the
Company financial statements in this Annual Report. For information on the rights attached
to the common shares, please refer to the Articles of Association which can be found on the
Company’s website. To summarize, the rights attached to common shares comprise pre-
emptive rights upon issue of common shares, the entitlement to attend the general meeting
of Shareholders and to speak and vote at that meeting and the entitlement to distributions of
such amount of the Company’s profit as remains after allocation to reserves. For information
on the rights attached to the special voting shares, please refer to the Articles of Association
and the Terms and Conditions for the Special Voting Shares which can both be found on the
Company’s website and more in particular to the paragraph “Loyalty Voting Structure” of
this Annual Report in the chapter “Corporate Governance”. As at 31 December 2017, the
issued share capital of the Company consisted of 193,923,499 common shares, representing
approximately 77.4 percent of the aggregate issued share capital, and 56,497,618 special voting
shares, representing approximately 22.6 percent of the aggregate issued share capital.
b. The Company has imposed no limitations on the transfer of common shares. The Articles of
Association provide in Article 13 for transfer restrictions for special voting shares.
c. For information on participations in the Company’s capital in respect of which pursuant to
Sections 5:34, 5:35 and 5:43 of the Dutch Financial Supervision Acts (Wet op het financieel
toezicht) notification requirements apply, please refer to the chapter “Major Shareholders” of
this Annual Report. There you will find a list of Shareholders who are known to the Company
to have holdings of 3% or more at the stated date.
d. No special control rights or other rights accrue to shares in the capital of the Company.
e. A mechanism for verifying compliance with a scheme allowing employees to subscribe for or
to acquire shares in the capital of the company or a subsidiary if the employees do not arrange
for such verification directly is not applicable to the Company.
f. No restrictions apply to voting rights attached to shares in the capital of the Company, nor are
there any deadlines for exercising voting rights. The Articles of Association allow the Company
to cooperate in the issuance of registered depositary receipts for common shares, but only
pursuant to a resolution to that effect of the Board of Directors. The Company is not aware of
any depository receipts having been issued for shares in its capital.
g. The Company is not aware of the existence of any agreements with Shareholders which may
result in restrictions on the transfer of shares or limitation of voting rights except for the
shareholders’ agreement, dated December 23, 2015 between Exor (formerly Exor S.p.A.)
and Piero Ferrari, which became effective upon the completion of the Separation on January
3, 2016 (the “Shareholders’ Agreement”). The Shareholders’ Agreement includes certain
preemption rights of Exor in the event of a proposed transfer of common shares by Piero
Ferrari, and certain rights of first offer of Piero Ferrari in the event of a proposed transfer of
common shares by Exor, in each case subject to the exceptions set forth in the Shareholders’
Agreement. The Shareholders’ Agreement will remain in force until the fifth anniversary of the
Separation provided that if neither of the parties to the Shareholders’ Agreement terminates
the Shareholders’ Agreement within six months before the end of the initial term, then the
Shareholders’ Agreement shall be renewed automatically for another five year term.
h. The rules governing the appointment and dismissal of members of the Board of Directors are
stated in the Articles of Association of the Company. All members of the Board of Directors
are appointed by the general meeting of Shareholders. The term of office of all members of the
Board of Directors is for a period of approximately one year after appointment, such period
expiring on the day the first Annual General Meeting of Shareholders is held in the following
calendar year. The general meeting of Shareholders has the power to suspend or dismiss any
member of the Board of Directors at any time. The rules governing an amendment of the
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Articles of Association are stated in the Articles of Association and require a resolution of the
general meeting of Shareholders which can only be passed pursuant to a prior proposal of the
Board of Directors.
i. The general powers of the Board of Directors are stated in the Articles of Association of the
Company. For a period of five (5) years from January 2, 2016, the Board of Directors has been
irrevocably authorized to issue shares up to the maximum aggregate amount of shares as
provided for in the Company’s authorized share capital as set out in Article 4.1 of the Articles of
Association, as amended from time to time. The Board of Directors has also been designated
for the same period as the authorized body to limit or exclude the rights of pre-emption of
shareholders in connection with the authority of the Board of Directors to issue common
shares and grant rights to subscribe for common shares as referred to above. In the event of an
issuance of special voting shares, shareholders have no right of pre-emptions. The Company
has the authority to acquire fully paid-up shares in its own share capital, provided that such
acquisition is made for no consideration. Further rules governing the acquisition of shares by
the Company in its own share capital are set out in article 8 of the Articles of Association.
j. The Company is not a party to any significant agreements which will take effect, will be altered
or will be terminated upon a change of control of the Company as a result of a public offer
within the meaning of Section 5:70 of the Dutch Financial Supervision Acts (Wet op het financieel
toezicht), provided that certain of the loan agreements entered into by the Company contain
clauses that, as is customary for financing agreements of similar type, may require early
repayment or termination in the event of a change of control of the Company.
k. The Company did not enter into any agreement of the company with a director or employee
providing for a payment / distribution upon termination of employment as a result of a public
offer within the meaning of article 5:70 of the Dutch Financial Supervision Acts.
the application if he is not satisfied that the applicants have previously requested the Board of Directors in
writing, stating the exact subjects to be discussed, to convene a general meeting of shareholders.
General meetings of shareholders shall be held in Amsterdam or Haarlemmermeer (Schiphol Airport),
the Netherlands, and shall be called by the Board of Directors, the Chairman or the Chief Executive Officer, in
such manner as is required to comply with the law and the applicable stock exchange regulations, not later than
on the forty-second day prior to the day of the meeting.
All convocations of general meetings of shareholders and all announcements, notifications and
communications to shareholders shall be made by means of an announcement on the Company’s corporate
website and such announcement shall remain accessible until the relevant general meeting of shareholders. Any
communication to be addressed to the general meeting of shareholders by virtue of Dutch law or the Articles
of Association, may be either included in the notice, referred to in the preceding sentence or, to the extent
provided for in such notice, on the Company’s corporate website and/or in a document made available for
inspection at the office of the Company and such other place(s) as the Board of Directors shall determine.
Convocations of general meetings of shareholders may be sent to Shareholders through the use of an
electronic means of communication to the address provided by such Shareholders to the Company for this
purpose.
The notice shall state the place, date and hour of the meeting and the agenda of the meeting as well as
the other data required by law.
An item proposed in writing by such number of Shareholders who, by Dutch law, are entitled to make
such proposal, shall be included in the notice or shall be announced in a manner similar to the announcement
of the notice, provided that the Company has received the relevant request, including the reasons for putting
the relevant item on the agenda, no later than the sixtieth day before the day of the meeting.
General Meeting of Shareholders
The agenda of the annual general meeting of shareholders shall contain, inter alia, the following items:
At least one general meeting of shareholders shall be held every year, which meeting shall be held within
a. adoption of the annual accounts;
six months after the close of the financial year.
Furthermore, general meetings of shareholders shall be held in the case referred to in Section 2:108a of
the Dutch Civil Code as often as the Board of Directors, the Chairman or the Chief Executive Officer deems it
necessary to hold them or as otherwise required by Dutch law, without prejudice to what has been provided in
the next paragraph hereof.
Shareholders solely or jointly representing at least ten percent (10%) of the issued share capital may
request the Board of Directors, in writing, to call a general meeting of shareholders, stating the matters to be
dealt with.
If the Board of Directors fails to call a meeting, then such shareholders may, on their application,
be authorized by the interim provisions judge of the court (voorzieningenrechter van de rechtbank) to convene a
general meeting of shareholders. The interim provisions judge (voorzieningenrechter van de rechtbank) shall reject
b.
the implementation of the remuneration policy;
c.
the policy of the Company on additions to reserves and on dividends, if any;
d. granting of discharge to the Directors in respect of the performance of their duties in the relevant
financial year;
e.
the appointment of Directors;
f.
if applicable, the proposal to pay a dividend;
g.
if applicable, discussion of any substantial change in the corporate governance structure of the
Company; and
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h. any matters decided upon by the person(s) convening the meeting and any matters placed on the
The chairman of the meeting shall decide on the admittance to the meeting of persons other than those
agenda with due observance of applicable Dutch law.
who are entitled to attend.
The Board of Directors shall provide the general meeting of shareholders with all requested information,
unless this would be contrary to an overriding interest of the Company. If the Board of Directors invokes an
overriding interest, it must give reasons.
When convening a general meeting of shareholders, the Board of Directors shall determine that, for
the purpose of Article 19 and Article 20 of the Articles of Association, persons with the right to vote or attend
meetings shall be considered those persons who have these rights at the twenty-eighth day prior to the day
of the meeting (the “Record Date”) and are registered as such in a register to be designated by the Board
of Directors for such purpose, irrespective whether they will have these rights at the date of the meeting. In
addition to the Record Date, the notice of the meeting shall further state the manner in which shareholders and
other parties with meeting rights may have themselves registered and the manner in which those rights can be
exercised.
The general meeting of shareholders shall be presided over by the Chairman or, in his absence, by the
person chosen by the Board of Directors to act as chairman for such meeting.
One of the persons present designated for that purpose by the chairman of the meeting shall act as
secretary and take minutes of the business transacted. The minutes shall be confirmed by the chairman of the
meeting and the secretary and signed by them in witness thereof.
For each general meeting of shareholders, the Board of Directors may decide that shareholders shall
be entitled to attend, address and exercise voting rights at such meeting through the use of electronic means
of communication, provided that shareholders who participate in the meeting are capable of being identified
through the electronic means of communication and have direct cognizance of the discussions at the meeting and
the exercising of voting rights (if applicable). The Board of Directors may set requirements for the use of electronic
means of communication and state these in the convening notice. Furthermore, the Board of Directors may for
each general meeting of shareholders decide that votes cast by the use of electronic means of communication
prior to the meeting and received by the Board of Directors shall be considered to be votes cast at the meeting.
Such votes may not be cast prior to the Record Date. Whether the provision of the foregoing sentence applies
and the procedure for exercising the rights referred to in that sentence shall be stated in the notice.
Prior to being allowed admittance to a meeting, a shareholder and each person entitled to attend the
meeting, or its attorney, shall sign an attendance list, while stating his name and, to the extent applicable, the
number of votes to which he is entitled. Each shareholder and other person attending a meeting by the use of
electronic means of communication and identified in accordance with the above shall be registered on the
attendance list by the Board of Directors. In the event that it concerns an attorney of a shareholder or another
person entitled to attend the meeting, the name(s) of the person(s) on whose behalf the attorney is acting, shall
also be stated. The chairman of the meeting may decide that the attendance list must also be signed by other
persons present at the meeting.
The minutes of the general meeting of shareholders shall be made available, on request, to the
shareholders no later than three months after the end of the meeting, after which the shareholders shall have
the opportunity to react to the minutes in the following three months. The minutes shall then be adopted in the
manner as described in the preceding paragraph.
The chairman of the meeting may determine the time for which shareholders and others entitled to
attend the general meeting of shareholders may speak if he considers this desirable with a view to the orderly
conduct of the meeting as well as other procedures that the chairman considers desirable for the efficient and
orderly conduct of the business of the meeting.
If an official notarial record is made of the business transacted at the meeting then minutes need not
Every share (whether common or special voting) shall confer the right to cast one vote.
be drawn up and it shall suffice that the official notarial record be signed by the notary.
As a prerequisite to attending the meeting and, to the extent applicable, exercising voting rights, the
shareholders entitled to attend the meeting shall be obliged to inform the Board of Directors in writing within
the time frame mentioned in the convening notice. At the latest this notice must be received by the Board of
Directors on the day mentioned in the convening notice.
Shareholders and those permitted by Dutch law to attend the general meetings of shareholders may
cause themselves to be represented at any meeting by a proxy duly authorized in writing, provided they shall
notify the Company in writing of their wish to be represented at such time and place as shall be stated in the
notice of the meetings. For the avoidance of doubt, such attorney is also authorized in writing if the proxy is
documented electronically. The Board of Directors may determine further rules concerning the deposit of the
powers of attorney; these shall be mentioned in the notice of the meeting.
The Company is exempt from the proxy rules under the U.S. Securities Exchange Act of 1934, as
amended.
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Shares in respect of which Dutch law determines that no votes may be cast shall be disregarded for the
purposes of determining the proportion of shareholders voting, present or represented or the proportion of the
share capital present or represented.
All resolutions shall be passed with an absolute majority of the votes validly cast unless otherwise
specified herein. Blank votes shall not be counted as votes cast.
All votes shall be cast in writing or electronically. The chairman of the meeting may, however, determine
that voting by raising hands or in another manner shall be permitted.
Voting by acclamation shall be permitted if none of the shareholders present or represented objects.
No voting rights shall be exercised in the general meeting of shareholders for shares owned by the
Company or by a subsidiary of the Company. Pledgees and usufructuaries of shares owned by the Company and
its subsidiaries shall however not be excluded from exercising their voting rights, if the right of pledge or usufruct
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was created before the shares were owned by the Company or a subsidiary. Neither the Company nor any of its
subsidiaries may exercise voting rights for shares in respect of which it holds a right of pledge or usufruct.
Without prejudice to the Articles of Association, the Company shall determine for each resolution passed:
a)
the number of shares on which valid votes have been cast;
b)
the percentage that the number of shares as referred to under a. represents in the issued share
capital;
c)
the aggregate number of votes validly cast; and
d)
the aggregate number of votes cast in favor of and against a resolution, as well as the number of
abstentions.
In the event of an issuance of common shares every holder of common shares shall have a right of pre-
emption with regard to the common shares or rights to subscribe for common shares to be issued in proportion
to the aggregate nominal value of his common shares, provided however that no such right of pre-emption shall
exist in respect of shares or rights to subscribe for common shares to be issued to employees of the Company
or of a group company pursuant to any option plan of the Company.
A shareholder shall have no right of pre-emption for shares that are issued against a non-cash contribution.
In the event of an issuance of special voting shares to qualifying shareholders, shareholders shall not
have any right of pre-emption.
The general meeting of shareholders or the Board of Directors, as the case may be, shall decide when
passing the resolution to issue shares or rights to subscribe for shares in which manner the shares shall be
issued and, to the extent that rights of pre-emption apply, within what period those rights may be exercised.
Issuance of shares
Corporate offices
The general meeting of shareholders or alternatively the Board of Directors, if it has been designated
to do so by the general meeting of shareholders, shall have authority to resolve on any issuance of shares and
rights to subscribe for shares. The general meeting of shareholders shall, for as long as any such designation of
the Board of Directors for this purpose is in force, no longer have authority to decide on the issuance of shares
and rights to subscribe for shares.
For a period of five years from January 2, 2016 the Board of Directors has been irrevocably authorized
to issue shares and rights to subscribe for shares up to the maximum aggregate amount of shares as provided
for in the company’s authorized share capital as set out in Article 4.1 of the Articles of Association, as amended
from time to time.
The general meeting of shareholders or the Board of Directors if so designated in accordance with the
Articles of Association, shall decide on the price and the further terms and conditions of issuance, with due
observance of what has been provided in relation thereto in Dutch law and the Articles of Association.
If the Board of Directors is designated to have authority to decide on the issuance of shares or rights
to subscribe for shares, such designation shall specify the class of shares and the maximum number of shares
or rights to subscribe for shares that can be issued under such designation. When making such designation
the duration thereof, which shall not be for more than five years, shall be resolved upon at the same time. The
designation may be extended from time to time for periods not exceeding five years. The designation may not
be withdrawn unless otherwise provided in the resolution in which the designation is made.
Payment for shares shall be made in cash unless another form of consideration has been agreed.
Payment in a currency other than euro may only be made with the consent of the Company.
The Board of Directors has also been designated as the authorized body to limit or exclude the rights
of pre-emption of shareholders in connection with the authority of the Board of Directors to issue common
shares and grant rights to subscribe for common shares as referred to above.
The Company is incorporated under the laws of the Netherlands. It has its corporate seat in Amsterdam,
the Netherlands, and the place of effective management of the Company is Via Abetone Inferiore n. 4 I-41053
Maranello (MO) Italy.
The business address of the Board of Directors and the senior managers is Via Abetone Inferiore n. 4
I-41053 Maranello (MO) Italy.
The Company is registered at the Dutch trade register under number 64060977.
The Netherlands is the Company’s home member state for the purposes of the EU Transparency
Directive (Directive 2004/109/EC, as amended).
Internal Control System
The Company has in place an internal control system (the “System”), based on the model provided by the
COSO Framework (Committee of Sponsoring Organizations of the Treadway Commission Report - Enterprise
Risk Management model) and the principles of the Dutch Corporate Governance Code, which consists of a set
of policies, procedures and organizational structures aimed at identifying, measuring, managing and monitoring
the principal risks to which the Company is exposed. The System is integrated within the organizational and
corporate governance framework adopted by the Company and contributes to the protection of corporate
assets, as well as to ensuring the efficiency and effectiveness of business processes, reliability of financial
information and compliance with laws, regulations, the Articles of Association and internal procedures.
The System, which has been developed on the basis of international best practices, consists of the
following three levels of control:
•
Level 1: operating areas, which identify and assess risk and establish specific actions for management
of such risk;
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•
•
Level 2: departments responsible for risk control, which define methodologies and instruments for
managing risk and monitoring such risk;
In accordance with international best practices, the Group has two principal types of control in place:
• controls that operate at Group or subsidiary level, such as delegation of authorities and responsibilities,
Level 3: Internal Audit department, which conducts independent evaluations of the System in its entirety.
separation of duties, and assignment of access rights to IT systems; and
Principal Characteristics of the Internal Control System and Internal Control over Financial Reporting
The Company has in place a system of risk management and internal control over financial reporting
based on the model provided by the COSO Framework, according to which the internal control system is
defined as a set of rules, procedures and tools designed to provide reasonable assurance of the achievement of
corporate objectives.
In relation to the financial reporting process, reliability, accuracy, completeness and timeliness of the
information contribute to the achievement of such corporate objectives. Risk management is an integral part
of the internal control system. A periodic evaluation of the system of internal control over financial reporting is
designed to ensure the overall effectiveness of the components of the COSO Framework (control environment, risk
assessment, control activities, information and communication, and monitoring) in achieving those objectives.
The Company has a system of administrative and accounting procedures in place that ensure a high
degree of reliability in the system of internal control over financial reporting.
The approach adopted by the Company for the evaluation, monitoring and continuous updating of
the system of internal control over financial reporting, is based on a ‘top-down, risk-based’ process consistent
with the COSO Framework. This enables focus on areas of higher risk and/or materiality, where there is risk of
significant errors, including those attributable to fraud, in the elements of the financial statements and related
documents. The key components of the process are:
•
identification and evaluation of the source and probability of material errors in elements of financial
reporting;
• assessment of the adequacy of key controls in enabling ex-ante or ex-post identification of potential
misstatements in elements of financial reporting; and
•
verification of the operating effectiveness of controls based on the assessment of the risk of misstatement
in financial reporting, with testing focused on areas of higher risk.
Identification and evaluation of the risk of misstatements which could have material effects on
financial reporting is carried out through a risk assessment process that uses a top-down approach to identify
the organizational entities, processes and the related accounts, in addition to specific activities, which could
potentially generate significant errors. Under the methodology adopted by the Company, risks and related
controls are associated with the accounting and business processes upon which accounting information is based.
Significant risks identified through the assessment process require definition and evaluation of key
controls that address those risks, thereby mitigating the possibility that financial reporting will contain any
material misstatements.
• controls that operate at process level, such as authorizations, reconciliations, verification of consistencies,
etc. This category includes controls for operating processes, controls for financial closing processes
and cross-sector controls carried out by captive service providers. These controls can be preventive
(i.e., designed to prevent errors or fraud that could result in misstatements in financial reporting) or
detective (i.e., designed to reveal errors or fraud that have already occurred). They may also be classified
as manual or automatic, such as application-based controls relating to the technical characteristics and
configuration of IT systems supporting business activities.
An assessment of the design and operating effectiveness of key controls is carried out through tests
performed by the Internal Audit department, both at group and subsidiary level, using sampling techniques
recognized as best practices internationally.
The assessment of the controls may require the definition of compensating controls and plans for
remediation and improvement. The results of monitoring are subject to periodic review by the manager
responsible for of the Company’s financial reporting and communicated by him to senior management and to
the Audit Committee (which in turn reports to the Board of Directors).
Code of Conduct
We have adopted a Code of Conduct which applies to all of our employees, including our principal
executive, principal financial and principal accounting officers. Our Code of Conduct is posted on our
website at http://corporate.ferrari.com/sites/ferrari15ipo/files/codice_condotta_ferrari_eng_def.pdf. If the
provisions of our Code of Conduct that apply to our principal executive officer, principal financial officer
or principal accounting officer are amended, or if a waiver is granted, we will disclose such amendment or
waiver.
The Code of Conduct represents a set of values recognized, adhered to and promoted by the Company
which understands that conduct based on the principles of diligence, integrity and fairness is an important
driver of social and economic development.
The Code of Conduct is a pillar of the governance system which regulates the decision-making
processes and operating approach of the Company and its employees in the interests of stakeholders. The
Code of Conduct amplifies aspects of conduct related to the economic, social and environmental dimensions,
underscoring the importance of dialog with stakeholders. Explicit reference is made to the UN’s Universal
Declaration on Human Rights, the principal Conventions of the International Labor Organization (ILO), the
OECD Guidelines for Multinational Enterprises and the U.S. Foreign Corrupt Practices Act (FCPA). The Code of
Conduct was amended to include specific guidelines relating to: the Environment, Health and Safety, Business
Ethics and Anti-corruption, Suppliers, Human Resource Management, Respect of Human Rights, Conflicts
of Interest, Community Investment, Data Privacy, Use of IT and Communications Equipment, Antitrust and
Export Controls.
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The Code of Conduct applies to the directors and all employees of the Company and its subsidiaries
and other individuals or companies that act in the name and on behalf of the Company or its subsidiaries.
The Company promotes adoption of the Code of Conduct as a best practice standard of business
conduct by partners, suppliers, consultants, agents, dealers and others with whom it has a long-term
relationship. In fact, the Company’s contracts worldwide include specific clauses relating to recognition and
adherence to the principles underlying the Code of Conduct and related guidelines, as well as compliance
with local regulations, particularly those related to corruption, money-laundering, terrorism and other crimes
constituting liability for legal persons.
The Company closely monitors the effectiveness of and compliance with the Code of Conduct. Violations
of the Code of Conduct are usually determined through, among other things: periodic activities carried out
by the Internal Audit department of the Group; reports received in accordance with the whistleblowing
management procedures; and checks forming part of the standard operating procedures. The Internal Audit
department investigates violations of the Code of Conduct during standard periodic or specific audits. Periodic
reporting is provided to the Chairman and CEO as well as to the Audit Committee. For all Code of Conduct
violations, the disciplinary measures taken are commensurate with the seriousness of the case and comply with
local legislation. The relevant corporate departments are notified of violations, irrespective of whether criminal
action is taken by the authorities.
Insider Trading Policy
As of January 3, 2016 the Company’s Board of Directors adopted an insider trading policy setting
forth guidelines and recommendations to all Directors, officers and employees of the Group with respect to
transactions in the Company’s securities. This policy, which also applies to immediate family members and
members of the households of persons covered by the policy, is designed to prevent insider trading or allegations
of insider trading, and to protect the Company’s for integrity and ethical conduct.
Diversity Policy
The Board of Directors adopted a diversity policy for the Board of Directors (the “Diversity Policy”)
effective as of 31 December 2017, since the Company believes that diversity in the composition of the Board of
Directors in terms of age, gender, expertise, professional background and nationality is an important means of
promoting debate, balanced decision making and independent actions of the Board of Directors.
The Diversity Policy gives weight to the following diversity factors in Board of Directors composition:
age, gender, expertise, work and personal background and nationality. The Company considers each of these
aspects key drivers to support the above mentioned goals and to achieve sufficient diversity of views and
the expertise needed for a proper understanding of current affairs and longer-term risks and opportunities
related to the Company’s business. The Board of Directors and its Governance and Sustainability Committee
consider such factors when evaluating nominees for election to the Board of Directors and during the annual
performance assessment process.
The Company has already achieved the following concrete targets: (a) at least 30% of the seats of the
Board of Directors are occupied by women and at least 30% by men; and (b) diversity in the age of the members
of the Board of Directors by having one or more members of the Board of Directors aged under 50 at the day
of their nomination; provided that, in the candidate selection process, rules and generally accepted principles
of non-discrimination (on grounds such as ethnic origin, race, disability or sexual orientation) will be taken
into account. In addition, the Company aims to achieve within the next several years (from the adoption of the
Diversity Policy) the target that the nationality of the members of the Board of Directors shall be reasonably
consistent with the geographic presence of the Company’s business, and that no nationality should count for
more than 60% of the members of the Board of Directors.
To ensure its correct implementation, the Diversity Policy will be taken into account in the nomination
of executive Directors, and in the adoption of a profile for non-executive Directors as well as in nominating and
recommending non-executive Directors. Since the financial year 2017, the targets relating to gender and age
have been realized.
Compliance with Dutch Corporate Governance Code
The Company endorses the principles and best practice provisions of the Dutch Corporate Governance
Code, except for the following best practice provisions which are explained below:
• Best practice provision 2.1.7(iii) of the Dutch Corporate Governance Code: for each shareholder, or group of affiliated
shareholders, who directly or indirectly hold more than ten percent of the shares in the company, there is at most one
supervisory board member who can be considered to be affiliated with or representing them as stipulated in best practice
provision 2.1.8, sections vi. and vii.
Since our non-executive Director Mr. John Elkann also serves as chairman and chief executive officer of
Exor N.V., Mr John Elkann is affiliated with a shareholder holding more than 10% of the shares in the Company.
Given the family ties between Mr. Lapo Elkann and Mr. John Elkann, the Company has two non-executive Directors
affiliated with a shareholder holding more than 10% of the shares. The composition of the Board of Directors
therefore deviates from best practice provision 2.1.7(iii) of the Dutch Corporate Governance Code. The Company
believes that Mr. John Elkann and Mr. Lapo Elkann bring valuable contributions to the Board of Directors in light
of their knowledge of the automotive and luxury industries, as well as the Company’s business, and therefore the
Company believes it is appropriate for both such Directors to participate in the Company’s Board of Directors .
For these reasons the Company does not apply this provision of the Dutch Corporate Governance Code.
• Best practice provision 2.2.4 of the Dutch Corporate Governance Code: The supervisory board should also draw up
a retirement schedule in order to avoid, as much as possible, supervisory board members retiring simultaneously. The
retirement schedule should be published on the company’s website.
The Company does not have a retirement schedule as referred to in best practice provision 2.2.4 of the
Dutch Corporate Governance Code, because the Company’s Articles of Association provide for a term of office
of member of the Board of Directors for a period of approximately one year after appointment, such period
expiring on the day the first annual general meeting of shareholders is held in the following calendar year. Short
terms of office for board members are customary for companies listed in the U.S. As the Company is listed on
the NYSE, the Company also relies on certain U.S. governance policies, one of which is the reappointment of
our Directors at each annual general meeting of shareholders. In light of this term of office, the Company does
not have a retirement schedule in place.
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• Best practice provision 2.3.4 of the Dutch Corporate Governance Code: More than half of the members of the committees
should be independent within the meaning of best practice provision 2.1.8..
Mr. John Elkann and Mr. Piero Ferrari, being non-independent non-executive Directors, have a position
on the Governance and Sustainability Committee to which best practice provision 2.3.4 of the Dutch Corporate
Governance Code applies. Consequently, only two out of four members of the Governance and Sustainability
Committee are independent. The position of Mr. Elkann and Mr. Ferrari in this committee inter alia follows
from the duties of the governance and sustainability committee, which are more extensive than the duties of a
selection and appointment committee. These duties warrant participation of Mr. Ferrari, the son of Ferrari’s
founder, and Mr. John Elkann, who each bring valuable contributions to the Board in light of their knowledge of
the automotive and luxury industries, as well as the Company’s business, and therefore the Company believes
it is appropriate for such Directors to participate in the Company’s Governance and Sustainability Committee.
The current Governance and Sustainability Committee is composed by four members two of which are
independent and therefore no more than two members are non-independent according to Company’s Charter
of the Governance and Sustainability Committee.
• Best practice provision 4.1.8 of the Dutch Corporate Governance Code: Management board and supervisory board members
nominated for appointment should attend the general meeting at which votes will be cast on their nomination.
Pursuant to best practice provision 4.1.8 of the Dutch Corporate Governance Code, every executive
and non-executive Director nominated for appointment should attend the general meeting at which votes
will be cast on its nomination. Since, pursuant to Article 14.3 of the Articles of Association, the term of office
of Directors is approximately one year, such period expiring on the day the first annual general meeting of
shareholders of the Company is held in the following calendar year, all members of the Board of Directors are
nominated for (re)appointment each year. By publishing the relevant biographical details and curriculum vitae of
each nominee for (re)appointment, the Company ensures that the Company’s general meeting of shareholders
is well informed in respect of the nominees for (re)appointment and in practice only the executive Director and
the Vice-Chairmen non-executive Directors will therefore be present at the general meeting.
REPORT OF THE NON-EXECUTIVE DIRECTORS
Introduction
This is the report of the non-executive Directors of the Company over the financial year 2017 as referred
to in best practice provision 5.1.5 of the Dutch Corporate Governance Code.
It is the responsibility of the non-executive Directors to supervise the policies carried out by the executive
Directors and the general affairs of the Company and its affiliated enterprise, including the implementation
of the strategy of the Company regarding long-term value creation. In so doing, the non-executive Directors
act solely in the interest of the Company. With a view to maintaining supervision on the Company, the non-
executive Directors regularly discuss Ferrari’s long-term business plans, the implementation of such plans and
the risks associated with such plans with the executive Directors.
Ferrari (executive Directors) and members not having such day-to-day responsibility (non-executive Directors).
The tasks of the executive and non-executive Directors in a one-tier board such as the Company’s Board of
Directors may be allocated under or pursuant to the Articles of Association, provided that the general meeting
of shareholders has stipulated whether such Director is appointed as executive or as non-executive Director
and furthermore provided that the task to supervise the performance by the Directors of their duties can
only be performed by the non-executive Directors. Regardless of an allocation of tasks, all Directors remain
collectively responsible for the proper management and strategy of the Company (including supervision thereof
in case of non-executive Directors).
Details of the current composition of the Board of Directors, including the non-executive Directors,
and its committees are set forth in the section “Board of Directors”.
Supervision by the non-executive Directors
The non-executive Directors supervise the policies carried out by the executive Directors and the
general affairs of the Company and its affiliated enterprise. In so doing, the non-executive Directors have also
focused on the effectiveness of the Company’s internal risk management and control systems, the integrity and
quality of the financial reporting and Ferrari’s long-term business plans, the implementation of such plans and
the risks associated.
Due to the revised Dutch Corporate Governance Code becoming applicable with regard to the financial
year 2017, the non-executive Directors and especially the members of the Governance and Sustainability
Committee spent significant time during the past year to assess the required amendments and arrange for
revised updates of the various corporate governance documents of the Company to align those to the current
Dutch Corporate Governance Code.
The non-executive Directors also determine the remuneration of the executive directors and nominate
candidates for the Director appointments. Furthermore, the Board of Directors may allocate certain specific
responsibilities to one or more individual directors or to a committee comprised of eligible Directors of the
Company and subsidiaries of the Company. In this respect, the Board of Directors has allocated certain specific
responsibilities to the Audit Committee, the Compensation Committee and the Governance and Sustainability
Committee. Further details on the manner in which these committees have carried out their duties, are set
forth in the sections “The Audit Committee”, “The Compensation Committee” and “The Governance and
Sustainability Committee”.
The non-executive Directors supervised the adoption and implementation of the strategies and policies
by the Group, reviewed this annual report, including the Remuneration Report and the Group’s financial
results, received updates on legal and compliance matters and they have been regularly involved in the review
and approval of transactions entered into with related parties. The non-executive Directors have also reviewed
the reports of the Board of Directors and its committees and the recommendations for the appointment of
Directors. The Board of Directors has furthermore proposed amendments to the Remuneration Policy, which
were adopted by the general meeting on 14 April 2017.
According to the Articles of Association, the Board of Directors is a single board and consists of
three or more members, comprising both members having responsibility for the day-to-day management of
During 2017, there were three meetings of the Board of Directors. Portions of these meetings took place
without the executive Directors being present. The average attendance at those meetings was 94.87 percent.
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An overview of the attendance of the individual Directors per meeting of the Board of Directors and its
committees set out against the total number of such meetings is set out below:
Director of the Board of Directors, is independent under the Dutch Corporate Governance Code in accordance
with best practice provision 2.1.9 of the Dutch Corporate Governance Code.
Name
Meeting Board of
Directors
Audit Committee
Governance and
Sustainability
Committee
Compensation
Committee
Sergio Marchionne
John Elkann
Piero Ferrari
Louis C. Camilleri
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Sergio Duca
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
3/3
3/3
3/3
3/3
3/3
3/3
3/3
3/3
3/3
3/3
3/3
2/3
2/3
0
0
0
0
0
9/9
0
9/9
0
0
9/9
0
0
0
1/1
1/1
0
0
0
1/1
1/1
0
0
0
0
0
0
1/1
0
1/1
0
0
0
0
0
0
0
0
1/1
During these meetings, key topics discussed were, amongst others: the Group’s strategy, the Group’s
financial results and reporting, sustainability, acquisitions and divestments, executive compensation, technological
developments, risk management, updates on legal and compliance, risk management, human resources with the
Head of Human Resources, implementation of the Remuneration Policy and the Remuneration Report.
Independence of the non-executive Directors
The non-executive Directors are required by Dutch law to act solely in the interest of the Company. The
Dutch Corporate Governance Code stipulates the corporate governance rules relating to the independence of
non-executive Directors and requires under most circumstances that a majority of the non-executive Directors
be “independent.”
Currently, nine out of twelve non-executive Directors are considered to be independent under the NYSE
definition while eight non-executive Directors are considered to be independent under the Dutch Corporate
Governance Code. Mr. Amedeo Felisa, Mr. Piero Ferrari, Mr. John Elkann and Mr. Lapo Elkann are considered
not to be independent under the Dutch Corporate Governance Code. Mr. Amedeo Felisa is the former CEO of
Ferrari and Mr. Piero Ferrari holds approximately 10 percent of our outstanding common shares. In addition
Mr. Lapo Elkann and Mr. John Elkann are not considered independent for the reasons set forth in the section
“Compliance with Dutch Corporate Governance Code”. Mr. Louis C. Camilleri, the Senior Non-Executive
Although it wishes to state that best practice provision 2.1.7 (iii) of the Dutch Corporate Governance
Code is not complied with given that more than one non-executive directors are affiliated with Ferrari’s largest
shareholder, Exor N.V. and notwithstanding the foregoing regarding the non-independent directors, Ferrari is
of the opinion that the independency requirements as referred to in best practice provision 2.1.10 of the Dutch
Corporate Governance Code are otherwise met by the Company.
Evaluation by the non-executive Directors
The non-executive Directors are responsible for supervising the Board of Directors and its committees,
as well as the individual executive and non-executive Directors, and are assisted by the Governance and
Sustainability Committee in this respect.
In accordance with the Governance and Sustainability Committee Charter, the Governance and
Sustainability Committee assists and advises the Board of Directors with respect to periodic assessment of
the performance of individual Directors. In this respect, the Governance and Sustainability Committee has,
amongst others, the duties and responsibilities to review annually the Board of Directors’ performance and
the performance of its committees and to review each Director’s continuation on the Board of Directors at
appropriate regular intervals as determined by the Governance and Sustainability Committee.
In 2017, the Governance and Sustainability Committee’s periodic assessments took place during the
meeting held on 1 March 2017. During that meeting, the Governance and Sustainability Committee focused
on the results of the periodic assessments and the performance of the Board of Directors, its committees and
the individual Directors, keeping also into account the self-assessment prepared by each Director. During such
meeting the Governance and Sustainability Committee dealt also with the directors’ nomination process, the
assessment of Directors’ qualifications, the size and composition of the Board of Directors and the committees,
and the recommendations for Directors’ election. The Governance and Sustainability Committee also reviewed
purpose, structure, operations and charter of each of the committees, assessing the required amendments
to align the various corporate governance documents to the revised Dutch Corporate Governance Code. In
addition the Committee reviewed the process for 2018 Board and Committees’ self-assessment.
The non-executive Directors have been regularly informed by each committee as referred to in best
practice provision 2.3.5 of the Dutch Corporate Governance Code and the conclusions of those committee
were taken into account when drafting this report of the non-executive Directors.
The non-executive Directors were able to review and evaluate the performance of the Audit Committee,
the Governance and Sustainability Committee and the Compensation Committee based on the assessments
made by the Governance and Sustainability Committee. The self-assessment of the Committees were also
discussed by the Board of Directors. The outcome of the evaluations is that there is no need to amend the size
or composition of the Audit Committee, the Governance and Sustainability Committee and the Compensation
Committee, nor is there any reason to amend their charters on this basis. Further details on the manner in
which these committees have carried out their duties, are set forth in sections “The Audit Committee”, “The
Compensation Committee” and “The Governance and Sustainability Committee”.
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On the basis of the preparations by the Governance and Sustainability Committee, the non-executive
Directors were able to review the Board of Director’s assessments, the individual Directors’ assessments and the
recommendation for Directors’ election, as well as the amendments of the Board regulations, the Committee’s
charters and other corporate documentation. The Board of Directors concluded that each of the Directors
continues to demonstrate commitment to its respective role in the Company.
Also, pursuant to the Compensation Committee Charter, the Compensation Committee implements
and oversees the remuneration policy as it applies to non-executive Directors, executive Directors and senior
officers reporting directly to the executive Directors. The Compensation Committee administers all the equity
incentive plans and the deferred compensation benefits plans. On the basis of the assessments performed, the
non-executive Directors determine the remuneration of the executive directors and nominate candidates for
the Director appointments.
The non-executive Directors have supervised the performance of the Audit Committee, the Compensation
Committee and the Governance and Sustainability Committee.
STATEMENT BY THE BOARD OF DIRECTORS
Based on the assessment performed, the Board of Directors believes that, as of December 31, 2017,
the Group’s and the Company’s Internal Control over Financial Reporting is considered effective and that (i)
the Board Report provides sufficient insights into any material weaknesses in the effectiveness of the internal
risk management and control systems, (ii) the internal risk management and control systems are designed to
provide reasonable assurance that the financial reporting does not contain any material inaccuracies, (iii)
based on the current state of affairs, it is justified that the Group’s and the Company’s financial reporting is
prepared on a going concern basis, and (iv) the Board Report states those material risks and uncertainties that
are, in the Board of Director’s judgment, relevant to the expectation of the Company’s continuity for the period
of twelve months after the preparation of the Board Report.
February 23, 2018
Sergio Marchionne
Chairman and Chief Executive Officer
RESPONSIBILITIES IN RESPECT TO THE ANNUAL REPORT
The Board of Directors is responsible for preparing the Annual Report, inclusive of the Consolidated
and Company Financial Statements and Board Report, in accordance with Dutch law and International
Financial Reporting Standards as issued by the International Accounting Standards Board and as adopted by
the European Union (IFRS).
In accordance with Section 5:25c, paragraph 2 of the Dutch Financial Supervision Act, the Board
of Directors states that, to the best of its knowledge, the Consolidated and Company Financial Statements
prepared in accordance with IFRS as adopted by the European Union provide a true and fair view of the assets,
liabilities, financial position and profit or loss for the year of the Company and its subsidiaries and that the
Board Report provides a true and a fair view of the performance of the business during the financial year and
the position at balance sheet date of the Company and its subsidiaries, together with a description of the
principal risks and uncertainties that the Company and the Group face.
February 23, 2018
Board of Directors
Sergio Marchionne
John Elkann
Piero Ferrari
Delphine Arnault
Louis C. Camilleri
Giuseppina Capaldo
Eddy Cue
Sergio Duca
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
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About Ferrari
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 229 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 164 authorized
dealers operating 185 points of sale.
Our Strategy
Our strategy focuses on maintaining our leading position in the luxury performance sports car market,
enhancing and protecting the value and exclusivity of the Ferrari brand. We focus on cost-efficiencies and aim
to achieve profitable growth by pursuing the following strategies.
Controlled growth in developed and emerging markets
Regular new model introductions and enhancements
Pursue excellence in racing
Controlled growth in adjacent luxury and lifestyle categories
Materiality Matrix of Ferrari Group
We have updated the analysis of the most relevant sustainability topics (materiality analysis) for us and
our stakeholders as disclosed in last year’s annual report in order to identify strategic priorities with defined
actions.
In the first phase of the analysis, the topics potentially relevant to our Group and our stakeholders
were identified. This was done by taking into consideration sector benchmarking analysis, UN Sustainable
Development Goals (SDGs), online press reviews, international studies and publications such as the
“Sustainability Topics for Sectors: What do stakeholders want to know?” (GRI, 2013).
During the second phase, the Group’s senior management, together with a sample of stakeholders,
assessed through a questionnaire the relative importance of the identified topics for our Group and our
stakeholders (as described in the Stakeholder engagement paragraph).
In order to identify any relevant change in our business context and strategy, this quantitative analysis
has been updated in 2017 and has been complemented by a qualitative analysis which resulted in the materiality
matrix below.
MATERIALITY MATRIX OF FERRARI GROUP
S
R
E
D
L
O
H
E
K
A
T
S
R
O
F
E
C
N
A
V
E
L
E
R
t
n
a
t
r
o
5,80
p
m
i
y
r
e
V
5,30
4,80
4,30
t
n
a
t
r
o
p
m
3,80
I
Innovation: technology and design
Image and brand reputation
Quality and safety of
products and customers
Customer satisfaction
Emissions
Sport fair play
Relationship with sponsor
Health and safety
Human capital
Ethical business
conduct
Diversity, inclusion and
non-discrimination
Education
Selection and research
of raw materials
Attention to enthusiasts
Risk management & Compliance
Environmental commitment
Economic and financial performance
Supply chain responsible
management
Responsible communication
and marketing
Relationship with Institutions and Authorities
Local communities
Industrial relations
3,80
Important
4,30
4,80
5,30
RELEVANCE FOR FERRARI GROUP
Work-life balance and
employees wellness
LEGEND:
Governance and Economic Responsibility
Product Responsibility
People Responsibility
Environmental Responsibility
Social Responsibility
5,80
Very important
The materiality matrix highlights the assessed aspects that are most relevant for the Group and our
stakeholders and therefore represent our strategic sustainability priorities, for which actions will be defined.
