FERRARI N.V.
Annual Report 2018
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Ferrari N.V.
ANNUAL REPORT
2018
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FERRARI N.V.Annual Report 2018 Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 2019 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, 2018
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, 2018
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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84
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Annual Report 2018
Board of Directors and Auditors
Board of Directors
Chairman
John Elkann
Chief Executive Officer
Louis C. Camilleri
Vice Chairman
Piero Ferrari
Directors
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Sergio Duca
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
Independent Auditors
Ernst & Young Accountants LLP
4
FERRARI N.V.Annual Report 2018 Letter from the Chairman
and the Chief Executive Officer
Dear Shareholders,
We would like to begin this letter by
remembering with great affection and gratitude the
late Sergio Marchionne whose passing had such
an undeniable impact on 2018. We are extremely
proud of the way Ferrari’s men and women reacted
to that tragic loss, not only ensuring a sense of
continuity but also achieving all of the goals we
had set ourselves for the financial year.
It was with a sense of great pride and
responsibility that we accepted the roles of
Chairman and Chief Executive Officer, respectively,
and in doing so, committed ourselves to guiding
Ferrari into the future whilst staying true to the
principles laid down for us by our founder.
We spoke about that future on Capital Markets
Day, which proved an invaluable opportunity to
meet and dialogue with the financial community.
We also presented our plans for the Company up to
2022 which centre around an exhilarating schedule
of launches spanning innovative hybrid models that
are the product of appropriate investment. Our
range is already more complete than it has ever
been. But in addition to its three classic pillars -
sports cars, Grand Tourers and Special Series - we
also further enhanced it with the Icona concept
of which the Ferrari Monza SP1and SP2 are the
forerunners. This completely unprecedented limited
edition concept offers a modern reinterpretation
of a timeless style and marries it with leading-edge
technologies and blistering performance. Last
year, we also launched the 488 Pista and the 488
Pista Spider, which hailed a further leap forward in
dynamic performance from the previous 8-cylinder
special series.
Ferrari’s solid financial results in 2018 either
matched or exceeded our targets and were the best
possible response to future challenges. In the course
of 2018, we delivered 9,251 cars, a jump of over 10%
on the previous year’s figure with increases across all
our regions. This too provides further confirmation of
the global power of the brand.
One of the keys to our success is the enduring
bond with our clients which we nurture through
a series of initiatives inspired by passion and the
sheer joy of driving our cars. Examples include the
Ferrari Cavalcade and Cavalcade Classiche, the
latter already eagerly-anticipated despite only being
on its second outing.
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FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
In 2018, the Group’s commitment to sustainability
progressed hand-in-glove with our economic and
financial growth. Aside from an intensive R&D
focus on hybridizing the range, we also worked on
improving the energy efficiency of the Ferrari complex
and invested in that most fundamental of resources,
our human capital, by boosting training hours by
over 45%.
As with all of our activities, our responsibility is
to look beyond the short term and guide the Ferrari
of tomorrow towards achieving even more ambitious
goals. As far as we are concerned there is no better
way of honouring both our history and you, our
shareholders, for the faith you have shown in us on
our shared journey.
On the motorsport front, the Scuderia Ferrari
proved highly competitive in 2018, delivering our
most successful F1 season of the last decade which,
unfortunately, was still not quite enough for us to
take the final, much coveted step.
Staying with racing, the GT categories almost all
lived up to expectations, while in terms of our Corse
Clienti activities, the Ferrari Challenge attracted an
even larger field of drivers. F1 Clienti too had another
very positive year and the XX Programmes received a
boost in the form of the FXX-K EVO.
In terms of our brand diversification activities,
we put the emphasis on loyalty to our unique
heritage through meticulously selecting licensing and
partnership opportunities, eliminating those that did
not reflect the brand’s values. We need to retain the
Scuderia Ferrari-branded products demanded by our
tifosi but also to simultaneously develop the range of
the high quality creations so greatly appreciated by
our clients.
February 26, 2019
John Elkann
Chairman
Louis Carey Camilleri
Chief Executive Officer
7
Annual Report 2018 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. 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. (“Fiat”) with and into FCA. References to the “Separation” refer to the series of transactions
through which the Ferrari business was separated from FCA as summarized in “Note on Presentation” below and
references to the “Restructuring” refer to a restructuring completed in October 2015 as part of the Separation.
Note on Presentation
This Annual Report includes the consolidated financial statements of Ferrari N.V. as of December 31,
2018 and 2017, and for the years ended December 31, 2018, 2017 and 2016 prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board, as well as IFRS as adopted by the European Union, 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, 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 referred to 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.
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.
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FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 “e” 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.
9
Annual Report 2018 Selected Financial and Other Data
The following tables set forth selected historical
consolidated financial and other data of Ferrari and
have been derived from:
(i) the audited Consolidated Financial Statements,
included elsewhere in this Annual Report;
(ii) the audited consolidated income statement of the
Company for the years ended December 31, 2015
and 2014 and the audited consolidated statement
of financial position at December 31, 2016, 2015
and 2014;
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 debt
owing to FCA 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, 2014.
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
(e million, except per share 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 (e) (1)
Diluted earnings per common share (e) (1) (2)
Dividend approved per common share (e) (3)
Distribution approved per common share (e) (4) (5)
For the years ended December 31,
2017
3,417
775
746
537
535
2
2.83
2.82
—
0.635
2016
3,105
595
567
400
399
1
2.11
2.11
—
0.46
2015
2,854
444
434
290
288
2
1.52
1.52
—
—
2014
2,762
389
398
265
261
4
1.38
1.38
—
—
2018
3,420
826
803
787
785
2
4.16 (6)
4.14 (6)
0.71
—
(1) For 2014 and 2015, retrospectively reflects the issuance of 188,923,499 common shares as if the Separation had occurred on January 1, 2014.
See also Note 13 to the Consolidated Financial Statements.
(2) In order to calculate the diluted earnings per common share 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 for the years ended
December 31, 2018 and 2017, and (ii) the potential common shares that would have been issued for the Non-Executive Directors’ compensation
agreement for the years ended December 31, 2017 and 2016. For the years ended December 31, 2015 and 2014 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 13, 2018, a dividend
distribution of e0.71 per common share was approved, corresponding to a total distribution of e134 million. The distribution was made from
the retained earnings reserve.
(4) 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 e0.635 per common share was approved, corresponding to a total distribution of e120 million. The distribution was made from
the share premium reserve which is a distributable reserve under Dutch law.
(5) Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 15, 2016, a cash
distribution of e0.46 per common share was approved, corresponding to a total distribution of e87 million. The distribution was made from the
share premium reserve which is a distributable reserve under Dutch law.
(6) The increase in the basic and diluted earnings per common share in 2018 compared to 2017 includes the effects of applying the Patent Box tax
regime starting in the third quarter of 2018. See Adjusted Basic and Diluted Earnings per Common Share for 2018 in the section “Operating Results
Non-GAAP Financial Measures” as well as Note 11 to the Consolidated Financial Statements, both included elsewhere in this Annual Report, for
additional information.
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FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATA
(e million, except number of shares issued)
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
2018
794
—
4,852
1,927
1,354
1,349
5
3
At December 31,
2017
648
—
4,141
1,806
784
779
5
3
2016
458
—
3,850
1,848
330
325
5
3
2015
183
139
3,875
2,260
(19)
(25)
6
4
2014
134
942
4,641
510
2,478
2,470
8
4
Common shares issued (in thousands of shares) (3)
187,921
188,954 188,923 188,923 188,923
(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 of the Group were centrally coordinated by dedicated
treasury companies with the objective of ensuring effective and efficient management of our funds. Following the completion of 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
e0.01, as if the Separation had occurred on January 1, 2014.
OTHER STATISTICAL INFORMATION
Shipments (number of cars)
Average number of employees for the period
For the years ended December 31,
2018
9,251
3,651
2017
8,398
3,336
2016
8,014
3,115
2015
7,664
2,954
2014
7,255
2,843
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Annual Report 2018
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 41% 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
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.
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.
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
The Non Financial Statement section of our
2018 Annual Report addresses those aspects of our
sustainability efforts that we have identified as being
of greatest importance to our internal and external
stakeholders.
12
FERRARI N.V.Annual Report 2018 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 and
electric engine technology will 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, GT, special series and
Icona 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 Drivers’ 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
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FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 brand and
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, in the next few years luxury performance
cars will increasingly transition to hybrid and electric
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
15
Annual Report 2018 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 museums and
affiliations with regional Ferrari clubs. The support
of this community also depends upon the perception
of our cars as collectibles, which we also support
through our Ferrari Classiche services, and the active
resale market for our automobiles which encourages
interest over the long term. The increase in the
number of cars we produce relative to the number
of automotive collectors and purchasers in the
secondary market may adversely affect our cars’ value
as collectible items and in the secondary market more
broadly.
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.
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 hybrid
and electric 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 brand and 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 or are delayed
in recognizing trends and customer preferences, 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, as we introduce the Purosangue, a luxury
high performance vehicle within the GT range that we
are developing and will launch in the coming years.
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.
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
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FERRARI N.V.Annual Report 2018> Risk Factors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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.
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, as
well as dealer operations and workshops, 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 successful new cars
or delays in their launch that could result in others
bringing new products and technologies to the
market first, could compromise our competitive
position and hinder the growth of our business. 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 planning
to introduce 15 new models in the 2019-2022
period (which is unprecedented for Ferrari over a
similar time period). We have recently introduced
the Icona limited editions, a new concept that takes
inspiration from our iconic cars of the past and
interprets them in a modern way with innovative
materials and innovative technology. In the GT
range, we are developing a luxury high performance
vehicle, the Purosangue, and we are planning a new
line of cars powered by V6 engines. In addition,
we will gradually but rapidly 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.
17
Annual Report 2018 We plan to redesign our international network
On the other hand, our current growth strategy
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.
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.
contemplates a measured but significant increase
in car sales above current levels as we target a larger
customer base and modes of use, we increase our
focus on GT cars and our product portfolio evolves
with a broader product range.
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.
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 a small number of
car models to generate our revenues. Our current
product range consists of six range models (including
three sports cars and three GT cars) and two
special series cars. While we anticipate significantly
expanding our car offerings as part of our growth
strategy through the introduction of 15 new products
in the 2019-2022 period, a limited number of models
will continue to account for a large portion of our
revenues at any given time in the foreseeable future,
compared to other automakers. 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, or that we will be able
to launch new models on a timely basis compared
to our competitors. 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 (including the
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new Icona limited editions) 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.
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. Although China only represents
approximately 8 percent of our net revenues and a
limited proportion of our growth in the short term,
slowing economic conditions in China may adversely
affect our revenues in that region.
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 China
and other growth and emerging markets may adversely
affect our business”.
Developments in China and other growth and
emerging markets may adversely affect our
business.
We operate in a number of growth and emerging
markets, both directly and through our dealers and
we have experienced increasing demand in China and
other regions in Asia.
We believe we have potential for further success
in new geographies, in particular in China, but also
more generally 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
19
Annual Report 2018 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 growth and 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 growth and 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 affect us”.
We may be adversely affected by the UK
determination to leave the European Union
(Brexit).
In a June 23, 2016, referendum, the United
Kingdom voted to terminate the UK’s membership in
the European Union (“Brexit”). On March 29, 2017,
the United Kingdom formally notified the European
Union of its intention to withdraw pursuant to Article
50 of the Lisbon Treaty. Negotiations 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 remain
ongoing. 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. It is possible that there will be greater
restrictions on imports and exports between the
UK and European Union countries and increased
regulatory complexities which may prove challenging
and costly. Approximately 9 percent of our cars and
spare parts net revenues in 2018 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.
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 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
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
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incentivize senior executives, other key employees
or new qualified personnel, our business, results of
operations and financial condition may suffer.
We rely on our dealer network to provide sales
and services.
We do not own our Ferrari dealers and virtually
all of our sales are made through our network of
dealerships located throughout the world. If our
dealers are unable to provide sales or service quality
that our clients expect or do not otherwise adequately
project the Ferrari image and its aura of luxury
and exclusivity, the Ferrari brand may be negatively
affected. We depend on the quality of our dealership
network and our business, operating results and
financial condition could be adversely affected if our
dealers suffer financial difficulties or otherwise are
unable to perform to our expectations. 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
21
Annual Report 2018 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 also “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
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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.
We rely on our licensing and franchising partners
to preserve the value of our licenses and the
failure to maintain such partners could harm our
business.
We currently have multi-year agreements with
licensing partners for various Ferrari-branded
products in the sports, lifestyle and luxury retail
segments. We also have multi-year agreements with
franchising partners for our Ferrari stores and theme
park. In the future, we may enter into additional
licensing or franchising arrangements. Many of the
risks associated with our own products also apply
to our licensed products and franchised stores. In
addition, there are unique problems that our licensing
or franchising partners may experience, including
risks associated with each licensing partner’s ability
to obtain capital, manage its labor relations,
maintain relationships with its suppliers, manage
its credit and bankruptcy risks, and maintain client
relationships. While we maintain significant control
over the products produced for us by our licensing
partners and the franchisees running our Ferrari
stores and theme 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.