This materiality matrix translated into our sustainability approach characterized by:
1. A high attention and care for products and relationships with clients
1.1 Image and brand reputation
1.2 Quality and safety of products and customers
1.3 Innovation: technology and design
2. Feasible thanks to the effort of the people working in Ferrari
2.1 Human capital
2.2 Work-life balance and employees’ wellness
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3. A specific focus on compliance and a strong business ethic
The high attention and care towards our products is the foundation upon which our success is built,
3.1 Ethical business conduct and, sports and fair play
3.2 Emissions
3.3 Risk management and compliance
4. Keeping the essence of Ferrari alive
4.1 Engagement with enthusiasts
4.2 Relationships with sponsors
Stakeholder engagement
As an international firm with ambitious corporate objectives and a complex value chain, we need to
develop forms of communication and collaboration with both our internal and external stakeholders that allow
us to understand their various needs, interests and expectations.
and this is feasible thanks to the efforts of our employees.
We depend on a significant number of suppliers who play an important part in the success of the
Group: for the sourcing of certain key components with highly technological specifications, we have developed
strong synergistic relationships with some of our suppliers, which are considered “key strategic innovation
partners”.
We have invested heavily to minimize our environmental impact. Our vehicles must comply with
extensive regional, national and local laws and regulations, and industry self-regulations (including those that
regulate vehicle safety).
We are a dual-listed company, therefore, the financial discipline enhanced by the relationship with
shareholders and investors supports the company in pursuing its own business targets.
Furthermore, we collaborate with universities and high schools to provide scholarships to exceptional
A review of relevant stakeholder groups has been conducted in conjunction with the materiality
analysis, addressing material aspects based on their importance to internal and external stakeholders.
students.
This Statement is addressed to all the stakeholders involved in our activities, as indicated in the
following picture:
Considering the rising environmental and social changes, these activities are an important part of the
sustainability strategy to help us in identifying our sustainability risks and opportunities, as well as to support
management in reaching our objectives.
Our Sustainability Governance
Pursuant to the charter of the Governance and Sustainability Committee, adopted by the Board of
Directors on February 23, 2018, the function of the Governance and Sustainability Committee is to assist
the board of Directors with respect to the determination of, inter alia: (i) drawing up the selection criteria
and appointment procedures for members of the Board of Directors; (ii) periodic assessment of the size and
composition of the Board of Directors; (iii) periodic assessment of the performance of individual directors and
reporting this to the Board of Directors; (iv) proposals for appointment and reappointments of executive and
non- executive directors. The Governance and Sustainability Committee shall be comprised of at least three (3)
directors, at most one (1) of whom may be an executive director and at least half of whom will be independent
within the meaning of the Code, elected by the Board of Directors.
The Governance and Sustainability Committee currently consists of Mr. Elkann (Chairperson), Mr.
Cue, Mr. Duca and Mr. Ferrari.
In 2017 the Governance and Sustainability Committee met once.
Integrity of Business Conduct
With regard to stakeholder involvement, we support our brand value by promoting a strong connection
with the Ferrari community: our enthusiasts and clients. We focus on strengthening this connection by rewarding
our most loyal clients through a range of initiatives.
The foundation of Ferrari’s governance model is the Code of Conduct that reflects our commitment to
a culture dedicated to integrity, responsibility and ethical behavior. Ferrari endorses the United Nations (“UN”)
Declaration on Human Rights, the International Labor Organization (“ILO”) Conventions and the Organization
for Economic Co-Operation and Development (“OECD”) Guidelines for Multinational Companies. Accordingly,
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the Code of Conduct is intended to be consistent with such guidelines and aims to ensure that all members of
Ferrari Group’s workforce act with the highest level of integrity, comply with applicable laws, and build a better
future for our Company and the communities in which we do business.
Ferrari’s integrity system is comprised of these primary elements:
• Principles that capture the Company’s commitment to important values in business and personal conduct
• Practices that are the basic rules that must guide our daily behaviors required to achieve our overarching
Principles
• Procedures that further articulate the Company’s specific operational approach to achieving
compliance and that may have specific application limited to certain geographical regions and/or
businesses as appropriate.
Our Code of Conduct is approved by the board of directors of Ferrari N.V. and applies to all board
members and officers, as well as full-time and part-time employees of the Ferrari Group. The Code of Conduct also
applies to all temporary, contract and all other individuals and companies that act on behalf of the Ferrari Group.
The Internal Audit department investigates possible violations of the Code of Conduct during standard
periodic audits and through specific Business Ethics Compliance (BEC) Audits.
The company’s policies includes policies for respecting Human Rights which prohibits child and forced
labor and pays attention to safe working environment for our employees.
Anti-Bribery and Corruption
Included in Ferrari’s Code of Conduct are, among others, rules related to anti-bribery, anti-corruption,
competitive behavior and conflicts of interest. Ferrari is committed to the highest standards of integrity,
honesty and fairness in all internal and external affairs and will not tolerate any kind of bribery. The laws of
virtually all countries in which Ferrari operates prohibit bribery. Ferrari’s policy is that no one - director, officer,
or other employee, agent or representative - shall, directly or indirectly, give, offer, request, promise, authorize,
solicit or accept bribes or any other perquisite (including gift or gratuities with the exception of commercial
items universally accepted in an international context of modest economic value, permitted by applicable laws
and in compliance with the Code of Conduct and all applicable practices and procedures) in connection with
their work for Ferrari at any time or for any reason.
individuals, which can result in significant fines, reputational damage and imprisonment of individuals.
Whistleblowing
Violations of the Code of Conduct are determined through periodic activities carried out by our
Internal Audit department, through the analysis of the reports received in accordance with the Ethics Helpline
Management Procedures and through checks forming part of the standard operating procedures.
The Ethics Helpline is a dedicated channel that allows employees, suppliers, dealers, consumers and
other stakeholders to request advice about the application of the Code of Conduct, and to report any concerns
about alleged situations, events, or actions that they believe may be inconsistent with the Code of Conduct.
Stakeholders can also report alleged violations anonymously. The Ethics Helpline can be accessed either by
phone or by web intake (with multiple language available) and is an essential element of the management
process, in accordance with the Code of Conduct, in relation to raised concerns. It is managed by an independent
provider, available 24 hours a day, seven days a week.
Furthermore, Ferrari employees may also seek advice concerning the application and interpretation of
the Code of Conduct by contacting their immediate supervisor, Human Resources representatives, or the Legal
Department.
The Internal Audit and Legal departments assess all the allegations received, and the results and
potential disciplinary actions are reported based on the necessary escalation process (the relevant internal
functions are notified of the violations).
On November 15, 2017, Italy’s law for whistleblowing, which contains provisions for the protection of
reporters of crimes or irregularities that have come to light in the context of a public or private employment
relationship, was definitively adopted (Law n. 179/2017). The law concerns the protection of workers, public
or private, who report or denounce crimes or other illegal conduct which they have come to know about in
the context of their employment relationship. Our whistleblowing procedures are already in line with the new
provisions of Law n.179/2017.
The violations of the Code of Conduct have been categorized according to the Principles of the Code of
Conduct. Accordingly, Managing Our Assets and Information includes Communicating Effectively, Protecting
Ferrari Assets and Maintaining Appropriate Records. The category Interacting with External Parties comprises
Avoiding Conflicts of Interest and Supporting Our Communities. Conducting Business covers Sustainably
Purchasing Goods or Services, Transacting Business Legally and Engaging in Sustainable Practices. Finally,
Protecting Our Workforce includes behaviours related to Maintaining a Fair and Secure Workplace, and Ensuring
Health and Safety. For all Code of Conduct violations, the disciplinary measures taken are commensurate with
the seriousness of the case and comply with local legislation.
WHISTLEBLOWING REPORTING AS OF DECEMBER 31, 2017
Category
Interacting with external parties
Managing our assets and information
Protecting our workforce
Total
Reports received
in 2017
Total 2017
reports closed
Reports in which a
violation
was confirmed
3
6
2
11
22
3
6
1
8
18
3
2
0
1
6
Periodic reporting is provided to the Chairman and CEO as well as to the Audit Committee.
A violation of anti-bribery and anti-corruption laws is a serious offense for both companies and
Conducting business
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Sustainability Risks
We are committed to create a culture of sustainability. Creating such a culture requires effective risk
management, responsible and proactive decision-making and innovation. Our efforts are aimed at minimizing
the negative impacts of our business.
Our risk management approach is an important business driver and it is integral to the achievement
of the Group’s long-term business plan. We take an integrated approach to risk management, where risk and
opportunity assessments are at the core of the leadership team agenda. The Board of Directors is responsible
for considering the ability to control strategic, operational, compliance, financial and reporting risks crucial to
achieving its identified business targets, and for the continuity of the Group.
Ferrari has adopted the COSO Framework (Committee of Sponsoring Organizations of the Treadway
Commission Report - Enterprise Risk Management Model) as the foundation of its risk management framework.
The Group Executive Council (“GEC”), which is supported by senior management, is responsible for identifying,
prioritizing and mitigating risks and for the establishment and maintenance of a risk management system
across our business functions. At least annually, our risk management framework and risks are discussed with
the Group’s Audit Committee.
We have integrated the analysis and assessment of socio-environmental risks in our risk management
framework and are currently integrating our risk management activities with the outcomes of the materiality
analysis described in the paragraph “Materiality analysis”.
In particular, the most material topics identified by Ferrari are strongly connected with the following
key risks and risk trends:
Topics
Image and brand reputation
Innovation: technology and design
Customer satisfaction
Key risks and risk trends
Brand Image
Brand image; Competition
Brand image; Competition
The preservation and enhancement of the value of the Ferrari brand is crucial in driving demand for
our cars and our revenues. The perception and recognition of the Ferrari brand are of strategic importance and
depend on many factors such as the design, technology, performance, quality and image of our cars, the appeal
of our dealerships and stores, the success of our client activities, as well as our general profile, including our
brand’s image of exclusivity.
The prestige, identity and appeal of the Ferrari brand also depend on the continued success of the
Scuderia Ferrari racing team in the Formula 1 World Championship.
We believe that we compete primarily thanks to our brand image, the performance and design of our
cars, our reputation for quality and the driving experience for our customers.
Topics
Key risks and risk trends
Ethical business conduct
Emissions
Risk management and Compliance
Quality and safety of products and customers
Non-compliance with laws, regulations, local standards
(including tax) and codes
Non-compliance with laws, regulations, local standards
(including tax) and codes
Non-compliance with laws, regulations, local standards
(including tax) and codes
Non-compliance with laws, regulations, local standards
(including tax) and codes
We are subject to comprehensive and constantly evolving laws, regulations and policies throughout
the world. In Europe and the United States, for example, significant governmental regulation is driven by
environmental, fuel economy, vehicle safety and noise emission concerns and regulatory enforcement has
become more active in recent years.
Topics
Human capital
Health and Safety
Key risks and risk trends
Attraction, development and retention of talents
Attraction, development and retention of talents
Our success depends on the ability of our senior executives and other members of management to
effectively manage individual areas of our business and our business as a whole. If we are unable to attract,
retain and incentivize senior executives, drivers, team managers and key employees to succeed in international
competitions or devote the capital necessary to fund successful racing activities, new models and innovative
technology, this may adversely affect 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. A
detailed description of how we respond to these risks can be found in the section “Risk, Risk Management and
Control Systems” of 2017 Annual Report.
Product Responsibility
Research, Innovation and Technology
Innovation is in our DNA and we will continue pushing boundaries to respond to customers’ desires,
always setting new standards in the “Ferrari way”. Innovation drives products and processes which represent
one of our key differentiating factors. This is why we are focused on developing new technologies and distinctive
designs.
Participation in the Formula 1 world championship with Scuderia Ferrari is an important source of
technological innovation, which is then transferred into Sports and GT cars. The product development efforts
continually focus on improving core components, such as the powertrain and the car dynamics, vehicle safety,
as well as the use of materials such as special aluminum alloys and carbon fiber. Throughout our history, we
have registered various patents, some of which were genuinely revolutionary.
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One of our other focuses is on innovating our working methods, which involves stimulating the creativity
of our employees. With this in mind, we have implemented programs designed to encourage the development
of ideas and solutions that will improve products, methods and the working environment. Pole Position Evo,
for instance, rewards ideas put forward by individual staff members. In 2017, we received more than 7,600
suggestions from employees (+13% vs. 2016).
In recent years, several of our innovations have been recognised, for instance, by winning the
International Engine of the Year award in both 2016 and 2017.
Technological breakthroughs are then enhanced through design. In 2010, the Ferrari Design Center
was established as a best-in-class in-house design department to improve our control over the design process
and to ensure long-term continuity of the Ferrari style.
The Design team has been presented with several design awards such as the Red Dot Best of the Best
award which was granted for three years in a row (2015 - 2017).
We relish new challenges and are now working hard on the integration of hybrid technology more broadly
into our car portfolio. The R&D investments and expenses to fuel the growth of our Group are represented in
the charts below.
Customer Satisfaction
We are devoted to the highest level of customer satisfaction. We have a structured process to assess
the overall customer satisfaction on product, service provided, events organized by us and the overall customer
experience with the car. Specific KPIs are constantly monitored and analyzed by the marketing department.
The KPIs are measured through bespoke surveys for each car launch and collected for every new model, from
range vehicles to special and limited editions. A similar approach is followed for evaluating the quality of
service and satisfaction of events.
The results of the product and service satisfaction analyses are used to outline any necessary action
plan for current models and, additionally, to identify potential features to be added to the next generation
of vehicles. Recent surveys show that customer satisfaction for Ferrari products and services has constantly
stayed at a very high level.
The below chart shows the flow between us and our clients:
Ferrari Clients
Dealers
Area Manager
& HQ
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R
Customer Care & Marketing Department
Reports
Feedback
Department & Production
(for future models)
(for current models)
We have developed an integrated system between our customer care, dealers, marketing department, and area
managers, to track all contact with clients and to share and manage inquiries and the results of customer satisfaction analysis.
Customers’ Privacy
Customer information is one of Ferrari’s cornerstones and a key component of our competitive
advantage.
According to the current legislation, the protection of the customers’ privacy is regulated by the
upcoming new General Data Protection Regulation “GDPR” (EU Regulation 2016/679), which is entering into
force on May, 25th 2018 and will replace the previous EU regulation and the national data protection laws.
The new regulation requires the application of increased transparency obligations, the introduction of
common records of processing activities and - where advisable - privacy impact assessments.
Within this context, in 2017 we embarked on a path to ensure full compliance with the new regulation.
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Vehicle Safety
Vehicle safety is among our top priorities and Ferrari cars are always designed and manufactured
with the safety of our customers and other road users in mind. Given the nature of our cars, the electronic
equipment is developed with an integrated approach, ensuring the best balance between safety, control and
best-in-class performance, to always maintain Ferrari DNA of driving emotions.
All of our range models are subject to a series of tests to obtain approval from the relevant authorities.
Moreover, we start assessing all our new models at an early stage of planning and design to identify areas of
improvement.
Vehicle safety is the starting point for the guidelines passed down to the engineers that participate in
the design of every component, from the car framework to the end. Moreover, specific devices are installed in
racing cars to obtain FIA (Federation International de l’Automobile) approval.
Ferrari promotes socially responsible sourcing by making reasonable effort to trace the source of
conflict minerals contained in our products.
The complex global challenge of managing multiple layers of suppliers is a driving force in working with
peers to address ethical and social sourcing risks. Ferrari has developed strategies addressing Section 1502 of
the Dodd-Frank Act, as well as subsequent rules promulgated by the U.S. Securities and Exchange Commission
(SEC), regarding conflict minerals. The rule requires companies to determine whether tin, tantalum, tungsten,
or gold (3TG) in their supply chain originated from the Democratic Republic of the Congo (DRC) or surrounding
countries, and if the sale of those minerals supported the armed conflict in the DRC. Therefore, Ferrari is
currently surveying whether and to what extent any of Tantalum, Tin, Tungsten (and the minerals that they
are derived from - Columbite-tantalite (coltan), cassiterite and wolframite and Gold) are necessary to the
functionality or production of a product manufactured by Ferrari or contracted by Ferrari to be manufactured,
with a view to designing appropriate policies and procedures specifically applicable to the supply chain for
those minerals.
With the aim of solving issues beforehand and reducing the environmental impact of these activities,
all tests are reproduced in a state-of-the-art virtual environment before conducing them with real cars. Prior
to being delivered, every Ferrari, complete a 40-Kilometer road test-drive.
In addition, Ferrari is obtaining conflict minerals reporting information through the iPoint Conflict
Minerals Platform (iPCMP), a web-based data management tool based on the Conflict Minerals Reporting
Template.
For more details, please refer to the “Regulatory Matters-Vehicle Safety” paragraph of 2017 Annual
Report.
Responsible Supply Chain
Our focus on excellence, in terms of luxury, quality, aesthetics and performance, requires us to
implement a responsible and efficient supply chain management in order to select suppliers and partners that
are able to meet our high standards. We source a variety of components (among which transmissions, brakes,
driving-safety systems and others), raw materials (such as aluminum and precious metals), supplies, utilities,
logistics and other services from numerous suppliers.
All suppliers must respect the Ferrari Code of Conduct, which includes the set of values recognized,
adhered to and promoted by the Company. The Code of Conduct was updated to include specific guidelines
relating to the respect of human rights and conflicts of interest. The Ferrari Group made its best effort to
ensure that the Code is regarded as a best practice of business conduct and followed by third parties, including
long lasting relationship business partners such as suppliers, dealers, advisors and agents.
Ferrari reviews the information and works with suppliers to ensure the fulfillment of due diligence
obligations under the SEC conflict minerals rule. Ferrari’s initial public offering was completed in October 2015
and, in accordance with the rules and regulations of the U.S. Securities and Exchange Commission applicable
to Ferrari, Ferrari expects to file its first report relating to conflict minerals in May 2018, if any will be required,
with respect to the calendar year 2017.
Our people
The high attention and care for our products is the foundation upon which Ferrari’s success is built and
this is feasible thanks to the efforts of the people working in Ferrari. One of the many strengths is the ability
to attract, retain and develop talents. Since 1997, we have developed the “Formula Uomo” initiative, with the
intention of developing a high quality working life for our employees.
Over the years, the project has become a pillar of our culture, based on redesigning the working
environment, enforcing a safety-first culture, enabling individual development, enhancing teamwork and
building a community now comprising 40 different nationalities.
Conflict minerals
Working environment
Ferrari supports the goal of preventing the exploitation of minerals violating human rights. As part of
Ferrari’s commitment to respect and promote human rights and the sustainability of its operations, Ferrari
selects suppliers based not only on the quality and competitiveness of their products and services, but also on
their adherence to social, ethical and environmental principles, as outlined in Ferrari’s Code of Conduct.
We know that the best individual and team performance is only achieved if employees feel they are in
the right environment. We also believe that the quality of our products cannot be separated from the lives of
the people working in Ferrari.
That is why the working environment and wellbeing of the company’s employees are among our most
Many geopolitical experts believe that conflicts may increasingly arise over access to raw materials. For
important priorities.
this reason, Ferrari places a high priority on responsible sourcing and the integrity of its suppliers.
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Our complex in Maranello, a state-of-the-art work environment was designed to reinforce the synergistic
relationship between work and results. Our manufacturing facilities are specifically designed with the needs of
employees firmly in mind and combines carefully designed lighting systems, green areas (there are numerous
trees along the roads and plants within the factory), a new restaurant, and special measures aimed at reducing
the environmental impact and noise through the use of advanced technologies.
Over the past few years, a significant investment has been made to increase the green areas. These can
be found both inside and outside of the various factory buildings, and today cover a surface area of 165,000
square metres.
To promote an active lifestyle among our employees, we have launched the “Formula Benessere”
program, aimed at providing preventative healthcare to employees and their children. A gym is available for
all the employees at Maranello and employees at the Modena plant have free membership in one of the city
gyms. Initially provided to the F1 racing team as part of their training program for the Grand Prix activities, the
initiative was subsequently rolled out to all employees.
As part of the “Formula Benessere” benefits, preventative healthcare is provided to all employees and
their children. Medical specialists are available for consultation in areas such as cardiology, osteopathy and
dermatology, among others. A free annual check-up focusing on general health and fitness is provided to senior
managers and to the children of all employees.
Our attention to the promotion of health and safety among our employees goes beyond what is
required by law and special workshops are organized for employees to raise awareness on the importance of
these topics.
Having a healthy working environment is the aim of a series of initiatives within the “Formula Uomo”
program. As an example, the Machining Department building is designed to maximize the amount of natural
light and, similar to many other facilities, benefits from several internal and external green areas. Its design is
aimed at providing the workshops with maximum acoustic comfort thanks to noise reduction solutions (source
and reverberation).
We have also invested in our own on-site foundry, where we manufacture aluminum alloys as well
as parts of engines and bodyworks. Since 2013, the foundry has included a cooling system that makes it air-
conditioned and climate controlled.
To foster a sense of belonging among employees and their families and to provide them with support
during the summer vacation, we have launched the program “Formula Estate Junior”, a free day camp for
children of employees aged 3 to 13, with various programs including sports, outdoor activities, excursions
and workshops. The program has a duration of 11 weeks (with a shorter 3-day version taking place during
Easter holidays) and allows children to enjoy an exciting experience with a didactic purpose: each edition of the
“Formula Estate Junior” camp has an educational theme developed by around 80 professional educators and
is organized in collaboration with the local community.
children’s textbooks (reimbursement is offered to all employees’ children until high school) and, in certain
cases, we reimburse the cost of school textbooks for employees in continued education. In 2017, we provided
44 scholarships and, going forward, we aim to offer specific scholarships to help children of employees to study
abroad.
We offer additional benefits to our employees, including personalised loans at competitive rates in
local banks, discounts in various commercial and service outlets and the opportunity to ask questions at the
Info point of the Maranello plant. To foster the sense of belonging, the Company organizes multiple events
such as the “Natale Bimbi” and the “Family Day”, where we open the gates to the families and friends of all
employees.
To celebrate our 70th Anniversary, 18,000 people crowded the Maranello and Modena plant complex
for the 2017 edition of the Family Day event, which was also attended by Chairman and CEO Sergio Marchionne
and Vice-Chairman Piero Ferrari. Some of our most exclusive areas were opened to the visitors especially for the
occasion. Family Day also provided a close look at the past and present single-seaters as well as other racing cars.
All these benefits are provided to all our employees.
Training and talent development
Along with the need to hire, develop, and retain talents, we are aware that we must manage human
capital as a critical resource to achieve the best possible results.
The success, prestige and appeal of our brand depends on the ability to attract talents and retain
them. In particular, top drivers, racing management, engineering talent and all the employees that make Ferrari
unique have to be rewarded, as they deserve based on their ability, determination, and expectations. This is
why we provide career progression opportunities tailored to each individual’s strengths and ambitions, and the
company’s own requirements, underpinned by substantial investments in training. A total of over 35,500 hours
of training have been delivered right across the company workforce in 2017.
Regarding specific training initiatives, in 2009 we started the “Scuola dei mestieri” for training both
office staff and operatives with the help of in-house tutors and external instructors, the “Maestri”, who attend
dedicated educational programs to learn how to transfer their know-how.
We offer an ongoing language training program, covering both professional development and specific
interests of employees.
Additionally, all training rooms are located within the plant, surrounded by green areas and equipped
with noise reduction solutions to foster acoustic comfort.
AVERAGE HOURS OF TRAINING
2017
10.51
2016
9.33
Education is also the focus of a series of different initiatives that provide scholarships to exceptional
junior high, high school and university students. In 2017, we reimbursed 570 employees for the cost of their
Total
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Anti-corruption and human rights training is provided in conjunction with our Code of Conduct: all
employees are required to complete an online training, and specific educational material is provided to workers.
A similar approach has been taken for online trainings on SOX topics and Cyber Security Training Basic Rules.
Occupational Health and Safety
We are particularly focused on the safety of our people.
Recruitment, selection and employee retention
At Ferrari, recruitment and selection is about sourcing the right qualities and skills that will represent
the backbone of future success and innovation. Our recruitment process provides a platform to engage with
future employees, to assess competencies through a structured selection process, and to prepare for post-
recruitment integration and development.
All employees receive a regular performance and career development review, tailored to their role.
Semi-annual formal reviews are carried out for all Senior and Middle managers as well as a relevant portion of
Employees, with the results linked to their variable remuneration. Workers are subjected to a different kind of
review which envisages regular assessments aimed at developing their internal career path. Ferrari encourages
the professional growth of its employees and tries to fill key positions with talented internal candidates before
tapping into the external market.
To promote responsible behaviour during the assembling phase of cars and engines, we launched many
years ago the “Pit Stop” and “Fiorano Race” initiatives, whereby colleagues on the same shift are assigned to
“teams”, with key performance indicators in place for occupational health and safety, absenteeism and quality.
The teams are then ranked based on this data, with the best performers being rewarded. Furthermore, we
organize the “Pole Position Evo” program to evaluate individual performances.
During 2017, we implemented a specific online tool to assess and monitor the performance of our
employees: roughly 800 employees have already been evaluated using this new system that allows tracking
and sharing, with the employees themselves and with management, the results of the assessment, strengths
and improvement areas, in addition to the aspiration of the employees and their final evaluation. This online
tool will be extended to all employees by 2020, ensuring a transparent process for the performance and career
development review process.
EMPLOYEES WHO RECEIVED A REGULAR PERFORMANCE AND CAREER DEVELOPMENT REVIEW
BY EMPLOYEE CATEGORY IN 2017
Employee category
Senior manager
Managers and Professionals
White Collars
Workers
Percentage
92%
95%
30%
0%
In 2017, an extensive analysis of the key positions covered by our employees has been conducted:
the results have been used to develop specific succession plans, with a timeframe of 2-4 years, to ensure the
competitiveness of Ferrari over time and to take advantage of our employees’ talent.
Ferrari S.p.A., which operates the Maranello and Modena plants, is dedicated to the prevention of
accidents at work, with safety in the workplace always a priority. Periodic meetings are held with management
to review safety issues, in addition to formal meetings also being held with employee representatives. Periodic
internal health and safety audits are performed to ensure compliance with the Ferrari health and safety
management system, current laws and best practices. The Maranello and Modena plants, and also the Mugello
racing circuit, have obtained the OHSAS 18001 certification.
HOURS OF HEALTH AND SAFETY TRAINING PER YEAR AND NUMBER OF PARTECIPANTS
Training hours
Number of participants
2017
15,386
1,656
2016
14,319
703
2015
4,965
854
There has been a huge investment in safety at work: improvements in the existing structures and
specific training have allowed the company to achieve significant results. As shown in the table above, in 2017
the hours of training more than tripled compared to 2015 and in 2017 we also more than doubled the number
of participants in the courses.
The table below shows the trend in accidents over last three years. As proof of the efficiency of the
occupational health and safety system, the Injury Rate is low and constant (0.009), with only 5 occurrences in
2017 (6 in 2016). The Rate represents the frequency of accidents occurred during the working activities in the
production plants.
The Lost Day Rate, that measures the days of absence for every million hours worked, continues to be
low (0.005).
Injury rate (2)
Lost day rate (3)
INJURY AND LOST DAY RATE (1)
2017
0.009
0.005
2016
0.012
0.005
2015
0.012
0.004
(1) The figures provided are referred to all the employees of Ferrari S.p.A., which operate in the plants of Maranello and Modena.
(2) The injury rate is the ratio of the number of injuries reported (resulting in more than three days of absence) to the number of hours worked (including overtime),
multiplied by 1,000,000, excluding commuting accidents.
(3) The lost day rate is the ratio of the number of days of absence due to accidents to the number of hours worked (including overtime), multiplied by 1,000,000,
excluding commuting accidents.
The most common injuries involved hands and fingers.
During the course of 2017, no accidents with fatal consequences have been recorded for employees and
external workers in the Maranello and Modena plants.
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Our employees in numbers
NEW EMPLOYEE HIRES AND EMPLOYEE TURNOVER
As of 31st December 2017, the number of our Group(4) employees was 3,380, an increase of 4% compared
to 31st December 2016 (3,248).
Number of employees
Total
of which women
December 31, 2017
December 31, 2016
3,380
12.3%
3,248
11.5%
(1) In this chapter, “Our Group” refers to all the legal entities indicated as consolidated line by line by Ferrari N.V. in 2017 Annual Report.
We also rely on external collaborators such as contractors, self-employed persons, workers hired
through external agencies and interns.
PERCENTAGE OF EMPLOYEES PER EMPLOYEE CATEGORY BY GENDER
Employment category
Senior Managers
Middle Managers and Professionals
White Collars
Workers
Total
December 31, 2017
December 31, 2016
Male
93.5%
90.5%
78.6%
92.5%
87.7%
Female
Total
6.5%
9.5%
21.4%
7.5%
12.3%
92
422
1,109
1,757
3,380
Male
94.5%
91.3%
79.8%
92.6%
88.5%
Female
Total
5.6%
8.7%
20.2%
7.4%
11.5%
90
392
1,015
1,751
3,248
As indicated in the table above, in the last year the percentage of females in the “Senior Managers”
category has increased from 5.6% to 6.5%, females in “Middle Managers and Professionals” positions also
increased by around one percentage point. The proportion of women in the other categories has remained
relatively constant.
PERCENTAGE OF EMPLOYEES BY AGE GROUP
Total
<30
9.8%
30-50
73.7%
>50
16.5%
Total
3,380
<30
12.7%
30-50
71.3%
>50
16.0%
Total
3,248
December 31, 2017
December 31, 2016
The majority of the workforce is between the age of 30 and 50 (73.7%). The percentage of workers
under 30 is 9.8%.
94.6% of our employees work in Italy, which is considered the only significant location of operation as
this is where our plants and most of our workforce are located.
GROUP
EMPLOYEE HIRED
EMPLOYEE TURNOVER
2017
Total
296
8.8%
2017
Total
150
4.4%
Number of employees
Turnover %
Number of employees
Turnover %
ABSENTEEISM RATE IN ITALY (5)
Workers
2017
2.1%
2016
2.1%
2016
Total
362
11.1%
2016
Total
136
4.2%
2015
2.7%
(5) The absenteeism rate is calculated as a ratio of hours lost for sickness divided the number of hours to be worked. The perimeter considered relates only to
Ferrari S.p.A. workers.
The absenteeism rate for 2017 was in the area of 2% and has been stable over the past few years.
Our Environmental Responsibility
Our most significant environmental efforts are deployed through efficiencies in the manufacturing
processes and a program for the reduction of polluting emissions.
The monitoring and management of the environmental performance of our productive plants is assigned
to a team that reports to our Chief Technology Officer. Their effort is aimed at minimizing the impact of our
activities on the environment, particularly in relation to the energy consumption of production facilities. A
different team is in charge of overseeing regulatory developments while monitoring the emissions of Ferrari cars.
We assemble all of our cars and manufacture all the engines used in our cars or sold to Maserati at our
production facility in Maranello(6) (Italy). The Carrozzeria Scaglietti plant, located in Modena (Italy), is where
we manufacture aluminum bodyworks and chassis. The two plants cover a cumulative area of approximately
550,000 m2. We also own the Mugello racing circuit in Scarperia, near Florence (Italy), which covers an area of
1,700,000 m2 (of which 1,200,000 m2 of green or tree-covered areas).
(6) Maranello production facility is composed by the main offices and production buildings, the “Nuova Gestione Sportiva” building and the adjacent Fiorano
The vast majority of our employees have a permanent contract (98.0%).
track (of approximately 3,000 meters).
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Additional facilities owned by us include a product development center, a hospitality area and the Ferrari
museum in Maranello. We also directly operate 18 retail stores and maintain offices for our foreign subsidiaries
and other smaller facilities in Italy, such as the Museo Enzo Ferrari (MEF) in Modena. The environmental impact of
these additional facilities is deemed negligible and is excluded in this chapter’s data, however, it will be monitored
and considered for inclusion in the next reporting cycles.
Our energy consumption mainly relates to the manufacturing of cars and engines. Over the years,
our Group has strived to lower its energy consumption and to minimize its environmental impact, adopting
innovative solutions and resorting to a trigeneration plant and to the use of renewable energy sources for its
manufacturing facilities.
ENERGY CONSUMPTION WITHIN THE ORGANIZATION
Plants and circuits
Environmental management systems
We have invested heavily to minimize our environmental impact since 2001, when the company was
given the ISO 14001 certification for our plants in Maranello and Modena. In 2016, we obtained the renewal of
the certification of our environmental management system according to the new standard ISO 14001:2015. In
addition, in 2007, we obtained and renewed the Integrated Environmental Authorisation.
In April 2015, Mugello was the first racing circuit in the world to get the “Achievement of Excellence”
certificate, which is the top accreditation level within the environmental sustainability program proposed by FIA.
The Mugello circuit obtained the certification for the environmental management system with ISO 14001 and the
EMAS (Eco-Management and Audit Scheme).
Energy efficiency and promotion of alternative energy sources
Renewable energy is a priority for us. In 2008, we installed our first solar panels (increased capacity in
2011 and 2015) and from 2009 we started using electricity and hot and cold water generated by the trigeneration
plant(7). In 2017, the trigeneration plant produced 86% of the electricity needed for the Maranello plant, while the
remaining 14% was generated from renewable sources(8).
Our culture embraces energy consumption reduction, constantly implementing actions such as the
replacement of traditional illumination systems to LED technology and the use of pumps with inverter technology
in the industrial water distribution system. In 2017, we installed a new sand regeneration system which allowed
us to achieve an energy saving of 50% compared to the previous technology. In 2016, we also undertook the
project of constructing two new buildings: “Nuova Gestione Sportiva” and “New Design Department” that will
be completed in the next years. In both cases, the new buildings will be Class A-ranked in order to reduce energy
consumption. All new facilities are designed and built to the highest eco-friendly standards. These projects follow
the path initiated in 2015, with the inauguration of the Formula 1 team headquarters.
Over the years, our Group has rolled out several initiatives to improve the energy efficiency of its plants,
such as a new gas furnace fitted for the production of the main engine components in aluminium (cylinder heads,
cam covers, crankcases, pumps). Apart from ensuring even higher manufacturing quality, the furnace consumes
70% less energy, while at the same time increasing the smelting capacity to 1,500 kg per hour. Furthermore,
thanks to the automation of the loading-unloading procedure, the new installation has significantly increased
the level of safety for workers, who are no longer exposed to the line of fire.
(7) Even if the trigenerator plant was bought by Ferrari in September 2016, data referring to energ y consumption and emissions consolidate trigenerator plant
data for the whole 2016 for comparative reasons.
(8) Thanks to a photovoltaic system and purchases of Guarantee of Origin certificates.
Unit of measurement: GJ
Non-renewable fuel consumption
Natural Gas (used for trigenerator)
Natural Gas (for other uses)
Gasoline (for production process)
Diesel (for motor room and other uses)
Total electricity bought for consumption
Electricity self-produced for consumption(9)
Electricity sold
(9) From photovoltaic.
From renewable sources
From non-renewable sources
2017
1,554,134
1,116,343
366,636
69,838
1,316
87,492
81,299
6,192
3,117
11,910
2016
1,578,699
1,146,750
356,658
74,250
1,040
80,963
75,171
5,792
1,612
22,122
Total
1,632,832
1,639,152
The total energy consumption within the Group for 2017 is 1,632,832 GJ, in line with 2016 (1,639,152 GJ),
notwithstanding a production increase.
Air emissions
The emissions of CO2eq deriving from the Maranello and Modena plants and from the Mugello racing
circuit (Scope 1 and Scope 2) are equal to 93,327 tCO2eq in 2017 (in line with 93,243 tCO2eq in 2016).
DIRECT AND ENERGY INDIRECT GHG EMISSIONS
Unit of measurement: tCO2eq
Scope 1 (10)
Scope 2 (market-based method) (11)
Scope 2 (location-based method)
2017
92,528
800
9,795
2016
92,495
748
9,080
(10) Direct greenhouse gas emissions, measured in tons of CO2 equivalent, were calculated using emission factors indicated in “The Greenhouse Gas Protocol: A
Corporate Accounting and Reporting Standard (Revised Edition, 2004)”. The data reported refers to emissions of carbon dioxide, methane, nitrous oxide emissions.
(11) The data reported in the table includes the purchased electricity and it was calculated in line with the Market-Based Method. In 2017 and 2016, the Group
purchased Guarantee of Origin (GO) certificates for Maranello plant in order to avoid the increase of CO2eq emissions in the atmosphere. Indirect greenhouse
gas emissions, measured in tons of CO2 equivalent, were calculated using the Residual Mix emission factors declared in 2015 European Residual Mixes, V.1.0,
published by AIB in May 2016.
GHG Protocol (WRI, WBCSD) definitions
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Since 2014 our Group has been purchasing Guarantee of Origin certificates in order to increase the
percentage of energy consumed by the Group derived from renewable sources, thus reducing the corresponding
CO2 emissions, as determined by the market-based method of calculation. This resulted in 2017 in a reduction of
8,995 tons of CO2eq.
Other significant air emissions are related mainly to volatile organic compounds (VOCs) released during
vehicle manufacturing. In addition, NOX, SOX and dusts emissions are constantly monitored. 87.3% of VOCs
emissions are related to the painting activity (48,848 Kg in 2017).
OTHER SIGNIFICANT AIR EMISSIONS(12)
Unit of measurement: Kg
NOX
SOX
Volatile Organic Compounds (VOCs)
Dusts
2017
69,610
995
55,980
2,432
129,017
2016(13)
74,345
1,504
52,507
5,513
133,869
Total
(12) Only air emissions of the plants of Maranello and Modena have been considered.
(13) Data regarding 2016 with reference to the trigenerator are estimated based on the last three months of 2016.
Furthermore, a new painting process was introduced since 2004 with the aim of reducing VOC emissions.
Waste management
We acknowledge that rational use of raw materials together with careful waste management helps
reducing the environmental impact of the manufacturing process. In addition, innovative solutions and
advanced technical processes minimize waste and negative environmental impact. The reuse of production
scraps in our manufacturing process(14) also has the objective of reducing waste.
To achieve this target, a series of initiatives in the different phases of the manufacturing process have
been implemented. As an example, aluminum scraps are melted in the foundry to avoid waste: this is particularly
important considering that aluminum is the first raw material used (by weight) in our manufacturing process.
Other projects aimed at reducing waste are undergoing a feasibility analysis, in particular, according to the
concept of the circular economy, in some cases our production scraps can be used by other business partners
in their manufacturing process (e.g. leather scraps, processed sand used in the foundry, aluminum that cannot
be smelted).
WASTE BY TYPE
NON HAZARDOUS WASTE
Unit of measurement: tons
Total
2017
8,839
2016
7,458.6
(14) Only waste generated in the plants of Maranello and Modena have been considered: waste of Mugello racing circuit have an impact of less than 2% of the
total waste produced by our Group.
HAZARDOUS WASTE
Unit of measurement: tons
Total
2017
3,430.2
2016
3,565.9
Total waste for 2017 is equal to 12.269.2 tons. Total waste recovery increased by 1.8% from 41.5% in
2016 to 43.3% in 2017.
None of our waste is disposed in landfills.
Logistics
We produce all of our vehicles and spare parts in our Maranello and Modena plants, in central Italy,
however, our network of third party dealers is comprised of 185 point of sales around the world. A meticulous
work is constantly carried out to optimize logistical operations with the aim of reducing the impact on the
environment and associated air emissions.
Water management
We are well aware of the importance of a responsible management of water and, even if our plants
are not located in areas exposed to high or extremely high overall water risks, nor our production process can
be considered water intensive, we have developed a series of initiatives to reduce water consumption in our
manufacturing processes, such as cooling systems with water recirculation (e.g. cooling towers).
All the water sourced by us comes from municipal water supplies or other utilities and wells: as of today,
no water bodies are directly affected by the withdrawal of water.
(15) Source: WRI Aqueduct 2014 (World Resources Institute, 2014)
WATER WITHRDRAWAL BY SOURCE
Unit of measurement: m3
Surface water
Wells
Municipal water or other water utilities
Total
2017
0
524,428
227,138
751,566
2016
0
436,348
152,124
588,472
We treat our wastewater in accordance with all applicable laws and regulations. All the wastewater of
our plants is always monitored and channelled not directly into water bodies but in the public sewage system.
The water used in some of the industrial processes (such as washing solutions or paint washing), before its
discharge in the public sewer system, is treated by an industrial water treatment plant where it undergoes the
necessary chemical, physical, and biological treatment.
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WATER DISCHARGE BY DESTINATION
The expertise acquired in these fields has recently guided our efforts to combine improved performance
Unit of measurement: m3
Effluents / Water bodies
Public sewer system
2017
0
378,895
378,895
2016
0
316,732
316,732
Total
Biodiversity and noise pollution
Ferrari plants and Mugello racing circuit, as of December 2017, are not located in any protected or
highly biodiverse areas and, to our best knowledge, they do not have significant environmental impacts on such
areas. Moreover, our plants and circuit are not adjacent(16) to any protected or highly biodiverse areas. This
analysis is conducted annually and is based on the World Database on Protected Areas(17).
Vehicles environmental impact
Part of the environmental impact of our activities is related to our product lifecycle. Ferrari cars are
perceived as collectibles and therefore the number of cars demolished each year is very scarce. In addition, the
cars are generally not considered means of transportation.
Vehicles emissions
We are subject to a variety of laws and regulations that, among others, are related to car emissions and
fuel consumption. Ferrari vehicles must comply with extensive regional, national and local laws and regulations,
as well as industry self-regulations (including those that regulate vehicle safety). However, we currently benefit
from certain regulatory exemptions because we qualify as a Small Volume Manufacturer or similar designation
in most of the jurisdictions where we sell our cars (for more details refer to the “Regulatory Matters” paragraph
of 2017 Annual Report).
In 2012, we achieved a 27% reduction in CO2 emissions (compared to 2007) for our European fleet
through improvements in energy efficiency by increasing the energy produced for the same level of input and
therefore reducing the cars’ energy requirements.
Following the achievement of this result, we continued focusing on researching technologies that further
reduced emissions and, in early 2013, introduced LaFerrari, the first of our cars to use hybrid technology.
Through innovations in areas such as turbochargers, engine downsizing, transmission, electric steering
and hybrid technologies, we continue to target further reductions in CO2 emissions and have set a target to
reduce by 2020 CO2 emission by 15% (compared to 2014) on our entire fleet.
Consistent with our mission to develop cutting edge sports and GT cars, 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.
(16) For this analysis, a distance of 3 km or less has been considered as “adjacent”.
(17) The database considered for the analysis is managed by the United Nations Environment World Conservation Monitoring Centre (UNEP-WCMC) with
support from IUCN and its World Commission on Protected Areas.
with reductions in CO2 emissions.
We are undertaking an important program to understand the potential of hybrid technology and are
researching how to improve the performance and driving experience of our cars without losing fuel efficiency
advantages. We are now working hard on the integration of hybrid technology more broadly into our car portfolio.
AVERAGE SPECIFIC CO2 EMISSIONS (EU FLEET)(18)
(18) For the purpose of this graph, 100% of the Ferrari fleet in EU has been taken into account to determine the average specific emissions of CO2, despite the
phase-in criteria granted in the years 2010-2014. 2017: provisional fleet average emissions of CO2.
Vehicles’ end of life
We are not directly involved in product take back programs due to the nature of our business: the
number of Ferrari cars demolished each year is very scarce as Ferrari cars are perceived as collectibles, which
the Group also supports through its “Ferrari Classiche” services, and the active preowned market.
Ferrari contributes towards the community
Community engagement and involvement with the local territory are of fundamental importance for
the Group. All Ferrari cars are manufactured in our production facilities in Maranello and Modena, in the
heart of the Italian “Motor Valley”: we are aware of our responsibility towards the community and our efforts
are directed to support the development of the local community mainly through collaborations with local
universities and thanks to the industry network in the Emilia-Romagna region. To keep alive the spirit of Ferrari
and the story of its founder Enzo Ferrari, two different museums have been established.
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Ferrari & universities
We believe that promoting the education of young talents is an essential step to reinforce the connection
with local communities. Shaping brilliant engineers with a specific academic background that focuses on
new technologies within the automotive industry, and in particular innovative solutions for state-of-the-art
performance in luxury cars, is also a prerequisite for the Group to seize future opportunities.
The Motorvehicle University of Emilia-Romagna (MUNER) is an association which was strongly
advocated by the Emilia-Romagna region. It was created thanks to a synergetic connection among the
universities of Modena and Reggio Emilia, Bologna, Ferrara and Parma along with car companies in the region
that represent the excellence of Italian brands, which of course includes Ferrari.
Ferrari Museum Maranello & Museo Enzo Ferrari (MEF)
The Ferrari Museum Maranello invites visitors to experience the Prancing Horse dream first-hand,
offering visitors a journey through the Group’s history, values and automotive world.
The Museo Enzo Ferrari is built around the house in which Enzo Ferrari was born in 1898. The MEF
tells the story of Enzo Ferrari as a young boy discovering the irresistible allure of the world of motor racing, his
career as a driver in 1920s, as the driving force behind the Scuderia Ferrari in the 1930s, and then as Ferrari, the
Constructor, from 1947 onwards.
Methodology and scope
Through our Non-Financial Statement, we aim to provide our stakeholders with non-financial information,
illustrate our sustainability strategy and our corporate social responsibility initiatives in 2017 (from January 1st,
2017 to December 31st, 2017) to ensure transparent and structured communication with our stakeholders.
This Statement was prepared in accordance with the Dutch Civil Code, and with the Dutch Decree on
Non-Financial Information (Besluit bekendmaking niet-financiële informatie), which is a transposition of Directive
2014/95/EU ‘Disclosure of non-financial and diversity information’ into Dutch law.
This Statement is an extract of our Sustainability Report, that is prepared in compliance with the “GRI
Sustainability Reporting Standards” (2016) issued by the Global Reporting Initiative (GRI). This has been shared
with the Executive Officers of the Group and approved by the Governance and Sustainability Committee of the
Board of Directors.
With regard to the financial data, the scope of reporting corresponds to that of Ferrari N.V.’s
consolidated financial statement.
Regarding the qualitative and quantitative data on social and environmental aspects, the scope of
reporting corresponds to Ferrari N.V. and our subsidiaries consolidated on a line-by-line basis (as indicated in
the section 3 “Scope of consolidation” of 2017 Annual Report). Any exceptions, with regard to the scope of this
data, are clearly indicated throughout the Statement.
Directly measurable quantities have been included, while limiting, as far as possible, the use of
estimates. Any estimated data is indicated accordingly, additionally certain totals in the tables included in this
document may not add due to rounding.
During the reporting period, we did not face any significant change concerning the organization’s size,
structure, ownership or supply chain.
RISKS, RISK MANAGEMENT
AND CONTROL SYSTEMS
Our risk management approach is an important business driver and it is integral to the achievement
of the Group’s long-term business plan. We take an integrated approach to risk management, where risk and
opportunity assessment are at the core of the leadership team agenda. The Board of Directors is responsible
for considering the ability to control strategic, operational, compliance, financial and reporting risks crucial
to achieving its identified business targets, and for the continuity of the Group. For this reason, Ferrari has
developed varying appetites to achieve different strategic objectives, focusing attention at all relevant risk
levels, from risk management to internal control.
Ferrari has adopted the COSO Framework (Committee of Sponsoring Organizations of the Treadway
Commission Report - Enterprise Risk Management Model) as the foundation of its risk management framework.
The Group Executive Council (“GEC”), which is supported by senior management, is responsible for identifying,
prioritizing and mitigating risks and for the establishment and maintenance of a risk management system
across our business functions. As the decision making body led by the CEO and composed of the heads of
the operating segments and certain central functions, the GEC reviews the risk management framework and
the Company’s key global risks on a regular basis. For those risks deemed to be significant, comprehensive
mitigating action plans are developed and reviewed on a regular basis to ensure the action plans are relevant
and sufficient. At least annually, our risk management framework and risks are discussed with the Group’s
Audit Committee.
Risk Appetite
The risk appetite of Ferrari, (i.e. the level of risk that Ferrari is willing to accept to achieve its objectives),
has been defined based on the parameters identified below and will be applied to our strategy, Code of
Conduct, company values and policies. Ferrari does not rank by importance the individual risks identified in
this section because it believes such ranking would be an arbitrary exercise as all risks mentioned have relevance
for the Group and the business. The type of risks identified are as follows:
Risk category
Risk description
Risk appetite
Strategic risks (S)
Operational risks (O)
Compliance risks (C)
Financial risks (F)
Financial reporting risks (FR)
Key Risks and Risk Trends
Risks which affect or are created by Ferrari’s business
strategy and could affect Ferrari’s long-term
positioning and performance.
Risk which affect Ferrari’s ability to execute its
business plan.
Risks of non-compliance with laws, regulations, local
standards, code of conduct, internal policies and
procedures.
Risks include areas such as valuation, currency,
liquidity and impairment risks.
Risks primarily relate to internal controls.
Moderate
Low - moderate
Zero tolerance
Low
Zero tolerance
Ferrari assesses risks according to their potential impact and the Company’s vulnerability (including
the related mitigating actions). The risk impact could result in a material direct or indirect adverse effect
on Ferrari’s business, operations, volumes, financial condition and performance, reputation and/or other
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interests. Below we identify and discuss our key Company-specific risks. The risks listed and the response plans
are not exhaustive and may be adjusted from time to time. Ferrari expects that the controls which have been
implemented will mitigate the risks up to the level of the risk appetite.
Brand Image (S)
The preservation and enhancement of the value of the Ferrari brand is crucial in driving demand for
our cars and our revenues. The perception and recognition of the Ferrari brand are of strategic importance and
depend on many factors such as the design, technology, performance, quality and image of our cars, the appeal
of our dealerships and stores, the success of our client activities, as well as our general profile, including our
brand’s image of exclusivity.
The prestige, identity and appeal of the Ferrari brand also depend on the continued success of the
Scuderia Ferrari racing team in the Formula 1 World Championship.
Key aspects
Response plans:
Preserving brand value
Selective licensees of the Ferrari brand
Success of the Formula 1 team
Monitor and maximize residual values of Ferrari cars
Selective franchising partners
Dealer score card
Ferrari Academy
COMPETITION (S)
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 them are part of larger automotive groups and may have greater financial resources and
bargaining power with suppliers, 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 thanks to our brand image, the
performance and design of our cars, our reputation for quality and the driving experience for our customers.
Several global luxury automotive manufacturers have increased competitive pressure for luxury cars
particularly in EMEA and the United States. Considering that these are mature markets, we anticipate that
existing market participants will try to aggressively protect or increase their market share. Increased competition
may result in pricing pressure, reduction of marginality and our inability to meet our shipment targets, which
could have a material adverse effect on our results of operations and financial condition.
Key aspects
Margin pressure
Shipments
Response plans:
Financing of pre-owned to keep residual values high
Focus on client relationships, including Maranello Experience, selected
participation for new model launches and Ferrari clubs
Close contact with dealers and clients programs
Personalization services (Atelier and Tailor Made)
Unfavorable global economic conditions (S)
Deteriorating general economic conditions may affect disposable incomes and reduce consumer
wealth, which in turn may impact 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.
Dependence on manufacturing facilities in Maranello and Modena and relationship with single source
suppliers (O)
All cars sold and assembled by us and all engines we use for our cars or we sell to Maserati are
manufactured at our production facility in Maranello, Italy, where we also have our corporate headquarters
and Formula 1 activities. We manufacture all our car chassis in a nearby facility in Modena, Italy.
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.
In the event that we are unable to continue production at either of these two facilities, we would need
to seek alternative manufacturing arrangements which would take time and reduce our ability to produce
sufficient cars to meet demand.
Key aspects
Response plans:
Dependency on mature economies,
particularly in EMEA and the United
States
Expanding in emerging markets, diversifying and monitoring economic trends;
developing growth plans in line with growth of High Net Worth Individuals and
Ultra High Net Worth Individuals.
Global economic developments
Closely monitoring all market developments and continuously reviewing the
countries in which we do business and their geo-political events
Monitoring budget and timing of capital expenditures
Monitoring backlog orders
Our Maranello or Modena plants could become unavailable either permanently or temporarily for
a number of reasons, including contamination, power shortage or labor unrest. In addition, Maranello and
Modena are located in the Emilia-Romagna region of Italy, which has the potential for seismic activity. If major
disasters such as earthquakes, fires, floods, hurricanes, wars, terrorist attacks, pandemics or other events
occur, our headquarters, Formula 1 activities and production facilities may be seriously damaged, or we may
have to stop or delay the production and shipment of our cars.
Our business depends on a significant number of suppliers that provide raw materials, parts and
systems we require to manufacture cars and parts to run our business. We source materials from a limited
number of suppliers. In addition, similar to other small volume car manufacturers, most of the key components
we use in our cars are purchased from single source suppliers.
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Key aspects
Response plans:
Dependence on two manufacturing
facilities located in close proximity to
each other
Design of business continuity plan
Single source suppliers for components Disaster recovery plan for IT systems
Dependence on limited number of
suppliers for raw materials
Investments in the last 15 years to reduce the effect of possible damage from
earthquakes
Insurance coverage
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 adversely affect our revenue and operating results.
Our compliance controls, policies, and procedures may not protect us in every instance 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. In particular, our business activities may be subject to
anticorruption 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, financial condition and reputation.
High quality reputable suppliers assessed through the “Supplier Risk Committee”
Key aspects
Response plans:
Attraction, development and retention of talents (O)
Our success depends on the ability of our senior executives and other members of management to
effectively manage individual areas of our business and our business as a whole. In particular, our management
team benefits from the leadership of our CEO and Chairman.
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, which depends on our ability to attract and retain
top drivers, racing management and engineering talent.
If we are unable to attract, retain and incentivize senior executives, drivers, team managers and key
employees to succeed in international competitions or devote the capital necessary to fund successful racing
activities, new models and innovative technology, this may adversely affect 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.
Key aspects
Response plans:
Requirement for skilled engineers
Preparing current successful employees for future key positions
Requirement to attract and retain the
best drivers
Improving talent development program for key resources
Management potential
Labor unions
Succession plan
Retention plan
Training
Non-compliance with laws, regulations, local standards (including tax) and codes (C)
We are subject to comprehensive and constantly evolving laws, regulations and policies throughout
the world. We expect the legal and regulatory requirements affecting our business and our costs of compliance
to keep increasing significantly in scope and complexity 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 and regulatory enforcement has become more active in recent years. Evolving regulatory
Requirement to be compliant with
changes in Formula 1 regulations
and ability to adapt on a timely
Continuous monitoring of changes in the Formula 1 regulations and identification
of early remediation plans
Participation in Formula 1 Strategic Group
HSE (Health, Safety and Environment)
Increasing knowledge and awareness of laws, regulations, standards and codes
Tax
Human Resources
Legal
Anti-Bribery & Corruption
Code of Conduct
Export - Import
Monitoring, reviewing, reporting and adapting to relevant changes in rules and
regulations
Strengthening IT infrastructure for standard operational procedures and guidance
Implement and update global HSE system
Risk-based reviews of operations by HSE professionals
Increasing internal compliance awareness and effective communication between
central compliance team and managers working in the subsidiaries
Communicating and implementing business conduct standards internally
Maintaining a global whistle blower procedure
Developing key procedures and policies for all relevant financial and business areas
Exchange rate fluctuations, interest rate changes, credit risk and other market risks (F)
Ferrari operates in numerous markets worldwide and is exposed to market risks stemming from
fluctuations in currency and interest rates. The exposure to currency risk is mainly linked to our cash flows from
sales which are denominated in currencies different from those connected to purchases or production activities.
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.
The main foreign currency exchange rate to which Ferrari is exposed is the Euro/U.S. Dollar for sales in
U.S. Dollars in the United States and other markets where the U.S. Dollar is the reference currency. In 2017, the
196
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ANNUAL REPORT
RISKS, RISK MANAGEMENT
AND CONTROL SYSTEMS
value of commercial activity exposed to changes in the Euro/U.S. Dollar exchange rate accounted for about 62
percent of the total currency risk from commercial activity. It is the Group’s policy to use derivative financial
instruments to hedge between 50 and 90 percent of certain exposures subject to foreign currency exchange risk
for up to twelve months.
Several subsidiaries are located in countries that are outside the Eurozone exposing Ferrari to conversion
exchange risk, in particular the United States, the United Kingdom, Switzerland, China, Hong Kong, Japan,
Australia and Singapore. The Group monitors its principal exposure to conversion exchange risk, although
there was no specific hedging in this respect at the reporting date.
Ferrari always had exceptionally high solvency rates. The company did not use any long-term credit lines
and boasted favorable liquidity positions and bank facilities that accommodate the day-to-day management of
the working capital. Approximately 32 percent of the Group’s total debt bears floating rates of interest. Ferrari
enters into interest rate caps as requested by certain of its securitization agreements which bear floating rates
of interest. Considering the current economic environment, Ferrari has not entered into any other interest rate
derivatives, however, the exposure is continually monitored.
Ferrari’s most important financial assets are its financial services portfolios secured on the titles of
cars or other guarantees, spread over more than 3,300 clients that are mainly in the US. Impairment risk mainly
relates to the financial services portfolio which is evaluated on an individual basis for material credit positions.
The amount of the write-down is based on an estimate of the recoverable cash flows, their timing, recovery
costs and the fair value of any guarantees received.
Further information is included in Note 31 to the Consolidated Financial Statements.
Key aspects
Response plans:
Exposure to foreign exchange
movements from non-Euro related
sales
Exposure to interest rate movements
on financial assets and liabilities
Foreign exchange hedging instruments in line with the Company’s risk
management policy
Monitoring interest rate movements for hedging purposes
Credit risk of default or insolvency
Credit approval policies applied to dealers and retail clients
Personal guarantees and security of the vehicle
Financial Reporting (FR)
Starting from October 2015 Ferrari N.V. is listed at the New York Stock Exchange (NYSE), while from
January 2016 Ferrari N.V. is also listed on the Italian Stock Exchange (Mercato Telematico Azionario - MTA).
Listing in regulated markets involves being compliant with the related local and specific regulations.
In particular, publicly traded companies filing financial statements with the US Securities and Exchange
Commission are required to comply with the Sarbanes Oxley Act requirements, in particular sections 302, 404
and 906 that involve a periodical management assessment of internal controls and CEO and CFO Certifications
of Periodic Financial Reports and SEC Filings (in addition, our independent registered public accounting firm
is also required to report on the effectiveness of the internal control over financial reporting).
Under the COSO Internal Control-Integrated Framework, according to which the internal control
system is defined as a set of rules, procedures and tools designed to provide reasonable assurance of the
achievement of corporate objectives, Ferrari has developed an Internal Control System over the Financial
Reporting in order to assure completeness, accuracy and reliability of the group financial reporting.
Within the abovementioned context, identification and evaluation of the risk of misstatements which
could have material effects on financial reporting is carried out through a risk assessment process that uses
a top-down approach to identify the organizational entities, processes and the related accounts, in addition
to specific activities that could potentially generate significant errors. Under the methodology adopted by the
Company, risks and related controls are associated with the accounting and business processes upon which
accounting information is based.
Significant risks identified through the assessment process require definition and evaluation of key
controls that address those risks, thereby mitigating the possibility that financial reporting will contain any
material misstatements.
In accordance with international best practices, the Group has two principal types of control in place:
• controls that operate at Group or subsidiary level, such as delegation of authorities and responsibilities,
separation of duties, and assignment of access rights to IT systems; and
• controls that operate at process level, such as authorizations, reconciliations, verification of consistencies,
etc. This category includes controls for operating processes, controls for financial closing processes
and controls carried out by specific service providers. These controls can be preventive (i.e., designed
to prevent errors or fraud that could result in misstatements in financial reporting) or detective (i.e.,
designed to reveal errors or fraud that have already occurred). These controls may also be classified as
manual or automatic, such as application-based controls relating to the technical characteristics and
configuration of IT systems supporting business activities.
An assessment of the design and operating effectiveness of key controls is carried out through
tests performed periodically during the year, both at Group and subsidiary level, using sampling techniques
recognized as best practices internationally.
The assessment of the controls may require the definition of compensating controls and plans for
remediation and improvement. The results of monitoring are subject to periodic review by the manager
responsible for the Company’s financial reporting and communicated by him to senior management and to the
Audit Committee.
During 2017, in addition to the current activities of specific committees (e.g. financial reporting
committee, disclosure committee, internal control committee) already created in the past, many others have
been carried out in order to improve our group internal control system over the financial reporting and to
strengthen the awareness over compliance, including:
•
•
introduction of new/updated policies and procedures;
implementation of new IT systems, mainly with reference to the sales process;
• update the SOX 404 compliance program, including setting and testing of operating controls; and
• organization of training sessions on security and compliance matters.
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ANNUAL REPORT
REMUNERATION
OF DIRECTORS
Introduction
This description below summarizes the remuneration policy applicable to the executive and non-
executive directors of the Company and the remuneration paid to these individuals for the year ended on
December 31, 2017. The form and amount of compensation received by the directors of Ferrari for the year
ended on December 31, 2017 was determined in accordance with the remuneration policy. The Company may
from time to time amend the remuneration policy subject to Shareholders’ approval when necessary.
Remuneration Policy for Executive Directors
The Board of Directors determines the compensation for our executive directors at the recommendation
of the Compensation Committee and with reference to the remuneration policy. The remuneration policy is
approved by our shareholders and is published on our corporate website www.ferrari.com.
The objective of the remuneration policy is to provide a compensation structure that allows us to
attract and retain the most highly qualified executive talent and by motivating such executives to achieve
business and financial goals that create long-term value for shareholders in a manner consistent with our core
business and leadership values.
The policy is aligned with Dutch law and the Dutch Corporate Governance Code.
Features of the remuneration for executive directors
The remuneration policy aims to provide total compensation that:
•
•
•
•
attracts, retains and motivates qualified executives;
is competitive as compared to the compensation paid by comparable companies;
reinforces our performance driven culture and meritocracy; and
is aligned to shareholders interests.
The compensation structure for executive directors includes a fixed component and a variable
component based on short and long-term performance. We believe that this compensation structure promotes
the interests of Ferrari in the short and the long-term and is designed to encourage the executive directors to
act in the best interests of Ferrari. In determining the level and structure of the compensation of the executive
directors, the non-executive directors will take into account, among other things, Ferrari’s financial and
operational results and other business objectives. We establish target compensation levels using a market-
based approach and we periodically benchmark our executive compensation program against peer companies
and monitor compensation levels and trends in the market.
Remuneration elements
On the basis of the remuneration policy objectives, compensation of executive directors consists,
inter alia, of the following elements discussed below. We note that only the long-term incentives element was
applicable in 2017.
Fixed component
The primary objective of the base salary (the fixed part of the annual cash compensation) for executive
directors is to attract and retain highly qualified senior executives. Our policy is to periodically benchmark
comparable salaries paid to executives with similar experience by comparable companies.
Variable components
Executive directors are also eligible to receive variable compensation subject to the achievement of
pre-established financial and other identified performance targets. The short and long-term components of
executive directors’ variable remuneration are linked to predetermined, assessable targets and add to long-
term shareholder creation.
Short-term incentives
The primary objective of performance based short-term variable cash based incentives is to incentivize
the executive directors to focus on the business priorities for the current or next year. The executive directors’
variable remuneration is linked to the achievement of short-term (i.e. annual) financial and other identified
objectives proposed by the Compensation Committee and approved by the non-executive directors each year.
To determine the executive directors’ annual performance bonus, the Compensation Committee and
the non-executive directors:
• approve the executive directors’ targets and maximum allowable bonuses;
• select the appropriate metrics and their weighting;
• set the stretch objectives;
• consider any unusual items in a performance year to determine the appropriate measurement of
achievement; and
• approve the final bonus determination.
In addition, upon proposal of the Compensation Committee, the non-executive directors have
authority to grant periodic bonuses for specific transactions that are deemed exceptional in terms of strategic
importance and effect on Ferrari’s results. The form of any such bonus (cash, common shares of Ferrari or
options to purchase common shares) is determined by the non-executive directors from time to time.
Long term-incentives
Following the approval of the equity incentive plan by the Board of Directors, upon the recommendation
of the Compensation Committee, on March 1, 2017, on April 14, 2017 the Shareholders approved an award to
the Chief Executive Officer under the Company’s equity incentive plan. In particular, 450 thousand performance
share units (“PSUs”) have been awarded to the Chief Executive Officer. The grants of the PSUs, which each
200
201
ANNUAL REPORT
REMUNERATION
OF DIRECTORS
represent the right to receive one common share of the Company, cover a five-year performance period from
2016 to 2020, consistent with the Company’s strategic horizon.
Other benefits
We believe that the equity incentive plan increases the alignment between the Company’s performance
and shareholder interests, by linking the compensation opportunity of the Chief Executive Officer of the
Company to increasing shareholder value.
The PSUs vest in three equal tranches in March 2019, 2020 and 2021, subject to the achievement of a
market performance condition related to Total Shareholder Return (“TSR”). The interim partial vesting periods
are independent of one another and any under-achievement in one period can be offset by over-achievement in
subsequent periods. The target amount of PSUs vest as follows based on the Company’s TSR ranking compared
to an industry specific peer group of eight, including the Company, (“Peer Group”):
Executive directors may also be entitled to customary fringe benefits such as personal use of aircraft,
company car and driver, personal/home security, medical insurance, accident insurance, tax preparation and
financial counseling. The Compensation Committee may grant other benefits to the executive directors in
particular circumstances.
Internal pay ratios
The Company is not disclosing pay ratios for 2017 compensation, as the Dutch Corporate Governance
Code does not describe the methodology to determine and disclose such ratios. The Company will continue to
monitor the new and still evolving guidance under the Dutch Corporate Governance Code.
Ferrari TSR Ranking
% of Target Awards that Vest
Remuneration Policy for Non-Executive Directors
1
2
3
4
5
150%
120%
100%
75%
50%
The defined Peer Group is as follows:
Remuneration of non-executive directors is approved by the Company’s shareholders and periodically
reviewed by the Compensation Committee.
Remuneration of non-executive directors is fixed and not dependent on the Company’s financial results.
Non-executive directors are not eligible for variable compensation and do not participate in any incentive plans.
The current annual remuneration for the non-executive directors (which was approved at the Annual
General Meeting of Shareholders’ of the Company, held on April 14, 2017) is:
Hermes
LVMH
Burberry
Moncler
Brunello Cucinelli
Richemont
Ferragamo
•
$75,000 for each non-executive director.
The total number of shares that will eventually be issued upon vesting of the PSUs may vary from the
original award of 450 thousand, depending on the level of TSR performance achieved compared to the Peer
Group.
The performance period for the PSUs commenced on January 1, 2016. The fair value of the awards used
for accounting purposes was measured at the grant date using a Monte Carlo Simulation model. The range
of the fair value of the PSUs that were awarded is €68.18-€72.06 per share. The key assumptions utilized to
calculate the grant-date fair values for these awards are summarized below:
Key Assumptions
Grant date share price
Expected volatility
Dividend yield
Risk-free rate
€66.85
17.4%
1.2%
0%
• An additional $10,000 for each member of the Audit Committee and $20,000 for the Audit
Committee Chairman.
• An additional $5,000 for each member of the Compensation Committee and the Governance
and Sustainability Committee and $15,000 for the Compensation Committee Chairman and the
Governance and Sustainability Committee Chairman.
• An additional $25,000 for the lead non-executive director.
All remuneration of the non-executive directors will be paid in cash.
The Board of Directors will determine stock ownership guidelines applicable to directors and employees.
The Compensation Committee has been considering options for determining formal stock ownership guidelines
that will apply in connection with the first vesting opportunity under the Company’s equity incentive plan in 2019.
Directors’ Compensation
The expected volatility was based on the observed volatility of the Peer Group. The risk-free rate was
based on the iBoxx sovereign Eurozone yield.
The following table summarizes the remuneration received by the members of the Board of Directors
for the year ended December 31, 2017 from Ferrari and its subsidiaries.
202
203
ANNUAL REPORT
REMUNERATION
OF DIRECTORS
Name
Office held
In office
from/to
Annual fee (€)
Other
compensation
(€)
Total
—
115,317
—
—
Sergio Marchionne(1)
Chairman, Chief Executive Officer
and Executive Director
01/01/17-12/31/17
—
John Elkann
Piero Ferrari
Vice Chairman and Non-Executive
Director
Vice Chairman and Non-Executive
Director
01/01/17-12/31/17
115,317
01/01/17-12/31/17
102,039
9,880(2)
111,919
Delphine Arnault
Non-Executive Director
01/01/17-12/31/17
Louis C. Camilleri
Senior Non-Executive Director
01/01/17-12/31/17
Giuseppina Capaldo
Non-Executive Director
01/01/17-12/31/17
Eddy Cue
Sergio Duca
Lapo Elkann
Non-Executive Director
01/01/17-12/31/17
Non-Executive Director
01/01/17-12/31/17
Non-Executive Director
01/01/17-12/31/17
Amedeo Felisa(3)
Non-Executive Director
01/01/17-12/31/17
Maria Patrizia Grieco
Non-Executive Director
01/01/17-12/31/17
Adam Keswick
Elena Zambon
Non-Executive Director
01/01/17-12/31/17
Non-Executive Director
01/01/17-12/31/17
97,614
133,021
106,465
102,039
119,743
97,614
47,655
106,465
97,614
102,039
—
—
—
—
—
—
40,000(3)
—
—
—
97,614
133,021
106,465
102,039
119,743
97,614
87,655
106,465
97,614
102,039
(1) No fixed compensation was paid by Ferrari or any of its subsidiaries to Mr. Marchionne in his capacity as Chairman or Chief Executive Officer for the year
ended December 31, 2017.
(2) Relates to a car benefit provided to the Vice-Chairman in accordance with the Remuneration policy of the Company.
(3) Mr. Felisa served on the Board of Directors as Executive Director with a specific consultancy contract until the Annual General Meeting of Shareholders held
on April 14, 2017, following which Mr Felisa served as Non-Executive Director.
Share-Based Compensation of Executive Directors
The following table gives an overview of the share plans held by the Chief Executive Officer.
Name
Grant Date
Vesting Date
Fair Value on
Grant Date
Awards
Granted
Awards
Vested
Sergio Marchionne
April 14, 2017
2019 / 2020 / 2021
€68.18 - €72.06
450,000
—
The above awards relate to 450 thousand PSUs awarded to the CEO under the equity incentive plan,
which covers a five-year performance period from 2016 to 2020, consistent with the Company’s strategic
horizon. The PSU awards vest in three equal tranches in March 2019, 2020 and 2021, subject to the achievement
of a market performance condition related to Total Shareholder Return. At December 31, 2017 none of the PSU
awards had vested. The total cost recognized in 2017 for the performance period 2016 and 2017 amounted
to approximately €16.5 million. For further details please see Note 22 “Share-Based Compensation” to the
Consolidated Financial Statements.
Compensation of the members of the GEC
The compensation paid to or accrued during the year ended December 31, 2017 by Ferrari and its
subsidiaries to the members of the GEC (excluding the CEO) amounted to €16.0 million in aggregate, including
€4.7 million for share-based compensation in relation to PSUs and RSUs awarded to key management under
the equity incentive plan for the performance period covering 2016 and 2017. The PSU and RSU awards vest
in three equal tranches in March 2019, 2020 and 2021, subject to the achievement of a market performance
condition related to Total Shareholder Return, therefore at December 31, 2017 none of the PSU or RSU awards
had vested. For further details please see Note 22 “Share-Based Compensation” to the Consolidated Financial
Statements.
Director and Officer Overlaps
There are overlaps among the directors and officers of FCA and our directors and officers. These
individuals owe duties both to us and to the other companies that they serve as officers and/or directors.
This may raise certain conflicts of interest as, for example, these individuals review opportunities that may be
appropriate or suitable for both Ferrari and such other companies, or business transactions are pursued in
which both Ferrari and such other companies have an interest, such as Ferrari’s arrangement to supply engines
for Maserati cars. For example, Mr. Marchionne is also the Chief Executive Officer of FCA, and certain of our
other directors and officers may also be directors or officers of FCA or Exor, including Mr. John Elkann, who
is our Vice Chairman, the Chairman of FCA and the Chairman and Chief Executive Officer of Exor. Exor holds
approximately 23.5 percent of our outstanding common shares and approximately 33.4 percent of the voting
power in the Company, while it holds approximately 29.2 percent of the outstanding common shares and
43.1 percent of the voting power in FCA. See “Risk Factors-Risks related to our Common Shares-We may have potential
conflicts of interest with FCA and Exor and its related companies.”
204
205
ANNUAL REPORT
FERRARI
RACING ACTIVITIES
SF70H
SF70H
Sebastian Vettel
Kimi Räikkönen
Sebastian Vettel
Kimi Räikkönen
World Endurance Championship
GT Manufacturers’ World Champions
James Calado and Alessandro Pier Guidi
GT Drivers’ World Champions
206
IMSA GTD Teams’ and Drivers’ Champions
ELMS GTE Teams’ and Drivers’ Champions
207
ANNUAL REPORT FERRARI
RACING ACTIVITIES
SF70H
208
209
FERRARI
RACING ACTIVITIES
SF70H
210
211
FERRARI
RACING ACTIVITIES
Sebastian Vettel
212
Kimi Räikkönen
213
FERRARI
RACING ACTIVITIES
Kimi Räikkönen
Sebastian Vettel
214
Kimi Räikkönen
215
FERRARI
RACING ACTIVITIES
World Endurance Championship - GT Manufacturers’ World Champions
216
217
FERRARI
RACING ACTIVITIES
James Calado and Alessandro Pier Guidi - GT Drivers’ World Champions
218
219
FERRARI
RACING ACTIVITIES
IMSA GTD Teams’ and Drivers’ Champions
220
221
FERRARI
RACING ACTIVITIES
ELMS GTE Teams’ and Drivers’ Champions
222
223
Ferrari N.V.
Ferrari N.V.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Income Statement
Consolidated Statement Of Comprehensive Income
Consolidated Statement Of Financial Position
Consolidated Statement Of Cash Flows
Consolidated Statements Of Changes In Equity
Notes To The Consolidated Financial Statements
225
226
227
228
229
230
CONSOLIDATED INCOME STATEMENT
for the years ended December 31, 2017, 2016 and 2015
Net revenues
Cost of sales
Selling, general and administrative costs
Research and development costs
Other expenses, net
Result from investments
EBIT
Net financial expenses
Profit before taxes
Income tax expense
Net profit
Net profit attributable to:
Owners of the parent
Non-controlling interests
Basic earnings per common share (in €)
Diluted earnings per common share (in €)
For the years ended December 31,
Note
2017
2016
2015
(€ thousand)
3,416,890
3,105,084
2,854,369
1,650,860
1,579,690
1,498,806
329,065
657,119
6,867
2,437
295,242
613,635
24,501
3,066
338,626
561,582
11,035
—
775,416
595,082
444,320
29,260
27,729
10,151
746,156
567,353
434,169
208,760
167,635
144,115
537,396
399,718
290,054
535,393
398,762
287,816
2,003
2.83
2.82
956
2.11
2.11
2,238
1.52
1.52
4
5
6
7
8
9
10
11
3
13
13
224
225
The accompanying notes are an integral part of the Consolidated Financial Statements.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Ferrari N.V.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the years ended December 31, 2017, 2016 and 2015
Net profit
Items that will not be reclassified to the consolidated income
statement in subsequent periods:
(Losses)/Gains on remeasurement of defined benefit plans
Related tax impact
Total items that will not be reclassified to the consolidated income
statement in subsequent periods
Items that may be reclassified to the consolidated income statement
in subsequent periods:
Gains on cash flow hedging instruments
Exchange differences on translating foreign operations
Related tax impact
Total items that may be reclassified to the consolidated income
statement in subsequent periods
Total other comprehensive income, net of tax
Total comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
For the years ended December 31,
Note
2017
2016
(€ thousand)
2015
537,396
399,718
290,054
21
21
21
21
21
(730)
203
(1,448)
(18)
(527)
(1,446)
898
(308)
590
34,971
(15,346)
51,086
4,118
(9,757)
(16,943)
8,234
13,344
(2,600)
9,868
38,261
18,978
9,341
36,795
19,568
546,737
436,513
309,622
545,071
435,691
306,699
1,666
822
2,923
The accompanying notes are an integral part of the Consolidated Financial Statements.
226
Ferrari N.V.
Ferrari N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 2017, 2016 and 2015
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
for the years ended December 31, 2017, 2016 and 2015
Cash and cash equivalents at beginning of the year
Cash flows from operating activities:
Profit before taxes
Amortization and depreciation
Provision accruals
Result from investments
Net finance costs
Other non-cash expenses/(income)
Net gains on disposal of property, plant and equipment and intangible assets
Change in inventories
Change in trade receivables
Change in trade payables
Change in receivables from financing activities
Change in other operating assets and liabilities
Finance income received
Finance costs paid
Income tax paid
Total
Cash flows used in investing activities:
Investments in property, plant and equipment
Investments in intangible assets
Proceeds from the sale of property, plant and equipment and intangible assets
Proceeds from exercising the Delta Topco option
Proceeds from the sale of a majority stake in FFS GmbH
Proceeds from the sale of assets and liabilities related to investment properties
Change in investments and other financial assets
Total
Cash flows used in financing activities:
Proceeds from bonds
Proceeds from securitizations, net of repayments
Proceeds from Term Loan and Bridge Loan
Repayment of Term Loan
Repayment of Bridge Loan
Net change in other bank borrowings
Net change in other debt
Net change in deposits in FCA Group cash management pools and financial
liabilities with FCA Group
Cash distribution of reserves
Dividends paid to non-controlling interest
Acquisition of non-controlling interest
Change in equity
Total
Translation exchange differences
Total change in cash and cash equivalents
Cash and cash equivalents at end of the year
For the years ended December 31,
2016
(€ thousand)
2017
2015
457,784
182,753
134,278
746,156
260,606
13,473
(2,437)
29,260
43,453
(2,585)
(88,483)
(1,745)
29,333
(44,123)
(72,803)
4,402
(36,222)
(215,486)
662,799
(188,904)
(202,506)
3,663
8,307
—
—
—
(379,440)
567,353
247,717
82,418
(3,066)
27,729
(38,465)
(2,652)
(33,187)
(88,847)
106,163
404,568
7,149
2,684
(22,239)
(252,026)
1,005,299
(175,647)
(166,340)
2,931
—
18,595
—
—
(320,461)
434,169
274,757
50,873
—
10,151
38,813
(6,964)
(2,885)
15,693
(45,792)
120,902
(24,698)
5,347
(18,081)
(145,017)
707,268
(184,910)
(171,033)
1,370
—
—
37,130
377
(317,066)
694,172
141,115
—
(795,254)
490,729
462,700
—
—
— 1,994,712
—
—
123,993
(11,114)
(700,846)
— (500,000)
(211,832)
15,847
4,385
(8,280)
—
135,094 (2,396,422)
(119,985)
(1,218)
—
—
(85,065)
(8,372)
189,922
647,706
(86,905)
(17,207)
—
1,384
(411,036)
1,229
275,031
457,784
—
(53,942)
(8,500)
—
(351,273)
9,546
48,475
182,753
Share
capital
Retained
earnings
and other
reserves
Cash
flow
hedge
reserve
Currency
translation
differences
Remeasu-
rement
of defined
benefit plans
Equity
attributable
to owners of
the parent
Non-
controlling
interests
Total
(€ thousand)
At January 1, 2015
3,778
2,503,614 (58,557)
29,912
(9,129)
2,469,618
8,695
2,478,313
Transaction with non-
controlling interest
Net profit
Other comprehensive
income/(loss)
Restructuring (1)
Share premium
contribution (2)
Reclassification (3)
—
—
—
(2,602)
287,816
—
—
—
—
—
—
(2,602)
(5,898)
(8,500)
287,816
2,238
290,054
—
5,634
12,659
590
18,883
685
19,568
— (2,800,000)
—
—
1,162
(2,117)
—
—
—
—
—
—
— (2,800,000)
— (2,800,000)
—
1,162
2,117
—
—
—
1,162
—
At December 31, 2015 3,778
(12,127)
(52,923)
42,571
(6,422)
(25,123)
5,720
(19,403)
398,762
—
—
—
398,762
956
399,718
—
34,143
4,252
(1,466)
36,929
(134)
36,795
Net profit
Other comprehensive
income/(loss)
Cash distribution of
reserves
Dividends to non-
controlling interests
Share-based
compensation (4)
Separation (5)
—
—
—
—
—
(1,274)
Net profit
Other comprehensive
income/(loss)
Cash distribution of
reserves
Dividends to non-
controlling interests
Share-based
compensation (4)
—
—
—
—
—
At December 31, 2016 2,504
302,336 (18,780)
46,823
(7,888)
324,995
535,393
—
—
—
535,393
(86,905)
—
1,110
1,496
—
—
—
—
—
—
—
—
—
—
—
—
(86,905)
—
(86,905)
—
(1,732)
(1,732)
1,110
222
—
—
1,110
222
4,810
2,003
329,805
537,396
—
25,214
(15,009)
(527)
9,678
(337)
9,341
(119,985)
—
28,597
—
—
—
—
—
—
—
—
—
(119,985)
—
(119,985)
—
(1,218)
(1,218)
28,597
—
28,597
At December 31, 2017 2,504
746,341
6,434
31,814
(8,415)
778,678
5,258
783,936
(1) Relates to the remaining principal amount of the note issued by the Company to FCA (“FCA Note”) recognized in connection with the Restructuring.
(2) Relates to the effect of a share premium contribution made by FCA N.V. in connection with the Restructuring.
(3) Relates to the reclassification of the actuarial gain recognized on the remeasurement of the defined benefit pension plan of the former Chairman of the Group.
(4) Relates to the equity-settled Non-Executive Directors’ compensation and from 2017 also the equity incentive plan. See Note 21 “Equity” and Note 22 “Share-based
Compensation” for additional details.
(5) Reflects the effects of the Separation.
The accompanying notes are an integral part of the Consolidated Financial Statements.
The accompanying notes are an integral part of the Consolidated Financial Statements.
228
229
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
1. BACKGROUND AND BASIS OF PRESENTATION
Background
Ferrari is among the world’s leading luxury brands. The activities of Ferrari N.V. (herein referred to as
“Ferrari” or the “Company” and together with its subsidiaries the “Group”) and its subsidiaries are focused
on the design, engineering, production and sale of luxury performance sports cars. The cars are designed,
engineered and produced in Maranello and Modena, Italy and sold in more than 60 markets worldwide through
a network of 164 authorized dealers operating 185 points of sale. The Ferrari brand is licensed to a selected
number of producers and retailers of luxury and lifestyle goods, with Ferrari branded merchandise also sold
through a network of 18 Ferrari-owned stores and 30 franchised stores (including 8 Ferrari Store Junior), as
well as on the Group’s website. To facilitate the sale of new and used cars, the Group provides various forms
of financing, through cooperation and other agreements, to both clients and dealers. Ferrari also participates
in the Formula 1 World Championship through Scuderia Ferrari. The activities of Scuderia Ferrari are the core
element of Ferrari marketing and promotional activities and an important source of innovation supporting the
technological advancement of Ferrari sports and street cars.
Fiat S.p.A. (merged with and into Fiat Chrysler Automobiles N.V. in October 2014, Fiat S.p.A. and Fiat
Chrysler Automobiles are defined as “FCA” as the context requires and together with their subsidiaries the
“FCA Group”) acquired 50 percent of Ferrari S.p.A. in 1969, and over time expanded its shareholding to 90
percent ownership, while the remaining 10 percent non-controlling interest was owned by Piero Ferrari.
On October 29, 2014, Fiat Chrysler Automobiles N.V. (“FCA”) announced its intention to separate
Ferrari S.p.A. from FCA. The separation was completed on January 3, 2016 and occurred through a series of
transactions (together defined as the “Separation”) including (i) an intra-group restructuring which resulted
in the Company’s 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 the Company, (ii) the transfer of Piero Ferrari’s 10
percent shareholding in Ferrari S.p.A. to the Company, (iii) the initial public offering of common shares of the
Company on the New York Stock Exchange, and (iv) the distribution, following the initial public offering, of
FCA’s remaining interest in the Company to FCA’s shareholders. Following the Separation, Ferrari operates as
an independent, publicly traded company.
The transactions described above in (i) and (ii) (referred to collectively as the “Restructuring”) were
completed in October 2015. The Restructuring comprised: (i) a capital reorganization of the group under the
Company, which has been accounted for in the consolidated financial statements as though it had occurred
effective January 1, 2015 using FCA’s basis of accounting, and (ii) the issuance of the FCA Note, which has been
reflected in the consolidated financial statements only from the date on which it occurred.
The remaining steps of the Separation, which were completed between January 1 and January 3,
2016 through two consecutive demergers followed by a merger under Dutch law, have been reflected in these
consolidated financial statements only from the date on which the related transactions occurred and had no
impact on the Company’s results of operations or financial position. 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 cash pooling and financial liabilities with the FCA Group were settled
and the relevant agreements were terminated. The derivative contracts that were previously held by FCA were
novated to Ferrari S.p.A.
On January 4, 2016 the Company also completed the listing of its common shares on the Mercato
Telematico Azionario, the stock exchange managed by Borsa Italiana, under the ticker symbol RACE.
At December 31, 2017, the fully paid up share capital of the Company amounted to €2,504 thousand,
comprising common shares and special voting shares all with nominal value of €0.01 per share. At December 31,
2017, the Company had 188,953,874 common shares and 56,493,519 special voting shares issued and outstanding.
References to the Company in these consolidated financial statements refer to Ferrari N.V. (formerly
named FE New N.V.) following the Separation and to Ferrari N.V.’s predecessor (formerly named New Business
Netherlands N.V.), prior to the completion of the Separation.
Basis of preparation
Authorization of consolidated financial statements and compliance with International Financial Reporting
Standards
These consolidated financial statements of Ferrari N.V. were authorized for issuance on February 23, 2018.