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
23
Annual Report 2018 into royalty or licensing agreements on unfavorable
terms or to redesign products to comply with third
parties’ intellectual property rights.
Engine production revenues are dependent on
Maserati’s ability to sell its cars.
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 profits related to Formula 1
activities may decline if either our team’s performance
worsens compared to other competing teams, or
if the overall Formula 1 business suffers, including
potentially as a result of increasing popularity of the
FIA Formula E championship. 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, extensive talks were held in 2018 and are
continuing among the owners of the Formula 1 business
and all teams with regards to the arrangements relating
to the participation of Ferrari and the other teams
competing in the championship in the period following
the 2020 expiration of the current arrangements
between racing teams and the operator of Formula 1.
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.
24
We produce V8 and V6 engines for Maserati.
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.
While Maserati is required to compensate us for
certain production costs we may incur 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.
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;
FERRARI N.V.Annual Report 2018> Risk Factors Board Report | Financial Statements | Other Information
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Company Financial Statements and Notes
• 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;
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.
• European Union and foreign government trade
Current European legislation limits fleet average
restrictions, customs regulations, tariffs and price or
exchange controls;
• 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.
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
greenhouse gas emissions for new passenger cars.
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 an SVM, we expect to
benefit from a derogation from currently applicable
standards. We have also petitioned the EPA for
alternative standards for the model years 2017-2021
and 2022-2025, 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, or if we produce
annually more than 10,000 vehicles globally, 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.
25
Annual Report 2018 In the United States, considerable uncertainty
is associated with emissions regulations under the
current administration. New regulations are in the
process of being developed, and many existing and
potential regulatory initiatives are subject to review
by federal or state agencies or the courts. In August
2018 the NHTSA and the EPA issued a common
proposal, the “Safer Affordable Fuel-Efficient (SAFE)
Vehicles Rule for model years 2021-2026 Passenger
Cars and Light Trucks” (SAFE Vehicles Rule). The
SAFE Vehicles Rule, if finalized, would amend certain
existing Corporate Average Fuel Economy (CAFE)
and tailpipe carbon dioxide emissions standards for
passenger cars and light trucks and establish new
standards, all covering model years 2021 through
2026. The authorities’ stated preferred alternative is
to retain the model year 2020 standards (specifically,
the footprint target curves for passenger cars and
light trucks) for both programs through model year
2026, but comment has been sought on a range of
alternatives.
In the state of California (which has been granted
special authority under the Clean Air Act to set its own
vehicle emission standards), the California Air Resources
Board (“CARB”) has enacted regulations under which
manufacturers of vehicles for model years 2012 through
2025 which are in compliance with the EPA greenhouse
gas emissions regulations are also deemed to be in
compliance with California’s greenhouse gas emission
regulations (the so-called “deemed to comply” option).
The SAFE Vehicles Rule mentioned above proposes to
withdraw the waiver granted to California under the
Clean Air Act to establish more stringent standards
for vehicle emissions that are applicable to model
years 2021 through 2025. In response to the proposed
California waiver withdrawal, on December 12, 2018
the CARB amended its existing regulations to clarify that
the “deemed to comply” provision shall not be available
for model years 2021-2025 if the EPA standards for
those years are altered via an amendment of federal
regulations. Ferrari currently avails itself of the “deemed-
to-comply” provision to comply with CARB greenhouse
gas emissions regulations. Therefore, it may necessary
to also petition the CARB for SVM alternative standards
and to increase the number of tests to be performed in
order to follow the CARB specific procedures.
In addition, we are subject to legislation relating
to the emission of other air pollutants such as,
among others, the EU “Euro 6” standards and
Real Driving Emissions (RDE) standards, 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. In 2016, NHTSA published guidelines
for driver distraction, for which rulemaking activities
have not progressed since early 2017. The costs
of compliance associated with these and similar
rulemaking 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 several autonomous Chinese regions and
municipalities are implementing the requirements
of the National 6 program even ahead of the
mandated deadlines. 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.
We could lose our status as an 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
26
FERRARI N.V.Annual Report 2018> Risk Factors Board Report | Financial Statements | Other Information
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Company Financial Statements and Notes
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 an
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 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 (defined as
manufacturers with less than 2,000 units imported
in China per year) 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.
The introduction of hybrid cars is costly and its
long term success is uncertain.
We are gradually but rapidly introducing hybrid
technology in our cars. 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 helping us meet increasingly stricter emissions
requirements.
While some of our past models, such as
LaFerrari and LaFerrari Aperta, have included
hybrid technology, 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 the medium term
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 brand and competitive
position may suffer.”
Because hybrid technology is a core component of
our strategy, and we expect that a significant portion
of our shipments will consist of hybrid vehicles in
the medium term, 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.
27
Annual Report 2018 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 recorded a provision
regarding this matter in the second quarter of
2016 for an amount of e37 million. This provision
amounted to e25 million as of December 31,
2018. For a description of these and other recent
recalls , see “Overview of Our Business-Regulatory
Matters-Vehicle safety”. In addition, regulatory
28
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.
FERRARI N.V.Annual Report 2018> Risk Factors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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.
A disruption in our information technology
could compromise confidential and sensitive
information.
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.
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,
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, human error, disruption,
or interruption to power supply, 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 by us and our
third party service providers 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,
29
Annual Report 2018 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 periodically assess
and implement actions to ameliorate risks to our
systems, a significant or large scale malfunction or
interruption of our 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. Therefore we are subject
to a variety of ever-changing data protection and
privacy laws on a global basis, including the EU
General Data Protection Regulation, which came
into force on May 25, 2018. 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.
Our indebtedness could adversely affect our
operations and we may face difficulties in servicing
or refinancing our debt.
As of December 31, 2018, our gross consolidated
debt was approximately e1,927 million (which
includes our financial services), including e500
million aggregate principal amount of 1.500 percent
notes due 2023, and e700 million aggregate
principal amount of 0.250 percent 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.
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
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
We may not be able to provide adequate access
to financing for our dealers and clients, and our
financial services operations may be disrupted.
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,
2018, an amount of $782 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 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.
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
31
Annual Report 2018 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.
We are subject to risks associated with exchange
rate fluctuations, interest rate changes, credit risk
and other market risks.
We operate in numerous markets worldwide
and are exposed to market risks stemming from
fluctuations in currency and interest rates. The
exposure to currency risk is mainly linked to the
differences in geographic distribution of our sourcing
and manufacturing activities from those in our
commercial activities, as a result of which our cash
flows from sales are denominated in currencies
different from those connected to purchases or
production activities. For example, we incur a large
portion of our capital and operating expenses in
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, the U.S. Dollar gradually
appreciated against the Euro in the first half of 2018,
to remain relatively stable until early 2019, while the
pound sterling remained subject to a high degree
of volatility against the Euro. If the U.S. Dollar were
to depreciate against the Euro, we expect that it
would adversely impact our revenues and results of
operations. Changes in exchange rates between the
Euro on the one hand and, on the other hand, the
main foreign currencies in which we operate, also
affect our revenues and results of operations.
We seek to manage risks associated with
fluctuations in currency through financial hedging
instruments. Although we seek to manage our foreign
currency risk in order to minimize any negative
effects caused by rate fluctuations, including through
hedging activities, there can be no assurance that we
will be able to do so successfully, and our business,
results of operations and financial condition could
nevertheless be adversely affected by fluctuations in
market rates, particularly if these conditions persist.
Our financial services activities are also subject to
the risk of insolvency of dealers and retail clients, as
well as unfavorable economic conditions in markets
where these activities are carried out. Despite our
efforts to mitigate such risks through the credit
approval policies applied to dealers and retail clients,
there can be no assurances that we will be able to
successfully mitigate such risks, particularly with
respect to a general change in economic conditions.
Changes in tax, tariff or fiscal policies could
adversely affect demand for our products.
Imposition of any additional taxes and levies
designed to limit the use of automobiles could
adversely affect the demand for our vehicles and our
results of operations. Changes in corporate and other
taxation policies as well as changes in export and other
incentives given by various governments or import or
tariff policies could also adversely affect our results of
operations. In addition, in the last months of 2018,
the United States administration declared that it is
considering imposing new tariffs on imported cars.
Considerable uncertainty surrounds the introduction
and scope of tariffs by the United States or other
countries, as well as the potential for additional trade
actions by the United States or other countries. The
impact of any such tariffs on our operations and
results is uncertain and could be significant, and
we can provide no assurance that any strategies we
implement to mitigate the impact of such tariffs or
other trade actions will be successful. 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
32
FERRARI N.V.Annual Report 2018> Risk Factors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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 currently
subject to mandatory audit review, to be completed
by May 1, 2019, according to the new European
Customs Legislation and therefore we are required
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.
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;
• 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.
33
Annual Report 2018 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 23.7 percent of our
outstanding common shares and approximately
33.6 percent of our voting power (as of February 15,
2019). 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 (the “Board
of Directors”), capital increases and amendments
to our articles of association. In addition, as of
February 15, 2019, Piero Ferrari, the Vice Chairman
of Ferrari, holds approximately 10.1 percent of our
outstanding common shares and approximately 15.5
percent of voting interest in us (as of February 15,
2019). 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. John
Elkann, our Chairman, is the Chairman and an
executive director of FCA and Chief Executive Officer
of Exor. Certain of our other directors and officers
may also be directors or officers of FCA or Exor, our
and FCA’s largest shareholder. These individuals
owe duties both to us and to the other companies
that they serve as officers and/or directors. This
may raise conflicts as, for example, these individuals
review opportunities that may be appropriate or
suitable for both us and such other companies, or
we pursue business transactions in which both we
and such other companies have an interest, such
as our arrangement to supply engines for Maserati
cars. Exor holds approximately 23.7 percent of our
outstanding common shares and approximately 33.6
percent of the voting power in us (as of February 15,
2019), while it holds approximately 29.0 percent of
the outstanding common shares and approximately
42.1 percent of the voting power in FCA (based on
SEC filings). 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
34
FERRARI N.V.Annual Report 2018> Risk Factors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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.
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. As of February 15, 2019, Exor
had approximately 23.7 percent of our outstanding
common shares and a voting interest in Ferrari of
approximately 33.6 percent. As of February 15,
2019, Piero Ferrari held approximately 10.1 percent
of our outstanding common shares and, as a result
of the loyalty voting mechanism, had approximately
15.5 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.”
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 our
shareholders and the responsibilities of members of
our Board of Directors may be different from the rights
of shareholders and the responsibilities of members of
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
35
Annual Report 2018 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.
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.
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.
We are a holding company and our operations are
conducted through our subsidiaries. As a result, our
ability to pay dividends primarily depends on the
ability of our subsidiaries, particularly Ferrari S.p.A.,
to generate earnings and to provide us with the
necessary financial resources.
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.
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
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
36
FERRARI N.V.Annual Report 2018> Risk Factors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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.
In order to reduce future potential disputes with
Shares of our stock would be stock of a “passive
tax authorities, we seek advance agreements with
tax authorities on significant matters. In particular
we filed a ruling application for advance pricing
agreement (APA) on transfer pricing.
In addition, tax laws are complex and subject to
subjective valuations and interpretive decisions, and
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
37
Annual Report 2018 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.
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, with the some limitations, until fiscal
year 2020 according to current regulations) and
for the investments on manufacturing equipment
(available until fiscal year 2019 according to current
regulations), which result in a tax saving. A change in
regulations or interpretation might adversely affect
the availability of such exemptions and result in
higher tax charges.
No statutory, judicial or administrative authority
Italian Law No. 190 of December 2014, as
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
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. In September 2018 we
received the mandatory ruling from the Italian
tax authorities according to which we are able to
significantly reduce our tax expenses. The ruling
covers the period starting from 2015 and it remains
in force until fiscal year 2019, following which we
may not be able to benefit from a comparably
favorable regime.
38
FERRARI N.V.Annual Report 2018> Risk Factors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Overview
Ferrari is among the world’s leading luxury brands
In 2018, we shipped 9,251 cars and recorded
net revenues of e3,420 million, EBIT of e826
million, net profit of e787 million, and adjusted
earnings before interest, taxes, depreciation, and
amortization (Adjusted EBITDA) of e1,114 million,
adjusted earnings before interest and taxes (Adjusted
EBIT) of e825 million and Adjusted Net Profit of
e645 million. For additional information regarding
Adjusted EBITDA, Adjusted EBIT and Adjusted Net
Profit, which are non-GAAP measures, including
a reconciliation of Adjusted EBITDA to net profit,
Adjusted EBIT to EBIT and Adjusted Net Profit to
net profit, see “Operating Results-Non-GAAP Financial
Measures.”
We divide our regional markets into EMEA,
Americas, Mainland China, Hong Kong and Taiwan
and Rest of APAC, representing respectively 45.7
percent, 32.4 percent, 7.5 percent and 14.4 percent of
units shipped in 2018.
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 235 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 167 authorized dealers
operating 190 points of sale as of the end of 2018.