The consolidated financial statements have been prepared in accordance with the International
Financial Reporting Standards as issued by the International Accounting Standards Board and endorsed by
the European Union (“EU-IFRS”) and with Part 9 of Book 2 of the Dutch Civil Code. The designation IFRS
also includes International Accounting Standards (“IAS”) as well as all the interpretations of the International
Financial Reporting Interpretations Committee (“IFRIC” and “SIC”).
The consolidated financial statements are prepared under the historical cost method, modified as
required for the measurement of certain financial instruments, as well as on a going concern basis.
The Group’s presentation currency is the Euro, which is also the functional currency of the Company,
and unless otherwise stated information is presented in thousands of Euro.
Transactions with FCA
The Group generates a portion of its net revenues from sale of goods to other FCA Group companies.
In particular, net revenues generated from FCA Group companies amounted to €324,033 thousand, €248,685
thousand and €194,506 thousand for the years ended December 31, 2017, 2016 and 2015, respectively. See
Note 29 for further details.
The Group enters into commercial transactions with the FCA Group in the ordinary course of business.
230
231
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Receivables and payables are settled in the ordinary course of business and are recorded as assets and liabilities
on the consolidated statement of financial position.
Historically the Group received various services, including human resources, payroll, financial
reporting and tax, customs, accounting and treasury, institutional and industrial relations, procurement of
insurance coverage, internal audit, IT and systems, risk, corporate security, executive compensation, legal and
corporate affairs from the FCA Group. Following the Separation, the Group has been gradually internalizing
these services. The costs for the recharge of services received, including costs for termination packages, totaled
€8,548 thousand, €15,021 thousand and €11,559 thousand for the years ended December 31, 2017, 2016 and
2015, respectively. These costs were recharged by the FCA Group based on the actual costs incurred for the
services provided to the Group and are reflected as expenses according to their nature in the consolidated
financial statements.
Prior to the Separation the Group participated in a group-wide cash management system at FCA Group,
where the operating cash management, main funding operations and liquidity investment of the Group were
centrally coordinated by dedicated treasury companies. The Group accessed funds deposited in these accounts on
a daily basis, had the contractual right to withdraw these funds on demand and terminate these cash management
arrangements depending on FCA’s ability to pay at the relevant time. The deposits with FCA Group relating to
the cash management system were recorded in the consolidated statement of financial position as “Deposits
in FCA Group cash management pools” and the finance income earned on such deposits was recorded as net
financial income/expenses in the consolidated income statement. Prior to the Separation, certain entities of the
Group also entered into credit lines with FCA Group entities. These financial liabilities were provided primarily to
finance the activities of the Group’s financial services portfolio in North America and were recorded as “Debt”
in the consolidated statement of financial position. The finance expense associated with such financial liabilities
was recorded in “Cost of sales” in the consolidated income statement. The deposits with FCA Group relating
to the cash management and the credit lines with FCA Group entities were settled and terminated following the
Separation. Management believes that the assumptions underlying the consolidated financial statements for the
periods prior to the Separation, including the recharges of expenses from FCA, are reasonable. Nevertheless,
for the periods prior to the Separation, the consolidated financial statements may not include all of the actual
expenses that would have been incurred by the Group and may not reflect the consolidated results of operations,
financial position and cash flows had Ferrari been a stand-alone company during those periods. Actual costs
that would have been incurred if Ferrari had been a stand-alone company would depend on multiple factors,
including organizational structure and strategic decisions made in various areas.
2. SIGNIFICANT ACCOUNTING POLICIES
Format of the financial statements
The consolidated financial statements include the consolidated income statement, consolidated state-
ment of comprehensive income, consolidated statement of financial position, consolidated statement of cash
flows, consolidated statement of changes in equity and notes thereto, (the “Consolidated Financial Statements”).
For presentation of the consolidated income statement, the Group uses a classification based on the
function of expenses, as it is more representative of the format used for internal reporting and management
purposes and is consistent with international practice.
In the consolidated income statement, the Group also presents a subtotal for Earnings Before Interest
and Taxes (EBIT). EBIT distinguishes between the profit before taxes arising from operating items and those aris-
ing from financing activities. EBIT is the primary measure used by the Group’s Chief Operating Decision Maker
(“CODM”) to assess performance.
For the consolidated statement of financial position, a mixed format has been selected to present current
and non-current assets and liabilities, as permitted by IAS 1 paragraph 60. More specifically, the Consolidated
Financial Statements include both industrial companies and financial services companies. The investment port-
folios of the financial services companies are included in current assets as the investments will be realized in their
normal operating cycle. However, the financial services companies obtain only a portion of their funding from
the market; the remainder has historically been obtained mainly through funding from certain of the Group’s
operating companies and, to a lesser extent, prior to the Separation, intercompany funding from FCA Group,
which provided funding to the financial services entities as the need arose. This financial service structure within
the Group does not allow the separation of financial liabilities funding the financial services operations (whose
assets are reported within current assets) and those funding the industrial operations. Presentation of financial
liabilities as current or non-current based on their date of maturity would not facilitate a meaningful comparison
with financial assets, which are categorized on the basis of their normal operating cycle. Disclosure as to the due
date of the debt is provided in Note 25.
The consolidated statement of cash flows is presented using the indirect method. Starting from 2017, the
Group has disclosed separately finance income received and finance costs paid on the consolidated statement of
cash flows. The comparative information for the years ended December 31, 2016 and 2015 has been reclassified
accordingly. This did not affect any of the subtotals presented on the consolidated statement of cash flows.
New standards and amendments effective from January 1, 2017
The following new standards and amendments that are applicable from January 1, 2017 were adopted
by the Group for the preparation of these Consolidated Financial Statements.
• The Group adopted the amendments to IAS 12 - Income taxes. The amendments clarify how to
account for deferred tax assets related to debt instruments measured at fair value. Specifically, the
amendments clarify the requirements on recognition of deferred tax assets for unrealized losses in
order to address diversity in practice. There was no effect from the adoption of these amendments.
• The Group adopted the amendments to IAS 7 - Statement of Cash Flows, which requires companies
to provide information about changes in their financing liabilities. The amendments are aimed
at improving disclosures so that users of financial statements are better able to understand the
changes in a company’s debt, including changes from cash flows and non-cash changes. There was
no effect from the adoption of these amendments.
• The Group adopted the amendments to IFRS 12 - Disclosure of Interests in Other Entities which were
included in the Annual Improvements to IFRSs 2014 - 2016 Cycle. The amendments relate to disclosures
of an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a
joint venture or an associate) that is classified (or included in a disposal group that is classified) as
held for sale in accordance with IFRS 5. There was no effect from the adoption of these amendments.
232
233
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
New standards, amendments and interpretations not yet effective
The following new standards, amendments and interpretations have been issued by the International
Accounting Standards Board (“IASB”) and adopted by the European Union, but are not yet effective for the
year ended December 31, 2017, or have been issued by the IASB and not adopted by the European Union. The
following new standards, amendments and interpretations have not been applied in preparing the Consolidated
Financial Statements.
Issued by the IASB and adopted by the European Union
In May 2014, the IASB issued IFRS 15 - Revenue from Contracts with Customers. The standard requires
a company to recognize revenue upon transfer of control of goods or services to a customer at an amount
that reflects the consideration it expects to receive. This new revenue recognition model defines a five step
process to achieve this objective. The updated guidance also requires additional disclosures about the nature,
amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In April 2016,
the IASB issued amendments to the standard which do not change the underlying principles of the standard,
but clarify how those principles should be applied. The amendments clarify how to identify a performance
obligation in a contract, determine whether a company is a principal or an agent and determine whether the
revenue from granting a license should be recognized at a point in time or over time. The amendments also
provide two additional reliefs to reduce cost and complexity. The standard and amendments are effective for
annual periods beginning on or after January 1, 2018, with earlier adoption permitted. The Group will adopt
the standard and amendments for its annual period beginning on January 1, 2018. The Group has completed
its analysis of the impact of adoption, including an analysis of each of the Group’s revenue streams by applying
the five-step model provided under IFRS 15. In performing the analysis, the Group identified the main revenue
streams (please refer to Note 4), and as permitted under the standard, applied the guidance in IFRS 15 to
portfolios of contracts (or performance obligations) with similar characteristics in situations where the Group
reasonably expects that the effects on the financial statements of applying the standard to the portfolio would
not differ materially from applying the standard to the individual contracts (or performance obligations) within
that portfolio. Based on the analysis performed, the Group concluded that the current accounting treatment
of revenue from contracts with customers is in accordance with the requirements of IFRS 15. The Group will
not apply any of the practical expedients permitted upon transition under the guidance in appendix C of IFRS
15. As permitted under IFRS 15, the Group will adopt the standard and amendments retrospectively with the
cumulative effect of initial adoption recognized at the date of initial application (the “modified retrospective
approach”), which has been determined to be January 1, 2018 and there will be no material impact on the
Group’s consolidated financial statements upon initial adoption of the standard and amendments.
In July 2014 the IASB issued IFRS 9 - Financial Instruments. The improvements introduced by the new
standard includes a logical approach for classification and measurement of financial instruments driven by
cash flow characteristics and the business model in which an asset is held, a single “expected loss” impairment
model for financial assets and a substantially reformed approach for hedge accounting. The standard is effective,
retrospectively with limited exceptions, for annual periods beginning on or after January 1, 2018 with earlier
application permitted. The Group has completed its analysis of the impact of adoption, including an analysis
of each of the Group’s classes of financial assets, financial liabilities and derivative instruments by applying the
requirements provided by the new standard. Based on the analysis performed, the Group concluded that the
current accounting treatment of financial assets, financial liabilities and derivative instruments is in accordance
with the requirements of IFRS 9 and, therefore, there will be no material impact on the Group’s consolidated
financial statements upon initial adoption of the standard.
In January 2016, the IASB issued IFRS 16 - Leases which sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract and replaces the previous
leases standard, IAS 17 - Leases. IFRS 16, which is not applicable to service contracts, but only applicable to
leases or lease components of a contract, defines a lease as a contract that conveys to the customer (lessee) the
right to use an asset for a period of time in exchange for consideration. IFRS 16 eliminates the classification of
leases for the lessee as either operating leases or finance leases as required by IAS 17 and, instead, introduces a
single lessee accounting model whereby a lessee is required to recognize assets and liabilities for all leases with
a term that is greater than 12 months, unless the underlying asset is of low value, and to recognize depreciation
of lease assets separately from interest on lease liabilities in the income statement. As IFRS 16 substantially
carries forward the lessor accounting requirements in IAS 17, a lessor will continue to classify its leases as
operating leases or finance leases and to account for those two types of leases differently. IFRS 16 is effective
from January 1, 2019 with early adoption allowed only if IFRS 15 - Revenue from Contracts with Customers is also
applied. The Group will not early adopt the standard and is currently evaluating the method of implementation
and impact of adoption.
In December 2016, the IASB issued Annual Improvements to IFRSs 2014 - 2016 Cycle, which has amendments
to three Standards: IFRS 12 - Disclosure of Interests in Other Entities (effective date of January 1, 2017), IFRS
1- First-time Adoption of International Financial Reporting Standards (effective date of January 1, 2018) and IAS
28 - Investments in Associates and Joint Ventures (effective date of January 1, 2018). The amendments clarify,
correct or remove redundant wording in the related IFRS Standard and are not expected to have a material
impact upon adoption.
Issued by the IASB and not adopted by the European Union
In June 2016, the IASB issued amendments to IFRS 2 - Share-Based Payment, which provide requirements
on the accounting for (i) the effects of vesting and non-vesting conditions on the measurement of cash-settled
share-based payments; (ii) share-based payment transactions with a net settlement feature for withholding
tax obligations; and (iii) a modification to the terms and conditions of a share-based payment that changes
the classification of the transaction from cash-settled to equity-settled. The amendments are effective for
annual periods beginning on or after January 1, 2018 with early application permitted. The Group will apply the
amendments to share-based payment transactions under the Group’s equity incentive plan that contains a net
settlement feature for withholding tax obligations, resulting in such transactions being classified in their entirety
as equity-settled. The Group does not expect any additional impact from the adoption of these amendments.
In December 2016, the IASB issued IFRIC Interpretation 22 - Foreign Currency Transactions and Advance
Consideration which addresses the exchange rate to use in transactions that involve advance consideration paid
or received in a foreign currency. The interpretation is effective on or after January 1, 2018. The Group is
currently evaluating the impact of adoption of this interpretation.
In May 2017, the IASB issued IFRS 17 - Insurance Contracts which establishes principles for the recognition,
measurement, presentation and disclosure of insurance contracts issued as well as guidance relating to reinsurance
contracts held and investment contracts with discretionary participation features issued. IFRS 17 is effective on or
234
235
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
after January 1, 2021 with early adoption allowed if IFRS 15 - Revenue from Contracts with Customers and IFRS 9 -
Financial Instruments are also applied. The Group does not expect any impact from the adoption of this standard.
In June 2017, the IASB issued IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments which provides
requirements regarding how to reflect uncertainties in accounting for income taxes. The interpretation is effective
on or after January 1, 2019. The Group is currently evaluating the impact of adoption of this interpretation.
In October 2017 the IASB issued Amendments to IFRS 9 - Financial Instruments that allow, under certain
conditions, for a prepayable financial asset with negative compensation payments to be measured at amortized
cost or at fair value through other comprehensive income. The final amendments also contain a clarification
relating to the accounting for a modification or exchange of a financial liability measured at amortized cost
that does not result in the derecognition of the financial liability. The amendments are effective on or after
January 1, 2019. The Group does not expect any impact from the adoption of these amendments.
In October 2017 the IASB issued amendments to IAS 28 - Long Term Interests in Associates and Joint Ventures
to clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture that form part
of the net investment in the associate or joint venture but to which the equity method is not applied. The
amendment is effective on or after January 1, 2019. The Group does not expect a material impact from the
adoption of these amendments.
In December 2017, the IASB issued Annual Improvements to IFRSs 2015 - 2017 Cycle, which has amendments
to the following four Standards: IFRS 3 - Business Combinations, in relation to obtaining control of a business
which was previously accounted for as an interest in a joint operation, IFRS 11- Joint Arrangements, in relation
to obtaining joint control of a business which was previously accounted for as a joint operation, IAS 12 -
Income Taxes, clarifying the treatment of taxes in relation to dividend payments and IAS 23 - Borrowing Costs,
clarifying the treatment of borrowings which were previously capitalized when the related asset is ready for
its intended use or sale. The amendments are effective on or after January 1, 2019. The Group is currently
evaluating the impact of adoption of these amendments.
In February 2018, the IASB issued amendments to IAS 19 - Employee Benefits. When there is a change to
a defined benefit plan (an amendment, curtailment or settlement) the amendments require that a company
use the updated assumptions from the remeasurement of a net defined benefit liability or asset to determine
current service cost and net interest for the remainder of the reporting period after the change to the plan.
These amendments are effective on or after January 1, 2019. The Group does not expect a material impact from
the adoption of these amendments.
Basis of consolidation
Subsidiaries
Subsidiaries are entities over which the Group has control. Control is achieved when the Group has
power over the investee, when it is exposed to, or has rights to, variable returns from its involvement with the
investee, and has the ability to use its power over the investee to affect the amount of the investor’s returns.
Subsidiaries are consolidated on a line by line basis from the date on which the Group achieves control. The
Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
The Group recognizes any non-controlling interests (“NCI”) in the acquiree on an acquisition-by-
acquisition basis, either at fair value or at the non-controlling interest’s share of the recognized amounts of the
acquiree’s identifiable net assets. Net profit or loss and each component of other comprehensive income/(loss)
are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income/
(loss) of subsidiaries is attributed to owners of the parent and to the non-controlling interests even if this results
in the non-controlling interests having a deficit balance.
All significant intra-group balances and transactions and any unrealized gains and losses arising from
intra-group transactions are eliminated in preparing the Consolidated Financial Statements.
Subsidiaries are deconsolidated from the date when control ceases. When the Group ceases to have
control over a subsidiary, it derecognizes the assets (including any goodwill) and liabilities of the subsidiary at
their carrying amounts, derecognizes the carrying amount of non-controlling interests in the former subsidiary
and recognizes the fair value of any consideration received from the transaction. Any retained interest in the
former subsidiary is then remeasured to its fair value.
In 2016 the Group sold a majority stake in Ferrari Financial Services GmbH. From such date, the
Group’s remaining interest has been remeasured at fair value and accounted for using the equity method.
Interests in associates
An associate is an entity over which the Group has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but without having control or
joint control over those policies. Associates are accounted for using the equity method of accounting from the
date significant influence is obtained.
Under the equity method, the investments are initially recognized at cost and adjusted thereafter to
recognize the Group’s share of the profit/(loss) and other comprehensive income/(loss) of the investee. The
Group’s share of the investee’s profit/(loss) is recognized in the consolidated income statement. Distributions
received from an investee reduce the carrying amount of the investment. Post-acquisition movements in other
comprehensive income/(loss) are recognized in other comprehensive income/(loss) with a corresponding
adjustment to the carrying amount of the investment.
Unrealized gains on transactions between the Group and its associates are eliminated to the extent
of the Group’s interest in the associate. Unrealized losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
When the Group’s share of the losses of an associate exceeds the Group’s interest in that associate, the
Group discontinues recognizing its share of further losses. Additional losses are provided for, and a liability is
recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments
on behalf of the associate.
The Group discontinues the use of the equity method from the date the investment ceases to be an
associate or when it is classified as available-for-sale.
236
237
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the assets and obligations for the liabilities, relating to the arrangement. Joint control is the
contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control.
When the Group undertakes its activities under joint operations, it recognizes in relation to its interest
in the joint operation: (i) its assets, including its share of any assets held jointly, (ii) its liabilities, including
its share of any liabilities incurred jointly, (iii) its revenue from the sale of its share of the output arising from
the joint operation, (iv) its share of the revenue from the sale of the output by the joint operation, and (v) its
expenses, including its share of any expenses incurred jointly.
Foreign currency transactions
The functional currency of the Group’s entities is the currency of their primary economic environment.
In individual companies, transactions in foreign currencies are recorded at the exchange rate prevailing at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet
date are translated at the foreign currency exchange rate prevailing at that date. Exchange differences arising
on the settlement of monetary items or on reporting monetary items at rates different from those at which they
were initially recorded during the period or in previous financial statements are recognized in the consolidated
income statement.
The principal foreign currency exchange rates used to translate other currencies into Euro were as follows:
Average
1.1297
0.8767
1.1117
126.7112
7.6290
1.4732
1.4647
1.5588
8.8045
2017
At December 31,
1.1993
0.8872
1.1702
135.0100
7.8044
1.5346
1.5039
1.6024
9.3720
Average
1.1069
0.8194
1.0901
120.2169
7.3519
1.4883
1.4659
1.5275
8.5924
2016
At December 31,
1.0541
0.8562
1.0739
123.4000
7.3202
1.4596
1.4188
1.5234
8.1751
Average
1.1094
0.7259
1.0677
134.2956
6.9723
1.4775
1.4184
1.5253
8.6014
2015
At December 31,
1.0887
0.7340
1.0835
131.0700
7.0608
1.4897
1.5116
1.5417
8.4376
U.S. Dollar
Pound Sterling
Swiss Franc
Japanese Yen
Chinese Yuan
Australian Dollar
Canadian Dollar
Singapore Dollar
Hong Kong Dollar
Intangible assets
Goodwill
Goodwill is not amortized, but is tested for impairment annually or more frequently if events or changes
in circumstances indicate that it might be impaired. After initial recognition, goodwill is measured at cost less
any accumulated impairment losses.
Consolidation of foreign entities
Development costs
All assets and liabilities of foreign consolidated companies with a functional currency other than the
Euro are translated using the closing rates at the date of the consolidated statement of financial position.
Income and expenses are translated into Euro at the average foreign currency exchange rate for the period.
Translation differences resulting from the application of this method are classified as currency translation
differences within other comprehensive income/(loss) until the disposal of the investment. Average foreign
currency exchange rates for the period are used to translate the cash flows of foreign subsidiaries in preparing
the consolidated statement of cash flows.
Goodwill, assets acquired and liabilities assumed arising from the acquisition of entities with a functional
currency other than the Euro are recognized in the Consolidated Financial Statements in the functional currency
and translated at the foreign currency exchange rate at the acquisition date. These balances are translated at
subsequent balance sheet dates at the relevant foreign currency exchange rate.
Development costs for car project production and related components, engines and systems are
recognized as an asset if, and only if, both of the following conditions under IAS 38 - Intangible Assets are met:
that development costs can be measured reliably and that the technical feasibility of the product, volumes and
pricing support the view that the development expenditure will generate future economic benefits. Capitalized
development costs include all direct and indirect costs that may be directly attributed to the development process.
Capitalized development costs are amortized on a straight-line basis from the start of production over
the estimated lifecycle of the model and the useful life of the components (generally between four and eight
years). All other research and development costs are expensed as incurred.
In particular the Group incurs significant research and development costs through the Formula 1
racing activities. These costs are considered fundamental to the development of the sports and street car
models and prototypes. The model for the Formula 1 racing activities continually evolves and as such these
costs are expensed as incurred.
Patents, concessions and licenses
Separately acquired patents, concessions and licenses are initially recognized at cost. Patents,
concessions and licenses acquired in a business combination are initially recognized at fair value. Patents,
concessions and licenses are amortized on a straight-line basis over their useful economic lives, which is
generally between three and five years.
238
239
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Other intangible assets
Other intangible assets mainly relate to the registration of trademarks and have been recognized in
accordance with IAS 38 - Intangible Assets, where it is probable that the use of the asset will generate future
economic benefits for the Group and where the cost of the asset can be measured reliably. Other intangible
assets are measured at cost less any impairment losses and amortized on a straight-line basis over their
estimated life, which is generally between three and five years.
Property, plant and equipment
Cost
Property, plant and equipment is initially recognized at cost which comprises the purchase price,
any costs directly attributable to bringing the assets to the location and condition necessary to be capable
of operating in the manner intended by management, capitalized borrowing costs and any initial estimate of
the costs of dismantling and removing the item and restoring the site on which it is located. Self-constructed
assets are initially recognized at production cost. Subsequent expenditures and the cost of replacing parts of
an asset are capitalized only if they increase the future economic benefits embodied in that asset. All other
expenditures are expensed as incurred. When such replacement costs are capitalized, the carrying amount of
the parts that are replaced is recognized as a loss in the period of replacement in the consolidated income
statement.
Depreciation
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:
Industrial buildings
Plant, machinery and equipment
Other assets
Land is not depreciated.
Depreciation rates
3% - 20%
5% - 22%
12% - 25%
If the asset being depreciated consists of separately identifiable components whose useful lives differ
from that of the other parts making up the asset, depreciation is charged separately for each of its component
parts through application of the ‘component approach’.
Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready
for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready
for their intended use.
All other borrowing costs are expensed in net financial expenses if related to the Group’s industrial
activities or cost of sales if related to the Group’s financial services activities in the consolidated income
statement, as incurred.
Impairment of assets
The Group continuously monitors its operations to assess whether there is any indication that its
intangible assets (including development costs) and its property, plant and equipment may be impaired.
Goodwill is tested for impairment annually or more frequently, if there is an indication that an asset may be
impaired.
If indications of impairment are present, the carrying amount of the asset is reduced to its recoverable
amount, which is the higher of fair value less costs of disposal and its value in use. The recoverable amount
is determined for the individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets, in which case the asset is tested as part of the
cash-generating unit (“CGU”) to which the asset belongs. A CGU is the smallest identifiable group of assets
that generates cash inflows that are largely independent of the cash inflows from other assets or groups of
assets. In assessing the value in use of an asset or CGU, the estimated future cash flows are discounted to
their present value using a discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset or CGU. An impairment loss is recognized if the recoverable amount is lower
than the carrying amount.
Where an impairment loss for assets other than goodwill, subsequently no longer exists or has decreased,
the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but not
in excess of the carrying amount that would have been recorded had no impairment loss been recognized. The
reversal of an impairment loss is recognized in the consolidated income statement immediately.
Financial instruments
Presentation
Financial instruments held by the Group are presented in the Consolidated Financial Statements as
described in the following paragraphs.
Investments and other financial assets include investment properties, investments in unconsolidated
companies and other non-current financial assets.
Current financial assets, as defined in IAS 39 - Financial Instruments: Recognition and Measurement, include
trade receivables, receivables from financing activities and current financial assets (which include derivative
financial instruments stated at fair value), deposits in FCA Group cash management pools and cash and cash
equivalents.
Financial liabilities comprise debt (which include bank borrowings and financial liabilities with FCA
Group) and other financial liabilities (which mainly include derivative financial instruments stated at fair value),
trade payables and other liabilities.
240
241
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Measurement
Non-current financial assets other than investments, as well as current financial assets and financial
liabilities, are accounted for in accordance with IAS 39 - Financial Instruments: Recognition and Measurement.
Current financial assets are recognized on the basis of the settlement date and, on initial recognition,
are measured at acquisition cost. Subsequent to initial recognition, current financial assets are measured at
fair value. When market prices are not directly available, the fair value of current financial assets are measured
using appropriate valuation techniques (e.g. discounted cash flow analysis based on market information
available at the balance sheet date).
Loans and receivables which are not held by the Group for trading (loans and receivables originating
in the ordinary course of business) and equity investments whose fair value cannot be determined reliably, are
measured, to the extent that they have a fixed term, at amortized cost, using the effective interest rate method.
When the financial assets do not have a fixed term, they are measured at acquisition cost. Receivables with
maturities of over one year which bear no interest or an interest rate significantly lower than market rates are
discounted using market rates. Assessments are made regularly as to whether there is any objective evidence
that a financial asset or group of assets may be impaired. If any such evidence exists, an impairment loss is
included in the consolidated income statement for the period within net financial income/(expenses).
Except for derivative instruments, financial liabilities are measured at amortized cost using the effective
interest rate method.
Derivative financial instruments
Derivative financial instruments are used for economic hedging purposes, in order to reduce currency
risks. In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the
inception of the hedge there is formal designation and documentation of the hedging relationship, the hedge is
expected to be highly effective, its effectiveness can be reliably measured and it is highly effective throughout
the financial reporting periods for which it is designated.
All derivative financial instruments are measured at fair value.
but the hedged transaction is still expected to occur, the cumulative gain or loss realized to the point
of termination remains in other comprehensive income/(loss) and is recognized in the consolidated
income statement at the same time as the underlying transaction occurs. If the hedged transaction
is no longer probable, the cumulative unrealized gain or loss held in other comprehensive income/
(loss) is recognized in the consolidated income statement immediately.
The Group did not use fair value hedges or hedges of a net investment in the period covered by these
Consolidated Financial Statements.
For further information on the effects reflected on the consolidated income statement from derivative
financial instruments refer to Note 20.
If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative
financial instruments are recognized immediately in the consolidated income statement within net financial
income/(expenses).
Trade receivables
Trade receivables are amounts due from clients for goods sold or services provided in the ordinary
course of business. Trade receivables are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest rate method, less any provision for allowances.
Inventories
Inventories of raw materials, semi-finished products and finished goods are stated at the lower of
cost and net realizable value, cost being determined on a first-in first-out (FIFO) basis. The measurement of
inventories includes the direct costs of materials, labor and indirect costs (variable and fixed). Purchase costs
include ancillary costs. Prototypes are recognized at their estimated realizable value, if lower than production
cost. Provision is made for obsolete and slow-moving raw materials, finished goods, spare parts and other
supplies based on their expected future use and realizable value. Net realizable value is the estimated selling
price in the ordinary course of business less the estimated costs of completion and the estimated costs for sale
and distribution.
When derivative financial instruments qualify for hedge accounting, the following accounting treatments
Transfers of financial assets
• Cash flow hedges - Where a derivative financial instrument is designated as a hedge of the exposure
to variability in future cash flows of a recognized asset or liability or a highly probable forecasted
transaction and could affect the consolidated income statement, the effective portion of any gain
or loss on the derivative financial instrument is recognized directly in other comprehensive income/
(loss). The cumulative gain or loss is reclassified from other comprehensive income/(loss) to the
consolidated income statement at the same time as the economic effect arising from the hedged
item affects the consolidated income statement. The gain or loss associated with a hedge or part of
a hedge that has become ineffective is recognized in the consolidated income statement immediately
within net financial income/(expense). When a hedging instrument or hedge relationship is terminated
The Group sells certain of its trade receivables through factoring transactions without recourse. In
addition, the Group sells certain of its receivables from financing activities under securitization programs.
Securitization transactions involve the sale, on a non-recourse basis, of a financial receivables portfolio to
a special purpose vehicle, which in turn finances the purchase of such financial receivables by issuing asset-
backed securities in the form of notes whose repayment of principal and interest depends on the cash flows
generated by the related financial receivables.
The Group derecognizes the financial assets when, and only when, the contractual rights and risks
to the cash flows arising from the related financial assets are no longer held or the Group has transferred the
financial assets. In the case of a transfer of financial assets, if the Group transfers substantially all the risks and
243
apply:
242
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
rewards of ownership of the financial assets, it derecognizes such assets and separately recognizes as assets or
liabilities any rights and obligations created or retained in the transfer. On derecognition of financial assets,
the difference between the carrying amount of the assets and the consideration received or receivable for the
transfer of the assets is recognized in the consolidated income statement in cost of sales.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term
highly liquid investments with original maturities of three months or less.
Employee benefits
Defined contribution plans
Costs arising from defined contribution plans are expensed as incurred.
Defined benefit plans
The Group’s net obligations are determined separately for each plan by estimating the present value
of future benefits that employees have earned in the current and prior periods, and deducting the fair value of
any plan assets. The present value of the defined benefit obligation is measured using actuarial techniques and
actuarial assumptions that are unbiased and mutually compatible and attributes benefits to periods in which
the obligation to provide post-employment benefits arise by using the Projected Unit Credit Method.
The components of the defined benefit cost are recognized as follows:
•
•
•
the service costs are recognized in the consolidated income statement by function and presented
in the relevant line items (cost of sales, selling, general and administrative costs, research and
development costs, etc.);
the net interest on the defined benefit liability is recognized in the consolidated income statement
as net financial income /(expenses), and is determined by multiplying the net liability/(asset) by
the discount rate used to discount obligations taking into account the effect of contributions and
benefit payments made during the year; and
the remeasurement components of the net obligations, which comprise actuarial gains and losses
and any change in the effect of the asset ceiling are recognized immediately in other comprehensive
income/(loss). These remeasurement components are not reclassified in the consolidated income
statement in a subsequent period.
Share-based compensation
The Group has implemented an equity incentive plan that provides for the granting of share-based
compensation to the Chief Executive Officer, all other members of the Group Executive Council (“GEC”) and
key leaders. The equity incentive plan is accounted for in accordance with IFRS 2 - Share-based Payment, which
requires the Company to recognize share-based compensation expense based on fair value of awards granted.
Compensation expense for the equity-settled awards containing market performance conditions is measured
at the grant date fair value of the award using the Monte Carlo simulation model, which requires the input of
subjective assumptions, including the expected volatility of the Company’s common stock, the dividend yield,
interest rates and a correlation coefficient between the common stock and the relevant market index. The fair
value of the awards which are conditional only on a recipient’s continued service to the Company is measured
using the share price at the grant date adjusted for the present value of future distributions which employees
will not receive during the vesting period.
Share-based compensation expense relating to the equity incentive plan is recognized over the service
period within selling, general and administrative costs or cost of sales in the consolidated income statement
depending on the function of the employee, with an offsetting increase to equity.
Non-Executive Directors’ compensation settled in common shares of the Company is accounted for as
equity-settled share-based compensation and measured at the fair value of the related compensation, which is
recognized as an expense over the service period with an offsetting increase to equity.
Provisions
Provisions are recognized when the Group has a present obligation, legal or constructive, as a result of
a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate of the amount of the obligation can be made.
Warranty and recall campaigns provision
All cars are sold with warranty coverage. The warranty coverage generally applies to defects that may
become apparent within a certain period from the purchase of the car.
The warranty provision is recognized at the time of the sale of the car, based on the present value of
management’s estimate of the expected cost to fulfill the obligations over the contractual warranty period.
Estimates are principally based on the Group’s historical claims or costs experience and the cost of parts and
services to be incurred in the activities. The costs related to these provisions are recognized within cost of sales
at the time when they are probable and reasonably estimable.
Other long-term employee benefits
Deferred income
The Group’s obligations represent the present value of future benefits that employees have earned in
return for their service during the current and prior periods. Remeasurement components on other long-term
employee benefits are recognized in the consolidated income statement in the period in which they arise.
Deferred income relates to amounts received by the Group under various agreements, which are reliant
on the future performance of a service or other act of the Group. Deferred income is recognized as net revenues
when the Group has fulfilled its obligations under the terms of the various agreements.
244
245
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Range models (models belonging to the Ferrari product portfolio, excluding special series, limited
edition and one-off (fuori serie) models) are sold with a scheduled maintenance program to ensure that the cars
are maintained to the highest standards to meet the Group’s strict requirements for performance and safety.
Amounts attributable to the maintenance program are not recognized as income immediately, but are deferred
over the maintenance program term. The amount of the deferred income related to this program, is based on
the estimated fair value of the service to be provided.
Advances
Advances relate to amounts received from or billed to customers in advance of having delivered the
related cars or provided the related services.
Revenue recognition
Revenues from shipments of cars are recognized if it is probable that the economic benefits associated
with a transaction will flow to the Group and the revenue can be reliably measured. Revenues are recognized
when the risks and rewards of ownership are transferred to the Group’s dealers, the sales price is agreed or
determinable and collectability is reasonably assured; for cars this generally corresponds to the date when the
cars are released to the carrier responsible for transporting cars to dealers.
Revenues are recognized net of discounts including but not limited to, sales incentives and performance
based bonuses.
Revenues from separately-priced extended warranty contracts are recognized over the contract period
in proportion to the costs expected to be incurred based on historical information. A loss on these contracts
is recognized if the sum of the expected costs for services under the contract exceeds unearned revenues. The
Group offers a scheduled maintenance program on range models, which is not separately priced. The Group
allocates revenue between the car and the maintenance program based on their relative estimated fair values.
Amounts paid and attributed to the maintenance program are deferred and recognized as net revenues over
the maintenance program period.
Revenues from sponsorship and licensing agreements are recognized on a straight-line basis over the
contract term. Certain of the sponsorship agreements contain performance related conditions while certain of
the licensing agreements contain minimum guaranteed payments. Performance related sponsorship revenues
and licensing revenues in excess of the minimum guaranteed payment are recognized when certain, which is
typically when the related conditions have been achieved.
Revenues also include operating lease rentals in conjunction with the rental of engines to other Formula 1
racing teams. Revenues from operating leases are recognized on a straight-line basis over the relevant term of
the lease.
Interest income earned in conjunction with the provision of client and dealer financing are reported
within the line item “Finance income from financial services companies” using the effective interest rate method.
Revenues from commercial activities relate to the revenues received from participating in the Formula 1
World Championship. The revenues attributable to each racing team are governed by a specific agreement
and depend upon, among other factors, the prior year ranking of each of the racing teams. Revenues of the
commercial activities are recognized pro-rata over the year.
Cost of sales
Cost of sales comprises expenses incurred in the manufacturing and distribution of cars and parts,
including the engines rented to other Formula 1 racing teams, of which, cost of materials, components and
labor costs are the most significant portion. The remaining costs principally include depreciation, amortization,
insurance and transportation costs. Cost of sales also includes warranty and product-related costs, which are
estimated and recorded at the time of sale of the car.
Expenses which are directly attributable to the financial services companies, including the interest
expenses related to their financing as a whole and provisions for risks and write-downs of assets, are also
reported in cost of sales.
Taxes
Income taxes include all taxes based upon the taxable profits of the Group. Current and deferred taxes
are recognized as income or expense and are included in the consolidated income statement for the period,
except tax arising from (i) a transaction or event which is recognized, in the same or a different period, either in
other comprehensive income/(loss) or directly in equity, or (ii) a business combination.
Deferred taxes are accounted using the full liability method. Deferred tax liabilities are recognized
for all taxable temporary differences between the carrying amounts of assets or liabilities and their tax base,
except to the extent that the deferred tax liabilities arise from the initial recognition of goodwill or the initial
recognition of an asset or liability in a transaction which is not a business combination and at the time of the
transaction, affects neither accounting profit nor taxable profit. Deferred tax assets are recognized for all
deductible temporary differences to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences can be utilized, unless the deferred tax assets arise from the initial
recognition of an asset or liability in a transaction that is not a business combination and at the time of the
transaction, affects neither accounting profit nor taxable profit.
Deferred tax assets and liabilities are measured at the substantively enacted tax rates in the respective
jurisdictions in which the Group operates that are expected to apply to the period when the asset is realized or
liability is settled. Any remeasurements to deferred tax assets and liabilities as a result of changes in substantially
enacted tax rates are recognized in the income statement.
The recoverability of deferred tax assets is dependent on the Group’s ability to generate sufficient
future taxable income in the period in which it is assumed that the deductible temporary differences reverse
and tax losses carried forward can be utilized. In making this assessment, the Group considers future taxable
income arising on the most recent budgets and plans, prepared by using the same criteria described for testing
the impairment of assets and goodwill, moreover, it estimates the impact of the reversal of taxable temporary
differences on earnings and it also considers the period over which these assets could be recovered. The carrying
amount of deferred tax assets is reduced to the extent that it is not probable that sufficient taxable profit will
be available to allow the benefit of part or all of the deferred tax assets to be utilized.
246
247
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
The Group recognizes deferred tax liabilities associated with the existence of a subsidiary’s undistributed
profits, except when it is able to control the timing of the reversal of the temporary difference; and it is probable
that this temporary difference will not reverse in the foreseeable future. The Group recognizes deferred tax
assets associated with the deductible temporary differences on investments in subsidiaries only to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary difference can be utilized.
Deferred tax assets relating to the carry-forward of unused tax losses and tax credits, as well as those
arising from deductible temporary differences, are recognized to the extent that it is probable that future
profits will be available against which they can be utilized.
Current income taxes and deferred taxes are offset when they relate to the same taxation authority and
there is a legally enforceable right of offset.
Italian Regional Income Tax (“IRAP”) is recognized within income tax expense. IRAP is calculated on a
measure of income defined by the Italian Civil Code as the difference between operating revenues and costs,
before financial income and expense, and in particular before the cost of fixed-term employees, credit losses
and any interest included in lease payments. IRAP is applied on the tax base at 3.9 percent for the years ended
December 31, 2017, 2016 and 2015.
Other taxes not based on income, such as property taxes and capital taxes, are included in other
expenses/(income), net.
Dividends
Dividends payable by the Group are reported as a change in equity in the period in which they are
approved by shareholders or the Board of Directors as applicable under local rules and regulations.
Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest
thousand Euro unless otherwise stated.
3. SCOPE OF CONSOLIDATION
Ferrari N.V. is the parent company of the Group and it holds, directly and indirectly, interests in the Group’s
main operating companies. The Group’s scope of consolidation at December 31, 2017 and 2016 was as follows:
Name
Country
Nature
of business
At December 31, 2017 At December 31, 2016
Shares
held by
the Group
Shares
held by
NCI
Shares
held by
the Group
Shares
held by
NCI
Directly held interests
Ferrari S.p.A.
Indirectly held through Ferrari S.p.A.
Italy
Manufacturing
100%
—%
100%
—%
Ferrari North America Inc.
Ferrari Japan KK
USA
Japan
Importer and distributor 100%
Importer and distributor 100%
Ferrari Australasia Pty Limited
Australia
Importer and distributor 100%
Ferrari (HK) Limited
Hong Kong Importer and distributor 100%
—%
—%
—%
—%
100 %
100 %
100 %
100 %
—%
—%
—%
—%
Ferrari International Cars Trading
(Shanghai) Co. L.t.d.
China
Importer and distributor
80%
20%
80 %
20%
Ferrari Far East Pte Limited
Singapore
Service company
Ferrari Management Consulting
(Shanghai) Co. L.t.d.
China
Service company
Ferrari South West Europe S.a.r.l.
France
Service company
Ferrari Central East Europe GmbH
Germany
Service company
G.S.A. S.A.
Switzerland
Service company
Ferrari North Europe Limited (1)
Mugello Circuit S.p.A.
Ferrari Financial Services S.p.A.
UK
Italy
Italy
Service company
Racetrack management
Financial services
Indirectly held through other Group entities
Ferrari Financial Services Inc. (2)
Ferrari Auto Securitization
Transaction, LLC (3)
Ferrari Auto Securitization
Transaction - Lease, LLC (3)
Ferrari Auto Securitization
Transaction - Select, LLC (3)
Ferrari Financial Services Titling Trust (3)
410, Park Display Inc. (4)
USA
USA
USA
USA
USA
USA
Financial services
Financial services
Financial services
100%
Financial services
100%
Financial services
Retail
100%
100%
100%
100%
100%
100%
100%
n.a.
100%
100%
100%
100%
—%
—%
—%
—%
—%
n.a.
—%
—%
—%
—%
—%
—%
—%
—%
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100%
100%
100%
100%
100%
100%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—
248
249
(1) On June 30, 2017, the liquidation process of Ferrari North Europe Limited was completed
(2) Shareholding held by Ferrari Financial Services S.p.A.
(3) Shareholding held by Ferrari Financial Services Inc. (“FFS Inc”).
(4) Shareholding held by Ferrari North America Inc.
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
On April 30, 2016, the liquidation process of Ferrari Financial Services Japan KK was completed. At
December 31, 2015 Ferrari Financial Services Japan KK was a wholly owned subsidiary.
any adverse impacts on its ability to meet liquidity requirements. Cash held in China at December 31, 2017
amounted to €66,456 thousand (€47,555 thousand at December 31, 2016).
Ferrari Financial Services GmbH (“FFS GmbH”) was a subsidiary of the Group until November 7, 2016
when the Group sold a majority stake in FFS GmbH to FCA bank. Upon completion of the transaction, FFS GmbH
was deconsolidated and the 49.9 percent interest in FFS GmbH retained by the Group was accounted for using the
equity method. See Note 17.
As permitted by IFRS, certain subsidiaries (mainly dormant companies or entities with insignificant
operations) are excluded from consolidation on a line-by-line basis and are accounted for at cost. Their aggregate
assets and revenues represent less than 1 percent of the Group’s respective amounts for each period and at each
date presented by these Consolidated Financial Statements.
Cash collected from the settlement of receivables or lines of credit pledged as collateral is subject to
certain restrictions regarding its use and is principally applied to repay principal and interest of the funding.
Such cash amounted to €28,230 thousand at December 31, 2017 (€19,411 thousand at December 31, 2016).
Segment reporting
The Group has determined that it has one operating and one reportable segment based on the
information reviewed by its CODM in making decisions regarding allocation of resources and to assess
performance.
Non-controlling interests
Use of estimates
The non-controlling interests at December 31, 2017 and 2016 relate to Ferrari International Cars Trading
(Shanghai) Co. L.t.d. (“FICTS”), in which the Group holds an 80 percent interest. The net profit attributable to
non-controlling interests for the years ended December 31, 2017, 2016 and 2015 relates to the non-controlling
interest in FICTS and for the year ended December 31, 2015 also the non-controlling interest in Ferrari Financial
Services S.p.A.:
The Consolidated Financial Statements are prepared in accordance with IFRS which require the use of
estimates, judgments and assumptions that affect the carrying amount of assets and liabilities, the disclosure
of contingent assets and liabilities and the amounts of income and expenses recognized. The estimates and
associated assumptions are based on elements that are known when the financial statements are prepared, on
historical experience and on any other factors that are considered to be relevant.
Equity attributable to non-controlling interests - FICTS
Net profit attributable to non-controlling interests
Of which attributable to FICTS
Of which attributable to Ferrari Financial Services S.p.A
At December 31,
2017
2016
(€ thousand)
5,258
4,810
For the years ended December 31,
2015
2016
2017
(€ thousand)
2,003
2,003
—
956
956
—
2,238
1,351
887
In July 2015 the Group acquired the remaining 10 percent of non-controlling interest of its subsidiary
Ferrari Financial Services S.p.A. from Aldasa GmbH, and as a result from such date the Group owns 100
percent of the share capital of Ferrari Financial Services S.p.A.
The non-controlling interests in FICTS and Ferrari Financial Services S.p.A. are not considered to be
significant to the Group for the relevant periods.
Restrictions
The Group may be subject to restrictions which limit its ability to use cash in relation to its interest
in FICTS. In particular, cash held in China is subject to certain repatriation restrictions (and may only be
repatriated as dividends). Based on the Group’s review, it does not believe that such transfer restrictions have
The estimates and underlying assumptions are reviewed periodically and continuously by the Group.
If the items subject to estimates do not perform as assumed, then the actual results could differ from the
estimates, which would require adjustment accordingly. The effects of any changes in estimate are recognized
in the consolidated income statement in the period in which the adjustment is made, or prospectively in future
periods.
The items requiring estimates for which there is a risk that a material difference may arise in respect of
the carrying amounts of assets and liabilities in the future are discussed below.
Recoverability of non-current assets with definite useful lives
Non-current assets with definite useful lives include property, plant and equipment and intangible
assets. Intangible assets with definite useful lives mainly consist of capitalized development costs.
The Group periodically reviews the carrying amount of non-current assets with definite useful lives
when events and circumstances indicate that an asset may be impaired. Impairment tests are performed
by comparing the carrying amount and the recoverable amount of the cash-generating unit (“CGU”).
The recoverable amount is the higher of the CGU’s fair value less costs of disposal and its value in use. In
assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific
to the CGU.
For the period covered by these Consolidated Financial Statements, the Group has not recognized any
impairment charges for non-current assets with definite useful lives.
250
251
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Recoverability of goodwill
The Group’s goodwill at December 31, 2017 amounted to €785,182 thousand and primarily relates to
the Separation, as a result of which the Company recorded goodwill of €780,542 thousand reflecting FCA’s
recorded goodwill relating to Ferrari S.p.A. In accordance with IAS 36 - Impairment of Assets, goodwill is not
amortized and is tested for impairment annually or more frequently if facts or circumstances indicate that the
asset may be impaired.
As the Group is composed of one operating segment, goodwill is tested at the Group level, which
represents the lowest level within the Group at which goodwill is monitored for internal management purposes
in accordance with IAS 36. The impairment test is performed by comparing the carrying amount (which mainly
comprises property, plant and equipment, goodwill and capitalized development costs) and the recoverable
amount of the CGU. The recoverable amount of the CGU is the higher of its fair value less costs of disposal and
its value in use.
Development costs
Development costs are capitalized if the conditions under IAS 38 - Intangible Assets have been met. The
starting point for capitalization is based upon the technological and commercial feasibility of the project,
which is usually when a product development project has reached a defined milestone according to the Group’s
established product development model. Feasibility is based on management’s judgment which is formed on
the basis of estimated future cash flows. Capitalization ceases and amortization of capitalized development
costs begins on start of production of the relevant project.
The amortization of development costs requires management to estimate the lifecycle of the related
model. Any changes in such assumptions would impact the amortization charge recorded and the carrying
amount of capitalized development costs. The periodic amortization charge is derived after determining the
expected lifecycle of the related model and, if applicable any expected residual value at the end of its life.
Increasing an asset’s expected lifecycle or its residual value would result in a reduced amortization charge in the
consolidated income statement.
The useful lives and residual values of the Group’s models are determined by management at the time
of capitalization and reviewed annually for appropriateness and recoverability. The lives are based on historical
experience with similar assets as well as anticipation of future events which may impact their life such as changes
in technology. Historically changes in useful lives and residual values have not resulted in material changes to
the Group’s amortization charge or estimated recoverability of the related assets.
car is sold. The reserve for product warranties includes the expected costs of warranty obligations imposed by
law or contract, as well as the expected costs for policy coverage. The estimated future costs of these actions
are principally based on assumptions regarding the lifetime warranty costs of each car line and each model
year of that car line, as well as historical claims experience for the Group’s cars. In addition, the number and
magnitude of additional service actions expected to be approved, and policies related to additional service
actions, are taken into consideration. Due to the uncertainty and potential volatility of these estimated factors,
changes in the assumptions used could materially affect the results of operations.
The Group periodically initiates voluntary service actions to address various client satisfaction, safety
and emissions issues related to cars sold. Included in the reserve is the estimated cost of these services and recall
actions. The estimated future costs of these actions are based primarily on historical claims experience for the
Group’s cars and the cost of parts and services to be incurred in the specified activities, and are recognized at
the time when they are probable and reasonably estimable. Estimates of the future costs of these actions are
inevitably imprecise due to several uncertainties, including the number of cars affected by a service or recall
action. It is reasonably possible that the ultimate cost of these service and recall actions may require the Group
to make expenditures in excess of (or less than) established reserves over an extended period of time. The
estimate of warranty and additional service obligations is periodically reviewed during the year.
In addition, the Group makes provisions for estimated product liability costs arising from property
damage and personal injuries including wrongful death, and potential exemplary or punitive damages alleged to be
the result of product defects. By nature, these costs can be infrequent, difficult to predict, and have the potential
to vary significantly in amount. Costs associated with these provisions are recorded in the consolidated income
statement and any subsequent adjustments are recorded in the period in which the adjustment is determined.
Share-based compensation
The Group accounts for its equity incentive plan in accordance with IFRS 2 - Share-based Payment, which
requires the recognition of share-based compensation expense based on the fair value of the awards granted.
Share-based compensation for equity-settled awards containing market performance conditions is measured
at the grant date of the awards using the Monte Carlo simulation model, which requires the input of subjective
assumptions, including the expected volatility of our common stock, the dividend yield, interest rates and the
correlation coefficient between our common stock and the relevant market index. The probability that the Group
will achieve a certain level of Total Shareholder Return performance compared to the defined peer group is
also considered. As a result, at the grant date management is required to make key assumptions and estimates
regarding conditions that will occur in the future, which inherently involves uncertainty. Therefore, the amount
of share-based compensation recognized has been effected by the significant assumptions and estimates used.
For the year ended December 31, 2017, the Group capitalized development costs of €185,115 thousand
Other contingent liabilities
(€141,396 thousand for the year ended December 31, 2016).
Product warranties liabilities
The Group establishes reserves for product warranties at the time the sale is recognized. The Group
issues various types of product warranties under which the performance of products delivered is generally
guaranteed for a certain period or term, which is generally defined by the legislation in the country where the
The Group makes provisions in connection with pending or threatened disputes or legal proceedings
when it is considered probable that there will be an outflow of funds and when the amount can be reasonably
estimated. If an outflow of funds becomes possible but the amount cannot be estimated, the matter is
disclosed in the notes to the Consolidated Financial Statements. The Group is the subject of legal and tax
proceedings covering a wide range of matters in various jurisdictions. Due to the uncertainty inherent in such
matters, it is difficult to predict the outflow of funds that could result from such disputes with any certainty.
252
253
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Moreover, the cases and claims against the Group often derive from complex legal issues which are subject
to a differing degree of uncertainty, including the facts and circumstances of each particular case and the
manner in which applicable law is likely to be interpreted and applied to such fact and circumstances, and the
jurisdiction and the different laws involved. The Group monitors the status of pending legal proceedings and
consults with experts on legal and tax matters on a regular basis. It is therefore possible that the provisions for
the Group’s legal proceedings and litigation may vary as the result of future developments in pending matters.
Litigation
Various legal proceedings, claims and governmental investigations are pending against the Group on a
wide range of topics, including car safety, emissions and fuel economy, early warning reporting, dealer, supplier
and other contractual relationships, intellectual property rights and product warranties matters. Some of
these proceedings allege defects in specific component parts or systems (including airbags, seatbelts, brakes,
transmissions, engines and fuel systems) in various car models or allege general design defects relating to car
handling and stability, sudden unintended movement or crashworthiness. These proceedings seek recovery for
damage to property, personal injuries or wrongful death and in some cases could include a claim for exemplary
or punitive damages. Adverse decisions in one or more of these proceedings could require the Group to pay
substantial damages, or undertake service actions, recall campaigns or other costly actions.
Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable
with assurance. An accrual is established in connection with pending or threatened litigation if a loss is probable
and a reliable estimate can be made. Since these accruals represent estimates, it is reasonably possible that the
resolution of some of these matters could require the Group to make payments in excess of the amounts accrued.
It is also reasonably possible that the resolution of some of the matters for which accruals could not be made may
require the Group to make payments in an amount or range of amounts that could not be reasonably estimated.
The term “reasonably possible” is used herein to mean that the chance of a future transaction or
event occurring is more than remote but less than probable. Although the final resolution of any such matters
could have a material effect on the Group’s operating results for the particular reporting period in which an
adjustment of the estimated reserve is recorded, it is believed that any resulting adjustment would not materially
affect the consolidated financial position of the Group.
4. NET REVENUES
Net revenues are as follows:
Cars and spare parts
Engines
Sponsorship, commercial and brand
Other
Total net revenues
For the years ended December 31,
2016
2017
(€ thousand)
2015
2,455,955
2,180,045
2,080,228
373,313
494,082
93,540
337,924
488,514
98,601
218,657
441,128
114,356
3,416,890
3,105,084
2,854,369
Other net revenues primarily include interest income generated by financial service activities and net
revenues from the management of the Mugello racetrack.
5. COST OF SALES
Cost of sales in 2017, 2016 and 2015 amounted to €1,650,860 thousand, €1,579,690 thousand and
€1,498,806 thousand, respectively, comprising mainly of expenses incurred in the manufacturing and distribution
of cars and spare parts, including the engines sold to Maserati and engines rented to other Formula 1 racing teams,
of which the cost of materials, components and labor are the most significant elements. The remaining costs
principally include depreciation, amortization, insurance and transportation costs. Cost of sales also includes
warranty and product-related costs, which are estimated and recorded at the time of shipment of the car.
Cost of sales in 2016 included €36,994 thousand related to the charges for Takata airbag inflator
recalls. See Note 24 “Provisions” for additional details.
Interest and other financial expenses from financial services companies included within cost of sales in
2017, 2016 and 2015 amounted to €30,945 thousand, €21,307 thousand and €23,702 thousand, respectively.
6. SELLING, GENERAL AND ADMINISTRATIVE COSTS
General and administrative costs in 2017, 2016 and 2015 amounted to €155,581 thousand, €148,812
thousand and €174,451 thousand, respectively, and mainly consist of administration expenses and other general
expenses that are not directly attributable to sales, manufacturing or research and development functions.
In 2015, general and administrative costs include €15,789 thousand in costs related to the initial public
offering process and €19,106 thousand related to the one off extra bonus paid to employees for the initial
public offering.
Selling costs in 2017, 2016 and 2015 amounted to €173,484 thousand, €146,430 thousand and €164,175
thousand, respectively, and mainly consist of costs for marketing and events, sales personnel, and retail stores.
Marketing and events expenses consist primarily of costs in connection with trade and auto shows, media and
client events for the launch of new models as well as sponsorship and indirect marketing costs incurred through
the Formula 1 racing team, Scuderia Ferrari.
7. RESEARCH AND DEVELOPMENT COSTS
Research and development costs are as follows:
Research and development costs expensed during the year
Amortization of capitalized development costs
Total research and development costs
For the years ended December 31,
2016
2017
(€ thousand)
2015
556,617
100,502
657,119
509,580
104,055
613,635
446,726
114,856
561,582
The main component of research and development costs expensed during the period relate to research
and development expenses to support the innovation of our product range and components, in particular,
in relation to hybrid technology and Formula 1 developments. Research and development costs also include
amortization of capitalized development costs.
254
255
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
In 2016, the U.S. National Highway Traffic Safety Administration (“NHTSA”) published new Visual-
Manual Driver Distraction Phase II draft guidelines. These guidelines focus, among other things, on the need
to modify the design of car devices and other driver interfaces to minimize driver distraction. The Group is
evaluating these guidelines and their potential impact on the Group’s results of operations and financial
position and determining what steps and/or countermeasures, if any, the Group will need to make.
8. OTHER EXPENSES, NET
Other expenses, net are as follows:
Other expenses
Other income
Other expenses, net
For the years ended December 31,
2015
2016
2017
(€ thousand)
11,830
(4,963)
6,867
30,249
(5,748)
24,501
33,137
(22,102)
11,035
Other expenses in 2017 include €5,593 thousand related to indirect taxes and €6,237 thousand related
to miscellaneous expenses.
Other income in 2017 includes €2,585 thousand of gain on the disposal of property plant and
equipment, €1,747 thousand related to rental income and €631 thousand related to miscellaneous income.
Other expenses in 2016 include €15,469 thousand related to provisions, primarily related to disputes with
a distributor, €5,628 thousand related to indirect taxes and €9,152 thousand related to miscellaneous expenses.
Other income in 2016 includes €2,903 thousand of gain on the disposal of property plant and
equipment, €1,569 thousand related to rental income and €1,276 thousand related to miscellaneous income.
Other expenses in 2015 include €12,933 thousand related to provisions, of which €8,822 thousand
related to legal proceedings and disputes and €4,111 thousand primarily related to disputes with suppliers,
employees and other parties relating to contracts. The most significant accruals to the provision for legal
proceedings and disputes recognized in 2015 relate to litigation with a former distributor.
Other income in 2015 includes €5,802 thousand for the gain on the sale of a group of assets related to
the investment properties in Modena, Italy, which the Group sold to the tenant, Maserati S.p.A., an FCA Group
company. The total sale price (as determined by an independent valuation) amounted to €37,130 thousand and
was received in the third quarter of 2015. At the transaction date the net book value of the assets and liabilities
disposed of was €31,328 thousand.
9. RESULT FROM INVESTMENTS
Result from investments of €2,437 thousand in 2017 related to the Group’s proportionate share of FFS
GmbH’s net profit.
Result from investments of €3,066 thousand in 2016 includes €660 thousand related to the gain on
the sale of a majority stake in FFS GmbH to FCA Bank on November 7, 2016, €1,489 thousand related to the
gain on the fair value measurement of the non-controlling interest retained in FFS GmbH and €917 thousand
related to the Group’s proportionate share of FFS GmbH’s net profit for the period from November 7, 2016 to
December 31, 2016. See Note 17 for additional details.
10. NET FINANCIAL EXPENSES
The following table sets out details of financial income and expenses, including the amounts reported
in the consolidated income statement within the net financial expenses line item, as well as interest income
from financial services activities, recognized under net revenues, and interest expenses and other financial
charges from financial services activities, recognized under cost of sales.
Financial income:
Interest income from bank deposits
Other interest income and financial income
Interest income and other financial income
Finance income from financial services companies
Total financial income
Total financial income relating to:
Industrial companies (A)
Financial services companies (reported in net revenues)
Financial expenses:
Interest expenses on financial liabilities with FCA Group
Capitalized borrowing costs
Other interest cost and financial expenses
Interest expenses and other financial expenses
Interest expenses from banks
Interest on bonds
Write-downs of financial receivables
Net interest expenses on employee benefits provisions
Other financial expenses
Total financial expenses
Net expenses from derivative financial instruments and foreign currency
exchange rate differences
Total financial expenses and net expenses from derivative financial
instruments and foreign currency exchange rate differences
Total financial expenses and net expenses from derivative financial
instruments and foreign currency exchange rate differences relating to:
Industrial companies (B)
Financial services companies (reported in cost of sales)
For the years ended December 31,
2015
2016
(€ thousand)
2017
1,153
5,284
6,437
50,254
56,691
6,437
50,254
—
1,578
(3,775)
(2,197)
(23,057)
(9,231)
(3,530)
—
(12,008)
(50,023)
843
1,841
2,684
58,236
60,920
2,684
58,236
—
1,519
(4,090)
(2,571)
(27,042)
(6,937)
(3,864)
(389)
(5,831)
(46,634)
54
6,473
6,527
61,587
68,114
6,527
61,587
(15,745)
1,530
(3,163)
(17,378)
(3,357)
—
(9,607)
(79)
(5,029)
(35,450)
(16,619)
(5,086)
(4,930)
(66,642)
(51,720)
(40,380)
(35,697)
(30,945)
(30,413)
(21,307)
(16,678)
(23,702)
Net financial expenses relating to industrial companies (A+B)
(29,260)
(27,729)
(10,151)
256
257
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Interest expenses from banks for the year ended December 31, 2017 and 2016 includes interest expenses
on the Term Loan, which was fully repaid in November 2017, and for the year ended December 31, 2016 also
includes interest expenses on the Bridge Loan, which was fully repaid in March 2016. Interest expenses from
banks for all years presented also includes interest expenses related to financial services activities, which are
reported within cost of sales, as well as interest expenses on other bank borrowings.
Interest on bonds includes interest expenses on the bonds issued in November 2017 (“2021 Bond”) and
March 2016 (“2023 Bond”). See Note 25 “Debt” for additional details.
Financial income for the year ended December 31, 2017 includes amounts recognized in relation to
the Delta Topco option and a gain on the fair value measurement of the Series C Liberty Formula One shares
(“Liberty Shares”) subsequent to initial recognition at cost.
Interest expenses on financial liabilities with FCA Group for the year ended December 31, 2015 included
€9,333 thousand related to the FCA Note.
11. INCOME TAXES
Income tax expense is as follows:
Current tax expense
Deferred tax expense/(income)
Taxes relating to prior periods
Total income tax expense
For the years ended December 31,
2017
201,274
8,718
(1,232)
208,760
2016
(€ thousand)
2015
189,492
(18,290)
(3,567)
167,635
153,739
(9,410)
(214)
144,115
The reconciliation between actual income tax expense and the theoretical income tax expense,
calculated on the basis of the theoretical tax rates in effect in Italy, is as follows:
For the years ended December 31,
2017
2016
(€ thousand)
2015
179,077
156,022
119,396
(7,061)
4,862
2,344
(1,232)
2,420
(10,219)
1,280
853
(3,567)
2,017
5,846
4,005
1,631
(214)
(384)
180,410
146,386
130,280
24.2%
28,350
25.8%
21,249
208,760
167,635
30.0%
13,835
144,115
Theoretical income tax expense, net of IRAP
Tax effect on:
Permanent differences
Effect of changes in tax rate and tax regulations
Differences between foreign tax rates and the theoretical Italian
tax rate and tax holidays
Taxes relating to prior years
Withholding tax on earnings
Total income tax expense, net of IRAP
Effective tax rate, net of IRAP
IRAP (current and deferred)
Total income tax expense
258
Theoretical income taxes have been calculated at the corporate income tax rate in Italy for the respective
years, which was 24.0 percent for the year ended December 31, 2017 and 27.5 percent for the years ended
December 31, 2016 and 2015. During 2015 a change in Italian tax law approved a reduction in the corporate
income tax rate from 27.5 percent to 24.0 percent, effective from 2017.
In order to facilitate the understanding of the tax rate reconciliation presented above, income tax
expense has been presented net of Italian Regional Income Tax (“IRAP”). IRAP is calculated on a measure
of income defined by the Italian Civil Code as the difference between operating revenues and costs, before
financial income and expense, and in particular before the cost of fixed-term employees, credit losses and any
interest included in lease payments. IRAP is applied on the tax base at 3.9 percent for each of the years ended
December 31, 2017, 2016 and 2015.
The decrease in the effective tax rate net of IRAP from 25.8 percent in 2016 to 24.2 percent in 2017 was
primarily attributable to the combined effects of a reduction in the Italian corporate income tax rate from 27.5
percent to 24.0 percent (effective from 2017), deductions related to eligible research and development costs
and depreciation of fixed assets in accordance with tax regulations in Italy, partially offset by a decrease in net
deferred tax assets due to the Tax Cuts and Jobs Act that was enacted into law in the U.S.
The Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law in the U.S. on December 22, 2017. The
Tax Act includes various changes to the tax law, including a reduction in the corporate income tax rate from
35% to 21% effective January 1, 2018. The Group recognized the effects of the changes in the tax rate and laws
resulting from the Tax Act in 2017, which resulted in a €4,646 thousand decrease in net deferred tax assets,
recorded through the income statement, related to adjusting deferred tax assets and liabilities to reflect the
new corporate tax rate. The accounting for the effects of the rate change on deferred tax balances is complete
and no provisional amounts were recorded for this item.
The decrease in the effective tax rate net of IRAP from 30.0 percent in 2015 to 25.8 percent in 2016
was primarily attributable to the combined effects of the previously mentioned adjustments to deferred taxes
due to the reduction in the Italian corporate income tax rate and additional tax deductions in 2016 on eligible
research and development costs and on investments and other expenses, in accordance with changes in tax
regulations in Italy.
The analysis of deferred tax assets and deferred tax liabilities at December 31, 2017 and 2016, is as follows:
Deferred tax assets:
To be recovered after 12 months
To be recovered within 12 months
Deferred tax liabilities:
To be realized after 12 months
To be realized within 12 months
Net deferred tax assets
At December 31,
2017
2016
(€ thousand)
63,286
30,805
94,091
(9,885)
(1,092)
(10,977)
83,114
72,142
47,215
119,357
(10,517)
(2,594)
(13,111)
106,246
259
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
The movements in deferred income tax assets and liabilities during the year, without taking into
consideration the offsetting of balances within the same tax jurisdiction, are as follows:
At
December
31, 2016
Recognized in
consolidated
income
statement
Charged
to equity
(€ thousand)
Translation
differences
and other
changes
At
December
31, 2017
Deferred tax assets arising on:
Provisions
Deferred income
Employee benefits
Cash flow hedge reserve
Foreign currency exchange rate differences
Inventory obsolescence
Allowances for doubtful accounts
Depreciation
Other
Total deferred tax assets
Deferred tax liabilities arising on:
111,321
43,549
2,370
7,325
3,028
24,569
4,107
19,853
13,833
229,955
(6,959)
2,649
(11)
—
(2,288)
13,515
(94)
(3,283)
2,007
5,536
Depreciation
(17,592)
7,408
Capitalization of development costs
(90,480)
(24,295)
Employee benefits
Exchange rate differences
Cash flow hedge reserve
Lease accounting
Withholding tax on undistributed earnings
(1,745)
(3,547)
(1)
(11,004)
(1,150)
(123)
2,900
—
352
1,150
Total deferred tax liabilities
(125,519)
(12,608)
Deferred tax asset arising on tax loss
carry-forward
1,810
(1,646)
—
—
203
(9,757)
—
—
—
—
—
(9,554)
—
—
—
—
—
—
—
—
—
(2,119)
102,243
—
—
—
—
(469)
(14)
—
(3,457)
(6,059)
46,198
2,562
(2,432)
740
37,615
3,999
16,570
12,383
219,878
1,254
(8,930)
—
—
—
—
—
—
(114,775)
(1,868)
(647)
(1)
(10,652)
—
1,254
(136,873)
(55)
109
Total net deferred tax assets
106,246
(8,718)
(9,554)
(4,860)
83,114
At
December
31, 2015
Recognized in
consolidated
income
statement
Charged
to equity
Changes
in the scope
of
consolidation
Translation
differences
and other
changes
At
December
31, 2016
(€ thousand)
Deferred tax assets arising on:
Provisions
Deferred income
Employee benefits
Cash flow hedge reserve
Foreign currency exchange rate
differences
Inventory obsolescence
Allowances for doubtful accounts
Depreciation
Other
77,915
39,318
2,242
24,267
343
25,075
3,633
21,682
10,838
Total deferred tax assets
205,313
Deferred tax liabilities arising on:
Depreciation
Capitalization of development costs
Employee benefits
Exchange rate differences
Cash flow hedge reserve
Lease accounting
Withholding tax on undistributed
earnings
Total deferred tax liabilities
Deferred tax asset arising on tax loss
carry-forward
Total net deferred tax assets
(14,571)
(79,531)
(1,713)
(1,970)
(1)
(11,457)
(1,150)
29,461
4,231
(54)
—
2,685
(626)
485
(1,783)
(1,808)
32,591
(2,591)
(10,949)
(32)
(1,577)
—
453
—
—
—
(18)
(16,943)
—
—
—
—
—
(16,961)
—
—
—
—
—
—
—
—
—
(78)
4,023
111,321
—
—
—
—
—
—
—
6,989
6,911
—
—
—
—
—
—
—
—
—
200
1
—
120
(11)
(46)
(2,186)
43,549
2,370
7,325
3,028
24,569
4,107
19,853
13,833
2,101
229,955
(430)
(17,592)
—
—
—
—
—
—
(90,480)
(1,745)
(3,547)
(1)
(11,004)
(1,150)
(430)
(125,519)
(2,949)
7
1,810
(110,393)
(14,696)
4,357
395
99,277
18,290
(16,961)
3,962
1,678
106,246
The decision to recognize deferred tax assets is made for each company in the Group by assessing
whether the conditions exist for the future recoverability of such assets by taking into account the basis of the
most recent forecasts from budgets and business plans.
Deferred taxes on the undistributed earnings of subsidiaries have not been recognized, except in cases
where it is probable the distribution will occur in the foreseeable future.
Starting in 2016 following the completion of the Separation, the Group’s entities participate in a group
Italian tax consolidation under Ferrari N.V. Previously, the Group participated in the FCA Group Italian tax
consolidation.
260
261
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
12. OTHER INFORMATION BY NATURE
14. GOODWILL
Personnel costs in 2017, 2016 and 2015 amounted to €305,584 thousand, €294,047 thousand and
€284,947 thousand, respectively. These amounts include costs that were capitalized mainly in connection to
product development activities.
In 2017, 2016 and 2015 the Group had an average number of employees of 3,336, 3,115 and 2,954,
respectively.
13. EARNINGS PER SHARE
For the purpose of calculating earnings per share for the year ended December 31, 2015, the weighted
average number of common shares outstanding retrospectively reflects the effects of the Separation.
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company
by the weighted average number of common shares in issue. The following table provides the amounts used in
the calculation of basic earnings per share for the years ended December 31, 2017, 2016 and 2015:
Profit attributable to owners of the Company € thousand
Weighted average number of common shares thousand
Basic earnings per common share €
Diluted earnings per share
For the years ended December 31,
2017
2016
2015
535,393
188,951
2.83
398,762
188,923
2.11
287,816
188,923
1.52
For the year ended December 31, 2017 the weighted average number of common shares for diluted
earnings per share was increased to take into consideration the theoretical effect of (i) the potential common
shares that would be issued under the equity incentive plan (see Note 22 for additional details of the equity
incentive plan) and (ii) the potential common shares that would have been issued for the Non-Executive
Directors’ compensation agreement. For the year ended December 31, 2016 the weighted average number of
common shares for diluted earnings per share was increased to take into consideration the theoretical effect
of the potential common shares that would have been issued for the Non-Executive Directors’ compensation
agreement. For the year ended December 31, 2015 there were no potentially dilutive instruments.
The following table provides the amounts used in the calculation of diluted earnings per share for the
years ended December 31, 2017, 2016 and 2015:
Profit attributable to owners of the Company € thousand
535,393
398,762
287,816
Weighted average number of common shares for diluted thousand
earnings per common share
189,759
188,946
188,923
Diluted earnings per common share €
2.82
2.11
1.52
For the years ended December 31,
2017
2016
2015
At December 31, 2017 and 2016 goodwill amounted to €785,182 thousand.
In accordance with IAS 36, goodwill is not amortized and is tested for impairment annually, or more
frequently if facts or circumstances indicate that the asset may be impaired. Impairment testing is performed by
comparing the carrying amount and the recoverable amount of the CGU. The recoverable amount of the CGU
is the higher of its fair value less costs of disposal and its value in use.
The assumptions used in this process represent management’s best estimate for the period under
consideration. The estimate of the value in use of the CGU for purposes of performing the annual impairment
test was based on the following assumptions:
• The expected future cash flows covering the period from 2018 through 2022 have been derived
from the Ferrari business plan. In particular the estimate considers expected EBITDA adjusted to
reflect the expected capital expenditure. These cash flows relate to the CGU in its condition when
preparing the financial statements and exclude the estimated cash flows that might arise from
restructuring plans or other structural changes. Volumes and sales mix used for estimating the
future cash flows are based on assumptions that are considered reasonable and sustainable and
represent the best estimate of expected conditions regarding market trends for the CGU over the
period considered.
• The expected future cash flows include a normalized terminal period used to estimate the future
results beyond the time period explicitly considered, which were calculated by using the specific
medium/long-term growth rate for the sector equal to 2.0 percent in 2017 (2.0 percent in 2016 and
2.1 percent in 2015).
• The expected future cash flows have been estimated in Euro, and discounted using a post-tax
discount rate appropriate for that currency, determined by using a base WACC of 7.0 percent in
2017 (7.0 percent in 2016 and 7.6 percent in 2015). The WACC used reflects the current market
assessment of the time value of money for the period being considered and the risks specific to the
CGU under consideration.
The recoverable amount of the CGU was significantly higher than its carrying amount. Furthermore,
the exclusivity of the business, its historical profitability and its future earnings prospects indicate that the
carrying amount of the goodwill will continue to be recoverable, even in the event of difficult economic and
market conditions.
262
263
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
15. INTANGIBLE ASSETS
Externally
acquired
development
costs
Development
costs
internally
generated
Patents,
concessions
and licenses
Other
intangible
assets
Total
(€ thousand)
Gross carrying amount at January 1, 2016
834,483
437,254
131,237
45,470
1,448,444
Additions
Reclassification
Change in scope of consolidation
Translation differences
104,009
37,387
—
—
—
—
—
—
12,110
4,369
(3,458)
(66)
12,834
(4,369)
—
(93)
166,340
—
(3,458)
(159)
Balance at December 31, 2016
938,492
474,641
144,192
53,842
1,611,167
Additions
Reclassification
Translation differences
142,795
42,320
—
—
—
—
12,416
12,289
(1,011)
4,975
202,506
(12,289)
—
(1,443)
(2,454)
Balance at December 31, 2017
1,081,287
516,961
167,886
45,085
1,811,219
16. PROPERTY, PLANT AND EQUIPMENT
Land
Industrial
buildings
Plant,
machinery
and
equipment
Other
assets
Advances
and assets
under
construction
(€ thousand)
Total
Gross carrying amount at January 1, 2016
22,671
331,177 1,691,482
131,627
35,763
2,212,720
Additions
Divestitures
Reclassification
Change in scope of consolidation
Translation differences
—
—
—
—
10
5,596
81,678
7,322
81,051
175,647
(1,021)
(9,902)
(7,631)
—
(18,554)
1,578
22,898
—
173
—
—
1,441
(613)
476
(28,341)
(2,424)
—
—
(613)
659
Balance at December 31, 2016
22,681
337,503
1,786,156
132,622
88,473
2,367,435
Additions
Divestitures
Reclassification
Translation differences
892
4,691
131,981
11,855
39,485
188,904
—
—
(36)
(77)
355
(723)
(31,877)
(3,101)
(368)
(35,423)
73,160
(2,685)
(70,830)
—
42
(1,700)
—
(2,417)
Accumulated amortization at January 1, 2016
696,911
289,009
117,766
36,948
1,140,634
Balance at December 31, 2017
23,537
341,749
1,959,462
136,991
56,760
2,518,499
Amortization
Reclassification
Change in scope of consolidation
Translation differences
77,240
26,815
—
—
—
—
—
—
11,628
3,317
(1,766)
(144)
2,419
118,102
(3,317)
—
(53)
—
(1,766)
(197)
Balance at December 31, 2016
774,151
315,824
130,801
35,997
1,256,773
Amortization
Translation differences
72,978
27,524
—
—
14,312
(3,307)
2,308
175
117,122
(3,132)
Balance at December 31, 2017
847,129
343,348
141,806
38,480
1,370,763
Carrying amount at:
January 1, 2016
December 31, 2016
December 31, 2017
137,572
148,245
164,341
234,158
158,817
173,613
13,471
13,391
26,080
8,522
17,845
307,810
354,394
6,605
440,456
Additions of €202,506 thousand in 2017 (€166,340 thousand in 2016) primarily relate to externally
acquired and internally generated costs for the development of new and existing models.
Accumulated amortization at January 1,
2016
Depreciation
Divestitures
Reclassification
Change in scope of consolidation
Translation differences
Balance at December 31, 2016
Depreciation
Divestitures
Translation differences
Balance at December 31, 2017
Carrying amount at:
January 1, 2016
December 31, 2016
December 31, 2017
—
—
—
—
—
—
—
—
—
—
—
123,099 1,364,471
99,020
— 1,586,590
9,995
(608)
177
—
159
109,939
9,681
(11,628)
(6,039)
(1,786)
—
(1)
1,609
(312)
376
—
—
—
—
—
129,615
(18,275)
—
(312)
534
132,822 1,460,995
104,335
— 1,698,152
9,860
124,629
8,995
(69)
(29,761)
(2,469)
(353)
(94)
(651)
—
—
—
143,484
(32,299)
(1,098)
142,260
1,555,769
110,210
— 1,808,239
22,671
208,078
327,011
32,607
22,681
204,681
325,161
28,287
23,537
199,489
403,693
26,781
35,763
88,473
56,760
626,130
669,283
710,260
Additions of €188,904 thousand in 2017 were mainly comprised of additions of €131,981 thousand
to plant, machinery and equipment and additions of €39,485 thousand related to advances and assets under
264
265
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
construction. Additions to plant, machinery and equipment in 2017 mainly related to investments in cars
production lines, personalization programs and engine assembly lines. Additions to advances and assets under
construction in 2017 mainly related to car production lines of models to be launched in future years.
Additions of €175,647 thousand in 2016 were mainly comprised of additions of €81,678 thousand to
plant, machinery and equipment and additions of €81,051 thousand related to advances and assets under
construction. Additions to plant, machinery and equipment in 2016 mainly related to investments in cars
production lines, engine assembly lines and personalization programs. Additions to advances and assets under
construction in 2016 mainly related to car production lines of models to be launched in future years.
At December 31, 2017, the Group had contractual commitments for the purchase of property, plant
and equipment amounting to €37,844 thousand (€49,614 thousand at December 31, 2016).
17. INVESTMENTS AND OTHER FINANCIAL ASSETS
Investments accounted for using the equity method
Delta Topco option
Other securities and financial assets
Total investments and other financial assets
Investments accounted for using the equity method
At December 31,
2017
2016
(€ thousand)
23,340
—
6,698
30,038
20,948
11,967
1,020
33,935
Investments accounted for using the equity method relates to the Group’s investment in FFS GmbH.
In particular, on November 7, 2016, Ferrari and FCA Bank finalized an agreement to provide financial services
in Europe, under which FCA Bank acquired a majority stake in FFS GmbH from Ferrari for a purchase price of
€18,595 thousand, which was received upon sale. In addition to the purchase price, as a result of the funding
of FFS GmbH being directly provided by FCA Bank, which is the consolidating entity of FFS GmbH following
the transaction, the Group also received cash of €431,958 thousand.
Upon completion of the transaction, FFS GmbH was deconsolidated and the 49.9 percent interest in
FFS GmbH retained by Ferrari is accounted for using the equity method.
Changes in the investments accounted for using the equity method during the years ended December
31, 2017 and 2016 were as follows:
Balance at January 1, 2016
Change in scope of consolidation
Fair value measurement of interest retained by the Group
Proportionate share of net profit for the period from November 7 to December 31, 2016
Balance at December 31, 2016
Proportionate share of net profit for the year ended December 31, 2017
Proportionate share of remeasurement of defined benefit plans
Balance at December 31, 2017
(€ thousand)
—
18,542
1,489
917
20,948
2,437
(45)
23,340
266
Summarized financial information relating to FFS GmbH at and for the years ended December 31, 2017
and 2016 were as follows:
Assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Inventories
Trade receivables
Receivables from financing activities
Other current assets
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Non-current liabilities and provisions
Debt
Trade payables
Other liabilities
At December 31,
2017
2016
(€ thousand)
647
66
1,977
2,690
259
1,461
493,985
8,292
8,109
512,106
514,796
44,705
8,903
457,787
457
2,944
1,133
119
2,736
3,988
412
472
463,108
3,543
29,087
496,622
500,610
39,921
7,920
447,272
123
5,374
Total equity and liabilities
514,796
500,610
Net revenues
Cost of sales
Selling, general and administrative costs
Other expenses, net
Profit before taxes
Income tax expense
Net profit
For the years ended December 31,
2017
2016
(€ thousand)
26,505
11,525
8,173
245
6,562
1,689
4,873
27,471
9,563
8,432
180
9,296
2,070
7,226
267
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Delta Topco option
The Group was granted an option to purchase a fixed number of shares in Delta Topco for a fixed price
on the occurrence of certain events. Delta Topco is a company belonging to the Formula 1 Group (the group
responsible for the promotion of the Formula 1 World Championship).
The Group exercised the Delta Topco option as a result of the sale of Delta Topco to Liberty Media
Corporation, which was completed on January 23, 2017. On February 22, 2017, the Group received (i) €10,878
thousand in cash (including €2,571 thousand of previously undistributed dividends), (ii) approximately 145
thousand Liberty Shares, which were initially recognized at cost of €2,887 thousand (based on the original
underlying agreement), and (iii) €851 thousand of Liberty Media exchangeable notes in relation to the Delta
Topco option. The Liberty Media exchangeable notes were subsequently converted into Liberty Media shares
in November 2017.
Other securities and financial assets
Other securities and financial assets primarily include the Liberty Shares obtained as a result of
exercising the Delta Topco option and the subsequent conversion of Liberty Media exchangeable notes into
Liberty Shares. The Liberty Shares are measured at fair value which amounted to €5,705 thousand at December
31, 2017.
19. CURRENT RECEIVABLES AND OTHER CURRENT ASSETS
Trade receivables
Receivables from financing activities
Current tax receivables
Other current assets
Total
Trade receivables
The following table sets forth a breakdown of trade receivables by nature:
18. INVENTORIES
Raw materials
Semi-finished goods
Finished goods
Total inventories
At December 31,
2017
2016
(€ thousand)
99,225
87,678
206,862
393,765
95,594
72,472
155,932
323,998
Trade receivables due from:
FCA Group companies
Dealers
Sponsors
Brand activities
Other
Total
At December 31,
2017
2016
(€ thousand)
239,410
732,947
6,125
45,441
243,977
790,377
1,312
53,729
1,023,923
1,089,395
At December 31,
2017
2016
(€ thousand)
75,245
48,166
30,058
33,283
52,658
75,694
47,208
42,789
15,650
62,636
239,410
243,977
The accrual to the provision for slow moving and obsolete inventories recognized within cost of sales
and are generally settled within 15 to 60 days from the date of invoice.
Trade receivables due from dealers relate to receivables for the sale of cars across the dealer network
during 2017 was €10,140 thousand (€2,120 thousand in 2016 and €11,610 thousand in 2015).
Changes in the provision for slow moving and obsolete inventories were as follows:
At January 1,
Provision
Use and other changes
At December 31,
268
2017
2016
(€ thousand)
60,548
10,140
(3,699)
66,989
60,588
2,120
(2,160)
60,548
Trade receivables due from FCA Group companies mainly relate to the sale of engines and car bodies to
Maserati S.p.A. and Officine Maserati Grugliasco S.p.A. (together “Maserati”) which are controlled by the FCA
Group. For additional information, see Note 29.
Trade receivables due from sponsors relate to amounts receivable from sponsors of the Group’s Formula 1
activities.
Trade receivables due from brand activities relate to amounts receivable for licensing and merchandising
activities.
The Group is not exposed to concentration of third party credit risk.
269
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
The following table sets forth a breakdown of trade receivables by currency:
Trade receivables denominated in:
Euro
U.S. Dollar
Pound Sterling
Chinese Yuan
Japanese Yen
Other
Total
At December 31,
2017
2016
(€ thousand)
172,492
155,545
53,618
2,915
2,947
3,151
4,287
62,701
1,222
3,819
16,310
4,380
239,410
243,977
Trade receivables are shown net of an allowance for doubtful accounts determined on the basis of
insolvency risk and historical experience. Accruals to the allowance for doubtful accounts are recorded in
selling, general and administrative costs in the consolidated income statement. Changes in the allowance for
doubtful accounts during the year were as follows:
At January 1,
Provision
Use and other changes
At December 31,
Receivables from financing activities
Receivables from financing activities are as follows:
Client financing
Dealer financing
Total receivables from financing activities
2017
2016
(€ thousand)
19,174
3,231
(412)
21,993
18,371
3,504
(2,701)
19,174
At December 31,
2017
2016
(€ thousand)
704,014
758,679
28,933
31,698
732,947
790,377
Receivables from financing activities are shown net of an allowance for doubtful accounts determined
on the basis of insolvency risks. Accruals to the allowance for doubtful accounts are recorded in cost of sales
in the consolidated income statement. Changes in the allowance for doubtful accounts of receivables from
financing activities during the year are as follows:
At January 1,
Provision
Change in scope of consolidation
Use and other changes
At December 31,
Client financing
2017
2016
(€ thousand)
11,556
3,530
—
(8,138)
6,948
18,671
2,455
(8,409)
(1,161)
11,556
Client financing relates to financing provided by the Group to Ferrari clients to finance their car
acquisition. During 2017 the average contractual duration at inception of such contracts was approximately 66
months and the weighted average interest rate was approximately 5.1 percent. Receivables for client financing
are generally secured on the titles of cars or other personal guarantees.
Following the sale of a majority stake in FFS GmbH to FCA Bank and the deconsolidation of FFS GmbH
on November 7, 2016, client financing mainly relates to activities in the United States and is denominated in
U.S. Dollars.
Dealer financing
The Group provides dealer financing in the United States. Receivables for dealer financing are typically
generated by sales of cars managed under dealer network financing programs as a component of the portfolio
of the financial services companies. In 2017 these receivables were interest bearing at a rate between 3.3
percent and 6.0 percent (between 2.9 percent and 5.2 percent in 2016), with the exception of an initial limited,
non-interest bearing period. The contractual terms governing the relationships with the dealer network vary
from country to country, although payment terms generally range from 1 to 6 months. Receivables on dealer
financing are generally secured by the title of the car or other collateral.