We believe our cars are the epitome of
performance, luxury and styling. Our current sports
and GT range consists of six models, including three
sports cars (488 GTB, 488 Spider and 812 Superfast)
and three GT cars (GTC4Lusso, GTC4Lusso T and
Ferrari Portofino) and two special series cars (488
Pista and 488 Pista Spider). The Ferrari Portofino was
unveiled in September 2017 and shipments began in
the second quarter of 2018, while the 488 Pista was
launched in March 2018 at the Geneva Motor Show,
with shipments beginning in the third quarter of
2018. The 488 Pista Spider was launched in August
2018 and shipments will begin in 2019. Our most
recent hypercar, the LaFerrari Aperta, was launched
in 2016 to celebrate our 70th Anniversary and finished
its limited series run in 2018. The Monza SP1 and
SP2 were unveiled in 2018 to kick off a new pillar in
our product offering, the Icona, a line of modern cars
inspired by our iconic cars of the past, with deliveries
expected to begin in 2019. We also produce very
limited editions series (fuori serie) and one-off cars.
39
Annual Report 2018 40
FERRARI N.V.Annual Report 2018 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 official seat (statutaire
zetel) is in Amsterdam, the Netherlands, and our
corporate address 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.
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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,
including a corporate restructuring intended to
facilitate the initial public offering of our shares (the
“IPO”). The IPO and the listing of common shares of
our predecessor company (“Predecessor Ferrari”) on
the NYSE were completed in October 2015. 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.
The remaining steps of the Separation were carried
out through a series of corporate transactions, which
occurred between January 1 and January 3, 2016,
pursuant to which, 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. Immediately after two consecutive
demergers under Dutch law, Predecessor Ferrari
merged with and into Ferrari, as surviving company.
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.
41
Annual Report 2018
Industry Overview
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.
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.
42
FERRARI N.V.Annual Report 2018 Ferrari vs. Luxury Perfomance Car Industry
UNITS
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
I
R
A
R
R
E
F
0
Dec 31,
2004
UNITS
49,000
44,000
39,000
34,000
29,000
24,000
19,000
14,000
Y
R
T
S
U
D
N
I
R
A
C
E
C
N
A
M
R
O
F
R
E
P
Y
R
U
X
U
L
Dec 31,
2005
Dec 31,
2006
Dec 31,
2007
Dec 31,
2008
Dec 31,
2009
Dec 31,
2010
Dec 31,
2011
Dec 31,
2012
Dec 31,
2013
Dec 31,
2014
Dec 31,
2015
Dec 31,
2016
Dec 31,
2017
Dec 31,
2018
FERRARI
LUXURY PERFORMANCE CAR INDUSTRY
• Ferrari and Luxury Performance Car Industry data are updated to December 31, 2018.
• 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 internal information for the 22 top countries (excluding Middle East countries) for Ferrari annual registrations and sales
(which accounted for approximately 87% of the total Ferrari shipments in 2018).
• 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, Mainland China, Russia, 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; Mainland China-China Automobile Industry
Association-DataClub; Russia-AEBRUS; 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.
Annual Report 2018
43
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 2018, our volumes in the largest 22 markets
were substantially in line with 2017, primarily driven
by contribution from our range models. We had a
market share of 17 percent in the luxury performance
car market; with 19 percent of market share in the
sports car segment and 14.5 percent of market share
in the GT segment.
The chart below sets forth our market shares in
2018 based on volumes in our largest 22 markets by
geographical area.
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.
TOP 22 Markets
Europe
Americas
Mainland China,
Hong Kong and
Taiwan
Rest of
APAC
17%
15%
16%
27%
26%
Ferrari Market Share
Luxury Perfomance Car Industry
• Ferrari and Luxury Performance Car Industry data are updated to December 31, 2018.
• 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 internal information for the 22 top countries (excluding Middle East countries) for Ferrari annual registrations and sales
(which accounted for approximately 87% of the total Ferrari shipments in 2018).
• 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, Mainland China, Russia, 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; Mainland China-China Automobile Industry
Association-DataClub; Russia-AEBRUS; 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.
• Ferrari is market leader in several countries, including Mainland China, Japan and Taiwan, among others.
44
FERRARI N.V.Annual Report 2018> Industry Overview Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
Competition
Competition in the luxury performance car market
is concentrated in a fairly small number of producers,
including both large automotive companies that
own luxury brands as well as small producers
exclusively focused on luxury cars, like us. The luxury
performance car market includes sports cars and
GT cars.
In relation to sports cars our models are the 488
GTB, the 488 Spider and the 812 Superfast, as well
as our latest special series models, the 488 Pista
and 488 Pista Spider, and our principal competitors
are Lamborghini, McLaren, Ford, Honda, Porsche,
Mercedes, Aston Martin and Audi. In relation
to GT our models are the Ferrari Portofino, the
GTC4Lusso and the GTC4Lusso T, and our principal
competitors are Rolls-Royce, Bentley, Aston Martin
and Mercedes.
In recent years, the market has shifted somewhat
with an increased focus on the GT cars market 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.
45
Annual Report 2018 Overview of Our Business
Ferrari is among the world’s leading luxury brands
In 2018, we shipped 9,251 cars and recorded
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 235 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 167 authorized dealers
operating 190 points of sale as of the end of 2018.
We believe our cars are the epitome of
performance, luxury and styling. Our current sports
and GT range consists of six models, including three
sports cars (488 GTB, 488 Spider and 812 Superfast)
and three GT cars (GTC4Lusso, GTC4Lusso T and
Ferrari Portofino) and two special series cars (488
Pista and 488 Pista Spider). The Ferrari Portofino was
unveiled in September 2017 and shipments began in
the second quarter of 2018, while the 488 Pista was
launched in March 2018 at the Geneva Motor Show,
with shipments beginning in the third quarter of
2018. The 488 Pista Spider was launched in August
2018 and shipments will begin in 2019. Our most
recent hypercar, the LaFerrari Aperta, was launched
in 2016 to celebrate our 70th Anniversary and finished
its limited series run in 2018. The Monza SP1 and
SP2 were unveiled in 2018 to kick off a new pillar in
our product offering, the Icona, a line of modern cars
inspired by our iconic cars of the past, with deliveries
expected to begin in 2019. We also produce very
limited editions series (fuori serie) and one-off cars.
net revenues of e3,420 million, EBIT of e826
million, net profit of e787 million, and adjusted
earnings before interest, taxes, depreciation, and
amortization (Adjusted EBITDA) of e1,114 million,
adjusted earnings before interest and taxes (Adjusted
EBIT) of e825 million and Adjusted Net Profit of
e645 million. For additional information regarding
Adjusted EBITDA, Adjusted EBIT and Adjusted Net
Profit, which are non-GAAP measures, including
a reconciliation of Adjusted EBITDA to net profit,
Adjusted EBIT to EBIT and Adjusted Net Profit to
net profit, see “Operating Results-Non-GAAP Financial
Measures.”
Whilst broadening our product portfolio to target
a larger customer base, we continue to pursue a low
volume production strategy in order to maintain
a reputation for exclusivity and scarcity among
purchasers of our cars and we carefully manage
our production volumes and delivery waiting lists
to promote this reputation. We divide our regional
markets into EMEA, Americas, Mainland China, Hong
Kong and Taiwan and Rest of APAC, representing
respectively 45.7 percent, 32.4 percent, 7.5 percent
and 14.4 percent of units shipped in 2018.
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 490 million television unique viewers in 2018
(based on a new viewer calculation methodology
applied by Formula 1 in the 2018 season) (Source:
Formula 1 Press Office). Although our most recent
Formula 1 world title was in 2008, we continuously
enhance 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.
46
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 17 franchised stores (including
5 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 clients and Ferrari enthusiasts.
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 Range, Special Series and Icona: Ferrari Line-Up Strategic Pillars
Sport
Range
Gran Turismo
Range
Special
Series
Icona
Our product offering comprises four main pillars:
We are also actively engaged in after sales activities
the sports range, the GT range, special series and
Icona. Our current product range includes three
sports cars, three GT cars and two special series
cars, as well as two Icona cars (introduced in
September 2018). 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).
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.
47
Annual Report 2018 The most complete Ferrari Product Range ever
ROAD CARS
RANGE MODELS
SPORTS
GRAN TURISMO
V8
488 GTB
V8
488 Spider
V12
812 Superfast
V8
Portofino
V8
GTC4Lusso T
V12
GTC4Lusso
SPECIAL SERIES MODELS
FUORISERIE and ONE-OFF
V8
488 Pista
V8
488 Pista Spider
V8
Ferrari J50
V8
SP38
FERRARI CHALLENGE
THE XX PROGRAMME
RACING CARS
TRACK CARS
V8
488 Challenge
V12
FXX K EVO
V8
488 GTE/GT3
The charts below set forth the percentage of our unit shipments (excluding the XX Programme, racing cars,
Fuori Serie and one-off cars) for the years ended December 31, 2018, 2017 and 2016 by strategic pillar:
Unit shipments
4%
6%
8%
32%
30%
33%
2018
2017
2016
64%
64%
59%
Sports
GT
Special Series *
Icona **
(*) Includes shipments of the LaFerrari and LaFerrari Aperta.
(**) Shipments of Icona cars to commence in 2019.
48
FERRARI N.V.Annual Report 2018> Overview of Our Business Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The table and charts below set forth our unit shipments for the years ended December 31, 2018, 2017 and
2016, 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)
Mainland China, Hong Kong and Taiwan
Rest of APAC (4)
Total
For the years ended December 31,
2018
%
2017
%
2016
%
981
803
479
399
380
326
859
4,227
3,000
695
1,329
9,251
10.6%
8.7%
5.2%
4.3%
4.1%
3.5%
9.3%
45.7%
32.4%
7.5%
843
710
417
346
339
331
751
3,737
2,811
617
10.0%
8.5%
5.0%
4.1%
4.0%
3.9%
9.0%
44.5%
33.5%
7.3%
769
675
364
306
333
439
724
9.6%
8.4%
4.5%
3.8%
4.2%
5.5%
9.1%
3,610
45.1%
2,687
33.5%
619
7.7%
14.4%
1,233
14.7%
1,098
13.7%
100.0%
8,398
100.0%
8,014 100.0%
(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.
Title title xxxxxxxxxxxx (%)
14,4%
7,5%
14,7%
13,7%
7,3%
7,7%
45,1%
2018
45,7%
2017
44,5%
2016
32,4%
33,5%
33,5%
EMEA
Americas
Mainland China, Hong Kong and Taiwan
Rest of APAC
49
Annual Report 2018 Sports Range
GT Range
Our sports cars are characterized by compact
Our GT cars, while maintaining the performance
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 current special series cars
are the 488 Pista, powered by a 720 hp V8 engine, and
its retractable hard top version, the 488 Pista Spider.
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 Ferrari
Portofino (with 600 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.
Special Series
Icona
We also from time to time design, engineer and
produce special series cars which can be limited in
time or volume and 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.
In September 2018, we introduced a new pillar of
our product portfolio: the Icona, a unique concept
which takes inspiration from the iconic cars of our
history and reinterprets them in a modern fashion,
pairing timeless design of the past with state-of-the-
art materials and technology. The first examples of
this strictly limited-edition product line-up are the
Ferrari Monza SP1 and SP2 inspired by the classic
collectible barchetta cars, 750Monza and 860Monza,
and presented at our Capital Markets Day in
September 2018.
50
FERRARI N.V.Annual Report 2018> Overview of Our Business Board Report | Financial Statements | Other Information
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Company Financial Statements and Notes
Limited Edition Hypercars,
Fuori Serie and One-Offs
Track Cars
In line with our tradition of hypercars starting
with the 288GTO in 1984 through to the Enzo in
2002 and the LaFerrari Aperta, our latest hypercar
which we launched in 2016, we also produce limited
edition hypercars. 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.
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 (inspired
by the 512 BB), the F12 TRS (a radical two-seat
roadster created on the platform of the F12berlinetta
in 2014), the SP38 (a superlative mid-rear V8 turbo
taking inspiration from the legendary Ferrari F40),
the 458MM Speciale (the last mid rear model with a
V8 natural aspirated engine in 2016) and the SP3JC
(the only one-off made using the F12tdf in 2018). The
program is expanding due to increasing demand.
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 (GT racing) and Corse Clienti (the
Ferrari Challenge one-make series, the Corso Pilota
driving courses, the XX Programmes and the F1
Clienti activity).
Ferrari Challenge Trofeo Pirelli - 488 Challenge
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 main series: Europe (which is the
oldest), North America and Asia-Pacific. A brand new
national championship will be launched in the United
Kingdom in 2019.
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.
51
Annual Report 2018 52
FERRARI N.V.Annual Report 2018> Overview of Our Business Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Competizioni GT (GT Racing)
F1 Clienti
The 488 GTE/GTLM and 488 GT3/GTD models
Introduced in 2003, the F1 Clienti program allows
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 and in several GT International
series, as well as historical races such as the Daytona
24 Hours and Le Mans 24 Hours. Since beginning
competition in 2016, the 488 GTE/GTLM and 488
GT3/GTD have won several competitions, including,
among others, the Pirelli World Challenge in the
SprintX division as well as the Petit Le Mans in the
GTD class (488 GT3). In 2019, Competizioni GT will
launch a new non-competitive track activity, Club
Competizioni GT, dedicated to clients who own older
and present day GT cars.