Other current assets
Other current assets are as follows:
Prepayments
Italian and foreign VAT credits
Due from personnel
Security deposits
Other receivables
Total other current assets
At December 31,
2017
2016
(€ thousand)
27,980
11,988
959
1,014
3,500
45,441
31,611
12,032
747
932
8,407
53,729
270
271
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
At December 31, 2017, the Group had provided guarantees through third parties amounting to
€132,014 thousand (€89,014 thousand at December 31, 2016), principally to banks and relevant tax author-
ities in relation to (i) a U.S. Dollar denominated credit facility of FFS Inc, (ii) the validity of value added tax
(“VAT”) and duties for which the Group requested reimbursement from the relevant tax authorities, (iii) the
VAT related to temporary import of classic cars for restoration activities which would become due if the car is
not exported.
The analysis of current receivables and other current assets by due date (excluding prepayments) is as
follows:
At December 31, 2017
Due
within one
year
Due
between
one and five
years
Due
beyond
five years
(€ thousand)
Overdue
Total
20. CURRENT FINANCIAL ASSETS AND OTHER FINANCIAL LIABILITIES
Financial derivatives
Other financial assets
Current financial assets
At December 31,
2017
2016
(€ thousand)
11,686
3,997
15,683
10,388
5,888
16,276
Current financial assets and other financial liabilities mainly relates to foreign exchange derivatives.
The following table sets further the analysis of derivative assets and liabilities at December 31, 2017 and 2016.
At December 31,
2017
2016
Positive fair
value
Negative fair
value
Positive fair
value
Negative fair
value
(€ thousand)
8,848
8,848
1,729
1,109
(1,136)
(1,136)
(308)
—
8,160
8,160
1,548
680
(39,580)
(39,580)
(58)
—
11,686
(1,444)
10,388
(39,638)
Trade receivables
207,074
—
—
32,336
239,410
Receivables from financing activities
Client financing
Dealer financing
Current tax receivables
Other current receivables
Total
144,621
529,489
134,972
513,079
9,649
5,667
16,767
16,410
458
682
46,894
44,020
2,874
—
7
11,943
732,947
11,943
704,014
—
—
5
28,933
6,125
17,461
374,129
530,629
46,901
44,284
995,943
Cash flow hedge:
Foreign currency forwards
Total cash flow hedges
Other foreign exchange derivatives
Interest rate caps
Total
At December 31, 2016
Due
within one
year
Due
between
one and five
years
Due
beyond
five years
(€ thousand)
Overdue
Total
Trade receivables
225,402
8
—
18,567
243,977
Receivables from financing activities
Client financing
Dealer financing
Current tax receivables
Other current receivables
Total
146,412
554,030
136,602
536,954
9,810
690
21,572
17,076
622
539
48,341
43,529
4,812
—
7
41,594
790,377
41,594
758,679
—
—
—
31,698
1,312
22,118
394,076
555,199
48,348
60,161
1,057,784
Receivables from financing activities at December 31, 2017 and 2016 relate entirely to the financial
services portfolio and are generally secured on the titles of cars or other guarantees.
272
Other foreign exchange derivatives relate to foreign currency forwards which do not meet the
requirements to be recognized as cash flow hedges. Interest rate caps relate to derivative instruments we are
required to enter into as part of certain of our securitization agreements.
The following tables provide an analysis by foreign currency and due date of outstanding derivative
financial instruments based on their fair value and notional amounts:
Fair value
due within one year
Total
fair value
Notional amount
due within one year
Total
notional amount
At December 31, 2017
Currencies:
U.S. Dollar
Pound Sterling
Chinese Yuan
Swiss Franc
Japanese Yen
Other(1)
2,637
510
(97)
1,999
4,402
791
(€ thousand)
2,637
510
(97)
1,999
4,402
791
Total amount
10,242
10,242
(1) Other mainly includes the Australian Dollar, the Hong Kong Dollar and the Canadian Dollar.
114,317
110,032
18,095
43,552
81,890
95,738
463,624
114,317
110,032
18,095
43,552
81,890
95,738
463,624
273
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Fair value
due within one year
Total
fair value
Notional amount
due within one year
Total
notional amount
At December 31, 2016
(€ thousand)
21. EQUITY
Share capital
Currencies:
U.S. Dollar
Pound Sterling
Chinese Yuan
Swiss Franc
Japanese Yen
Other(1)
Total amount
(33,758)
(33,758)
3,668
(125)
(476)
2,835
(1,394)
(29,250)
3,668
(125)
(476)
2,835
(1,394)
(29,250)
788,274
106,056
19,917
47,923
91,854
74,822
788,274
106,056
19,917
47,923
91,854
74,822
1,128,846
1,128,846
(1) Other mainly includes the Australian Dollar, the Hong Kong Dollar and the Canadian Dollar.
Cash flow hedges
The effects recognized in the consolidated income statement mainly relate to currency risk management
and in particular the exposure to fluctuations in the Euro/U.S. Dollar exchange rate for sales in U.S. Dollars.
The policy of the Group for managing foreign currency risk normally requires hedging of a portion of
projected future cash flows from trading activities and orders acquired (or contracts in progress) in foreign
currencies which will occur within the following 12 months. It is considered reasonable that the hedging effect
arising from this and recorded in the cash flow hedge reserve will be recognized in the consolidated income
statement, mainly during the following 12 months.
Derivatives relating to currency risk management are treated as cash flow hedges where the derivative
qualifies for hedge accounting. The amount recorded in the cash flow hedge reserve will be recognized in the
consolidated income statement according to the timing of the flows of the underlying transaction.
At December 31, 2017 and 2016, the fully paid up share capital of the Company was €2,504 thousand,
consisting of 193,923,499 common shares and 56,497,618 special voting shares, all with a nominal value of
€0.01 per share. At December 31, 2017, the Company had 4,969,625 common shares and 4,099 special voting
shares held in treasury, while at December 31, 2016, the Company had 5,000,000 common shares and 2,930
special voting shares held in treasury. The decrease in common shares held in treasury primarily reflects the
granting of shares to Non-Executive Directors as part of their directors’ compensation.
The Company did not issue new common shares or special voting shares in the initial public offering
and did not receive any of the proceeds.
The loyalty voting structure
The purpose of the loyalty voting structure is to reward ownership of the Company’s common shares
and to promote stability of the Company’s shareholder base by granting long-term shareholders of the Company
with special voting shares. Following the Separation, Exor N.V. (“Exor”) and Piero Ferrari participate in the
Company’s loyalty voting program and, therefore, effectively hold two votes for each of the common shares
they hold. Investors who purchased common shares in the initial public offering may elect to participate in the
loyalty voting program by registering their common shares in the loyalty share register and holding them for
three years. The loyalty voting program will be effected by means of the issue of special voting shares to eligible
holders of common shares. Each special voting share entitles the holder to exercise one vote at the Company’s
shareholders meeting. Only a minimal dividend accrues to the special voting shares allocated to a separate
special dividend reserve, and the special voting shares do not carry any entitlement to any other reserve of the
Group. The special voting shares have only immaterial economic entitlements and, as a result, do not impact
the Company’s earnings per share calculation.
Retained earnings and other reserves
The Group reclassified gains and losses, net of the tax effect, from other comprehensive income/(loss)
Retained earnings and other reserves includes:
to the consolidated income statement as follows:
Net revenues/(costs)
Net financial expenses
Income tax (expense)/benefit
Total recognized in the consolidated income statement
For the years ended December 31,
2017
2016
2015
(€ thousand)
19,724
(69,368)
(145,095)
—
(5,503)
14,221
—
(23,745)
19,354
53,016
(50,014)
(115,824)
The ineffectiveness of cash flow hedges was not material for the years 2017, 2016 and 2015.
•
•
the share premium reserve of €5,768,544 thousand at December 31, 2017 (€5,888,529 thousand
at December 31, 2016). The share premium reserve originated from the issuance of common shares
pursuant to the Restructuring and from a share premium contribution of €1,162 thousand made by
FCA in 2015 and received in 2016. As explained below, the movements in 2017 and 2016 relate to cash
distributions made from this reserve;
the legal reserve of €8 thousand at December 31, 2017 and €14 thousand at December 31, 2016,
determined in accordance with Dutch law.
Following approval of the annual accounts by the shareholders at the Annual General Meeting of the
Shareholders on April 14, 2017, a cash distribution of €0.635 per common share was approved, corresponding to
a total distribution of €119,985 thousand. In May 2017 the Company paid €114,738 thousand of the distribution
274
275
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
and the remainder was paid in July 2017. Following approval of the annual accounts by the shareholders at the
Annual General Meeting of the Shareholders on April 15, 2016, the Company paid a cash distribution of €0.46
per common share in May 2016, corresponding to a total distribution of €86,905 thousand. Both distributions
were made from the share premium reserve which is a distributable reserve under Dutch law.
At December 31, 2017 a cumulative amount of €28,179 thousand was recognized as an increase to other
reserves for the PSU and RSU awards under the Group’s equity incentive plan. See Note 22 for additional details.
Equity-settled Non-Executive Directors’ compensation amounted to €418 thousand and €1,110
thousand for the years ended December 31, 2017 and 2016 and was recognized as an increase to other reserves.
See Note 29 for additional details.
Other comprehensive income
The following table presents other comprehensive income:
Items that will not be reclassified to the consolidated income statement
in subsequent periods:
(Losses)/Gains on remeasurement of defined benefit plans (1)
Total items that will not be reclassified to the consolidated income
statement in subsequent periods
Items that may be reclassified to the consolidated
income statement in subsequent periods:
For the years ended December 31,
2017
2016
2015
(€ thousand)
(730)
(1,448)
(730)
(1,448)
898
898
Gains/(Losses) on cash flow hedging instruments arising during the period
(Gains)/Losses on cash flow hedging instruments reclassified to the consoli-
dated income statement
Gains on cash flow hedging instruments
54,695
(18,282)
(160,606)
(19,724)
69,368
168,840
34,971
51,086
8,234
Exchange differences on translating foreign operations arising during the period
(15,346)
4,118
13,344
Total items that may be reclassified to the consolidated income statement in
subsequent periods
Total other comprehensive income
Related tax impact
Total other comprehensive income, net of tax
19,625
55,204
21,578
18,895
53,756
22,476
(9,554)
(16,961)
(2,908)
9,341
36,795
19,568
(1) For the year ended December 31, 2017 includes €45 thousand related to the Group’s proportionate share of the remeasurement of defined benefit plans of FFS GmbH, for
which the Group holds a 49.9 percent interest.
Losses on remeasurement of defined benefit plans mainly include actuarial gains and losses arising
during the period. These gains and losses are offset against the related net defined benefit liabilities.
The tax effect relating to other comprehensive income are as follows:
For the years ended December 31,
2017
Related
tax
impact
Pre-tax
balance
Net
balance
Pre-tax
balance
2016
Related
tax
impact
(€ thousand)
Net
balance
Pre-tax
balance
2015
Related
tax
impact
Net
balance
(730)
203
(527)
(1,448)
(18)
(1,466)
898
(308)
590
34,971
(9,757)
25,214
51,086 (16,943)
34,143
8,234
(2,600)
5,634
(15,346)
— (15,346)
4,118
—
4,118
13,344
— 13,344
18,895
(9,554)
9,341
53,756 (16,961)
36,795
22,476 (2,908)
19,568
(Losses)/Gains on
remeasurement of
defined benefit plans
Gains on cash flow
hedging instruments
Exchange gains on
translating foreign
operations
Total other comprehensive
income
Transactions with non-controlling interests
With the exception of dividends paid to non-controlling interests, there were no transactions with non-
controlling interests for the years ended December 31, 2017 or 2016.
Transactions with non-controlling interests for the year ended December 31, 2015 relate to the purchase
of the remaining 10 percent of NCI of the subsidiary FFS from Aldasa GmbH. The purchase price for the FFS
shares was €8,500 thousand (based on an independent valuation) and the carrying value of the 10 percent
interest at the time of purchase was €5,898 thousand. In accordance with IAS 27, the difference of €2,602
thousand was recorded as a reduction to equity.
Policies and processes for managing capital
The Group’s objectives when managing capital are to create value for shareholders as a whole,
safeguard business continuity and support the growth of the Group. As a result, the Group endeavors to
maintain a satisfactory economic return for its shareholders and guarantee economic access to external
sources of funds.
22. SHARE-BASED COMPENSATION
Following the approval of the equity incentive plan by the Board of Directors on March 1, 2017, on
April 14, 2017 the Shareholders approved an award to the Chief Executive Officer under the Company’s
equity incentive plan, which is applicable to all Group Executive Council (“GEC”) members and key leaders
of the Company. Under the Company’s equity incentive plan, an aggregate of approximately 687 thousand
performance share units (“PSUs”) and an aggregate of approximately 119 thousand restricted share units
(“RSUs”) have been awarded. The grants of the PSUs and the RSUs, each representing the right to receive one
common share of the Company, cover a five-year performance period from 2016 to 2020, consistent with the
Company’s strategic horizon.
276
277
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
At December 31, 2017, the Company has recognized a cumulative amount of €28,179 thousand as an
increase to other reserves in equity for the PSU awards and RSU awards and had unrecognized compensation
expense of approximately €26,051 thousand, which will be recognized over the remaining vesting period until 2020.
Performance Share Units
The Company awarded members of the GEC and key leaders a total target of approximately 237
thousand PSUs and 450 thousand PSUs to its Chief Executive Officer. The PSUs vest in three equal tranches
in March 2019, 2020 and 2021, subject to the achievement of a market performance condition related to
Total Shareholder Return (“TSR”). The interim partial vesting periods are independent of one another and any
under-achievement in one period can be offset by over-achievement in subsequent periods. The target amount
of PSUs vests as follows based on the Company’s TSR ranking compared to an industry specific peer group of
eight, including the Company, (“Peer Group”):
Ferrari TSR Ranking
% of Target Awards that Vest
1
2
3
4
5
CEO
150%
120%
100%
75%
50%
GEC and Key Leaders
150%
120%
100%
—
—
The defined Peer Group is as follows:
Hermes
LVMH
Burberry
Moncler
Brunello Cucinelli
Richemont
Ferragamo
The total number of shares that will eventually be issued upon vesting of the PSUs may vary from the
original award of 687 thousand, depending on the level of TSR performance achieved compared to the Peer Group.
None of the PSU awards were forfeited and none of the outstanding PSUs had vested at December 31, 2017.
The performance period for the PSUs commenced on January 1, 2016. The fair value of the awards used
for accounting purposes was measured at the grant date using a Monte Carlo Simulation model. The range
of the fair value of the PSUs that were awarded is €59.36-€72.06 per share. The key assumptions utilized to
calculate the grant-date fair values for these awards are summarized below:
Key Assumptions
Grant date share price
Expected volatility
Dividend yield
Risk-free rate
€66.85
17.4%
1.2%
0%
The expected volatility was based on the observed volatility of the Peer Group. The risk-free rate was
based on the iBoxx sovereign Eurozone yield.
Retention Restricted Share Units
The Company awarded members of the GEC and key leaders a total of approximately 119 thousand RSUs.
The Chief Executive Officer has not received any RSUs. The RSU awards granted to GEC members and key leaders
are conditional on a recipient’s continued service to the Company, as described below. The RSUs, each of which
represents the right to receive one common share of the Company, will vest in three equal tranches in March 2019,
2020 and 2021, subject to continued employment with the Company at the time of vesting. None of the RSU
awards were forfeited and none of the RSU awards had vested at December 31, 2017.
The performance period for the RSUs commenced on January 1, 2016. The fair value of the awards was
measured using the share price at the grant date adjusted for the present value of future distributions which
employees will not receive during the vesting period. The range of the fair value of the RSUs awarded is €63.00-
€64.64 per share.
23. EMPLOYEE BENEFITS
The Group’s provisions for employee benefits are as follows:
Present value of defined benefit obligations:
Italian employee severance indemnity (TFR)
Pension plans
Total present value of defined benefit obligations
Other provisions for employees
Total provisions for employee benefits
Defined contribution plan
At December 31,
2017
2016
(€ thousand)
22,641
23,783
604
828
23,245
24,611
60,914
84,159
66,413
91,024
The Group recognizes the cost for defined contribution plans over the period in which the employee
renders service and classifies this by function in cost of sales, selling, general and administrative costs and
research and development costs. The total income statement expense for defined contributions plans in the
years ended December 31, 2017, 2016 and 2015 was €3,149 thousand, €9,719 thousand and €2,990 thousand,
respectively.
278
279
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Defined benefit obligations
Italian employee severance indemnity (TFR)
Trattamento di fine rapporto or “TFR” relates to the amounts that employees in Italy are entitled to
receive when they leave the company and is calculated based on the period of employment and the taxable
earnings of each employee. Under certain conditions the entitlement may be partially advanced to an employee
during the employee’s working life.
The Italian legislation regarding this scheme was amended by Law 296 of 27 December 2006 and
subsequent decrees and regulations issued in the first part of 2007. Under these amendments, companies with
at least 50 employees are obliged to transfer the TFR to the “Treasury fund” managed by the Italian state-
owned social security body (“INPS”) or to supplementary pension funds. Prior to the amendments, accruing
TFR for employees of all Italian companies could be managed by the company itself. Consequently, the Italian
companies’ obligation to INPS and the contributions to supplementary pension funds take the form, under
IAS 19 revised, of “Defined contribution plans” whereas the amounts recorded in the provision for employee
severance pay retain the nature of “Defined benefit plans”. Accordingly, the provision for employee severance
indemnity in Italy consists of the residual obligation for TFR until December 31, 2006. This is an unfunded
defined benefit plan as the benefits have already been almost entirely earned, with the sole exception of
future revaluations. Since 2007 the scheme has been classified as a defined contribution plan, and the Group
recognizes the associated cost, being the required contributions to the pension funds, over the period in which
the employee renders service.
Pension plans
Group companies, primarily in Germany sponsor non-contributory defined benefit pension plans,
for which the Group meets the benefit payment obligation when it falls due. Benefits provided depends on
the employee’s length of service and their salary in the final years leading up to retirement.
The expected benefit payments for the defined benefit obligations are as follows:
Expected benefit payments
TFR
Pension plans
(€ thousand)
1,350
1,401
1,596
1,960
1,725
7,089
15,121
41
41
42
42
3,262
597
4,025
2018
2019
2020
2021
2022
Beyond 2022
Total
280
The following table summarizes the changes in the defined benefit obligations:
TFR liability
Pension
plans
(€ thousand)
Total
23,119
391
805
(37)
23,924
354
1,580
232
1,812
(1,337)
30
23,783
—
(172)
—
828
142
(1,509)
30
24,611
142
685
(2,128)
(65)
23,245
Amounts at December 31, 2015
Included in the consolidated income statement
Included in other comprehensive income/loss
Actuarial losses from financial assumptions
Other
Benefits paid
Other changes
Amounts at December 31, 2016
Included in the consolidated income statement
Included in other comprehensive income/loss
Actuarial losses/(gains) from financial assumptions
820
(135)
Other
Benefits paid
Other changes
Amounts at December 31, 2017
(1,964)
2
22,641
(164)
(67)
604
Amounts recognized in the consolidated income statement are as follows:
For the years ended December 31,
2017
Pension
plans
TFR
Total
TFR
2016
Pension
plans
(€ thousand)
Total
TFR
2015
Pension
plans
Total
—
—
—
141
1
142
141
1
142
31
360
391
(41)
4
(37)
(10)
364
354
8
74
82
72
—
72
80
74
154
Current service cost
Interest (income)/expense
Total recognized in the
consolidated income statement
The discount rates used for the measurement of the Italian TFR obligation are based on yields of high-
quality (AA rated) fixed income securities for which the timing and amounts of payments match the timing
and amounts of the projected benefit payments. For this plan, the single weighted average discount rate that
reflects the estimated timing and amount of the scheme future benefit payments for 2017 is equal to 1.5
percent (1.3 percent in 2016 and 1.6 percent in 2015). The average duration of the Italian TFR is approximately
9 years. Retirement or employee leaving rates are developed to reflect actual and projected Group experience
and legal requirements for retirement in Italy.
281
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
The discount rates used for the measurement of the pension plan obligation (excluding TFR) and the
interest expense/(income) of net period cost, are based on the rate of return on high-quality (AA rated) fixed
income investments for which the timing and amounts of payments match the timing and amounts of the
projected pension defined benefit plan which for 2017 was equal to approximately 0.7 percent (1.3 percent
2016 and 1.6 percent in 2015). The average duration of the obligations is approximately 13 years.
Current service cost is recognized by function in cost of sales, selling, general and administrative costs
or research and development costs.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
At December 31,
2017
2016
Changes in
assumption of
+1%
discount rate
Changes in
assumption of
-1%
discount rate
Changes in
assumption of
+1%
discount rate
Changes in
assumption of
-1%
discount rate
(€ thousand)
Impact on defined benefit obligation
(1,771)
2,036
(1,909)
2,201
The above sensitivity analysis on TFR is based on a change in an assumption while holding all other
assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may
be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial
assumptions the same method has been applied as when calculating the defined benefit liability recognized in
the statement of the financial position.
Other provisions for employees
Other provisions for employees consist of the expected future amounts payable to employees in
connection with other remuneration schemes, which are not subject to actuarial valuation, including long-term
bonus plans.
At December 31, 2017, other provisions for employees comprised long term bonus benefits amounting
to €58,090 thousand (€64,432 thousand at December 31, 2016), jubilee benefits granted to certain employees
by the Group in the event of achieving 30 years of service amounting to €2,745 thousand (€1,905 thousand at
December 31, 2016), and other provisions for employees benefits amounting to €79 thousand (€76 thousand
at December 31, 2016).
24. PROVISIONS
Changes in provisions were as follows:
At
December 31,
2016
Additional
provisions
Utilization
(€ thousand)
Translation
differences
and other
At
December 31,
2017
Warranty and recall campaigns provision
122,411
16,705
(15,328)
Legal proceedings and disputes
Other risks
Total provisions
45,336
47,480
6,670
8,339
(1,271)
(30,320)
215,227
31,714
(46,919)
(652)
(360)
(1,618)
(2,630)
123,136
50,375
23,881
197,392
Warranty and recall campaigns provision
The warranty and recall campaigns provision represents the best estimate of commitments given by the
Group for contractual, legal, or constructive obligations arising from product warranties given for a specified
period of time. Such provisions are recognized on shipment of the car to the dealer.
The warranty and recall campaigns provision is estimated on the basis of the Group’s past experience
and contractual terms. Related costs are recognized within cost of sales.
Takata airbag inflator recalls
On May 4, 2016, the United States National Highway Traffic Safety Administration (“NHTSA”)
published an amendment (the “Amendment”) to the November 3, 2015 Takata Consent Order regarding Takata
airbags manufactured using non-desiccated Phase Stabilized Ammonium Nitrate (“PSAN”), expanding the
scope of a prior recall under the Takata Consent Order. The recall is industry wide and replacement parts are
limited as Takata is the single supplier.
In compliance with the Amendment to the Takata Consent Order, on May 16, 2016, Takata submitted
a defect information report (“DIR”) to NHTSA declaring the non-desiccated PSAN airbag inflators, including
those sold by Takata to the Group, defective.
Although the Group was not aware of any confirmed incidents or warranty claims relating to such
airbag inflators mounted in its cars or that the airbag inflators were not performing as designed, as a result
of the Amendment issued by NHTSA and the DIR issued by Takata, the Group initiated a global recall relating
to certain cars produced between 2008 and 2011. Following a Third Amendment to the Coordinated Remedy
Order (“ACRO”) published by NHTSA in December 2016 and an additional Takata DIR filed on January 3, 2017,
the Group filed an additional DIR on January 10, 2017 to also include certain cars produced in 2012.
As a result of internal assessments, in 2016 Ferrari decided to extend the recall campaign to include all
cars produced in all model years based on priority groups and the timeline set by NHTSA.
282
283
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
As a result of these developments and due to the uncertainty of recoverability of the costs from
Takata, an aggregate provision of €36,994 thousand was recognized within cost of sales in the year ended
December 31, 2016.
25. DEBT
At December 31, 2017, the provision amounted to €34,567 thousand. Such provision reflects the
current best estimate for future costs related to the entire recall campaign to be carried out by the Group.
Legal proceedings and disputes
The provision for legal proceedings and disputes represents management’s best estimate of the
expenditures expected to be required to settle or otherwise resolve legal proceedings and disputes. This class
of claims relate to allegations by contractual counterparties that the Group has violated the terms of the
arrangements, including by terminating the applicable relationships. Judgments in these proceedings may be
issued in 2018, although any such judgment may remain subject to judicial review. While the outcome of such
proceedings is uncertain, any losses in excess of the provisions recorded are not expected to be material to the
Group’s financial condition or results of operations.
The utilization related to the reversal of accruals for legal proceedings and disputes resolved in 2017.
Accruals to the provision for legal proceedings and disputes are recognized within other expenses, net.
Other risks
The provision for other risks are related to disputes and matters which are not subject to legal
proceedings, including disputes with suppliers, distributors, employees and other parties. The utilization in
2017 primarily relates to a dispute with a distributor as well as various contractual risks.
The following table sets forth additional provisions to other risks recognized for the years ended
December 31, 2017, 2016 and 2015.
Recorded in the consolidated income statement within:
Cost of sales
Other expenses, net
Selling, general and administrative costs
Income tax expense
For the years ended December 31,
2015
2016
2017
(€ thousand)
8,065
—
274
—
4,499
14,559
2,604
—
3,847
4,111
8
569
8,339
21,662
8,535
Balance at
December 31,
2016
Proceeds
from
borrowings
Repayments
of
borrowings
Interest
accrued
and other
Translation
differences
Balance at
December 31,
2017
(€ thousand)
Borrowings from banks
Bonds
Securitizations
Other debt
Total debt
836,886
497,614
485,670
10,074
(800,943)
694,172
232,520
—
(91,405)
27,871
34,804
(43,084)
264
1,731
178
—
(8,222)
38,059
—
1,193,517
(70,687)
556,276
(1,262)
18,329
1,848,041
971,570
(935,432)
2,173
(80,171)
1,806,181
The breakdown of debt by nature and by maturity is as follows:
At December 31,
2017
2016
Due
within
one year
Due
between
one and
five years
Due
beyond
five years
Total
Due
within
one year
Due
between
one and
five years
Due
beyond
five years
Total
(€ thousand)
Bonds
— 694,623 498,894 1,193,517
—
— 497,614
497,614
Securitizations
254,891
301,385
— 556,276 144,597
341,073
32,811
18,329
5,248
—
—
—
38,059
227,408
609,478
18,329
27,871
—
306,031 1,001,256 498,894 1,806,181 399,876
950,551
497,614 1,848,041
—
—
—
485,670
836,886
27,871
Borrowings from banks
Other debt
Total debt
Borrowings from banks
Borrowings from banks at December 31, 2017 mainly relate to financial liabilities of FFS Inc to support
the financial services operations, and in particular (i) €29,189 thousand (€23,745 thousand at December 31,
2016) relating to a U.S. Dollar denominated credit facility for up to $50 million (drawn down for $35 million at
December 31, 2017) and bearing interest at LIBOR plus a range of between 65 and 75 basis points; (ii) other
borrowings from banks of €8,870 thousand (€12,707 thousand at December 31, 2016) relating to various short
and medium term credit facilities.
Borrowings from banks at December 31, 2016 also included €800,383 thousand relating to the Term
Loan, which was fully repaid in 2017, primarily with proceeds from the 2021 Bond issued in November 2017. See
“The Facility” 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 banks (the “Facility”). At inception,
284
285
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
the Facility comprised a bridge loan of €500 million (the “Bridge Loan”), a term loan of €1,500 million (the
“Term Loan”) and a revolving credit facility of €500 million (the “RCF”).
(iv) other clauses that are customarily applicable to debt securities of issuers with a similar credit standing. A
breach of these covenants may require the early repayment of the notes. As of December 31, 2017 and 2016,
Ferrari was in compliance with the covenants of the notes.
In December 2015 the Bridge Loan and Term Loan were fully drawn down for the purposes of repaying
financial liabilities with FCA, including the FCA Note that originated as a result of the Restructuring.
Securitizations
In March 2016, the Bridge Loan was fully repaid, primarily using the proceeds from the 2023 Bond (see
“Bonds” below).
In 2016 and 2017 the Company made scheduled payments and voluntary prepayments, funded in part
with the proceeds of the 2021 Bond described under “Bonds” below, to fully repay the Term Loan.
At December 31, 2017 and 2016 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 RCF has a maturity of five years
from inception of the Facility.
Bonds
2023 Bond
On March 16, 2016, the Company issued 1.5 percent coupon notes due March 2023, having a
principal of €500 million. The bond was issued at a discount for an issue price of 98.977 percent, resulting
in net proceeds of €490,729 thousand after the debt discount and issuance costs. The net proceeds were
used, together with additional cash held by the Company, to fully repay the €500 million Bridge Loan under
the Facility. The bond is unrated and was admitted to trading on the regulated market of the Irish Stock
Exchange. The amount outstanding at December 31, 2017 of €498,894 thousand includes accrued interest of
€5,938 thousand.
2021 Bond
On November 16, 2017, the Company issued 0.25 percent coupon notes due January 2021, having a
principal of €700 million. The bond was issued at a discount for an issue price of 99.557 percent, resulting
in net proceeds of €694,172 thousand after the debt discount and issuance costs. The net proceeds were
primarily used to repay the Term Loan. The bond is unrated and was admitted to trading on the regulated
market of the Irish Stock Exchange. The amount outstanding at December 31, 2017 of €694,623 thousand
includes accrued interest of €221 thousand.
The notes for both the 2023 Bond and the 2021 Bond impose covenants on Ferrari including: (i)
negative pledge clauses which require that, in case any security interest upon assets of Ferrari is granted in
connection with other notes or debt securities with the consent of Ferrari are, or are intended to be, listed,
such security should be equally and ratably extended to the outstanding notes, subject to certain permitted
exceptions; (ii) pari passu clauses, under which the notes rank and will rank pari passu with all other present
and future unsubordinated and unsecured obligations of Ferrari; (iii) events of default for failure to pay
principal or interest or comply with other obligations under the notes with specified cure periods or in the
event of a payment default or acceleration of indebtedness or in the case of certain bankruptcy events; and
In 2016 and 2017 FFS Inc has pursued a strategy of self-financing, further reducing dependency
on intercompany funding and increasing the portion of self-liquidating debt with various securitization
transactions.
On January 19, 2016, FFS Inc entered into a revolving securitization program for funding of up to
$250 million by pledging retail financial receivables in the United States as collateral. In 2016, proceeds
from the first sale of financial receivables were $242 million and were primarily used to repay intercompany
loans. The funding limit of the program has been progressively increased over time, including to $275 million
on December 16, 2016, to $325 million on July 14, 2017, and to $350 million on December 15, 2017. The
notes bear interest at a rate per annum equal to the aggregate of LIBOR plus a margin of 65 basis points. As
of December 31, 2017 total proceeds from the sales of financial receivables under the program were $325
million. The securitization agreement requires the maintenance of an interest rate cap.
On October 20, 2016, FFS Inc entered into a revolving securitization program for funding of up to
$200 million by pledging leasing financial receivables in the United States as collateral. In 2016, proceeds
from the first sale of financial receivables were $175 million and were primarily used to repay U.S. Dollar
denominated bank borrowings. On April 21, 2017 the funding limit of the program was increased to $225
million and this amount remained unchanged in the renewal of the program in September 2017. The notes
bear interest at a rate per annum equal to the aggregate of LIBOR plus a margin of 65 basis points. As
of December 31, 2017 total proceeds from the sales of financial receivables under the program were $222
million. The securitization agreement requires the maintenance of an interest rate cap.
On December 28, 2016, FFS Inc entered into a revolving securitization program for funding of up to
$120 million by pledging credit lines to Ferrari customers secured by personal vehicle collections and personal
guarantees in the United States as collateral. In 2016, proceeds from the first sale of financial receivables
were $64 million and were primarily used to repay U.S. Dollar denominated bank borrowings. On December
20, 2017 the funding limit of the program was increased to $135 million. The notes bear interest at a rate per
annum equal to the aggregate of LIBOR plus a margin of 120 basis points. As of December 31, 2017 total
proceeds from the sales of financial receivables under the program were $120 million. The securitization
agreement does not require an interest rate cap.
Cash collected from the settlement of receivables or lines of credit pledged as collateral is subject to
certain restrictions regarding its use and is principally applied to repay principal and interest of the funding.
Such cash amounted to €28,230 thousand at December 31, 2017 (€19,411 thousand at December 31, 2016).
Other debt
Other debt primarily relates to funding for operating activities of the Group’s U.S. subsidiaries.
286
287
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
26. OTHER LIABILITIES
An analysis of other liabilities is as follows:
Deferred income
Advances and security deposits
Accrued expenses
Payables to personnel
Social security payables
Other
Total other liabilities
At December 31,
2017
2016
(€ thousand)
274,186
167,293
77,024
38,488
20,553
42,806
273,069
229,975
61,403
36,843
18,559
36,426
28. FAIR VALUE MEASUREMENT
IFRS 13 establishes a hierarchy that categorizes into three levels the inputs to the valuation techniques
used to measure fair value by giving the highest priority to quoted prices (unadjusted) in active markets for
identical assets and liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs).
In some cases, the inputs used to measure the fair value of an asset or a liability might be categorized within
different levels of the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety
in the same level of the fair value hierarchy at the lowest level input that is significant to the entire measurement.
Levels used in the hierarchy are as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities
that the Group can access at the measurement date.
• Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for
620,350
656,275
the assets or liabilities, either directly or indirectly.
Deferred income primarily includes amounts received under the scheduled maintenance program of
€173,646 thousand at December 31, 2017 and €155,121 thousand at December 31, 2016, which are deferred
and recognized as net revenues over the length of the maintenance program term. Deferred income also includes
amounts collected under various other agreements, which are dependent upon the future performance of a
service or other act of the Group.
Advances and security deposits at December 31, 2017 and at December 31, 2016 primarily include
advances received from clients for the purchase of special series, limited edition and supercars. Upon shipment
of such cars, the advances are recognized as revenue. The decrease in 2017 primarily related to a reduction in
advances received for the LaFerrari Aperta, which was partially offset by advances received for the Ferrari J50.
An analysis of other liabilities (excluding accrued expenses and deferred income) by due date is as follows:
At December 31,
2017
2016
Due
within
one year
Due
between
one and
five years
Due
beyond
five
years
Total
Due
within
one year
Due
between
one and
five years
Due
beyond
five
years
Total
(€ thousand)
264,380
4,760
— 269,140 309,864
4,913
7,026 321,803
Total other liabilities (excluding accrued
expenses and deferred income)
27. TRADE PAYABLES
Trade payables of €607,505 thousand at December 31, 2017 (€614,888 thousand at December 31,
2016) are entirely due within one year. The carrying amount of trade payables is considered to be equivalent to
their fair value.
• Level 3 inputs are unobservable inputs for the assets and liabilities.
Assets and liabilities that are measured at fair value on a recurring basis
The following table shows the fair value hierarchy for financial assets and liabilities that are measured
at fair value on a recurring basis at December 31, 2017 and 2016:
Cash and cash equivalents
Investments and other financial assets - Liberty Shares
Current financial assets
Total assets
Other financial liabilities
Total liabilities
Cash and cash equivalents
Investments and other financial assets - Delta Topco option
Current financial assets
Total assets
Other financial liabilities
Total liabilities
At December 31, 2017
Note
Level 1
Level 2
Level 3
Total
(€ thousand)
647,706
5,705
—
—
—
11,686
— 647,706
—
—
5,705
11,686
653,411
11,686
— 665,097
—
—
1,444
1,444
—
—
1,444
1,444
17
20
20
At December 31, 2016
Note
Level 1
Level 2
Level 3
Total
(€ thousand)
457,784
—
— 457,784
—
—
11,967
10,388
—
—
11,967
10,388
457,784
22,355
— 480,139
—
—
39,638
39,638
—
—
39,638
39,638
17
20
20
288
289
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
There were no transfers between fair value hierarchy levels between 2016 and 2017.
In 2017, the Group exercised the Delta Topco option as a result of the sale of Delta Topco to Liberty
Media Corporation, which was completed on January 23, 2017. Therefore the Delta Topco option was
derecognized and the Group’s investment in the Liberty Shares and exchangeable notes were recognized. In
November 2017 the Liberty exchangeable notes were converted into Liberty Shares.
The fair value of current financial assets and other financial liabilities is related to derivative financial
instruments and is measured by taking into consideration market parameters at the balance sheet date, using
valuation techniques widely accepted in the financial business environment. In particular, the fair value of
forward contracts, currency swaps and interest rate caps is determined by taking the prevailing foreign currency
exchange rate and interest rates, as applicable, at the balance sheet date.
The fair value of cash and cash equivalents usually approximates fair value due to the short maturity of
these instruments, which consist primarily of bank current accounts.
Assets and liabilities not measured at fair value on a recurring basis
For financial instruments represented by short-term receivables and payables, for which the present
value of future cash flows does not differ significantly from carrying value, the Group assumes that carrying
value is a reasonable approximation of the fair value. In particular, the carrying amount of current receivables
and other current assets and of trade payables and other liabilities approximates their fair value.
The following table represents carrying amount and fair value for the most relevant categories of finan-
cial assets and liabilities not measured at fair value on a recurring basis:
Receivables from financing activities
Client financing
Dealer financing
Total
Debt
At December 31,
2017
2016
Note
Carrying
amount
Fair value
Carrying
amount
Fair value
(€ thousand)
732,947
732,947
790,377
790,377
704,014
704,014
758,679
758,679
19
28,933
28,933
31,698
31,698
732,947
732,947
790,377
790,377
25
1,806,181 1,819,337 1,848,041 1,849,000
29. RELATED PARTY TRANSACTIONS
Pursuant to IAS 24, the related parties of the Group are entities and individuals capable of exercising
control, joint control or significant influence over the Group and its subsidiaries, companies belonging to
the FCA Group and Exor Group, unconsolidated subsidiaries of the Group, associates and joint ventures.
In addition, members of Ferrari Group Board of Directors, Board of Statutory Auditors and executives with
strategic responsibilities and their families are also considered related parties.
The Group carries out transactions with related parties on commercial terms that are normal in the
respective markets, considering the characteristics of the goods or services involved. Transactions carried out by
the Group with these related parties are primarily of a commercial nature and, in particular, these transactions
relate to:
Transactions with FCA Group companies
•
•
•
•
•
•
the sale of engines and car bodies to Maserati S.p.A. (“Maserati”) which is controlled by the FCA
Group;
the purchase of engine components for the use in the production of Maserati engines from FCA US
LLC, which is controlled by FCA Group;
the purchase of automotive lighting and automotive components from Magneti Marelli S.p.A.,
Automotive Lighting Italia S.p.A., Sistemi Sospensioni S.p.A. and Magneti Marelli Powertrain
Slovakia s.r.o. (which form part of “Magneti Marelli”), which are controlled by the FCA Group;
transactions with other FCA Group companies, mainly relating to the services provided by
FCA Group companies, including human resources, payroll, tax, customs and procurement of
insurance coverage and sponsorship revenues for the display of FCA Group company logos on the
Formula 1 cars;
in 2016, the Group sold a portion of its trade and financial receivables to the FCA Bank Group,
which is a joint venture between FCA Group and Credit Agricole. On derecognition of the asset,
the difference between the carrying amount and the consideration received or receivable was
recognized in cost of sales;
in November 2016, the Group finalized an agreement with FCA Bank to provide financial services
in Europe. Under such agreement FCA Bank acquired from the Group a majority stake in FFS
GmbH for a purchase price of €18,595 thousand, which the Group received upon sale. In addition
to the purchase price, as a result of the funding of FFS GmbH being directly provided by FCA Bank,
the Group also received cash of €431,958 thousand.
Transactions with Exor Group companies
•
•
the Group incurs rental costs from Iveco Group companies related to the rental of trucks used by
the Formula 1 racing team;
the Group earns sponsorship revenue from Iveco S.p.A.
Transactions with other related parties
•
the purchase of components for Formula 1 racing cars from COXA S.p.A., controlled by Piero
Ferrari;
290
291
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
• consultancy services provided by HPE S.r.l., controlled by Piero Ferrari;
Non-financial assets and liabilities originating from related party transactions are as follows:
• sponsorship agreement relating to Formula 1 activities with Ferretti S.p.A.;
• sale of cars to certain members of the Board of Directors of Ferrari N.V. and Exor.
Pursuant to the charter of the Audit Committee, the Audit Committee reviews and approves related
party transactions in order ensure that they are entered into on arm’s length terms. In accordance with IAS 24,
transactions with related parties also include compensation to Directors, the Audit Committee and managers
with strategic responsibilities.
The amounts of the transactions with related parties recognized in the consolidated income statement
are as follows:
For the years ended December 31,
2017
2016
2015
Net
revenues
Costs(1)
Net
financial
expenses/
(income)
Net
revenues
Costs(1)
(€ thousand)
Net
financial
expenses/
(income)
Net
revenues
Costs(1)
Net
financial
expenses/
(income)
FCA Group companies
Maserati
FCA US LLC
Magneti Marelli
Other FCA Group companies
315,407
4,698
— 241,478
1,933
— 184,444
2,250
6
44,882
36,670
1,866
6,754
—
—
—
37,612
29,663
1,735
5,472
7,007
(1,191)
9,163
(471)
7,412
42,768 (11,601)
—
—
1,253
1,397
23,562
29,746
67
—
—
Total FCA Group companies 324,033
93,257
(1,191) 248,685
78,371
(471) 194,506
98,326 (11,534)
Exor Group companies
(excluding the FCA Group)
Other related parties
COXA S.p.A.
HPE S.r.l.
Other related parties
283
492
48
—
2,111
6,141
7,525
—
Total other related parties
2,159
13,666
—
—
—
—
—
192
173
121
—
1,950
7,096
6,447
24
2,071
13,567
—
—
—
—
—
277
338
174
11
1,024
7,561
5,518
6
1,209
13,085
—
—
—
—
—
Total transactions with
related parties
326,475 107,415
(1,191) 250,948
92,111
(471) 195,992 111,749 (11,534)
Total for the Group
3,416,890 1,986,792
29,260 3,105,084 1,899,433
27,729 2,854,369 1,848,467
10,151
1) Costs include cost of sales, selling, general and administrative costs and other expenses/(income).
At December 31,
2017
2016
Trade
receivables
Trade
payables
Other
current
assets (1)
Other
liabilities (2)
Trade
receivables
Trade
payables
Other
current
assets (1)
Other
liabilities (2)
FCA Group companies
Maserati
FCA US LLC
Magneti Marelli
71,560
129
899
Other FCA Group companies
2,657
3,028
6,848
8,103
4,646
Total FCA Group companies
75,245
22,625
Exor Group companies
(excluding the FCA Group)
345
202
Other related parties
COXA S.p.A.
HPE S.r.l.
Other related parties
Total other related parties
Total transactions
with related parties
3
—
268
271
1,142
1,150
—
2,292
(€ thousand)
—
—
—
2,097
2,097
37,496
73,532
4,462
—
—
27
166
12,529
1,739
257
6,702
3,291
37,523
75,694
26,984
—
—
—
1,439
1,439
32,379
—
—
12
32,391
—
—
—
—
—
—
—
—
—
—
235
41
16
—
554
570
1,194
1,162
68
2,424
—
—
—
—
—
—
—
—
4
4
75,861
25,119
2,097
37,523
76,499
29,449
1,439
32,395
Total for the Group
239,410
607,505
51,566
649,510
243,977
614,888
55,041
697,870
(1) Other current assets include other current assets and current tax receivables.
(2) Other liabilities include other liabilities and current tax payables.
Financial assets and liabilities originating from related party transactions are as follows:
2017
Current
financial
assets
Receivables
from
financing
activities
Debt
Receivables
from
financing
activities
2016
Current
financial
assets
Debt
FCA Global Finance
Total transactions with
related parties
—
—
—
—
—
—
861
861
—
—
—
Total for the Group
732,947
15,683
1,806,181
790,377
16,276
1,848,041
292
293
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Emoluments to Directors, Statutory Auditors and Key Management
The fees of the Directors and Statutory Auditors of Ferrari N.V. (and for 2015 also Ferrari S.p.A.) for
carrying out their respective functions, including those in other consolidated companies, are as follows:
Directors of Ferrari N.V.
Directors of Ferrari S.p.A.
Statutory auditors
Total emoluments
For the years ended December 31,
2017
2016
2015
(€ thousand)
8,617
—
105
8,722
17,767
—
112
17,879
243
2,904
105
3,252
The aggregate compensation to Directors of Ferrari N.V. for year ended December 31, 2017 was €17,767
thousand, inclusive of the following:
• €1,277 thousand for salary; and
• €16,490 thousand for share-based compensation recognized for the performance period 2016 and
2017 in relation to 450 thousand PSUs awarded to the CEO under the equity incentive plan, which
covers a five-year performance period from 2016 to 2020, consistent with the Company’s strategic
horizon. The PSU awards vest in three equal tranches in March 2019, 2020 and 2021, subject to the
achievement of a market performance condition related to Total Shareholder Return, therefore at
December 31, 2017 none of the PSU awards had vested. See Note 22 “Share-based compensation” for
information related to the equity incentive plan.
their Directors’ compensation in 50% cash and 50% Ferrari common shares, or alternatively, to receive 100%
in Ferrari common shares. Following the Annual General Meeting of Shareholders on April 14, 2017, Non-
Executive Directors’ compensation is fully settled in cash. The amounts settled in Ferrari common shares
were accounted for as equity-settled share-based compensation and recognized as increases to equity in the
relevant year.
The aggregate compensation for remaining key management in 2017 was €16,015 thousand (€12,290
thousand in 2016), inclusive of the following:
• €10,964 thousand for salary (€11,059 thousand in 2016);
• €314 thousand for long-term benefits (€1,231 thousand in 2016); and
• €4,737 thousand for share-based compensation in relation to PSUs and RSUs awarded to key
management under the equity incentive plan for the performance period covering 2016 and 2017.
The PSU and RSU awards vest in three equal tranches in March 2019, 2020 and 2021, subject to
the achievement of a market performance condition related to Total Shareholder Return, therefore
at December 31, 2017 none of the PSU or RSU awards had vested. See Note 22 “Share-based
compensation” for information related to the equity incentive plan.
30. COMMITMENTS
Arrangements with key suppliers
From time to time, in the ordinary course of business, the Group enters into various arrangements with
key third party suppliers in order to establish strategic and technological advantages. A limited number of these
arrangements contain unconditional purchase obligations to purchase a fixed or minimum quantity of goods
and/or services with fixed and determinable price provisions.
The aggregate compensation to Directors of Ferrari N.V. for year ended December 31, 2016 was €8,617
thousand and for the year ended December 31, 2015, including Ferrari S.p.A., was €3,147 thousand, inclusive
of the following:
Arrangements with sponsors
• €2,827 thousand in 2016 and €2,372 thousand in 2015 for salary;
• €290 thousand in 2016 and €775 thousand in 2015 as the Group’s contribution to defined benefit
obligations and long-term bonus plans; and
• €5,500 thousand in 2016 for compensation costs related to the retirement of the former CEO of
the Group.
Non-Executive Directors’ compensation for the years ended December 31, 2017 and 2016 included
€418 thousand and €1,110 thousand, respectively, that was settled in treasury shares in 2017.
Following the election of the Board of Directors at the Annual General Meeting of Shareholders
on April 15, 2016, Non-Executive Directors had the option to receive the board retainer fee component of
Certain of the Group’s sponsorship contracts include terms whereby the Group is obligated to purchase
a minimum quantity of goods and/or services from its sponsors.
Future minimum purchase obligations under these arrangements at December 31, 2017 were as follows:
At December 31, 2017
Due within
one year
Due between
one and three
years
Due between
three and five
years
Due beyond
five years
Total
(€ thousand)
Minimum purchase obligations
137,250
101,988
5,760
4,372
249,370
294
295
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
Operating lease agreements
The future aggregate minimum lease payments under non-cancellable operating leases, mainly relating
to the lease of property and cars, are as follows:
Due within
one year
Due between
one and three
years
At December 31, 2017
Due between
three and five
years
(€ thousand)
Due beyond
five years
Total
Future minimum lease payments
under operating lease agreements
694
1,353
105
—
2,152
During 2017, the Group’s operating lease expenses amounted to €16,964 thousand (€14,820 thousand
in 2016 and €19,612 thousand in 2015).
31. QUALITATIVE AND QUANTITATIVE INFORMATION ON FINANCIAL RISKS
The Group is exposed to the following financial risks connected with its operations:
•
•
financial market risk (principally relating to foreign currency exchange rates, and to a much lesser
extent, interest rates), as the Group operates internationally in different currencies;
liquidity risk, with particular reference to the availability of funds and access to the credit market,
should the Group require, and to financial instruments in general;
The Group’s exposure to interest rate risk arises from the need to fund certain activities and the
necessity to deploy surplus funds. Changes in market interest rates may have the effect of either increasing
or decreasing the Group’s net profit/(loss), thereby indirectly affecting the costs and returns of financing and
investing transactions.
These risks could significantly affect the Group’s financial position, results of operations and cash
flows, and for this reason these risks are identified and monitored, in order to detect potential negative effects
in advance and take the necessary actions to mitigate them, primarily through the Group’s operating and
financing activities, and if required, through the use of derivative financial instruments.
The Group has in place various risk management policies, which primarily relate to foreign exchange,
interest rate and liquidity risks. The Group’s risk management policies permit derivatives to be used for managing
exposures to foreign exchange rates and interest rates. Counterparties to these agreements are major financial
institutions. Derivatives cannot be entered into for speculative purposes.
In particular, the Group used derivative financial instruments as cash flow hedges for the purpose
of fixing the foreign currency exchange rate at which a predetermined proportion of forecasted transactions
denominated in foreign currencies will be accounted for. Accordingly, as a result of applying risk management
policies with respect to foreign currency exchange exposure, the Group’s results of operations have not been
fully exposed to fluctuations in foreign currency exchange rates. However, despite these risk management
policies and hedging transactions, sudden adverse movements in foreign currency exchange rates could have a
significant effect on the Group’s earnings and cash flows.
The Group also enters into interest rate caps as requested by certain of its securitization agreements.
• credit risk, arising both from its normal commercial relations with final clients and dealers, and its
Information on the fair value of derivative financial instruments held is provided in Note 20.
financing activities.
These risks could significantly affect the Group’s financial position, results of operations and cash
flows, and for this reason the Group identifies and monitors these risks, in order to detect potential negative
effects in advance and take the necessary action to mitigate them, primarily through its operating and financing
activities and if required, through the use of derivative financial instruments.
The following section provides qualitative and quantitative disclosures on the effect that these risks
may have upon the Group. The quantitative data reported in the following section does not have any predictive
value. In particular, the sensitivity analysis on finance market risks does not reflect the complexity of the market
or the reaction which may result from any changes that are assumed to take place.
Financial market risks
Due to the nature of the Group’s business, the Group is exposed to a variety of market risks, including
foreign currency exchange rate risk and to a lesser extent, interest rate risk.
The Group’s exposure to foreign currency exchange rate risk arises from the geographic distribution of
the Group’s shipments, as the Group generally sells its models in the currencies of the various markets in which the
Group operates, while the Group’s industrial activities are all based in Italy, and primarily denominated in Euro.
Information on foreign currency exchange rate risk
The Group is exposed to risk resulting from changes in foreign currency exchange rates, which can
affect its earnings and equity. In particular:
• Where a Group company incurs costs in a currency different from that of its revenues, any change
in foreign currency exchange rates can affect the operating results of that company. In 2017, the
total trade flows exposed to foreign currency exchange rate risk amounted to the equivalent of 51
percent of the Group’s turnover (57 percent in 2016).
• The main foreign currency exchange rate to which the Group is exposed is the Euro/U.S. Dollar for
sales in U.S. Dollar in the United States and other markets where the U.S. Dollar is the reference
currency. In 2017, the value of commercial activity exposed to fluctuations in the Euro/U.S. Dollar
exchange rate accounted for approximately 62 percent (60 percent in 2016) of the total currency
risk from commercial activity. In 2017, the commercial activity exposed to the Euro/Pound Sterling
exchange rate exceeded 10 percent while in 2016 such exposure was below 10 percent. Other
significant exposures included the exchange rate between the Euro and the following currencies:
Japanese Yen, Chinese Renminbi, Swiss Franc, Canadian Dollar and Australian Dollar. None of these
exposures, taken individually, exceeded 10 percent of the Group’s total foreign currency exchange
296
297
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
rate exposure for commercial activity in 2017. It is the Group’s policy to use derivative financial
instruments to hedge between 50 and 90 percent of certain exposures subject to foreign currency
exchange risk for up to twelve months.
• Several subsidiaries are located in countries that are outside the Eurozone, in particular the United
States, the United Kingdom, Switzerland, China, Hong Kong, Japan, Australia and Singapore. As the
Group’s reporting currency is the Euro, the income statements of those companies are converted
into Euro using the average exchange rate for the period and, even if revenues and margins are
unchanged in local currency, changes in exchange rates can impact the amount of revenues, costs
and profit as restated in Euro.
• The amount of assets and liabilities of consolidated companies that report in a currency other than
the Euro may vary from period to period as a result of changes in exchange rates. The effects of
these changes are recognized directly in equity as a component of other comprehensive income/
(loss) under gains/(losses) from currency translation differences.
Information on interest rate risk
The Group’s exposure to interest rate risk, though less significant, arises from the need to fund financial
services activities and the necessity to deploy surplus funds. Changes in market interest rates may have the
effect of either increasing or decreasing the Group’s net profit/(loss), thereby indirectly affecting the costs and
returns of financing and investing transactions.
The Group’s most significant floating rate financial assets at December 31, 2017 were cash and cash
equivalents and certain receivables from financing activities (related to client and dealer financing) while 32
percent of our total debt bears floating rates of interest. At December 31, 2017, a 10 basis point decrease in
interest rates on floating rate financial assets and debt, with all other variables held constant, would have
resulted in a decrease in profit before taxes of €225 thousand on an annual basis (an increase of €367 thousand
at December 31, 2016). The analysis is based on the assumption that floating rate financial assets and debt
which expires during the projected 12-month period will be renewed or reinvested in similar instruments,
bearing the hypothetical short-term interest rates.
The Group monitors its principal exposure to conversion exchange risk, although there was no specific
Liquidity risk
hedging in this respect at the reporting date.
Exchange differences arising on the settlement of monetary items or on reporting monetary items
at rates different from those at which they were initially recorded during the period or in previous financial
statements, are recognized in the consolidated income statement within the net financial income/(expenses)
line item or as cost of sales for charges arising from financial services companies.
The impact of foreign currency exchange rate differences recorded within financial income/(expenses)
for the year ended December 31, 2017, except for those arising on financial instruments measured at fair value,
amounted to net losses of €18,059 thousand (net gains of €8,335 thousand and €10,794 thousand for the years
ended December 31, 2016 and 2015, respectively).
The impact of foreign currency exchange rate differences arising from financial services companies
recognized under cost of sales, except for those arising on financial instruments measured at fair value,
amounted to net losses of €58,808 thousand in 2016 (net gains of €20,908 thousand in 2015). Following the
deconsolidation of FFS GmbH in November 2016, all of the Group’s financial services activities are conducted
in the functional currency of the related financial services companies, therefore, such impact in 2017 was nil.
Except as noted above, there have been no substantial changes in 2017 in the nature or structure of
exposure to foreign currency exchange rate risk or in the Group’s hedging policies.
The potential decrease in fair value of derivative financial instruments held by the Group at December
31, 2017 to hedge against foreign currency exchange rate risk, which would arise in the case of a hypothetical,
immediate and adverse change of 10 percent in the exchange rates of the major foreign currencies with the
Euro, would be approximately €45,439 thousand (€128,753 thousand at December 31, 2016). Receivables,
payables and future trade flows for which hedges have been put in place were not included in the analysis. It is
reasonable to assume that changes in foreign currency exchange rates will produce the opposite effect, of an
equal or greater amount, on the underlying transactions that have been hedged.
Liquidity risk arises if the Group is unable to obtain the funds needed to carry out its operations under
economic conditions. The main determinant of the Group’s liquidity position is the cash generated by or used
in operating and investing activities.
From an operating point of view, the Group manages liquidity risk by monitoring cash flows and
keeping an adequate level of funds at its disposal. The main funding operations and investments in cash and
marketable securities of the Group are centrally managed or supervised by the treasury department with the
aim of ensuring effective and efficient management of the Group’s liquidity. The Group has established series of
policies which are managed or supervised centrally by the treasury department with the purpose of optimizing
the management of funds and reducing liquidity risk which include:
• centralizing liquidity management through the use of cash pooling arrangement
• maintaining a conservative level of available liquidity
• diversifying sources of funding
• obtaining adequate credit lines
• monitoring future liquidity requirements on the basis of business planning
Intercompany financing between Group entities is not restricted other than through the application of
covenants requiring that transactions with related parties be conducted at arm’s length terms.
Details on the maturity profile of the Group’s financial assets and liabilities and on the structure of
derivative financial instruments are provided in Notes 20 and 26. Details of the repayment of derivative financial
instruments are provided in Note 20.
298
299
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
During 2015 the Group entered into a new revolving credit facility of €500 million. This facility was
entirely undrawn at December 31, 2016 and 2017. The Group believes that the funds currently available to it, in
addition to those that will be generated from operating activities, will enable Ferrari to satisfy the requirements
of its investing activities and working capital needs, fulfill its obligations to repay its debt and ensure an
appropriate level of operating and strategic flexibility. The Group, therefore believes there is no significant risk
of a lack of liquidity.
Credit risk
Credit risk is the risk of economic loss arising from the failure to collect a receivable. Credit risk
encompasses the direct risk of default and the risk of a deterioration of the creditworthiness of the counterparty.
The maximum credit risk to which the Group is theoretically exposed at December 31, 2017 is
represented by the carrying amounts of the financial assets stated in the consolidated statement of financial
position sheet and the nominal value of the guarantees provided.
Dealers and clients are subject to a specific evaluation of their creditworthiness. Additionally, it is
Group practice to obtain financial guarantees against risks associated with credit granted for the purchase of
cars and parts. These guarantees are further strengthened, where possible, by retaining title on cars subject to
financing agreement.
Credit positions of material significance are evaluated on an individual basis. Where objective evidence
exists that they are uncollectible, in whole or in part, specific write-downs are recognized. The amount of
the write-down is based on an estimate of the recoverable cash flows, timing of those cash flows, the cost of
recovery and the fair value of any guarantees received.
Receivables from financing activities amounting to €732,947 thousand at December 31, 2017 (€790,377
thousand at December 31, 2016) are shown net of the allowance for doubtful accounts amounting to €6,948
thousand (€11,556 thousand at December 31, 2016). After considering the allowance for doubtful accounts,
€11,943 thousand of receivables were overdue (€41,594 thousand at December 31, 2016). Therefore, overdue
receivables represent a minor portion of receivables from financing activities.
Receivables from financing activities relate entirely to the financial services portfolio and such
receivables are generally secured on the titles of cars or other guarantees.
Trade receivables amounting to €239,410 thousand at December 31, 2017 (€243,977 thousand at
December 31, 2016) are shown net of the allowance for doubtful accounts amounting to €21,993 thousand
(€19,174 thousand at December 31, 2016). After considering the allowance for doubtful accounts, €32,336
thousand of receivables were overdue (€18,567 thousand at December 31, 2016).
32. ENTITY-WIDE DISCLOSURES
The following table presents an analysis of net revenues by geographic location of the Group’s clients:
Italy
Other EMEA
Americas (1)
China, Hong Kong and Taiwan (on a combined basis)
Rest of APAC (2)
Total net revenues
For the years ended December 31,
2015
2016
2017
(€ thousand)
563,921
387,184
238,532
1,308,261
1,314,788
1,209,916
920,858
282,550
341,300
835,045
272,223
295,844
884,971
257,249
263,701
3,416,890
3,105,084
2,854,369
(1) Americas includes the United States of America, Canada, Mexico, the Caribbean and of Central and South America
(2) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia and South Korea
The following table presents an analysis of non-current assets other than financial instruments and
deferred tax assets by geographic location:
2017
Goodwill
Property,
plant and
equipment
At December 31,
Intangible
assets
Property,
plant and
equipment
(€ thousand)
2016
Goodwill
Intangible
assets
Italy
Other EMEA
Americas (1)
China, Hong Kong and Taiwan
(on a combined basis)
Rest of APAC (2)
704,262
785,182
439,369
661,770
785,182
353,116
2,368
2,760
264
606
—
—
—
—
—
812
—
275
2,430
3,877
258
948
—
—
—
—
—
988
—
290
Total
710,260
785,182
440,456
669,283
785,182
354,394
(1) Americas includes the United States of America, Canada, Mexico, the Caribbean and of Central and South America
(2) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia and South Korea
300
301
FINANCIAL STATEMENTS
INDEX TO COMPANY FINANCIAL STATEMENTS
Ferrari N.V.
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
304
305
306
307
308
FERRARI N.V.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
AT DECEMBER 31, 2017 AND 2016
33. SUBSEQUENT EVENTS
The Group has evaluated subsequent events through February 23, 2018, which is the date the
Consolidated Financial Statements were authorized for issuance.
On February 9, 2018 the Company announced its intention to launch a share buyback program. The
Company expects the program to involve the repurchase from time to time of up to €100 million in common
shares. The program is intended to optimize the capital structure of the Company. Shares repurchased may
be used to meet the Company’s obligations arising from the equity incentive plan approved in 2017. Under the
program, as of February 20, 2018 the Company purchased an aggregate of 190,600 common shares on the
New York Stock Exchange (NYSE) for an aggregate consideration of $22,838,301. As of February 20, 2018 the
Company held 5,160,225 common shares in treasury, and in total the Company held 2.06 percent of the total
issued share capital in treasury, including the common shares and the special voting shares.
On February 20, 2018, the Company announced that Scuderia Ferrari has extended its partnership
agreement with Philip Morris International, continuing a collaboration of nearly five decades.
On February 21, 2018, the Group announced that it has selected the 88th edition of the Geneva
International Motor Show for the world premiere of the Ferrari 488 Pista, the Group’s successor to Ferrari’s
V8-engined special series. The Ferrari 488 Pista marks a significant step forward from the previous special
series in terms of both sporty dynamics and for the level of technological carryover from racing.
On February 22, 2018, the Company presented the new car for the 2018 Formula 1 World Championship.
On February 23, 2018, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders
that the Company declare a dividend of €0.71 per common share, totaling approximately €134 million. The
proposal is subject to the approval of the Company’s shareholders at the AGM to be held on April 13, 2018.
302
303
FINANCIAL STATEMENTS
Ferrari N.V.
INCOME STATEMENT / STATEMENT OF COMPREHENSIVE INCOME
for the years ended December 31, 2017 and 2016
Ferrari N.V.
STATEMENT OF FINANCIAL POSITION
at December 31, 2017 and 2016
Net revenues
Other income
Dividend income
Cost of sales
Selling, general and administrative costs
Net financial expenses
Profit / (Loss) before taxes
Income tax benefit
Net and comprehensive income /
(Net and comprehensive loss)
For the years ended December 31,
Note
2017
2016
(€ thousand)
3
3
4
5
6
7
2,399
5,171
235,000
904
26,646
32,210
182,810
9,591
192,401
2,587
4,482
—
1,418
17,299
35,445
(47,093)
14,920
(32,173)
Assets
Property, plant and equipment
Investments in subsidiaries
Financial assets - Non-current
Deferred tax assets
Total non-current assets
Inventories
Trade receivables
Tax receivables
Financial assets - Current
Other current assets
Ferrari Group cash management pools
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Share capital
Share premium
Other reserves
Retained earnings / (deficit)
Total equity
Debt - Non-current
Deferred tax liabilities
Total non-current liabilities
Debt - Current
Trade payables
Tax payables
Other current liabilities
Ferrari Group cash management pools
Total current liabilities
Total liabilities
Total equity and liabilities
At December 31,
Note
2017
2016
(€ thousand)
8
9
11
7
10
11
7
11
11
12
13
14
16
7
16
17
7
18
12
119
101
8,778,123
8,778,123
15,417
—
—
1,128
8,793,659
8,779,352
317
9,999
30,037
54,269
3,472
—
114,922
213,016
670
5,713
43,636
—
8,405
349
119,372
178,145
9,006,675
8,957,497
2,504
2,504
5,768,544
5,888,529
13,119
160,178
(15,478)
(32,223)
5,944,345
5,843,332
1,625,975
1,477,889
1,206
1,627,181
1,400,574
10,820
19,078
1,978
2,699
1,435,149
3,062,330
9,006,675
—
1,477,889
1,587,183
11,598
31,859
5,636
—
1,636,276
3,114,165
8,957,497
The accompanying notes are an integral part of the Company Financial Statements.
The accompanying notes are an integral part of the Company Financial Statements.
304
305
FINANCIAL STATEMENTS
Ferrari N.V.
Ferrari N.V.
STATEMENT OF CASH FLOWS
for the years ended December 31, 2017 and 2016
STATEMENTS OF CHANGES IN EQUITY
for the years ended December 31, 2017 and 2016
Cash and cash equivalents at beginning of the period
119,372
49
For the years ended December 31,
2017
2016
(€ thousand)
Share capital Share premium Other reserves
Retained
earnings/
(deficit)
Total equity
At December 31, 2015
Separation(1)
Comprehensive loss
Cash distribution of reserves
Share-based compensation
50
2,454
—
—
—
—
(86,905)
—
At December 31, 2016
2,504
5,888,529
Comprehensive income
Cash distribution of reserves
Share-based compensation
—
—
—
—
(119,985)
—
At December 31, 2017
2,504
5,768,544
(1) Reflects the effects of the Separation.
(€ thousand)
—
—
(50)
(0.2)
5,975,434
(16,588)
—
5,961,300
—
—
1,110
(15,478)
—
—
28,597
13,119
(32,173)
—
—
(32,173)
(86,905)
1,110
(32,223)
5,843,332
192,401
192,401
—
—
(119,985)
28,597
160,178
5,944,345
Cash flows from/(used in) operating activities
Profit/(Loss) before taxes
Interest expenses
Depreciation
Other non-cash income and expenses
Change in inventories
Change in trade receivables
Change in trade payables
Change in other operating assets and liabilities
Interest paid
Total
Cash flows (used in)/from investing activities
Loans to related parties
Proceeds from financial receivables with related parties
Investments in property, plant and equipment
Total
Cash flows (used in)/from financing activities
Proceeds from bonds
Repayment of Term Loan
Repayment of Bridge Loan
Repayment of financial liabilities with related parties
Proceeds from financial liabilities with related parties
Change in Ferrari Group cash management pools
Cash distribution of reserves
Change in equity
Total
Total change in cash and cash equivalents
Cash acquired in the Separation
Cash and cash equivalents at the end of the period
182,810
31,582
24
14,772
162
(4,429)
(660)
14,034
(30,257)
208,038
(53,214)
—
(54)
(53,268)
694,172
(733,333)
—
(3,122)
—
3,048
(119,985)
—
(159,220)
(4,450)
—
114,922
(47,093)
34,190
24
3,163
2,982
(1,991)
7,251
(414)
(23,384)
(25,272)
—
91,846
(81)
91,765
490,729
(691,667)
(500,000)
—
831,538
(349)
(86,905)
1,384
44,730
111,223
8,100
119,372
(*) Dividends received for the year ended December 31, 2017 of €235,000 thousand are included within profit before taxes.
The accompanying notes are an integral part of the Company Financial Statements.
The accompanying notes are an integral part of the Company Financial Statements.
306
307
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES
Ferrari N.V., formerly known as FE New N.V., (the “Company” or “Ferrari” and together with its
subsidiaries the “Ferrari Group” or the “Group”) was incorporated as a public limited company (naamloze
vennootschap) under the laws of the Netherlands on September 4, 2015 under the name FE New N.V. The
Company was formed to ultimately act as a holding company for Ferrari S.p.A., which, together with its
subsidiaries, is focused on the design, engineering, production and sale of luxury performance sports cars.
Upon incorporation, the Company was 100 percent owned by Stitching FCA, a Dutch foundation formed by
the FCA Group (as defined below), and was formed as part of a series of transactions pursuant to which Ferrari
S.p.A. was separated from Fiat Chrysler Automobiles N.V. (“FCA” and together with its subsidiaries the “FCA
Group”) (the “Separation”).
The Separation was completed on January 3, 2016 and occurred through a series of transactions
including (i) an intra-group restructuring which resulted in the Company’s 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 the
Company, (ii) the transfer of Piero Ferrari’s 10 percent shareholding in Ferrari S.p.A. to the Company, (iii) the
initial public offering of common shares of the Company on the New York Stock Exchange under the ticker
symbol RACE, and (iv) the distribution, following the initial public offering, of FCA’s remaining interest in the
Company to FCA’s shareholders.
The transactions described above in (i) and (ii) (referred to collectively as the “Restructuring”) were
completed in October 2015. Upon completion of the Restructuring, Ferrari S.p.A. became a wholly owned
subsidiary of New Business Netherlands N.V. (subsequently renamed Ferrari N.V.) (“Predecessor Ferrari”). The
initial investment in Ferrari S.p.A. arising from the restructuring was measured based on the transaction price
of €8,778 million, as determined by an independent valuation.
The remaining steps of the Separation were completed between January 1 and January 3, 2016 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. All of the shares held by Stitching FCA were repurchased by the Company for no consideration, as a
result of which Stitching FCA no longer has any shareholding in the Company. On completion of the Separation
Predecessor Ferrari was merged with and into FE New N.V. and FE New N.V. was renamed Ferrari N.V.
Following the Separation, Ferrari operates as an independent, publicly traded company.
On January 4, 2016 the Company also completed the listing of its common shares on the Mercato
Telematico Azionario, the stock exchange managed by Borsa Italiana, under the ticker symbol RACE.
At December 31, 2017 and 2016, the fully paid up share capital of the Company amounted to €2,504
thousand, comprising 193,923,499 common shares and 56,497,618 special voting shares all with nominal value
of €0.01 per share. At December 31, 2017, the Company had 4,969,625 common shares and 4,099 special voting
shares held in treasury, while at December 31, 2016 the Company had 5,000,000 common shares and 2,930
special voting shares held in treasury. The authorized share capital of the Company is €7,500,000, divided into
375,000,000 common shares with nominal value of €0.01 per share and an equal number of special voting
shares with nominal value of €0.01 per share.
The Company’s official seat (statutaire zetel) is in Amsterdam, the Netherlands, and the Company’s
registered office is in Maranello, Italy at Via Abetone Inferiore 4. The Company is registered with the Dutch
trade register under number 64060977.
2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
Date of authorization for issuance
The separate financial statements of the Company (the “Company Financial Statements”) for the year
ended December 31, 2017 were authorized for issuance on February 23, 2018.
Basis of preparation
The Company Financial Statements are prepared on a going concern basis using the historical cost
method, modified as required for the measurement of certain financial instruments.
Statement of compliance
The Company Financial Statements have been 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.
Measurement basis
The Company Financial Statements were prepared using the same accounting policies as set out
in the notes to the consolidated financial statements at December 31, 2017 (the “Consolidated Financial
Statements”), except for the measurement of the investments as presented under “investments in subsidiaries”
in the Company Financial Statements.
Management considers the primary focus of these Company Financial Statements to be the legal entity
perspective and considers that these Company Financial Statements should properly reflect the cost of the
subsidiaries acquired through their contribution as well as the amounts that are eligible for distribution to the
Company’s shareholders. Management believes that the measurement of its subsidiaries at cost, as permitted
under EU IFRS, provides the best insight into the Company’s financial position and results, in addition to the
information provided in the Consolidated Financial Statements.
The accounting policies were consistently applied to all periods presented with the exception of the
new standards and amendments effective from January 1, 2017, as noted below.
The amounts in the Company Financial Statements are presented in thousands of Euro (€), except
where otherwise indicated.
308
309
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
Format of the Company Financial Statements
The Company presents the income statement by function.
Statement of cash flows
The statement of cash flows is prepared using the indirect method with a breakdown into cash flows
from operating, investing and financing activities. Cash inflows or outflows related to taxes are reported as
changes in other operating assets and liabilities as they are primarily settled through transactions with related
parties as a result of the Group Italian Tax Consolidation. Dividends received are treated as part of operating
activities.
material impact on the Company’s financial statements upon initial adoption of the standard and related
amendments.
Annual Improvements to IFRS 2014-2016 Cycle - The amendments relate to three Standards: IFRS 12 -
Disclosure of Interests in Other Entities (effective date of January 1, 2017, see above), IFRS 1 - First-time Adoption of
International Financial Reporting Standards (effective date of January 1, 2018) and IAS 28 - Investments in Associates and
Joint Ventures (effective date of January 1, 2018). The amendments clarify, correct or remove redundant wording
in the related IFRS Standard and are not expected to have a material impact upon adoption.
IFRS 16 - Leases - The effective date of the standard is January 1, 2019. The Company is currently
evaluating the method of implementation and impact of adoption on its Company Financial Statements.
New standards and amendments effective from January 1, 2017
Further information on these standards is provided in Note 2 of the Consolidated Financial Statements.
The following amendments were effective from January 1, 2017 and were adopted by the Company for
New standards, amendments, clarifications and interpretations issued by IASB but not yet endorsed by the EU
the purpose of the preparation of the Company Financial Statements.
• Amendments to IAS 12 - Income Taxes
• Amendments to IAS 7 - Statement of Cash Flows
The following standards, amendments and interpretations have been issued by the IASB but not yet
endorsed by the EU:
• Amendments to IFRS 2 - Share-based Payments
• Annual Improvements to IFRS 2014-2016 Cycle - Amendments to IFRS 12 - Disclosure of Interests in Other Entities
•
IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration
There were no significant effects from the adoption of these amendments.
New standards issued by the International Accounting Standards Board (“IASB”) and endorsed by the
European Union (“EU”) but not yet effective
The following standards issued by the IASB and endorsed by the EU are effective for annual periods
beginning on or after January 1, 2018:
IFRS 15 - Revenue from Contracts with Customers and Clarifications to IFRS 15 - The Company will adopt the
standard and amendments for its annual period beginning on January 1, 2018. The Company has completed its
analysis of the impact of adoption, including an analysis of each of the Company’s revenue streams by applying
the five-step model provided under IFRS 15. Based on the analysis performed, the Company concluded that the
current accounting treatment of revenue from contracts with customers is in accordance with the requirements
of IFRS 15 and, therefore, there will be no material impact on the Company’s financial statements upon initial
adoption of the standard and related amendments.
IFRS 9 - Financial Instruments - The Company will adopt the standard and amendments for its annual
period beginning on January 1, 2018. The Company has completed its analysis of the impact of adoption,
including an analysis of each of the Company’s classes of financial assets, financial liabilities and derivative
instruments by applying the requirements provided by the new standard. Based on the analysis performed,
the Company concluded that the current accounting treatment of financial assets, financial liabilities and
derivative instruments is in accordance with the requirements of IFRS 9 and, therefore, there will be no
• Amendments to IAS 40 - Transfers of Investment Property
•
•
IFRS 17 - Insurance Contracts
IFRIC 23 - Uncertainty over Income Tax Treatments
• Amendments to IFRS 9 - Prepayment Features with Negative Compensation
• Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures
• Annual Improvements to IFRSs 2015-2017 Cycle
• Amendments to IAS 19 - Plan Amendment, Curtailment or Settlement
The Company will introduce any new standards, amendments and interpretations once they are
endorsed by the European Union and as of their effective dates. Further information on these standards is
provided in Note 2 of the Consolidated Financial Statements.
Investments in subsidiaries
Investments in subsidiaries are stated at cost, less impairment. Dividend income from the Company’s
subsidiaries are recognized in the income statement when the right to receive payment is established.
310
311
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
Impairment of investments in subsidiaries
Property, plant and equipment
At each reporting date, the Company assesses whether there is an indication that the investments
in subsidiaries may be impaired. If any such indication exists, the Company makes an estimate of the asset’s
recoverable amount. The recoverable amount is defined as the higher of the fair value of the investment less
costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable amount. Such impairment is recognized
in the income statement. An assessment is made at each reporting date as to whether there is any indication
that previously recognized impairment losses may no longer exist or may have decreased. If such an indication
exists, the Company makes an estimate of the recoverable amount. A previously recognized impairment loss
is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount
since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased
to its recoverable amount. Such recoverable amount cannot exceed the carrying amount that would have been
determined if no impairment loss had been recognized for the asset in prior periods. Such a reversal is recognized
in the income statement.
Property, plant and equipment is recognized at cost net of accumulated depreciation. Depreciation is
calculated on a straight line basis over the useful lives of the assets as follows:
Office equipment
Other assets
Depreciation rates
20% - 22%
20% - 25%
Trade receivables
Trade receivables are amounts due for goods sold or services provided in the ordinary course of
business. Trade receivables are initially recognized at fair value and subsequently measured at amortized cost
using the effective interest rate method, less any provision for allowances.
Foreign currency transactions
Inventories
The financial statements are prepared in Euro, which is the Company’s functional and presentation
currency. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
translated at the foreign currency exchange rate prevailing at that date. Exchange differences arising on the
settlement of monetary items or on reporting monetary items at rates different from those at which they
were initially recorded during the period or in previous financial statements are recognized in the income
statement.
Foreign currency translation
The Company has a branch in the United Kingdom (UK) that operates in Pound Sterling. At each
reporting period, the assets and liabilities within the UK branch are translated to Euro using the exchange rate
at the balance sheet date and the income statement is translated using the average exchange rate for the period.
Translation differences resulting from the application of this method are classified as translation differences
within other comprehensive income/(loss) until the disposal of the branch. The cumulative translation differences
at December 31, 2017 amounted to €2 thousand (€8 thousand at December 31, 2016).
Inventories of demo vehicles and spare parts are stated at the lower of cost and net realizable value.
Cost is determined on a first-in first-out (“FIFO”) basis. Provision is made for obsolete and slow-moving
inventories based on their expected future use and realizable value. Net realizable value is the estimated selling
price in the ordinary course of business less the estimated costs of completion and the estimated costs for sale
and distribution.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term,
highly liquid investments with original maturities of three months or less. There are no liens, pledges, collateral
or restrictions on cash and cash equivalents. Cash and cash equivalents do not include amounts in Ferrari
Group cash management pools.
Debt
Debt is measured at amortized cost using the effective interest rate method.
The principal foreign currency exchange rates used to translate other currencies into Euro were as follows:
Trade payables
2017
2016
Trade payables are amounts payable for services, legal and professional fees and other expenses
Average
At December 31,
Average
At December 31,
incurred. Trade payables are all due within one year.
U.S. Dollar
Pound Sterling
1.1297
0.8767
1.1993
0.8872
1.1069
0.8194
1.0541
0.8562
Deferred income
Deferred income relates to amounts received in advance under certain agreements, primarily relating
to marketing-related events hosted for third party dealers, which are reliant on the future performance of a
service or other act of the Company. Deferred income is recognized as net revenues or other income when the
312
313
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
Company has fulfilled its obligations under the terms of the various agreements. Deferred income is recorded
on the statement of financial position within “other liabilities”.
Net revenues
Net revenues relate to the sale of demo vehicles and spare parts to third party dealers and other income
generated for marketing-related events hosted by the Company on behalf of third party dealers, such as new car
launches. Net revenues are recognized if it is probable that the economic benefits associated with a transaction
will flow to the Company and the revenues can be reliably measured. Net revenues are recognized when the risks
and rewards of ownership are transferred to our third party dealers or when the services have been provided, the
sales price is agreed or determinable and collectability is reasonably assured. For cars this generally corresponds
to the date when the cars are released to the carrier responsible for transporting cars to dealers. Net revenues
are recognized net of discounts including, but not limited to, sales incentives and performance based bonuses.
Other income
Other income primarily relates to services performed by the Company on behalf of its subsidiaries for
certain corporate services rendered and other recharge fees.
Derivative financial instruments
Derivative financial instruments are used for economic hedging purposes in order to reduce currency risk,
principally between the Euro and the U.S. Dollar. The Company does not apply hedge accounting. All derivative
financial instruments are measured at fair value. Gains and losses from the fair value measurement of derivative
financial instruments are recognized immediately in the income statement within net financial expenses.
Income taxes
Current and deferred taxes are recognized as income or expense and are included in the income
statement for the period, except tax arising from a transaction or event which is recognized, in the same or a
different period, either in other comprehensive income/(loss) or directly in equity.
Dividends
Dividends payable by the Company are reported as a change in equity in the period in which they are
approved by the shareholders as applicable under local rules and regulations.
Dividend income is recognised in the income statement on the date that the right to receive payment is
established.
Share-based compensation
The Company has implemented an equity incentive plan that provides for the granting of share-based
compensation to the Chief Executive Officer, all other members of the Group Executive Council (“GEC”) and
key leaders. The equity incentive plan is accounted for in accordance with IFRS 2 - Share-based Payments, which
requires the Company to recognize share-based compensation based on fair value of awards granted. Share-
based compensation for the equity-settled awards containing market performance conditions is measured at
the grant date fair value of the award using the Monte Carlo simulation model, which requires the input of
subjective assumptions, including the expected volatility of the Company’s common stock, the dividend yield,
interest rates and a correlation coefficient between the common stock and the relevant market index. The fair
value of the awards which are conditional only on a recipient’s continued service to the Company is measured
using the share price at the grant date adjusted for the present value of future distributions which employees
will not receive during the vesting period.
Share based compensation is recognized over the service period. Pursuant to an agreement between
the Company and various subsidiaries of the Group, the Company recharges subsidiaries for share-based
compensation relating to equity instruments awarded to employees of the subsidiaries under the equity incentive
plan. The Company’s portion of the share-based compensation for the equity incentive plan is recognized as
an expense within selling, general and administrative costs or cost of sales in the income statement depending
on the function of the employee with an offsetting entry recorded as an increase to equity, whilst share-
based compensation recharged to the subsidiaries of the Group is recognized as a financial receivable with an
offsetting entry recorded as an increase to equity.
Non-Executive Directors’ compensation settled in common shares of the Company is accounted for as
equity-settled share-based compensation and measured at the fair value of the related compensation, which is
recognized as an expense over the service period with an offsetting increase to equity.
Segment reporting
As disclosed in the Consolidated Financial Statements, the Group has determined that it has one
operating and one reportable segment based on the information reviewed by its Chief Operating Decision
Maker in making decisions regarding allocation of resources and to assess performance.
Use of estimates
The Company Financial Statements are prepared in accordance with EU IFRS, which requires the use of
estimates, judgments, and assumptions that affect the carrying amount of assets and liabilities, the disclosure
of contingent assets and liabilities and the amounts of income and expenses recognized. The estimates and
associated assumptions are based on elements that are known when the financial statements are prepared, on
historical experience and on any other factors that are considered to be relevant. The estimates and underlying
assumptions are reviewed periodically and continuously by the Company. If the items subject to estimates
do not perform as assumed, then the actual results could differ from the estimates, which would require
adjustment accordingly. The effects of any changes in estimate are recognized in the income statement in the
period in which the adjustment is made, or prospectively in future periods. The estimates and assumptions that
management considers most critical for the Company Financial Statements relate to investments in subsidiaries
and in particular relating to impairment indicators. See Note 9.
314
315
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
3. NET REVENUES AND OTHER INCOME
Net revenues for the year ended December 31, 2017 amounted to €2,399 thousand (€2,587 thousand
for the year ended December 31, 2016) and relate to sales of demo cars and spare parts to third parties as well
as marketing-related events hosted on behalf of third party dealers and other customers.
Other income for the year ended December 31, 2017 amounted to €5,171 thousand (€4,482 thousand for the
year ended December 31, 2016) and primarily relates to corporate services rendered and costs recharged to
Ferrari S.p.A.
4. DIVIDEND INCOME
Dividend income for the year ended December 31, 2017 amounted to €235,000 thousand and related
entirely to a dividend from Ferrari S.p.A, approved on November 2, 2017 and received on November 23, 2017.
No dividend income was recognized for the year ended December 31, 2016.
5. SELLING, GENERAL AND ADMINISTRATIVE COSTS
Selling, general and administrative costs consisted of the following:
Personnel expenses
Shared services provided by Ferrari S.p.A.
Legal and professional services
Insurance
Other expenses
Total selling, general and administrative costs
For the years ended December 31,
2017
2016
(€ thousand)
11,808
7,436
4,061
2,043
1,298
26,646
6,118
5,830
2,447
1,501
1,403
17,299
Personnel expenses include costs related to the equity incentive plan (see Note 15), compensation for
Non-Executive Directors’ and employees of the UK Branch. Detailed information on Board of Directors and key
officer compensation is included in the “Corporate Governance” and “Remuneration of Directors” sections to
the Annual Report.
At December 31, 2017 the Company had 12 full time equivalent employees (13 at December 31, 2016),
all of which relate to the UK Branch. All employees work outside of the Netherlands.
Shared service costs mainly relate to services provided by Ferrari S.p.A. for human resources, payroll,
tax, legal, accounting and treasury.
Legal and professional services mainly relate to listing fees and expenses for legal, financial and other
consulting services.