XX Programme
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.
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.
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”,
“Avanzato”, and “Evoluzione” 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.
53
Annual Report 2018
Personalization by Level and Location
Where (Sales Channel)
New Initiatives
One-off
Tailor Made
Special Equipment
Personalization Program
("Carrozzeria Scaglietti")
Maranello
TM Center
@Maranello
@Shanghai
Atelier
@Maranello
@New York
New York
New Opening 2019
New Maranello Center
New Atelier
in Maranello
Dealership
with Special Equipment
Last Generation
Car Configurator
Dealership
Continuous renewal and
enrichment of OPT list
All of our models feature highly customizable
interior and exterior options, which are included in
our personalization catalogue. Some of these options
include carbon fiber wheels, alternative brake caliper
colors, parking cameras, MagneRide dual mode
suspension, sport exhaust systems, panoramic roof
option, various door panel configurations, steering
wheel inserts and state of the art custom high fidelity
sound systems.
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).
With our “Special Equipment” program, we
offer clients additional customization choices for
their cars. 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 “Tailor Made” program provides an
additional level of personalization in accordance with
the expectations of our clients. 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 selection
The “One-off” program is the maximum level of
personalization and exclusivity. See “Limited Edition
Hypercars, Fuori Serie and One-Offs” above for more
details.
Ferrari is developing new initiatives at all levels
of the personalization offer in order to improve the
customer experience, to differentiate from competitors
and to maximize the potential of the personalization
business. Some of the main initiatives will include:
• a completely new generation of car configurator
tools;
• new Atelier and Tailor Made facilities in Maranello;
and
• the opening of a Tailor Made Center in New York.
54
FERRARI N.V.Annual Report 2018> Overview of Our Business
Design
Design is a fundamental and distinctive aspect of
our products and our brand. Our designers, modelers
and engineers work together to create car bodies that
incorporate the most innovative aerodynamic solutions
in the sleek and powerful lines typical of our cars. The
interiors of our cars seek to balance functionality,
aesthetics and comfort. Cockpits are designed to
maximize the driving experience, tending towards
more sporty or more comfortable, depending on the
model. The interiors of our vehicles boast elegant
and sophisticated trims and details that enhance the
ergonomic layout of all main controls, many of which
are clustered on the steering wheel. 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
Pininfarina. These partnerships helped Ferrari in
defining its design language at the forefront of design
advance. Throughout the years this area of excellence
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, with the objective
of improving control over the entire design process
and ensuring long-term continuity of the Ferrari
style. The mission of the Ferrari Design Centre 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,
Iconas, one-off models, concept cars and some track-
only models. Ferrari Design also includes a Color
& Trim unit which manages 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
in the styling and conceptual definition of Ferrari
branded products produced by our licensees
(see “Brand Activities”).
Ferrari Design is organized as an integrated
automotive design studio, employing a total
workforce of approximately 90 people (full-time
workers as well as 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.
The new building of the Ferrari Design Centre was
opened in September 2018 and is our first facility fully
dedicated to the Ferrari Design. Sitting at the heart of
the Ferrari headquarters in Maranello, the building
covers more than 5,600 square meters over four levels
and houses the design offices, a fully-equipped model
making studio and a vast indoor/outdoor presentation
space on the top floor. Additionally, the new building
hosts two Ateliers and the Tailor Made department
to engage clients with Ferrari’s rich personalization
services. The project 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. The
new building helps to improve the synergies between
design studios, the physical modelling area and virtual
modelling specialists, by bringing them together in a
highly integrated and technological environment.
Ferrari Design Centre entirely designed our most
recent cars, such as the Monza SP1 and SP2, the
488 Pista, the 488 Pista Spider, the FXX K EVO, the
Ferrari Portofino, the 812 Superfast, the GTC4Lusso,
the F12tdf, the 488 GTB, the 488 Spider, the 488
Challenge, the FXX K, the LaFerrari, the LaFerrari
Aperta and the limited-series J50, as well as one-off
cars including the F12 TRS, the 458MM Speciale and
the SP38.
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During its 9 years of activity, the Ferrari Design Centre has received prestigious design awards for several
cars it has designed, among which:
• SP38: Design Award for Concept Cars & Prototypes - Concorso d’Eleganza Villa d’Este 2018;
• Ferrari Portofino: Red Dot Best of the Best Award (2018);
• 812 Superfast: Red Dot Design Award (2018);
• FXX K EVO: Red Dot Design Award (2018);
• J50: iF Gold Design Award (2018);
• LaFerrari Aperta: iF Design Award (2018);
• 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).
57
Annual Report 2018 Product Development
Innovation principles
Product development and technological innovation
Our development efforts take into account
the three defining dimensions of Ferrari cars;
performance; versatility and comfort; and driving
emotions.
Performance reflects features such as weight,
horsepower, torque, aerodynamic efficiency,
acceleration, and maximum speed, which all
contribute to determine the lap time on track.
We strive to ensure that every Ferrari is the best
performing car in its segment.
Versatility derives from spaciousness, accessibility
and mode of traction, including rear wheel drive or all
wheel drive and, in future, electric-powered driving.
Comfort results from the ease of the riding experience
and on board interface. Regulation will affect
development in this area - for example, a prescribed
electric range may be required in future to access city
centers.
Driving emotions is a key differentiator of Ferrari
cars. There are three elements to driving emotions:
sound, perceived acceleration and responsiveness
of the car. Sound is an important part of the
experience and very involving for the driver. Perceived
acceleration is the driver’s subjective impression of
the car acceleration beyond the actual 0-100 or 0-200
km/h performance measured in the car technical
specifications. Responsiveness requires that every
driver command lead to a direct and controllable
reaction of the car.
These three dimensions variably interact in
our sports and GT cars. As we work on the future
product range, we strive to improve on each of those
dimensions, focusing for sports cars on performance
and driving emotions, and for GT cars on versatility and
comfort on board and fun to drive - driving emotions.
We believe there are five key guidelines to
innovation at Ferrari: focus on the three key
defining dimensions described above, leveraging
on Formula 1 know how, first mover positioning
in core areas such powertrain and aerodynamics,
customization of technologies available on the
market (such as the turbo technology) and pursuit
of synergies (arising from common architectures
within our range). In addition to these internally
driven factors, regulation is key in determining the
direction of innovation.
Combustion engines
We believe internal combustion engines will
remain important in Ferrari’s powertrain mix and
therefore we continue to invest significantly in
new combustion engine technologies. In 2018 we
won the “Engine of the Year” award for the newest
edition of our V8 turbocharged engine mounted on
the 488 Pista.
Going forward, Ferrari will have three engine
families: we will maintain and develop the V12
naturally aspirated engine family, long the pinnacle
of Ferrari engines; we will implement the next
technological step ups for the V8 family; and we
will develop a completely new V6 family based on a
specific and innovative architecture.
The industry effort to combine greater power
outputs with lower emissions and consumption
often leads to a higher turbo lag. Through a
technological breakthrough, Ferrari has engineered
a turbo engine with turbo engine performance but
with the response of a naturally aspirated engine.
For example, the specific power output of the 488
Pista was increased to 184 horsepower without
meaningful turbo lag.
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In the future, we intend to use hybrid technology
and Formula 1 technology to increase specific power
output without turbo lag.
We are deploying considerable resources for the
development of hybrid powertrains, which will be
mounted on an increasingly larger proportion of our
car models; this is intended to improve performance
and driving experience while also satisfying customer
preferences and regulatory requirements regarding
emissions. LaFerrari and LaFerrari Aperta are early
examples of our efforts in this field, and we believe
they show our ability to apply our core mechanical
know-how to new and expanding fields such as hybrid
technology.
SPORTS
Driving
Emotions
GRAN TURISMO
Perfomance
Versatility
& Comfort
59
Annual Report 2018 Architecture
In addition to engines, the other principal technical area we are focusing on is the architecture.
Our architecture covers all principal technical specifications of future Ferrari models. We expect that
innovation requirements will arise principally from: the evolution of engine families; the level of hybridization;
modes of traction; the number of seats up to a real four-seater; and the body style, which will vary much more
significantly than in the past in light of the introduction of the Purosangue.
We expect that our core architectures will be the rear-mid-engine architecture and the front-mid-engine
architecture, each comprising several variants.
Product Specification
Architecture
Engine
V12 vs. V8 vs. V6
Rear-mid-engine
Hybridization Yes vs. No
Traction
2WD vs. 4WD
Seating
2 vs. 2+ vs. 2+2 vs. 4
Body style
Coupè vs. Spider vs. “Purosangue”
NEW
FERRARI
PRODUCT
RANGE
Power unit
Gearbox
Front-mid-engine
Clearance
Low vs. High
Power unit
Gearbox
Rear-mid-engine architecture
Front-mid-engine architecture
The rear-mid-engine architecture is designed to
integrate multiple power units with a higher specific
power output than the 488 Pista. In this architecture,
combustion engines can be combined with an electric
motor to realize hybridization, including a battery
to enable electric range. In combination, we are
developing a new and highly innovative double clutch
transmission gearbox. Hybridization will impact the
weight of engines and therefore we will deploy new
lightweight technologies to compensate this impact.
Package efficiency will also be key to achieve a
compact car that reduces weight and inertia. In order
to apply the architecture to different powertrains, the
wheelbase may vary.
The front-mid-engine architecture, also a
transaxle powertrain concept, is even more flexible
than the rear-mid-engine architecture. This
architecture will be able to accommodate an all
wheel drive powertrain, will allow for hybridization,
and will have a flexible wheelbase suited to a
variety of engines as well as seat configurations
including two seaters and four seaters. It will be
accessible, spacious and comfortable. Key to this
architecture will be the new suspension systems we
are developing, with a high range between comfort
and sportiness.
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New-generation human-machine interface
Autonomous driving
Particularly driven by growth in the GT segment,
Ferrari is developing the next generation of human
machine interface technologies. Using state of the
art technologies we will be guided by the Formula 1
derived concept of “eyes on the street, hands on the
steering wheel”, for a focused, safe and enjoyable
drive. We intend to add several new technologies,
including a new head up display, a new innovative
cluster, a new steering wheel that features new
commands and a new infotainment system, as
well as tools aimed at positively enhancing the
passengers’ experience.
While we do not intend to develop self-
driving cars, we will adopt certain features of
autonomous driving technology in response to
regulatory developments and customer preferences,
especially in the GT segment. For example, in 2018
we launched initial functionalities for Advanced
Driving Assistant Systems (ADAS) such as predictive
breaking and automatic cruise control on current
models, and further innovations will be introduced
in future models.
Ferrari is carefully monitoring the evolution of
autonomous driving technologies, including sensors
and artificial intelligence, and we will select and
customize those innovations compatible with the
Ferrari experience. These technologies will also have
an important impact on the electronic architecture
of our cars.
61
Annual Report 2018 Production and Procurement
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 750
total suppliers— entailing complex supply chain
management to ensure continuity of production.
Our stock of supplies is warehoused in Ubersetto,
near Maranello.
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”).
The plants housing our production processes
were entirely renovated or rebuilt between 2002 and
2012. We plan our investment activities based on an
estimated plant useful life of approximately 20 years.
We are planning investments in plant, machinery and
equipment that reflect our focus on the hybridization
and broadening of our product range to support
future launches. 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, and to maintain state-of-the-art technology.
At December 31, 2018, our production
processes employed over 1,460 engineers,
technicians and other personnel, of which
approximately 1,280 blue collar employees
(including approximately 130 temporary
production employees) and approximately
180 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
introduction of additional shifts or an increase of
weekend shifts to address special peaks in demand.
We constantly work to increase the utilization rate
and reduce the internal scrap rate and we closely
monitor an index of our production efficiency.
In the past few years we have reduced our cycle
time by approximately three percent per year. We
are also committed to improve the reliability of
our cars, reduce their defects, and optimize their
finishing.
Unlike most low volume car producers, we
operate our own foundry and machining department
producing several of the main components of our
engines, such as engine blocks, cylinders heads and
crankshafts. We believe this accelerates product
development and results in components that meet
our specifications more closely.
Engine Production
Our engines are produced according to a
vertical structure, from the casting of aluminum in
our foundry up to the final assembly and testing
of the engine. Several of the main components of
our engines, such as blocks and cylinders heads
are produced at our foundry in Maranello. For
this purpose, we use a special aluminum alloy
that includes seven percent silicon and a trace of
iron, which improves mechanical integrity, and
our own shell and sand casting molds. Once all
components are ready, engines are assembled, on
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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 to ensure it
delivers the expected performance: 10 - 20 percent
of engines are also hot tested and their power and
torque is measured. In 2018 we produced an average
of approximately 177 engines per day, including
approximately 10 V12, 43 V8 (including 5 V8 turbo
and 7 V8 aspirated for Maserati) and 124 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 body shop
Carrozzeria Scaglietti in Modena. The main
components of body-shells are not manufactured
internally but are sourced from manufacturers for
chassis, bodies and carbon fiber parts.
At Carrozzeria Scaglietti we have two different
production lines dedicated to the assembly of
our V8 and V12 aluminium bodies, respectively.
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 on 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 hypercar, the LaFerrari Aperta, and the
FXX K EVO.