6. NET FINANCIAL EXPENSES
Net financial expenses consisted of the following:
Interest expenses
Of which:
Interest on the Term Loan and Bridge Loan (1)
Interest on bonds (2)
Interest on intercompany borrowings
Other financial expenses
Financial income
Net financial expenses
For the years ended December 31,
2017
2016
(€ thousand)
31,582
34,190
7,227
9,231
15,124
1,580
(952)
16,694
6,937
10,559
1,471
(216)
32,210
35,445
(1) For 2017 includes interest on the Term Loan and for 2016 on the Term Loan and the Bridge Loan.
(2) For 2017 includes interest on the 2023 and 2021 bonds and for 2016 only the 2023 bond.
Other financial expenses relate to bank fees and charges and net foreign exchange losses.
Financial income for the year ended December 31, 2017 relates to the gain on the fair value of a
currency swap entered into to hedge exposure to foreign currency exchange fluctuations of a U.S. Dollar
denominated financial receivable with Ferrari Financial Services Inc. (“FFS Inc”), an indirectly held subsidiary,
that was entered into in November 2017 (see Note 11 for additional details). Financial income for both 2017
and 2016 also includes interest income on cash and cash equivalents held with banks and the financial
receivable with FFS Inc.
7. INCOME TAXES
Income tax benefit for the years ended December 31, 2017 and 2016 is as follows:
Current income tax benefit
Deferred income tax (expense)/benefit
Total income tax benefit
For the years ended December 31,
2017
2016
(€ thousand)
11,938
(2,347)
9,591
13,788
1,132
14,920
316
317
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
Profit/(Loss) before tax
Theoretical income tax (expense)/benefit
Tax effect on:
Non-taxable dividends
Non-deductible costs
Other permanent differences
Total income tax benefit
For the years ended December 31,
2017
2016
(€ thousand)
182,810
(43,877)
53,580
(19)
(93)
9,591
(47,093)
12,951
—
(55)
2,024
14,920
The theoretical income tax (expense)/benefit has been calculated at a rate of 24.0 percent for the year
ended December 31, 2017 and 27.5 percent for the year ended December 31, 2016, which are the corporate
rates of taxation according to the Italian Tax Code for the respective years.
Tax receivables
Tax payables
Net
For the years ended December 31,
2017
2016
(€ thousand)
30,037
19,078
10,959
43,636
31,859
11,777
Tax receivables of €30,037 thousand at December 31, 2017 (€43,636 thousand at December 31, 2016)
primarily relate to amounts due from related parties for the 2017 group tax consolidation in Italy.
Tax payables of €19,078 thousand at December 31, 2017 (€31,859 thousand at December 31, 2016)
primarily relate to amounts due to the tax authorities for the 2017 group tax consolidation in Italy.
Deferred tax assets
To be recovered after 12 months
To be recovered within 12 months
Deferred tax liabilities
To be realized after 12 months
To be realized within 12 months
Net deferred tax (liabilities)/assets
For the years ended December 31,
2017
2016
(€ thousand)
—
—
—
(9)
(1,197)
(1,206)
(1,206)
1,128
—
1,128
—
—
—
1,128
Net deferred tax liabilities of €1,206 thousand at December 31, 2017 primarily relate to timing
differences arising from the deduction of bond issuance costs. Net deferred tax assets of €1,128 thousand at
December 31, 2016 primarily relate to Directors’ compensation recognized but not settled in 2016.
8. PROPERTY, PLANT AND EQUIPMENT
Cost
Accumulated depreciation
Carrying amount
At December 31,
2017
2016
(€ thousand)
172
(53)
119
130
(29)
101
Property, plant and equipment relates to office furniture and equipment in the UK Branch. There are
no liens, pledges, collateral or restrictions on use over property, plant and equipment. Depreciation charges
of €24 thousand for the year ended December 31, 2017 (€24 thousand for the year ended December 31, 2016)
were recorded within cost of sales.
9. INVESTMENTS IN SUBSIDIARIES
Upon completion of the Separation on January 3, 2016, Ferrari S.p.A. became a wholly owned
subsidiary of the Company. The initial investment in Ferrari S.p.A. was measured in the 2015 company financial
statements of Predecessor Ferrari based on the transaction price of €8,778,000 thousand, as determined by an
independent valuation.
Investments in subsidiaries also includes €123 thousand relating to the subsidiary New Business 33
S.p.A. (formerly Fiat Investments S.p.A.).
Investment in subsidiaries amounted to €8,778,123 thousand at December 31, 2017 and 2016.
Impairment testing
At December 31, 2017, the market capitalization of Ferrari N.V. at December 31, 2017 amounted to
approximately €16.5 billion. The main difference in the valuation of Ferrari N.V. and the investment in Ferrari
S.p.A. mainly relates to the additional net debt of €2.9 billion in Ferrari N.V.
Considering the share price of the Company at December 31, 2017 and at the date of authorization of
the Company Financial Statements, no impairment indicators were identified. As disclosed in Note 14 to the
Consolidated Financial Statements, no impairment indicators were identified in respect to the impairment test
performed for the Consolidated Financial Statements.
10. INVENTORIES
Inventories at December 31, 2017 amounted to €317 thousand (€670 thousand at December 31,
2016) and relate to demo cars purchased from Ferrari S.p.A. for eventual sale to third parties. Such inventories
318
319
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
are recorded net of an accumulated provision of €353 thousand (€252 thousand at December 31, 2016). An
inventory provision charge of €172 thousand was recorded within cost of sales for the year ended December 31,
2017 (€188 thousand for the year ended December 31, 2016).
Financial assets
Changes in the provision for slow moving and obsolete inventories were as follows:
At January 1,
Provision
Use and other changes
At December 31,
2017
2016
(€ thousand)
252
172
(71)
353
11. TRADE RECEIVABLES, FINANCIAL ASSETS AND OTHER CURRENT ASSETS
Trade receivables
Financial assets
Other current assets
Total
Trade receivables
At December 31,
2017
2016
(€ thousand)
9,999
69,686
3,472
83,157
127
188
(63)
252
5,713
—
8,405
14,118
Trade receivables at December 31, 2017 amounted to €9,999 thousand (€5,713 thousand at December
31, 2016) and included €9,512 thousand due from Ferrari S.p.A. for corporate services rendered and fees
charged and €487 thousand due from third parties for marketing-related events (€4,216 thousand and €1,497
thousand respectively at December 31, 2016).
The carrying amount of trade receivables is deemed to approximate their fair value. There are no
overdue balances and no allowance has been recorded for trade receivables.
The following sets forth a breakdown of trade receivables by currency:
Trade receivables denominated in:
Euro
Pound Sterling
Total
At December 31,
2017
2016
(€ thousand)
3,900
6,099
9,999
2,738
2,975
5,713
Current financial receivables
Non-current financial receivables
Derivative financial instruments
Total
At December 31,
2017
2016
(€ thousand)
15,417
53,546
723
69,686
—
—
—
—
Current financial receivables for the year ended December 31, 2017 relate to a U.S. Dollar denominated
loan of $64 million provided to FFS Inc in November 2017, primarily to repay the U.S. Dollar denominated
portion of the Term Loan. The receivable, which amounted to €53,546 thousand at December 31, 2017, is due
in November 2018 and accrues interest quarterly at a rate of LIBOR 3M + 60 basis points.
Non-current financial receivables for the year ended December 31, 2017 of €15,417 thousand relate
to receivables from subsidiaries, mainly Ferrari S.p.A., for recharges of share-based compensation relating to
equity instruments awarded to employees of the subsidiaries under the equity incentive plan, pursuant to an
intercompany agreement. The receivables will become due as the awards under the equity incentive plan begin
to vest (see Note 15).
Derivative financial instruments relate to the fair value of a currency swap entered into in November
2017 to hedge against the currency risk of the $64 million U.S. Dollar denominated loan provided to FFS Inc.
The currency swap has a notional value of $64 million.
Other current assets
Other current assets of €3,472 thousand at December 31, 2017 (€8,405 thousand at December 31,
2016) primarily include VAT credits and prepaid expenses.
12. FERRARI GROUP CASH MANAGEMENT POOLS
Ferrari Group cash management pools relate to the Company’s participation in a group-wide cash
management system that is managed centrally by Ferrari S.p.A. At December 31, 2017, the Company had a net
liability of €2,699 thousand and at December 31, 2016 the Company had a net asset of €349 thousand.
13. CASH AND CASH EQUIVALENTS
Cash and cash equivalents amounted to €114,922 thousand at December 31, 2017 (€119,372 thousand
at December 31, 2016) and were entirely denominated in Euro.
The carrying amount of cash and cash equivalents is deemed to be in line with their fair value. There was
no restricted cash at December 31, 2017 and 2016.
Credit risk associated with cash and cash equivalents is considered limited as the counterparties are
leading national and international banks.
320
321
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
14. EQUITY
Share capital
At December 31, 2017 and 2016 the fully paid up share capital of the Company was €2,504 thousand,
consisting of 193,923,499 common shares and 56,497,618 special voting shares, all with a nominal value of
€0.01 per share. At December 31, 2017, the Company had 4,969,625 common shares and 4,099 special voting
shares held in treasury, while at December 31, 2016 the Company held 5,000,000 common shares and 2,930
special voting shares in treasury. The authorized share capital of the Company is €7,500,000, divided into
375,000,000 common shares with nominal value of €0.01 per share and an equal number of special voting
shares with nominal value of €0.01 per share.
The loyalty voting structure
The purpose of the loyalty voting structure is to reward ownership of the Company’s common shares
and to promote stability of the Company’s shareholder base by granting long-term shareholders of the Company
with special voting shares. Following the Separation, Exor B.V. (“Exor”) and Piero Ferrari participate in the
Company’s loyalty voting program and, therefore, effectively hold two votes for each of the common shares they
hold. Investors who purchased common shares in the initial public offering may elect to participate in the loyalty
voting program by registering their common shares in the loyalty share register and holding them for three years.
The loyalty voting program will be effected by means of the issue of special voting shares to eligible holders of
common shares. Each special voting share entitles the holder to exercise one vote at the Company’s shareholders
meetings. Only a minimal dividend accrues to the special voting shares allocated to a separate special dividend
reserve, and the special voting shares do not carry any entitlement to any other reserve of the Company.
Share premium
A share premium reserve of €5,975,434 thousand originated from the Separation.
Following approval of the annual accounts by the shareholders at the Annual General Meeting of the
Shareholders on April 15, 2016, the Company paid a cash distribution of €0.46 per common share in May 2016,
corresponding to a total distribution of €86,905 thousand. Following approval of the annual accounts by the
shareholders at the Annual General Meeting of the Shareholders on April 14, 2017, a cash distribution of €0.635
per common share was approved, corresponding to a total distribution of €119,985 thousand. In May 2017 the
Company paid €115 million of the distribution and the remaining balance was paid in July 2017.
As a result of the above transactions, the share premium reserve amounted to €5,768,544 thousand at
December 31, 2017 (€5,888,529 thousand at December 31, 2016).
Other reserves
Other reserves at December 31, 2017 and 2016 include the effects of the Separation which amounted
to €16,588 thousand.
At December 31, 2017 a cumulative amount of €28,179 thousand was recognized as an increase to
other reserves for the awards under the Company’s equity incentive plan. Of this amount, €12,762 thousand was
recognized as an expense in cost of sales and selling, general and administrative costs, and €15,417 thousand
was recorded as financial receivables in relation to the costs recharged to subsidiaries. See Notes 11 and 15 for
additional details.
Equity-settled Non-Executive Directors’ compensation amounted to €418 thousand for the year ended
December 31, 2017 (€1,110 thousand for the year ended December 31, 2016) and was recognized within selling,
general and administrative costs and as an increase to other reserves.
Legal reserve
Pursuant to Dutch law, limitations exist relating to the distribution of shareholders’ equity up to at
least the total amount of the legal reserve, as well as other reserves mandated per the Company Articles of
Association. At December 31, 2017, the legal and non-distributable reserves of the Company amounted to €8
thousand (€14 thousand at December 31, 2016) and included the following:
• The UK Branch operates in the Pound Sterling. At each reporting period end, the assets and liabilities
within the UK branch are translated to Euro and the respective foreign currency translation gain or
loss is recorded in other comprehensive income. At December 31, 2017, the cumulative translation
reserve amounted to €2 thousand (€8 thousand at December 31, 2016).
• The Company records a statutory non-distributable reserve equal to 1 percent of the nominal value
of the special voting shares. At December 31, 2017 and 2016, this reserve amounted to €6 thousand.
Reconciliation of Equity and Net Profit/Loss
The reconciliation of equity as per the Consolidated Financial Statements to equity as per the Company
Financial Statements is provided below:
Equity attributable to owners of the parent in the Consolidated
Financial Statements of Ferrari N.V.
Separation (1)
OCI reserves in the Consolidated Financial Statements
Cumulative results of subsidiaries in the Consolidated Financial
Statements in prior years
Results of subsidiaries in the Consolidated Financial Statements
Dividends
Equity in the Company Financial Statements of Ferrari N.V.
(1) Reflects differences in equity arising as a result of the effects of the Separation.
At December 31,
2017
2016
(€ thousand)
778,678
324,995
5,969,427
(29,833)
(430,935)
(577,992)
235,000
5,944,345
5,969,427
(20,155)
—
(430,935)
—
5,843,332
322
323
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
The reconciliation of net profit as per the Consolidated Financial Statements to net profit/(loss) as per
16. DEBT
the Company Financial Statements is provided below:
Net profit in the Consolidated Financial Statements of Ferrari N.V.
Results of subsidiaries in the Consolidated Financial Statements
Dividends
Net profit/(loss) in the Company Financial Statements of Ferrari N.V.
15. SHARE-BASED COMPENSATION
For the years ended December 31,
2017
2016
(€ thousand)
535,393
(577,992)
235,000
192,401
398,762
(430,935)
—
(32,173)
Following the approval of the equity incentive plan by the Board of Directors on March 1, 2017, on
April 14, 2017 the Shareholders approved an award to the Chief Executive Officer under the Group’s equity
incentive plan, which is applicable to all Group Executive Council (“GEC”) members and key leaders of the
Group. Under the Group’s equity incentive plan, an aggregate of approximately 687 thousand performance
share units (“PSUs”) and an aggregate of approximately 119 thousand restricted share units (“RSUs”) have
been awarded. The grants of the PSUs and the RSUs, which each represent the right to receive one common
share of the Company, cover a five-year performance period from 2016 to 2020, consistent with the Group’s
strategic horizon.
Pursuant to an agreement between the Company and various subsidiaries of the Group, the Company
recharges subsidiaries for share-based compensation relating to equity instruments awarded to employees of
the subsidiaries under the equity incentive plan.
At December 31, 2017, the Company recognized a cumulative amount of €28,179 thousand as an increase
to other reserves in equity for the PSU and RSU awards. Of this amount, €12,762 thousand was recognized as
an expense in cost of sales and selling, general and administrative costs, and €15,417 thousand was recorded as
financial receivables in relation to share-based compensation recharged to subsidiaries.
At December 31, 2017 the unrecognized share-based compensation amounted to approximately €26,051
thousand and will be recognized over the remaining vesting period until 2020. A portion of the unrecognized
share-based compensation will be recharged to subsidiaries of the Company.
None of the PSU awards or RSU awards were forfeited and none of the PSU awards or RSU awards had
vested at December 31, 2017.
See Note 22 “Share-based Compensation” to the Consolidated Financial Statements for additional details
relating to the equity incentive plan.
The breakdown of debt at December 31, 2017 and 2016 by nature and by maturity is as follows:
At December 31,
2017
2016
Due
within
one year
Due
between
one and
five years
Due
beyond
five years
Total
Due
within
one year
Due
between
one and
five years
Due
beyond
five years
Total
(€ thousand)
Financial liabilities
with related parties
Bonds
Borrowings from banks
1,400,574
432,458
— 1,833,032 1,403,817
432,473
— 1,836,290
—
—
694,623
498,894 1,193,517
—
—
497,614
—
—
—
183,366
547,802
—
497,614
731,168
Total debt
1,400,574
1,127,081
498,894 3,026,549
1,587,183
980,275
497,614
3,065,072
Financial liabilities with related parties
Financial liabilities with related parties at December 31, 2017 are broken down as follows:
Currency
Total amount
outstanding at
December 31,
2017
Due date
Interest Rate
Euro
Euro
Euro
Euro
Euro
(€ thousand)
1,000,331 September 2018
EURIBOR 3M
100,141
April 2018
200,021 December 2018
100,081
May 2018
432,458 October 2019
1,833,032
EURIBOR 3M
EURIBOR 3M
EURIBOR 3M
EURIBOR 3M
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari Financial Services S.p.A.
Total
Financial liabilities with related parties at December 31, 2016 are broken down as follows:
Currency
Euro
Euro
Euro
Euro
Total amount
outstanding at
December 31,
2016
Due date
Interest Rate
(€ thousand)
1,000,348
September 2017
EURIBOR 3M
300,105
September 2017
EURIBOR 3M
100,083
May 2017
432,473
October 2019
EURIBOR 3M
EURIBOR 3M
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari Financial Services S.p.A.
Ferrari North Europe Ltd. (FNE Note)
Pound Sterling
3,281
n.a.
2%
Total
1,836,290
The Company repaid the FNE Note in 2017.
324
325
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
At December 31, 2017 a 10 basis point increase in interest rates on the floating rate financial liabilities,
with all other variables held constant, would have resulted in a decrease in profit before tax of €1,832 thousand
on an annualized basis (decrease of €2,121 thousand at December 31, 2016).
Borrowings from banks
At December 31, 2017 there were no borrowings from banks.
Information on fair value measurement and qualitative and quantitative information on financial risks
are provided in Note 28 and Note 31, respectively, to the Consolidated Financial Statements.
Further information on the Group’s liquidity is provided in the “Liquidity and Capital Resources” section of
this Annual Report. Based on this information the Company deems the going concern assumption adequate.
Bond
2023 Bond
On March 16, 2016, the Company issued 1.5 percent coupon notes due March 2023, having a principal
of €500 million. The bond was issued at a discount for an issue price of 98.977 percent, resulting in net proceeds
of €490,729 thousand after the debt discount and issuance costs. The net proceeds together with additional
cash held by the Company, were used to fully repay the €500,000 thousand Bridge Loan under the Facility. The
bond is unrated and was admitted to trading on the regulated market of the Irish Stock Exchange. The amounts
outstanding at December 31, 2017 and 2016 of €498,894 thousand and €497,614 thousand, respectively,
include accrued interest of €5,938 thousand.
2021 Bond
On November 16, 2017, the Company issued 0.25 percent coupon notes due January 2021, having a
principal of €700 million. The bond was issued at a discount for an issue price of 99.557 percent, resulting in
net proceeds of €694,172 thousand after the debt discount and issuance costs. The net proceeds were primarily
used to fully repay the Term Loan and the remainder will be used for general corporate purposes. The bond
is unrated and was admitted to trading on the regulated market of the Irish Stock Exchange. The amount
outstanding at December 31, 2017 of €694,623 thousand includes accrued interest of €221 thousand.
The notes for both the 2013 Bond and the 2021 Bond impose covenants on Ferrari including: (i)
negative pledge clauses which require that, in case any security interest upon assets of Ferrari is granted in
connection with other notes or debt securities with the consent of Ferrari are, or are intended to be, listed,
such security should be equally and ratably extended to the outstanding notes, subject to certain permitted
exceptions; (ii) pari passu clauses, under which the notes rank and will rank pari passu with all other present and
future unsubordinated and unsecured obligations of Ferrari; (iii) events of default for failure to pay principal
or interest or comply with other obligations under the notes with specified cure periods or in the event of a
payment default or acceleration of indebtedness or in the case of certain bankruptcy events; and (iv) other
clauses that are customarily applicable to debt securities of issuers with a similar credit standing. A breach of
these covenants may require the early repayment of the notes. As of December 31, 2017 and 2016, the Company
was in compliance with the covenants of the notes.
At December 31, 2016 borrowings from banks of €731,168 thousand related entirely to the Term
Loan (as defined below) which was fully repaid in 2017, primarily with proceeds from the 2021 Bond issued in
November 2017. See “The Facility” below.
Currency
Principal
Book value
Interest rate
At December 31, 2016
(€ thousand)
Euro
733,333
731,168
EURIBOR 3M +80bps
Term Loan
The Facility
On November 30, 2015, Predecessor Ferrari, as borrower and guarantor, and certain other members
of the Predecessor Ferrari group, as borrowers, entered into a €2.5 billion facility with a syndicate of banks
(the “Facility”). The Facility comprises a bridge loan of €500 million (the “Bridge Loan”), a term loan of €1,500
million (the “Term Loan”) and a revolving credit facility of €500 million (the “RCF”).
In December 2015 the Bridge Loan and Term Loan were fully drawn down for the purposes of repaying
financial liabilities with FCA, including the Note issued to the company by FCA (“FCA Note”) recognized in
connection with the restructuring.
In March 2016, the Bridge Loan was fully repaid, primarily using the proceeds from the 2023 Bond.
In 2016 and 2017 the Company made scheduled payments and voluntary prepayments, funded in part
with the proceeds of the 2021 Bond, to fully repay the Term Loan.
At December 31, 2017 and 2016 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 RCF has a maturity of five years
from inception of the Facility.
17. TRADE PAYABLES
Due to related parties
Due to third parties
Total trade payables
At December 31,
2017
2016
(€ thousand)
9,305
1,515
10,820
6,641
4,957
11,598
Due to related parties primarily relates to amounts owing to Ferrari S.p.A. for corporate services
rendered and costs recharged. Due to third parties relates to costs for marketing-related events and legal and
professional services.
326
327
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
The following sets for a breakdown of trade payables by currency:
21. REMUNERATION
Trade payables denominated in:
Euro
Pound Sterling
Total
At December 31,
2017
2016
(€ thousand)
8,407
2,413
10,820
7,801
3,797
11,598
Detailed information on Board of Directors and key officer compensation is included in the “Corporate
Governance” and “Remuneration of Directors” sections to the Annual Report.
22. COMMITMENTS AND CONTINGENCIES
At December 31, 2017 and 2016, the Company provided guarantees over certain debt of its subsidiary
Ferrari Financial Services Inc. The book value of the related debt at December 31 2017 and 2016 was €29,189
thousand and €93,012 thousand, respectively.
Trade payables are due within one year and their carrying amount at the reporting date is deemed to
23. RELATED PARTY TRANSACTIONS
approximate their fair value.
18. OTHER CURRENT LIABILITIES
Pursuant to IAS 24, the related parties with which the Company has transactions are Ferrari S.p.A.
and other companies within the Ferrari Group. The Group carries out transactions with related parties on
commercial terms that are normal in their respective markets, considering the characteristics of the goods or
services involved.
Other current liabilities amounted to €1,978 thousand at December 31, 2017 (€5,636 thousand at
December 31, 2016) and primarily relate to employee benefits, provisions, deferred income and VAT payable.
Related party transactions include:
Deferred income principally relates to advances received from dealers for marketing-related events,
• Purchase of demo vehicles and spare parts from Ferrari S.p.A. (Note 10)
such as new car launches.
19. EARNINGS PER SHARE
• Corporate services and recharge of expenses to Ferrari S.p.A. (Note 5)
• Share services received from Ferrari S.p.A. mainly related to human resources, payroll, tax, legal,
Earnings per share information is provided in Note 13 to the Consolidated Financial Statements.
accounting and treasury. (Note 5)
20. AUDIT FEES
The fees for services provided by the Company’s independent auditors, Ernst & Young Accountants
LLP, and its member firms and/or affiliates, to the Company and its subsidiaries are broken down as follows:
Audit fees
Audit-related fees
Tax fees
Total
At December 31,
2017
2016
(€ thousand)
1,610
2
4
1,616
1,554
25
32
1,611
Audit fees of Ernst & Young Accountants LLP amounted to €100 thousand in 2017 (€100 thousand in
2016) and are included in the table above.
• Participation in a Ferrari Group-wide cash management system where the operating cash
management, main funding operations and liquidity investment of the Ferrari Group are centrally
coordinated by Ferrari S.p.A. Amounts recorded as Ferrari Group cash management pools
represented the Company’s participation in such pools. (Note 12)
• Financial liabilities with Ferrari S.p.A., Ferrari Financial Services S.p.A. and Ferrari North Europe
Ltd. (Note 16)
• Financial receivables with Ferrari Financial Services Inc. originated in 2017 primarily to repay the
U.S denominated portion of the Term Loan (Note 11)
• Key management compensation (Note 21).
The impact of transactions with related parties on the Company Financial Statements is disclosed
separately in the relevant notes.
328
329
FINANCIAL STATEMENTS
FERRARI N.V.
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
24. ORGANIZATIONAL STRUCTURE
25. SUBSEQUENT EVENTS
The following table sets forth the Company’s subsidiaries and associates at December 31, 2017:
The Company has evaluated subsequent events through February 23, 2018, which is the date the
Name
Country
Nature of business
Shares held
by the Group
Directly held interests
Ferrari S.p.A.
New Business 33 S.p.A.
Indirectly held through Ferrari S.p.A.
Ferrari North America Inc.
Ferrari Japan KK
Italy
Italy
USA
Japan
Manufacturing
Holding company
Importer and distributor
Importer and distributor
Ferrari Australasia Pty Limited
Australia
Importer and distributor
Ferrari International Cars Trading (Shanghai) Co. L.t.d.
China
Importer and distributor
Ferrari (HK) Limited
Ferrari Far East Pte Limited
Ferrari Management Consulting (Shanghai) Co. L.t.d.
Ferrari South West Europe S.a.r.l.
Ferrari Central East Europe GmbH
G.S.A. S.A.
Mugello Circuit S.p.A.
Ferrari Financial Services S.p.A.
Indirectly held through other Group entities
Ferrari Financial Services Inc.
Ferrari Auto Securitization Transaction, LLC
Ferrari Auto Securitization Transaction - Lease, LLC
Ferrari Auto Securitization Transaction - Select, LLC
Ferrari Financial Services Titling Trust
410, Park Display Inc.
Associated companies valued at cost
Hong Kong
Importer and distributor
Singapore
Service company
China
France
Service company
Service company
Germany
Service company
Switzerland Service company
Italy
Italy
USA
USA
USA
USA
USA
USA
Racetrack management
Financial services
Financial services
Financial services
Financial services
Financial services
Financial services
Retail
Fondazione Casa di Enzo Ferrari
Italy
Service company
Branches
UK Branch
UK
Sales and after sales support
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
25%
The liquidation process of Ferrari North Europe Limited, which at December 31, 2016 was a wholly
owned subsidiary, was completed in June 2017.
Financial Statements were authorized for issuance.
On February 9, 2018 the Company announced its intention to launch a share buyback program. The
Company expects the program to involve the repurchase from time to time of up to €100 million in common
shares. The program is intended to optimize the capital structure of the Company. Shares repurchased may
be used to meet the Company’s obligations arising from the equity incentive plan approved in 2017. Under the
program, as of February 20, 2018 the Company purchased an aggregate of 190,600 common shares on the
New York Stock Exchange (NYSE) for an aggregate consideration of $22,838,301. As of February 20, 2018 the
Company held 5,160,225 common shares in treasury, and in total the Company held 2.06 percent of the total
issued share capital in treasury, including the common shares and the special voting shares.
On February 23, 2018, the Board of Directors of Ferrari N.V. recommended to the Company’s
shareholders that the Company declare a dividend of €0.71 per common share, totaling approximately €134
million. The proposal is subject to the approval of the Company’s shareholders at the AGM to be held on April
13, 2018.
February 23, 2018
Board of Directors
Sergio Marchionne
John Elkann
Piero Ferrari
Delphine Arnault
Louis C. Camilleri
Giuseppina Capaldo
Eddy Cue
Sergio Duca
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
330
331
FINANCIAL STATEMENTS
OTHER
INFORMATION
Independent Auditor’s Report
The report of the Company’s independent auditor, Ernst & Young Accountants LLP, the Netherlands, is
set forth at the end of this Annual Report.
Dividends
Dividends will be determined in accordance with the articles 23 of the Articles of Association of Ferrari
N.V. The relevant provisions of the Articles of Association read as follows:
1. The Company shall maintain a special capital reserve to be credited against the share premium
exclusively for the purpose of facilitating any issuance or cancellation of special voting shares. The special voting
shares shall not carry any entitlement to the balance of the special capital reserve. The Board of Directors shall
be authorized to resolve upon (i) any distribution out of the special capital reserve to pay up special voting
shares or (ii) re-allocation of amounts to credit or debit the special capital reserve against or in favor of the
share premium reserve.
2. The Company shall maintain a separate dividend reserve for the special voting shares. The special
voting shares shall not carry any entitlement to any other reserve of the Company. Any distribution out of the
special voting rights dividend reserve or the partial or full release of such reserve will require a prior proposal
from the Board of Directors and a subsequent resolution of the meeting of holders of special voting shares.
the share capital and the reserves that must be maintained pursuant to Dutch law and the Company’s Articles
of Association. No distribution of profits or other distributions may be made to the Company itself for shares
that the Company holds in its own share capital.
8. The distribution of profits shall be made after the adoption of the annual accounts, from which it
appears that the same is permitted.
9. The Board of Directors shall have power to declare one or more interim distributions of profits,
provided that the requirements of paragraph 7 hereof are duly observed as evidenced by an interim statement
of assets and liabilities as referred to in Section 2:105 paragraph 4 of the Dutch Civil Code and provided further
that the policy of the Company on additions to reserves and distributions of profits is duly observed. The
provisions of paragraphs 2 and 3 hereof shall apply mutatis mutandis.
10. The Board of Directors may determine that distributions are made from the Company’s share
premium reserve or from any other reserve, provided that payments from reserves may only be made to the
Shareholders that are entitled to the relevant reserve upon the dissolution of the Company.
11. Distributions of profits and other distributions shall be made payable in the manner and at such
date(s) - within four (4) weeks after declaration thereof - and notice thereof shall be given, as the general meeting
of Shareholders, or in the case of interim distributions of profits, the Board of Directors shall determine.
3. From the profits, shown in the annual accounts, as adopted, such amounts shall be reserved as the
Board of Directors may determine.
12. Distributions of profits and other distributions, which have not been collected within five (5) years
and one (1) day after the same have become payable, shall become the property of the Company.
Branch offices
Please make reference to Note 24 of the Company Financial Statements included in this Annual Report.
4. The profits remaining thereafter shall first be applied to allocate and add to the special voting shares
dividend reserve an amount equal to one percent (1%) of the aggregate nominal value of all outstanding special
voting shares. The calculation of the amount to be allocated and added to the special voting shares dividend
reserve shall occur on a time-proportionate basis. If special voting shares are issued during the financial year to
which the allocation and addition pertains, then the amount to be allocated and added to the special voting
shares dividend reserve in respect of these newly issued special voting shares shall be calculated as from the
date on which such special voting shares were issued until the last day of the financial year concerned. The
special voting shares shall not carry any other entitlement to the profits.
5. Any profits remaining thereafter shall be at the disposal of the general meeting of Shareholders for
distribution of profits on the common shares only, subject to the provision of paragraph 8 of this article.
6. Subject to a prior proposal of the Board of Directors, the general meeting of Shareholders may
declare and pay distribution of profits and other distributions in United States Dollars. Furthermore, subject
to the approval of the general meeting of Shareholders and the Board of Directors having been designated as
the body competent to pass a resolution for the issuance of shares in accordance with Article 6, the Board of
Directors may decide that a distribution shall be made in the form of shares or that Shareholders shall be given
the option to receive a distribution either in cash or in the form of shares.
7. The Company shall only have power to make distributions to Shareholders and other persons entitled
to distributable profits to the extent the Company’s equity exceeds the sum of the paid in and called up part of
332
333
FINANCIAL STATEMENTS
INDEPENDENT
AUDITOR’S REPORT
To: the shareholders and audit committee of Ferrari N.V.
Report on the audit of the 2017 financial statements included in the annual report
Our opinion
We agreed with the audit committee that misstatements in excess of €1.8 million, which are identified
during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported
on qualitative grounds.
We have audited the 2017 financial statements of Ferrari N.V. (the Company), incorporated in
Amsterdam, the Netherlands.
Scope of the group audit
In our opinion the accompanying financial statements give a true and fair view of the financial position
of Ferrari N.V. as at December 31, 2017, and of its result and its cash flows for 2017, 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.
The financial statements comprise:
• The consolidated and Company statement of financial position as at December 31, 2017
• The following statements for 2017: the consolidated and Company income statement, the
consolidated and Company statements of comprehensive income, cash flows and changes in equity
• The notes comprising a summary of the significant accounting policies and other explanatory
information
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing.
Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the
financial statements” section of our report.
We are independent of Ferrari N.V., in accordance with the EU Regulation on specific requirements
regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms
supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO,
Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant
independence regulations in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en
beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Materiality
Materiality
€36 million (2016: €28 million)
Benchmark applied
Explanation
Approximately 5% of consolidated profit before taxes
We consider an earnings-based measure, particularly profit before taxes, as the appropriate
basis for determining our materiality because the users of the financial statements of profit-
oriented entities tend to focus on operational performance
We have also taken misstatements into account and/or possible misstatements that in our opinion are
material for the users of the financial statements for qualitative reasons.
Ferrari N.V. is the parent of a group of entities. The financial information of this group is included in the
consolidated financial statements of Ferrari N.V.
Our group audit mainly focused on significant group entities. Group entities are considered significant
because of their individual financial significance or because they are more likely to include significant risks of
material misstatement due to their specific nature or circumstances. All significant group entities were included
in the scope of our group audit. We identified two group entities, which, in our view, required an audit of their
complete financial information, either due to their overall size or their risk characteristics. Specific scope audit
procedures on certain balances and transactions were performed on four entities. Other procedures were
performed on the remaining entities.
In establishing the overall approach to the audit, we determined the work to be performed by us, as
group auditors, or by component auditors from Ernst & Young Global member firms and operating under our
coordination and supervision. We have performed the following procedures:
• We visited EY Italy to review the audit work performed on the group consolidation, financial
statements and related disclosures and the key audit matters related to Ferrari S.p.A.: revenue
recognition and warranty and recall campaigns provisions. We reviewed the audit files of the
component auditor and determined the sufficiency and appropriateness of the work performed.
• Other component auditors included in the group audit scope received detailed instructions,
including key risks and audit focus areas, and we reviewed the reporting deliverables for Ferrari
North America Inc. and Ferrari Financial Services Inc.
The entities included in the group audit scope represent 99% of the group’s total assets and 99% of net
revenues. The scope of the procedures performed is detailed in the graphs reported below:
By performing the procedures at group entities, together with additional procedures at group level, we
have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to
provide an opinion on the financial statements.
334
335
FINANCIAL STATEMENTS
INDEPENDENT
AUDITOR’S REPORT
To: the shareholders and audit committee of Ferrari N.V.
Our key audit matters
Warranty and recall campaigns provision
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements. We have communicated the key audit matters to the audit committee.
The key audit matters are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and
in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit
matters are consistent with those reported in prior year.
Key observations (as communicated
to the audit committee)
As a result of the audit procedures per-
formed we did not identify any material
misstatement in the revenues reported
in the financial statements.
Risk
Our audit approach
Revenue recognition
is
The Company recognizes revenue for
sales of vehicles, net of discounts, cash
sales incentives and rebates recognized
to dealers or customers, when persuasive
evidence of an arrangement exists,
collectability
reasonably assured,
and the risks and rewards of ownership
have transferred to the customer (for
vehicle sales, generally when the vehicle
is released to the carrier responsible for
transporting vehicles to dealers).
The Company grants to customers the
opportunity to benefit of maintenance
programs performed by authorized
dealers. The scheduled maintenance
service is included in the price paid
by the customer for the car. The
free
maintenance programs
annual maintenance services, performed
once a year, for a period of 7 years.
Other
to
relate
sponsorships, commercial, brand and
engine sales.
Revenue recognition is inherently an
area of audit risk which we substantially
focus on.
The Company has disclosed
its
accounting policy related to revenue
recognition in the financial statements
under note 2: significant accounting
policies.
streams
revenue
include
Our procedures, designed
to be
responsive to the risk identified, included
the following:
We confirmed our understanding of
the revenues recognition process for
each class of transaction, evaluated
the Company’s accounting policy, and
the design and operating
assessed
effectiveness of relevant internal controls.
We performed sales cut-off testing
procedures, with an additional focus on
shipping terms or manual adjustments.
We performed in depth analysis on
revenues and margin, disaggregated by
month, on the Company’s key revenues
streams, compared
to operational
data (i.e. cars/engines shipping data),
identify and assess any unusual
to
fluctuations.
We performed testing of sales incentive
programs and
late period-end sale,
including a retrospective review of any
credits to customers issued subsequent
to the year-end date.
We assessed the reasonableness of the
fair value allocated to vehicle sales and
maintenance programs based on the
relative stand-alone selling price. We
further tested the recognition of revenues
over the maintenance programs terms
and underlying base data.
Finally, we reviewed the adequacy of the
disclosures made by the Company re-
garding revenue recognition.
As a result of the audit procedures
performed we did not identify any
material misstatement in the provision
for warranty and recall campaigns
reported in the financial statements.
Our procedures, designed to be respon-
sive to the risk identified, included the
following:
We confirmed our understanding of
recall campaign
the warranty and
provisioning process, evaluated
the
Company’s accounting policy, and
assessed the design and operating
effectiveness of relevant internal controls.
We assessed the reasonableness of the
methodology and assumptions used
by management in estimating future
costs for warranty programs and recall
campaigns, and assessed any changes,
or the lack thereof, from the prior year.
We completed analytical procedures
aimed at assessing the reasonableness of
the accrued provisions.
We completed a retrospective analysis
comparing the provisions recorded by
the Company against actual spending
for warranty and recall service costs to
corroborate the cost assumptions used
by management.
Finally, we reviewed the adequacy of the
disclosures made by the Company.
As at December 31, 2017 warranty and
recall campaigns provision amounts to
€123 million. The Company establishes
provisions for product warranties at the
time the sale is recognized to guarantee
the performance of vehicles from defects
that may become apparent within a
certain period or term. The provision
includes management’s best estimate of
the expected cost to fulfill the obligations
over the contractual warranty period
based on the Company’s historical
claims or costs experience and the cost
of parts and services to be incurred.
In addition, the Company periodically
initiates voluntary service actions to
address various client satisfaction,
safety and emissions issues related to
cars sold. Included in the provision are
the estimated costs of these services and
recall actions.
Estimates of the future costs of these
to numerous
subject
actions are
uncertainties, including the enactment
of new laws and regulations, the number
of vehicles affected by warranty or recall
actions and the nature of the corrective
action that may result in adjustments to
the established provisions.
The costs related to these provisions are
recognized within cost of sales.
its
The Company has disclosed
accounting policy related to warranty
and recall campaigns provision in the
financial statements under note 2:
significant accounting policies.
Report on other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report contains
other information that consists of:
• The board report
• Other information pursuant to Part 9 of Book 2 of the Dutch Civil Code
336
337
FINANCIAL STATEMENTS
INDEPENDENT
AUDITOR’S REPORT
To: the shareholders and audit committee of Ferrari N.V.
Based on the following procedures performed, we conclude that the other information:
Our responsibilities for the audit of the financial statements
• Is consistent with the financial statements and does not contain material misstatements
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient
• Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code
We have read the other information. Based on our knowledge and understanding obtained through
our audit of the financial statements or otherwise, we have considered whether the other information contains
material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2
of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less than the
scope of those performed in our audit of the financial statements.
Management is responsible for the preparation of the other information, including the board report in
accordance with Part 9 of Book 2 of the Dutch Civil Code and other information pursuant to Part 9 of Book 2
of the Dutch Civil Code.
Report on other legal and regulatory requirements
Engagement
We were engaged by the audit committee as auditor of Ferrari N.V. on September 29, 2015, to perform
the audit of its 2015 financial statements, and have operated as statutory auditor since then.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation
on specific requirements regarding statutory audit of public-interest entities.
Description of responsibilities for the financial statements
Responsibilities of management and the audit committee for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible
for such internal control as management determines is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned,
management should prepare the financial statements using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative
but to do so. Management should disclose events and circumstances that may cast significant doubt on the
Company’s ability to continue as a going concern in the financial statements.
and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may
not have detected all material errors and fraud.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and
the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism throughout the
audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements.
Our audit included e.g.,:
•
Identifying and assessing the risks of material misstatement of the financial statements, whether
due to fraud or error, designing and performing audit procedures responsive to those risks, and
obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control
• Obtaining an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control
• Evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management
• Concluding on the appropriateness of management’s use of the going concern basis of accounting,
and based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause a company to
cease to continue as a going concern
• Evaluating the overall presentation, structure and content of the financial statements, including the
disclosures
• Evaluating whether the financial statements represent the underlying transactions and events in a
The audit committee is responsible for overseeing the Company’s financial reporting process.
manner that achieves fair presentation
338
339
FINANCIAL STATEMENTS
INDEPENDENT
AUDITOR’S REPORT
To: the shareholders and audit committee of Ferrari N.V.
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising
and performing the group audit. In this respect we have determined the nature and extent of the audit
procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group
entities or operations. On this basis, we selected group entities for which an audit or review had to be carried
out on the complete set of financial information or specific items.
We communicate with the audit committee regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant findings in internal control that
we identify during our audit. In this respect we also submit an additional report to the audit committee in
accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-
interest entities. The information included in this additional report is consistent with our audit opinion in this
auditor’s report.
We provide the audit committee with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the audit committee, we determine those matters that were
of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the
public interest.
Rotterdam, February 23, 2018
Ernst & Young Accountants LLP
/s/ Pieter Laan
FERRARI
WORLDWIDE
Geneva, International Motor Show
Frankfurt, International Motor Show
Tarragona, Ferrari Land at PortAventura Park
Maranello and London, “Under the Skin” exhibition
340
Mugello, Finali Mondiali
The 55th Anniversary of the 250 GTO
341
FINANCIAL STATEMENTS
FERRARI
WORLDWIDE
Geneva, International Motor Show
342
343
FERRARI
WORLDWIDE
Frankfurt, International Motor Show
344
345
FERRARI
WORLDWIDE
Tarragona, Ferrari Land at PortAventura Park
346
347
FERRARI
WORLDWIDE
Maranello and London, “Under the Skin” exhibition
348
349
FERRARI
WORLDWIDE
Mugello, Finali Mondiali
350
351
FERRARI
WORLDWIDE
The 55th Anniversary of the 250 GTO
352
353
Ferrari N.V.
Official Seat:
Amsterdam, The Netherlands
Dutch Trade Registration Number:
64060977
Administrative Offices:
Via Abetone Inferiore 4
I- 41053, Maranello (MO)
Italy
Ferrari N.V.ANNUAL REPORT2017ANNUAL REPORT 2017Ferrari N.V.Official Seat:Amsterdam, The NetherlandsDutch Trade Registration Number:64060977 Administrative Offices:Via Abetone Inferiore 4I- 41053, Maranello (MO)ItalyFerrari N.V.ANNUAL REPORT2017