Painting
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 and give the bodies their final finish.
In 2018 we substituted our clear coat with a new
generation 2K (bi-component) transparent coat that
requires a lower baking temperature; this innovative
process brings significant benefits as it allows us to
simultaneously paint both aluminum and carbon
fiber parts.
Assembly Line and Final Checks
The final assembly of our cars takes place in
Maranello, in a dedicated building constructed 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. In 2018 the line on the first floor moved
from one shift to two shifts. Given the special
craftsmanship required for the production of our
Icona cars, during the second half of 2018, we built
a dedicated assembly line for the Ferrari Monza
SP1 and SP2, the first models of this new product
pillar.
Personalization and Road Tests
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 “Sports and GT Range, Special Series and Icona:
Ferrari Line-Up Strategic Pillars-Personalization Offer”).
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.
63
Annual Report 2018 Manufacturing of Engines for Maserati
Procurement
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 2018, we sold approximately 900 V8 turbo
engines and approximately 1,500 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 in 2016 we started 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 2018, we sold
approximately 28,000 V6 engines to Maserati in four
different versions, ranging from 330 hp to 450 hp.
In order to meet the V6 volumes and specifications
requirements, in 2012 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 integrated in the engines
we manufacture for Maserati are sourced externally
from our panel of suppliers (see “Procurement”)
and then assembled in Maranello on our highly
automated V6 assembly line.
We source a variety of components, raw materials,
supplies, utilities, logistics and other services from
numerous suppliers. We recognize the contribution
of our suppliers to our success in pursuing excellence
in terms of luxury and performance, therefore we
carefully select suppliers 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 for the
supply of transmissions and brakes. 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, 2018, the
purchases from our ten largest suppliers by value
accounted for approximately 21 percent of total
procurement costs, and no supplier accounted for
more than 10 percent of our total procurement costs.
Sales and After-Sales
Our commercial team, which includes 334
employees at December 31, 2018, 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) Mainland
China, Hong Kong and Taiwan, and (iv) Rest of APAC
(which includes the rest of Asia and Oceania).
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FERRARI N.V.Annual Report 2018> Overview of Our Business
Dealer network
We sell our cars exclusively through a network
of authorized dealers (with the exception of one-
offs and track cars 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/dealer. We regularly assess
the composition of our dealer network in order to
maintain the highest level of quality. At December
31, 2018, our network comprised 167 dealers
operating 190 points of sale.
We do not presently 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 proven track
records. We are also mindful to select dealers
who are able to provide a purchase and after-
sales experience aimed at exceeding our clients’
high expectations. Furthermore, our dealers are
committed to promote and market 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 with all dealers to ensure our operating
standards are met. Our rigorous design, layout and
corporate identity guidelines guarantee uniformity
of the Ferrari image and client interface. Through
our in-house Ferrari Academy we provide training to
dealers for sales, after-sales and technical activities.
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This ensures that our dealer network delivers a
consistent level of market leading standards across
diverse cultural environments. We train and monitor
dealers intensively. 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
regional representatives visit dealerships regularly to
monitor and measure performance and 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 closely reflect
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.
65
Annual Report 2018 The chart below sets forth the geographic distribution of our 190 points of sale at December 31, 2018:
Americas
52 POS
U.S.A.
40 POS
Canada
5 POS
EMEA
90 POS
North Europe
18 POS
Central Europe
20 POS
FERRARI - MARANELLO
China, Hong Kong,
Taiwan
22 POS
Rest of
APAC
26 POS
China
18 POS
Taiwan
3 POS
North East Asia
11 POS
South East Asia
6 POS
Australasia
9 POS
Latin America
7 POS
East West Europe & Africa
25 POS
Hong Kong
1 POS
South Europe
16 POS
Middle East
11 POS
Our sales are diversified across our dealer
network, with the largest dealer representing
approximately 2.3 percent of sales, and our 15 largest
dealers representing 22 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 230 facilities
worldwide. After-sales activities are very important
for our business to ensure the client’s continued
enjoyment of the car and the experience.
Therefore, we enforce a strict quality control on
our dealers’ services activities and we provide
continued training and support to the dealers’
service personnel. This includes our team of “flying
doctors,” Ferrari engineers who regularly travel to
service centers to address difficult technical issues
for our clients.
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We sell 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.
Our 7 Year Maintenance Program (free of charge
for customers since 2011 on any new cars) is offered
to further strengthen customer retention in the
official network and has been coupled with the
possibility to extend the statutory warranty term of
our standard warranty terms through the POWER
coverage program up to the 7th year of life of the car.
After the 7th year of life, the car (if in perfect
maintenance condition) can be included in the MAIN
POWER coverage program (Maintenance and POWER)
up to the car’s 15th year of life. Between the 10th year
of life and the Classiche eligibility (20 year old car)
Ferrari provides its customers, in addition to standard
maintenance items, also certain specific maintenance
kits (Ferrari Premium) to preserve car performance and
safety systems. When a car follows the full maintenance
program up to the 20th year of life, it automatically
obtains the Ferrari Classiche certification.
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
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 2018, 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 in
Maranello as well as other locations.
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 also have the
opportunity to configure their cars through our
personalization and bespoke program (see “Sports
and GT Range, Special Series and Icona: Ferrari Line-Up
Strategic Pillars-Personalization Offer”).
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.
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
view of its design. Clients are then invited to a preview
67
Annual Report 2018 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.
On September 18, 2018, on the occasion of
the Capital Markets Day, Ferrari invited clients to
Maranello for the World Premiere of the Ferrari Monza
SP1 and SP2, the forerunners in our new Icona range.
Just a few weeks earlier, on August 25, 2018 a world
premiere of the 488 Pista Spider, the new special series
model derived from the coupé version unveiled at the
Geneva Motorshow, was held during the renowned
Concours d’Elegance at Pebble Beach in California.
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 activities are mainly targeted to
clients with a preference for sports models.
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 program, which consists of driving sessions
with a team of highly qualified and skilled Ferrari
instructors and technicians. In addition we also offer
to our clients on-track driving courses (Corso Pilota),
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.
In addition to several track day activities,
organized by local sales departments and dealers
to allow clients to enjoy 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 (Europe,
North America and the Asia-Pacific series), and
non-competitive events, such as with XX Programme
and F1Clienti activities, dedicated to clients who own
respectively, non-homologated GT laboratory cars
and F1 single-seaters previously used by the Scuderia
Ferrari in the Formula 1 Championship. Ferrari
Challenge and XX/Formula 1 events are run together
in the so-called Ferrari Racing Days, which are open to
the public and intended for a wider audience.
These track activities reached their climax at the
Finali Mondiali, the last races of three Challenge series,
which last year took place from November 1 to 4
at the Monza Circuit, with more than one hundred
drivers, sporting customers from all over the world,
and approximately 50,000 spectators in the stands.
In addition to on-track racing, we organize various
on-the-road driving events, including both proprietary
formats (Ferrari Cavalcade, including the Cavalcade Classiche
and 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
these traditional events.
Another exclusive driving experience took place
from April to June 2018, when Prancing Horse
enthusiasts and collectors were invited to take turns
behind the wheel of the Ferrari Portofino on some of
Europe’s most scenic roads.
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
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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
and 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.
At the Maranello workshop, Ferrari Classiche
carries out full restorations using either original
components and spare parts or replicas
manufactured in accordance with the original
specifications. Our restoration service offers our
clients the opportunity to reinstate any classic Ferrari
to its original pristine conditions.
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 authorized a new service network with 69
new “Officina Ferrari Classiche” workshops to date,
primarily for vehicle repairs and the certifications’
inspections or revalidation, and the network is
expected to expand in future periods.
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Annual Report 2018
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, GT and special series cars. The Formula 1
World Championship is the pinnacle of motorsports
with approximately 490 million television unique
viewers all over the world (based on a new viewer
calculation methodology applied by Formula 1 in the
2018 season) (Source: Formula 1 Press Office). Overall
audience numbers should also consider data from
various social media platforms, which have become
an increasing focus under the leadership of Liberty
Media Corporation starting in 2017. In 2018, Formula
1 was one of the fastest-growing sports in terms
of social media outreach, with an increase in total
number of followers on Facebook, Twitter, Instagram
and YouTube of 53.7 percent compared to 2017.
(Source: Formula 1 Press Office).
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, Azerbaijan and the United
States. This provides participants in the Formula 1
World Championship exceptional visibility on the
world stage.
Scuderia Ferrari has been racing in the Formula 1
World Championship since the series was 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 235
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 in 2018 comprised four-time World Champion
Sebastian Vettel, who joined Ferrari at the beginning
of 2015, and Kimi Raikkonen, who won the World
Drivers title in 2007 for Scuderia Ferrari and
competed for the team for eight seasons.
The 2018 season was Raikkonen’s last at Ferrari as
he will be replaced by Charles Leclerc for the 2019
season.
2018 was the most successful in the last ten
years for Scuderia Ferrari, with the team winning six
races (five with Vettel and one with Raikkonen) and
achieving as many pole positions. Both Vettel and
the team were runner-ups in their respective point
standings. Scuderia Ferrari’s tally of 571 points is the
team’s best performance since the current scoring
system was introduced in 2010.
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
Scuderia Ferrari) and by regulations issued by the
Federation Internationale de l’Automobile (FIA), the
motorsport’s governing body.
The Team Agreements cover the 2013-2020
racing seasons and govern the terms by which the
racing teams take their share of commercial profits.
The FIA regulations govern technical matters
ranging from tires, weight to ignition, fueling and
throttle requirements, as well as racing rules, such
as 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.
Shares in the 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
70
FERRARI N.V.Annual Report 2018> Overview of Our Business designing and producing a set of single-seaters
each year and the costs associated with managing
a racing team including earnings of drivers, who
are typically among the most highly paid athletes
in the world. In 2018, certain changes to FIA
regulations were issued and will become effective
in 2019. These changes to the regulations relate
to aerodynamics, drivers’ weight, fuel allowance
and the requirement for drivers to wear biometric
gloves for additional safety. Extensive talks were
held in 2018 and are continuing among the owners
of the Formula 1 business and all teams to help
configure the future structure of the sport for 2021
and beyond, when the current agreement will have
expired.
Improvements in technology and, from time
to time, changes in regulation, such as those
we will experience in 2019, 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 gear-shifting, 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 car to recover,
store and deploy energy generated both by the vehicle
during braking and by the exhaust gases through a
turbocharger.
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 partner
for over forty years and currently remains our Title
Partner. Starting from the Japanese Grand Prix in
October 2018, the “Mission Winnow” logo has
appeared on the cars’ livery and drivers’ overalls,
promoting a Philip Morris corporate campaign for
a healthier future. Shell has also been a long term
Sponsor and Technical Partner of Scuderia Ferrari
(since 1996). Other official sponsors include Ray-
Ban, Kaspersky lab, UPS, Lenovo, Weichai, Mahle,
Hublot, AMD, OMR and Alfa Romeo. 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.
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The Mugello Circuit
Licensing and Theme Parks
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
2018, almost 76,000 people attended the MotoGP
World Championship at Mugello, one of the largest
audience ever recorded in the 28 years of the Mugello
circuit’s history.
In 2011, the Mugello circuit won its fifth “Best
Grand Prix” award, the highest honor given in the
motor sport world to 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 540,000 visitors in 2018.
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. Ferrari branded products include
consumer electronics, sportswear, toys, video games,
watches and other accessories, as well as theme
parks.
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. 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.
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.
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Annual Report 2018 Retail
Research and Development
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, 2018, there were a total of 35
retail Ferrari stores, including those in Maranello,
Milan, Rome, Macau, Miami, Los Angeles,
Johannesburg, Dubai and Abu Dhabi, of which 17
franchised stores (including 5 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 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.
We engage in research and development activities
aimed at improving the design, performance, safety,
efficiency and reliability of our cars. The first stage of
product development is the research phase. In this
phase, we research the specifications of new models
that we believe will appeal to our clients and will be
commercially viable. Costs we incur for the development
of cars 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. Our
capitalized development costs are primarily affected by
the timing of renewals to our product range and more
recently, by our intention to integrate hybrid technology
more broadly into our product portfolio.
We also incur research and development
expenses in connection with Formula 1 racing
activities, including initiatives to maximize the
performance, efficiency and safety of our racing
cars. While we develop these technologies for
initial use in our Formula 1 racing cars, we seek
to transfer these components and technologies,
where appropriate, to models in our current and
future product range. Technological developments
and changes in the regulations of the Formula 1
World Championship lead us to design, develop
and construct a new racing car each year. The
costs incurred for these activities are expensed
as incurred and classified as research and
development costs in the income statement.
Research and development costs for Formula 1
activities can vary from year to year and may be
difficult to predict because they are subject to,
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among other things, changes in race regulations
and the need to respond to our car’s performance
relative to other racing teams.
Research and development costs expensed, which
primarily relate to our Formula 1 racing and research
phase activities, remained relatively consistent from
2016 to 2018. As a result of our strategy to update
and broaden our product range and significantly
increase our efforts relating to hybrid technology,
our overall research and development expenditure,
and in particular our capitalized development costs,
increased during the period from 2016 to 2018.
The following table summarizes our research and
development for the years ended December 31, 2018,
2017 and 2016.
Our results of operations are dependent on
the comparative success of our product offering
over time. Our range models typically have a
lifecycle of four to five years, while our special
series, hypercars and limited edition cars (and
starting in 2019, our Icona cars) typically have
shorter lifecycles. A portion of our research
and development efforts are related to the
development of the various components used in
our models, and in particular, hybrid, electronic
and mechanical components. Our new models
generally include new technological content,
part of which is related to the output from the
component research and development efforts.
Our continued focus on component development
has the objective of reducing the costs to develop
new models.
Capitalized development costs (1)
Research and development costs expensed (A)
Total research and development
Amortization of capitalized development costs (B)
Research and development costs as recognized in the consolidated income
statement (A+B)
(1) Capitalized to developed costs within intangible assets during the year.
For the years ended December 31,
2018
318
528
846
115
643
2017
2016
185
556
741
101
657
141
510
651
104
614
Financial Services
We offer retail client financing for the purchase of
our cars and dealer financing through the operations
of Ferrari Financial Services (“FFS”). We offer retail
client financing:
• directly in the United States through our fully owned
subsidiary Ferrari Financial Services Inc. (“FFS Inc”);
• through our associate Ferrari Financial Services
GmbH in certain markets in EMEA (primarily the
UK, Germany and Switzerland); and
• through various partnerships in other European
countries and other major international markets,
such as Japan and Australia.
ancillary services to clients (both current and new)
interested in purchasing a wide range of cars, from
our current product range of sports, GT and special
series cars, to older pre-owned and classic models.
FFS also provides special financing arrangements
to a selected group of our most valuable and loyal
customers.
Starting in 2016, FFS Inc has pursued a strategy
of autonomous financing for our financial services
activities in the United States, further reducing
dependency on intercompany funding and increasing
the portion of self-liquidating debt with various
securitization transactions.
We also offer direct dealer financing in the
United States through FFS Inc. Through FFS, we
offer a range of flexible, bespoke financial and
At December 31, 2018, the consolidated financial
services portfolio was e878 million and originated in
the United States.
75
Annual Report 2018 • “Ferrari” (word)
• “Ferrari” logotype
• The “Prancing Horse” (figurative)
• The trademark (figurative)
• The racing shield (figurative)
• Scuderia Ferrari (word and figurative)
Intellectual Property
We own a number of registered designs and
utility patents. 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 485
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 more than 4,000 applications/registrations
in approximately 140 countries, in most of the main
classes for goods and services.
The names of our sports, GT, special series and
Icona car models and Formula 1 single-seater models
are also registered as trademarks (and logotypes) and
we also register their domain names and the cars’
design.
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.
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Properties
Our principal manufacturing facility is located
in Maranello (Modena), Italy. It has an aggregate
covered area of approximately 672 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-Production and
Procurement-Production Process”). Except for some
leased technical equipment, we own all of our
facilities and equipment in Maranello.
Between 2002 and 2012 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.
In 2018 we completed the new Ferrari Design
Centre, a building that covers more than 5,600
square meters over four levels.
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.
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 for our regular range, special
series and prototype cars.
The total carrying value of our property, plant
and equipment at December 31, 2018 was e850,550
thousand.
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Annual Report 2018 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, 2018, we had a total of 3,851
employees, including 110 executives. Of these,
approximately 3,647 were based at our Maranello
facility, and approximately 204 in offices around
the world (including 8 executives), mostly in North
America and China.
Approximately 12 percent of the employees were
trade union members in 2018. 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.
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 expired 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 e5,720 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.
At December 31,
2018
1,691
1,517
174
2,050
2,047
3
110
2017
1,531
1,358
173
1,757
1,754
3
92
2016
1,407
1,216
191
1,751
1,748
3
90
3,851
3,380
3,248
White collar employees
Italy
Rest of the world
Blue collar employees
Italy
Rest of the world
Executives
Total
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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 an SVM
or similar designation in certain jurisdictions where
we sell cars. 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.
Approval and market surveillance
In May 2018 the European Parliament and
European Council issued Regulation 2018/858,
establishing the new framework for the approval
and market surveillance of motor vehicles (repealing
Directive 2007/46/EC). While the previous regulatory
framework of Directive 2007/46/EC was focused on
technical standards, the new regulation has a broader
scope by including market surveillance requirements
in order to ensure the enforcement of applicable
standards. The key objectives of Regulation 2018/858
are: enhancing the independence of technical services
(i.e. the approved testing laboratories) as well as
improving the quality of the testing of vehicles and
setting stricter requirements for technical services;
introducing market surveillance in order to verify the
conformity of vehicles on the market to the applicable
standards, and requiring corrective measures in case
of non-compliance or where a vehicle poses a safety
risk or a risk to the environment; strengthening the
type approval system with more stringent oversight by
the EU. The Commission has the power to suspend,
restrict or withdraw the designation of technical
services, to order recalls, and to impose financial
penalties.
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. 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 were 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 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.
Pursuant to the derogation approved by the
European Commission following our petition, 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
79
Annual Report 2018 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 years 2022-2025
CAFE standards, inviting stakeholders to provide
comments. The EIS purpose is to define the potential
environmental impacts of the model years 2022-2025
CAFE standards and represents the first step of the
rulemaking process relating to those model years.
In August 2018 the NHTSA and the EPA issued
a common proposal, the “Safer Affordable Fuel-
Efficient (SAFE) Vehicles Rule for model years
2021-2026 Passenger Cars and Light Trucks” (SAFE
Vehicles Rule). The SAFE Vehicles Rule, if finalized,
would amend certain existing CAFE and tailpipe
carbon dioxide emissions standards for passenger
cars and light trucks and establish new standards,
all covering model years 2021 through 2026. More
specifically, NHTSA is proposing new CAFE standards
for model years 2022 through 2026 and amending
its 2021 model year CAFE standards because they are
no longer deemed to be maximum feasible standards,
and EPA is proposing to amend its carbon dioxide
emissions standards for model years 2021 through
2025 because they are no longer deemed appropriate
and reasonable in addition to establishing new
standards for model year 2026. The authorities’
stated preferred alternative is to retain the model
year 2020 standards (specifically, the footprint target
curves for passenger cars and light trucks) for both
programs through model year 2026, but comment
has been sought on a range of alternatives. No final
decision has been taken to date.
Under current regulation, for model years 2017-
2025, the EPA allows a SVM, defined as manufacturer
with less than 5,000 yearly unit sales in the United
States, to petition for a less stringent standard.
The EPA has granted us SVM status. We have
therefore petitioned the EPA for alternative standards
for the model years 2017-2021 and 2022-2025,
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. In December, 2017, we
amended the petition by proposing alternative CAFE
standards for model years 2016, 2017 and 2018,
covering also the 2016 model years. NHTSA have not
yet responded to our petition. If our petitions are
rejected or if we produce annually more than 10,000
vehicles globally, 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.
The state of California has been granted special
authority under the Clean Air Act to set its own
vehicle emission standards. In February 2010,
the California Air Resources Board (“CARB”)
enacted regulations under which manufacturers
of vehicles for model years 2012-2016 which are in
compliance with the EPA greenhouse gas emissions
regulations are also deemed to be in compliance
with California’s greenhouse gas emission
regulations (the so-called “deemed to comply”
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provision). 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 model
years 2022 through 2025, in parallel with EPA and
NHTSA, and confirmed in March 2017 that the
standards defined in 2012 may be still considered
appropriate. The SAFE Vehicles Rule mentioned
above proposes to withdraw the waiver granted
to California under the Clean Air Act to establish
more stringent standards for vehicle emissions
that are applicable to model years 2021 through
2025. In response to the proposed California
waiver withdrawal, on December 12, 2018 the
CARB amended its existing regulations to clarify
that the “deemed to comply” provision shall not
be available for model years 2021-2025 if the
EPA standards for those years are altered via an
amendment of federal regulations. Ferrari currently
avails itself of the “deemed-to-comply” provision
to comply with CARB greenhouse gas emissions
regulations. Therefore, it may be necessary
to also petition the CARV for SVM alternative
standards and to increase the number of tests to
be performed in order to follow the CARB specific
procedures.
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 (defined as a
manufacturer with less than 2,000 units imported in
China per year) 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 a series of
updated 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). SVMs (vehicle manufacturers with
a worldwide annual production lower than 10,000
units) are required to be compliant with RDE standards
starting from 2020 while non-SVMs have been required
to comply with RDE standards starting from 2017. In
2018, the European Commission issued Regulation
2018/1832 for the purpose of improving the emission
type approval tests and procedures for light passenger
and commercial vehicles, including those for in-service
conformity and RDE and introducing devices for
monitoring the consumption of fuel and electric energy.
Under the new EU Regulation, which became applicable
in January 2019, among other things, the extended
documentation package provided by manufacturers to
type approval authorities to describe Auxiliary Emission
Strategies (AES) is no longer required to be kept
confidential, and the decision whether to allow access
to such documentation package is left to national
authorities. In addition, the Regulation introduced a
new methodology for checking In-Service Conformity
(ISC) which includes RDE tests. Compliance is tested
based on ISC checks performed by the manufacturer,
the granting type approval authority (GTAA), and
accredited laboratories or technical services. Test results
will be publicly available; in addition, the GTAA will
publish annual reports on the ISC checks performed, in
order to improve transparency.
In the United States, the “Tier 3” Motor Vehicle
Emission and Fuel Standards issued by the EPA were
finalized in April 2014. 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
81
Annual Report 2018 organic compounds, carbon monoxide and particulate
matter. 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.
Additional stringency of evaporative emissions
also requires more advanced materials and technical
solutions to eliminate fuel evaporative losses, all for
much longer warranty periods (up to 150,000 miles in
the United States).
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 (6a and 6b) effective starting from 2020. In
July 2018 China’s central government launched a three-
year plan to reduce air pollution, extending targets for
reducing lung-damaging airborne particulate pollution
to the country’s 338 largest cities. This plan includes
reductions in steel and other industrial capacity,
reducing reliance on coal, promoting electric vehicles
and cleaner transport, enhancing air-pollution warning
systems, and increasing inspections of businesses
for air pollution infractions. Several autonomous
regions and municipalities are implementing the
requirements of the National 6 program even ahead
of the mandated deadlines. For instance, Shenzhen
and Beijing announced the introduction of the 6b
level requirements starting from July 2019 and January
2020, respectively.
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 (the “General Safety 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 onwards to have electronic stability control
systems and tire pressure monitoring systems.
Regulations on low-rolling resistance tires have
also been introduced. The framework is reviewed
periodically, and a revised version of the General
Safety Regulation is currently under discussion.
In May 2018, the European Commission adopted
a proposal for a regulation which mandates new
model cars to be compliant, among other things,
with Advanced Emergency Braking, Emergency Lane
Keeping systems, and car crash test requirements. In
2017 the EU published technical requirements for the
Emergency Call (eCall) system, mandatory for new
model cars starting from 2018. Starting from July 1,
2019, new types of pure electric vehicle and new types
of hybrid electric vehicle capable of operating without
propulsion from a combustion engine operating are
required to be equipped with an Acoustic Vehicle
Alerting System (AVAS), and from July 1, 2021
for all new vehicles of such types, in order to alert
pedestrians that a vehicle is moving at low speeds.
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
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Company Financial Statements and Notes
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 owner. Moreover, the Transportation Recall
Enhancement, Accountability, and Documentation Act
(“TREAD”) 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). U.S. federal
law also sets forth minimum sound requirements
for hybrid and electric vehicles (FMVSS No. 141).
Because of our status as SVM, Ferrari is required to be
compliant at the end of the phase-in period.
On May 4, 2016, the NHTSA published a
Consent Order Amendment (the “Amended Consent
Order”) to the November 3, 2015 Takata Consent
Order regarding 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
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. In January 2019, 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 2014 -
2018 vehicles worldwide. 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 e37 million in 2016 to cover the cost of the
worldwide global Takata recall due to uncertainty of
recoverability of the costs from Takata. At December
31, 2018 the provision amounted to e25 million.
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, may 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.
However, NHTSA rulemaking on driver distraction
guidelines has not progressed since early 2017, and
the announced Phase III draft on voice-activated
controls has not yet been published.
In 2017 Chinese authorities published an
updated version of the current local general safety
standard which allows China to become the driver
market for the Event Data Recorder mandatory
installation starting from 2021. Technical
requirements are expected to be defined in mid-
2019, once the current draft standard is adopted in
its final form.
83
Annual Report 2018 Operating Results
Results of Operations
Consolidated Results of Operations - 2018 compared to 2017 and 2017 compared to 2016
The following is a discussion of the results of operations for the year ended December 31, 2018 as
compared to the year ended December 31, 2017, and for the year ended December 31, 2017 as compared to
the year ended December 31, 2016. The presentation includes line items as a percentage of net revenues for the
respective periods presented to facilitate year-over-year comparisons.
(e million, except percentages)
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 REVENUES
(e million, except percentages)
For the years ended December 31,
2018
3,420
1,623
327
643
4
3
826
23
803
16
787
Percentage of
net revenues
100.0%
47.4%
9.6%
18.8%
0.1%
0.1%
24.2%
0.7%
23.5%
0.5%
23.0%
2017
3,417
1,651
329
657
7
2
775
29
746
209
537
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%
2016
3,105
1,580
295
614
24
3
595
28
567
167
400
Percentage of
net revenues
100.0%
50.9%
9.5%
19.8%
0.8%
0.2%
19.2%
0.9%
18.3%
5.4%
12.9%
The following table sets forth an analysis of our net revenues for the periods indicated:
For the years ended December 31,
Increase/(Decrease)
Cars and spare parts (1)
Engines (2)
Sponsorship,
commercial and brand (3)
Other (4)
2018
2,535
284
506
95
Percentage
of net
revenues
2017
Percentage
of net
revenues
2016
74.1% 2,456
71.9% 2,180
Percentage
of net
revenues
70.2%
8.3%
373
10.9%
338
10.9% (89)
(23.8)%
2018 vs. 2017
2017 vs. 2016
79
3.2%
276
35
12.7%
10.5%
12
1
3
2.4%
1.4%
6
(5)
1.1%
(5.1)%
0.1% 312
10.0%
Total net revenues
3,420
100.0% 3,417
100.0% 3,105
100.0%
14.8%
2.8%
494
94
14.5%
2.7%
488
99
15.7%
3.2%
(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 Ferrari financial services activities and net revenues from the management of the Mugello racetrack.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
2018 compared to 2017
Net revenues for 2018 were e3,420 million, an increase of e3 million, or 0.1 percent (an increase of
3.2 percent on a constant currency basis), from e3,417 million for 2017.
The increase in net revenues was attributable to the combination of (i) a e79 million increase in cars and
spare parts net revenues, (ii) a e12 million increase in sponsorship, commercial and brand net revenues, and
(iii) a e1 million increase in other net revenues, partially offset by (iv) a e89 million decrease in engines net
revenues.
Cars and spare parts
Cars and spare parts net revenues were e2,535 million for 2018, an increase of e79 million, or
3.2 percent, from e2,456 million for 2017. The increase was primarily attributable to a e145 million increase
in net revenues from range and special series cars, partially offset by a e66 million decrease in net revenues
from hypercars and limited edition cars.
The e145 million increase in net revenues from range and special series cars and spare parts was
principally attributable to an increase in shipments driven by the 812 Superfast, as well as a greater
contribution from personalization programs and pricing increases, partially offset by significant negative
foreign currency exchange impact. Shipments of V12 range and special series models increased by
approximately 25 percent, primarily attributable to shipments of the 812 Superfast, which commenced in
the third quarter of 2017, partially offset by the phase-outs of the limited series F12tdf and the F12berlinetta
in 2017. Shipments of V8 range and special series models increased by approximately 7 percent, mainly
due to the Ferrari Portofino and our first shipments of the newly launched 488 Pista, partially offset by the
phase-out of the California T in 2018.
The e145 million increase in net revenues from range and special series cars and spare parts was composed
of increases in all four of our geographical regions, including: (i) an e88 million increase in EMEA, (ii) a e32
million increase in Americas, (iii) a e21 million increase in Rest of APAC, and (iv) a
e4 million increase in Mainland China, Hong Kong and Taiwan.
(i)
The e88 million increase in EMEA net revenues was primarily attributable to positive volume and pricing,
as well as greater contribution from personalization programs. The positive volume was driven by double-
digit growth in shipments in the UK, Italy, France, Switzerland, Germany and Other EMEA.
(ii) The e32 million increase in Americas net revenues was primarily attributable to positive volume and
pricing, as well as a greater contribution from our personalization programs, partially offset by negative
foreign currency translation impact.
(iii) The e21 million increase in Rest of APAC net revenues was primarily attributable to positive volumes
in Japan and to a lesser extent in Australia and other countries within Rest of APAC, partially offset by
negative foreign currency translation impact in Japan and Australia.
(iv) The e4 million increase in Mainland China, Hong Kong and Taiwan net revenues was primarily
attributable to positive volume and mix, partially offset by negative foreign currency translation impact.
The positive volume impacts referred to above were primarily attributable to the Ferrari Portofino, the 812
Superfast and the newly launched 488 Pista, partially offset by the phase-out of the California T.
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Annual Report 2018 The e66 million decrease in net revenues from hypercars and limited edition cars was primarily attributable
to a decrease in shipments of the LaFerrari Aperta, which finished its limited series run in 2018, partially offset
by deliveries of the strictly limited edition Ferrari J50 and the FXX K EVO.
Engines
Net revenues generated from engines were e284 million for 2018, a decrease of e89 million, or 23.8
percent, from e373 million for 2017. The e89 million decrease was mainly attributable to a decrease in net
revenues generated from the sale of engines to Maserati, driven by a decrease in the number of engines shipped
in 2018 compared to 2017.
Sponsorship, commercial and brand
Net revenues generated from sponsorship, commercial agreements and brand management activities were
e506 million for 2018, an increase of e12 million, or 2.4 percent, from e494 million for 2017. The increase
was primarily related to sponsorship revenues and a higher 2017 championship ranking compared to 2016,
partially offset by other brand related activities and negative foreign currency exchange impact.
Other
Other net revenues, which primarily relate to our financial services activities and management of the
Mugello racetrack, amounted to e94 million for 2017 and e95 million for 2018.
2017 compared to 2016
Net revenues for 2017 were e3,417 million, an increase of e312 million, or 10.0 percent (an increase of 8.4
percent on a constant currency basis), from e3,105 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 e276 million increase in cars and spare parts net revenues, (ii) a e35
million increase in engines net revenues and (iii) a e6 million increase in sponsorship, commercial and brand
net revenues, partially offset by (iv) a e5 million decrease in other net revenues.
Cars and spare parts
Cars and spare parts net revenues were e2,456 million for 2017, an increase of e276 million, or 12.7
percent, from e2,180 million for 2016. The increase was primarily attributable to a e249 million increase
in net revenues from range and special series cars and spare parts, as well as a e27 million increase in net
revenues from hypercars and limited edition cars.
The e249 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.
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Company Financial Statements and Notes
The e249 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 e146 million increase in EMEA, (ii) a
e40 million increase in Americas, (iii) a e36 million increase in Rest of APAC, and (iv) a e27 million increase
in Mainland China, Hong Kong and Taiwan.
(i)
The e146 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.
(ii) The e40 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
currency translation 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.
(iii) The e36 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 translation impact. Double-digit growth
in shipments was achieved in Australia and Rest of APAC, supported by the 488 and the GTC4Lusso
families.
(iv) The e27 million increase in Mainland China, Hong Kong and Taiwan net revenues was primarily
attributable to a positive mix, driven by the GTC4Lusso family and other V12 models, particularly in
Mainland 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 e27 million increase in net revenues from supercars and limited edition cars was primarily 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.
Engines
Net revenues generated from engines were e373 million for 2017, an increase of e35 million, or 10.5
percent, from e338 million for 2016. The e35 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
e494 million for 2017, an increase of e6 million, or 1.1 percent, from e488 million for 2016. The increase
87
Annual Report 2018 was primarily related 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
Other net revenues were e94 million for 2017, a decrease of e5 million, or 5.1 percent, from e99 million
for 2016. The e5 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.
COST OF SALES
(e million, except percentages)
For the years ended December 31,
Increase/(Decrease)
2018
Percentage
of net
revenues
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2018 vs. 2017
2017 vs. 2016
Cost of sales
1,623
47.4% 1,651
48.3% 1,580
50.9% (28)
(1.7)%
71
4.5%
2018 compared to 2017
Cost of sales for 2018 was e1,623 million, a decrease of e28 million, or 1.7 percent, from e1,651 million
for 2017. As a percentage of net revenues, cost of sales decreased from 48.3 percent in 2017 to 47.4 percent in
2018.
The decrease in cost of sales was primarily attributable to (i) a decrease of e122 million driven by lower
engine volumes and lower industrial costs, including warranty charges, partially offset by (ii) an increase in
costs of e94 million driven by an increase in volumes, as well as higher depreciation.
The increase in cost of sales related to volumes was driven by the 812 Superfast, the Ferrari Portofino
and the newly-launched 488 Pista, partially offset by the phase-outs of the F12tdf, the F12berlinetta and the
California T.
2017 compared to 2016
Cost of sales for 2017 was e1,651 million, an increase of e71 million, or 4.5 percent, from e1,580
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 e58 million driven by an
increase in volumes and personalization programs, (ii) increased costs of e46 million driven by an increase in
production volumes of engines for Maserati and costs for other supporting activities and (iii) an increase in
production costs, including depreciation, of e4 million, partially offset by (iv) the effect of charges in 2016 for
Takata airbag inflator recalls of e37 million.
The e58 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 e46 million increase in cost of sales related to the
production of engines for Maserati and other supporting activities was driven by a 25 percent increase in the
volume of engines shipped to Maserati.
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FERRARI N.V.Annual Report 2018> Operating Results Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
SELLING, GENERAL AND ADMINISTRATIVE COSTS
(e million, except percentages)
For the years ended December 31,
Increase/(Decrease)
2018
Percentage
of net
revenues
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2018 vs. 2017
2017 vs. 2016
Selling, general and
administrative costs
327
9.6%
329
9.6%
295
9.5%
(2)
(0.5)%
34
11.5%
2018 compared to 2017
Selling, general and administrative costs for 2018 were e327 million, a decrease of e2 million, or 0.5
percent, from e329 million for 2017. As a percentage of net revenues, selling, general and administrative costs
were substantially unchanged.
2017 compared to 2016
Selling, general and administrative costs for 2017 were e329 million, an increase of e34 million, or 11.5
percent, from e295 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 (Mr. Amedeo Felisa) retirement package recognized in 2016 and (v) a decrease in costs due to the
deconsolidation of FFS GmbH since November 2016.
RESEARCH AND DEVELOPMENT COSTS
(e million, except percentages)
For the years ended December 31,
Increase/(Decrease)
2018
Percentage
of net
revenues
2017
Percentage
of net
revenues
2016
Percentage
of net
revenues
2018 vs. 2017
2017 vs. 2016
528
15.4%
556
16.3%
510
16.4% (28)
(5.2)%
46
9.2%
115
3.4%
101
2.9%
104
3.4%
14
14.6%
(3)
(3.4)%
643
18.8%
657
19.2%
614
19.8% (14)
(2.1)%
43
7.1%
Research and
development costs
expensed during the year
Amortization of
capitalized development
costs
Research and
development costs
2018 compared to 2017
Research and development costs for 2018 were e643 million, a decrease of e14 million, or 2.1 percent,
from e657 million for 2017. As a percentage of net revenues, research and development costs were 18.8
percent in 2018 compared to 19.2 percent in 2017.
The decrease in research and development costs was attributable to a decrease of e28 million in research
and development costs expensed, primarily driven by lower research and development costs for Formula 1
activities and lower research activities for our GT and sports cars, partially offset by an increase of e14 million
in amortization of capitalized development costs.
89
Annual Report 2018 2017 compared to 2016
Research and development costs for 2017 were e657 million, an increase of e43 million, or 7.1 percent,
from e614 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.
The increase in research and development costs was attributable to an increase of e46 million in research
and development costs expensed, partially offset by a decrease of e3 million in amortization of capitalized
development costs.
The e46 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.
OTHER EXPENSES, NET
(e million, except percentages)
Other expenses, net
2018 compared to 2017
For the years ended December 31,
Increase/(Decrease)
2018
4
2017
2016
2018 vs. 2017
2017 vs. 2016
7
24
(3)
(53.5)%
(17)
(72.0)%
Other expenses, net for 2018 amounted to net other expenses of e4 million, a decrease of e3 million, or
53.5 percent, compared to net other expenses of e7 million for 2017.
For 2018, other expenses, net included other expenses of e19 million, which mainly related to indirect taxes,
accruals for provisions and miscellaneous expenses, partially offset by other income of e15 million, which
mainly related to a favorable ruling on a prior year’s legal dispute, and to a lesser extent other miscellaneous
income.
For 2017, other expenses, net included other expenses of e12 million, which mainly related to indirect taxes
and miscellaneous expenses, partially offset by other income of e5 million, which mainly related to gains on
disposals of property, plant and equipment, rental income and miscellaneous income.
2017 compared to 2016
Other expenses, net for 2017 amounted to net other expenses of e7 million, a decrease of e17 million, or
72.0 percent, compared to net other expenses of e24 million for 2016.
For 2017, other expenses, net included other expenses of e12 million, which mainly related to indirect taxes
and miscellaneous expenses, partially offset by other income of e5 million, which mainly related to gains on
disposals of property, plant and equipment, rental income and miscellaneous income.
For 2016, other expenses, net included other expenses of e30 million, which mainly related to provisions
(primarily due to disputes with a distributor), indirect taxes and miscellaneous expenses, partially offset by
other income of e6 million, which mainly related to gains on the disposal of property plant and equipment,
rental income and miscellaneous income.
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FERRARI N.V.Annual Report 2018> Operating Results Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
EBIT
(e million, except percentages)
For the years ended December 31,
Increase/(Decrease)
Percentage
of net
revenues
24.2%
2018
826
Percentage
of net
revenues
22.7%
2017
775
Percentage
of net
revenues
19.2%
2016
595
2018 vs. 2017
2017 vs. 2016
51
6.6%
180
30.3%
EBIT
2018 compared to 2017
EBIT for 2018 was e826 million, an increase of e51 million, or 6.6 percent, from e775 million for 2017. As
a percentage of net revenues, EBIT increased from 22.7 percent in 2017 to 24.2 percent in 2018.
The increase in EBIT was primarily attributable to the combined effects of (i) positive volume impact of
e118 million, (ii) positive contribution from other supporting activities of e26 million, (iii) a decrease in
research and development costs of e14 million, and (iv) a decrease in selling, general and administrative
costs of e2 million, partially offset by (v) negative product mix of e17 million and (vi) negative foreign
currency exchange impact of e92 million (including foreign currency hedging instruments) primarily driven by
fluctuations in the U.S. Dollar, the Pound Sterling and the Japanese Yen compared to the Euro.
The positive volume impact of e118 million was attributable to an increase in total shipments, driven
by the 812 Superfast, the Ferrari Portofino and the 488 Pista. The negative product mix of e17 million was
primarily attributable to the combined impact of lower sales of LaFerrari Aperta and the strong performance
of the Ferrari Portofino, partially offset by the 812 Superfast, as well as pricing increases and deliveries of the
strictly limited edition Ferrari J50 and the FXX K EVO. The positive contribution from other supporting activities
of e26 million was primarily attributable to sponsorship activities, a higher 2017 championship ranking
compared to 2016 and a favorable ruling on a prior year’s legal dispute, partially offset by a lower contribution
from other brand related activities and engines supplied to Maserati.
The increase in EBIT as a percentage of net revenues from 22.7 percent in 2017 to 24.2 percent in 2018 was
primarily attributable to the combination of the previously mentioned effects on EBIT, including a decrease in
cost of sales as a percentage of net revenues from 48.3 percent in 2017 to 47.4 percent in 2018.
2017 compared to 2016
EBIT for 2017 was e775 million, an increase of e180 million, or 30.3 percent, from e595 million for 2016.
As a percentage of net revenues, EBIT increased from 19.2 percent in 2016 to 22.7 percent in 2017.
The increase in EBIT was primarily attributable to (i) positive volume impact of e67 million, (ii) favorable
mix impact of e80 million, (iii) positive net foreign currency exchange impact of e53 million (resulting from
positive e101 million relating to foreign currency hedging instruments, partially offset by an adverse impact
on revenues from the weakening of foreign currencies against the Euro) and (iv) a decrease of e57 million in
other supporting costs, including the effect of charges in 2016 for Takata airbag inflator recalls of e37 million,
partially offset by (v) an increase in research and development costs of e43 million and (vi) an increase in
selling, general and administrative costs of e34 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
91
Annual Report 2018 California T and the F12berlinetta, as well as the F12tdf, which finished its limited series run in 2017.
The favorable mix impact of e80 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, including a
decrease in cost of sales as a percentage of net revenues from 50.9 percent in 2016 to 48.3 percent in 2017.
NET FINANCIAL EXPENSES
(e million, except percentages)
Net financial expenses
2018 compared to 2017
For the years ended December 31,
Increase/(Decrease)
2018
23
2017
29
2016
2018 vs. 2017
2017 vs. 2016
28
(6)
(19.5)%
1
5.5%
Net financial expenses for 2018 were e23 million compared to e29 million for 2017, representing a
decrease of e6 million.
The decrease in net financial expenses was primarily attributable to (i) a decrease in interest expenses and
(ii) a decrease in net foreign exchange losses. The decrease in interest expenses was mainly driven by lower
interest on bank borrowings due to the full repayment of the Term Loan in November 2017, partially offset by
higher interest on bonds due to a new bond issued in November 2017. For the year ended December 31, 2017,
net financial expenses included gains resulting from exercising the Delta Topco option.
2017 compared to 2016
Net financial expenses for 2017 were e29 million compared to e28 million for 2016, representing an
increase of e1 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, and (iv) gains resulting from
exercising the Delta Topco option.
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FERRARI N.V.Annual Report 2018> Operating Results Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
For the years ended December 31,
Increase/(Decrease)
2018
16
2017
209
2016
2018 vs. 2017
2017 vs. 2016
167 (193)
(92.2)%
42
24.5%
INCOME TAX EXPENSE
(e million, except percentages)
Income tax expense
2018 compared to 2017
Income tax expense for 2018 was e16 million, a decrease of e193 million, or 92.2 percent, from
e209 million for 2017. The decrease in income tax expense was primarily attributable to the positive impact
from the application of the Patent Box tax regime (as described below), including e141 million of Patent Box
benefits related to the years 2015 to 2017 (of which e139 million was from direct use and e2 million was from
indirect use of copyrights, patents, trademarks, designs and know-how) and the estimated Patent Box tax
benefit relating to the year 2018, which amounted to e61 million.
In September 2018, the Group signed an agreement with the Italian Revenue Agency in relation to the
Patent Box tax regime, which provides a tax benefit for companies that generate income through the use, both
direct and indirect, of copyrights, patents, trademarks, designs and know-how. For further information see
Note 12 “Income Taxes” to our Consolidated Financial Statements included elsewhere in this Annual Report.
2017 compared to 2016
Income tax expense for 2017 was e209 million, an increase of e42 million, or 24.5 percent, from
e167 million for 2016. The increase in income tax expense was primarily attributable to an increase in profit
before taxes from e567 million in 2016 to e746 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 to the Tax Cuts and Jobs Act (the “Tax Act”), which 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 percent to 21 percent 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 e4.7 million decrease in net deferred tax assets.
Recent Developments
See “Subsequent Events and 2019 Outlook”.
93
Annual Report 2018 Liquidity and Capital Resources
Liquidity Overview
We require liquidity in order to fund our business operations and meet our obligations. Short-term
liquidity is required to purchase raw materials, parts and components for car production, as well as to fund
selling, general, 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
product range and broaden our future product portfolio. We make capital investments, primarily in Italy, for
initiatives to develop and introduce new products, enhance manufacturing efficiency and improve capacity,
as well as for maintenance and environmental compliance. Our capital expenditure in 2018 was primarily to
support continuous product range renewal and expansion, as well as research and development expenditure
to transition our product portfolio to hybrid technology. We fund our capital expenditure primarily with cash
generated from our operating activities.
Our business and results of operations depend on our ability to achieve certain minimum car shipment
volumes. We have significant fixed costs and therefore, changes in our car shipment volumes can have a
significant effect on profitability and liquidity. We 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.
Cyclical Nature of our Cash Flows
Our working capital is subject to month to month fluctuations due to, among other things, 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 the launches of new models, during
the phase out of existing models and at the end of the second quarter when our inventory levels are generally
higher to support the summer plant shutdown.
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 60 and 90
days after we receive the raw materials or components. Additionally, we also receive advance payments from
our customers, mainly for our hypercars and limited edition cars (and starting in 2019, our Icona 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 of the
above, including the advances received from customers on certain models, we tend to receive payment
for cars shipped before we are required to make payment for the raw materials and components used in
manufacturing the cars.
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FERRARI N.V.Annual Report 2018> Operating Results
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Our capital expenditure requirements are, among other things, influenced by the timing and the number
of new model launches. Our development costs, as well as our other investments in capital expenditure,
generally 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 the expansion of our product range. We significantly increased our capital
expenditure in 2018 and we expect our capital expenditure will continue to increase in 2019 to further our
investments in hybrid technology and fuel future growth. 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.
The payment of taxes also affects our working capital. We typically pay our taxes in two advances.
In 2017, we paid the remaining balance of 2016 taxes as well as the first advance in relation to 2017 taxes in the
second quarter, and we paid the second advance in relation to 2017 taxes in the fourth quarter. In the second
quarter of 2018, we paid the remaining balance of 2017 taxes as well as the first advance in relation to 2018
taxes. As a result of signing an agreement in September 2018 with the Italian Revenue Agency in relation to our
application of the Patent Box tax regime for the years 2015 to 2019, our tax expense was significantly reduced
in 2018 and we did not pay the second advance in relation to 2018 taxes in the fourth quarter of 2018.
The current Patent Box ruling remains in force until fiscal year 2019. The potential applicability of the Patent
Box tax regime beyond 2019 will depend on future changes to Italian tax legislation. See Note 11 “Income Taxes”
to the Consolidated Financial Statements for additional details related to the Patent Box.
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, 2018, 2017 and 2016. For additional details of our cash flows, see
our Consolidated Financial Statements included elsewhere in this Annual Report.
OTHER EXPENSES, NET
(e million)
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,
2018
934
(637)
(152)
1
146
2017
663
(379)
(85)
(9)
190
2016
1,005
(320)
(411)
1
275
Operating Activities - Year Ended December 31, 2018
For the year ended December 31, 2018, our cash flows from operating activities were e934 million,
primarily the result of:
(i)
profit before tax of e803 million, adjusted to add back e289 million of depreciation and amortization
expense, e30 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),
e23 million of net finance costs and e16 million in provisions accrued. Other non-cash expenses were
primarily attributable to share-based compensation expense under the equity incentive plan;
95
Annual Report 2018
(ii) e62 million of cash related to the net change in inventories, trade payables and trade receivables.
In particular, the movement was attributable to (a) cash generated from trade payables of e40 million
driven by higher capital expenditures and an increase in volumes, (b) cash generated by trade receivables
of e27 million, partially offset by (c) cash absorbed by inventory of e5 million.
(i)
These cash inflows were partially offset by:
e107 million of cash absorbed from receivables from financing activities driven by an increase in the
financial services portfolio in the United States;
(ii) e83 million of cash absorbed by the change in other operating assets and liabilities, primarily attributable
to a decrease in advances for the LaFerrari Aperta and the Ferrari J50;
(iii) e11 million of net finance costs paid; and
(iv) income tax paid of e88 million, primarily related to the payment of the remaining balance of 2017 taxes as
well as the first advance in relation to 2018 taxes.
Operating Activities - Year Ended December 31, 2017
For the year ended December 31, 2017, our cash flows from operating activities were e663 million, primarily
the result of:
(i)
profit before tax of e746 million, adjusted to add back e261 million of depreciation and amortization
expense, e39 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),
e29 million of net finance costs and e13 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.
(i)
These cash inflows were partially offset by:
e73 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) e61 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 e88 million
driven by projected volume growth in line with our 2018 production outlook, and (b) cash absorbed by
trade receivables of e2 million, partially offset by (c) cash generated from trade payables of e29 million,
driven by an increase in volumes;
(iii) e44 million related to cash absorbed from receivables from financing activities driven by an increase in the
financial services portfolio in the United States;
(iv) e32 million of net finance costs paid; and
(v)
income tax paid of e215 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 e1,005 million,
primarily the result of:
(i)
profit before tax of e567 million, adjusted to add back e248 million of depreciation and amortization
expense, e82 million in provisions and e28 million of net finance costs, partially offset by e41 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 e3 million non-cash result from investments. The e82 million
in provisions accrued was primarily attributable to (a) a warranty and recall campaigns provision of
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FERRARI N.V.Annual Report 2018> Operating Results
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
e60 million, of which e37 million related to the Takata airbag inflator recalls and the remainder primarily
related to an increase in volumes, and (b) other risks of e22 million, primarily related to disputes with a
distributor;
(ii) e405 million related to cash generated by a decrease in receivables from financing activities, primarily
attributable to a cash payment of e432 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) e7 million relating to cash generated by other operating assets and liabilities, which benefited by
approximately e69 million from advances received, mainly related to the LaFerrari Aperta.
These cash inflows were partially offset by:
(i) e20 million in net finance costs paid;
(ii) e16 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 e33 million, (b) cash
absorbed by trade receivables of e89 million, partially offset by (c) cash generated from trade payables of
e106 million, all of which were driven by an increase in volumes and Maserati engines; and
(iii) income tax paid of e252 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.
Investing Activities - Year Ended December 31, 2018
For the year ended December 31, 2018, our net cash used in investing activities was e637 million, primarily
the result of:
(i)
capital expenditures of e301 million related to additions to property, plant and equipment and
e338 million related to intangible assets, partially offset by proceeds from the sale of property, plant and
equipment and intangible assets.
Investing Activities - Year Ended December 31, 2017
For the year ended December 31, 2017, our net cash used in investing activities was e379 million, primarily
the result of:
(i)
e392 million of capital expenditures, mainly including e189 million related to additions to property, plant
and equipment and e203 million relating to intangible assets.
These cash outflows were partially offset by:
(i) e8 million of proceeds from exercising the Delta Topco option; and
(ii) e5 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 e320 million, primarily
the result of:
(i)
e342 million of capital expenditures, including e176 million related to additions to property, plant and
equipment and e166 million relating to additions to intangible assets.
These cash outflows were partially offset by:
(i) e19 million of proceeds from the sale of a majority stake in FFS GmbH to FCA Bank; and
(ii) e3 million proceeds from the sale of property, plant and equipment and intangible assets.
97
Annual Report 2018 Financing Activities - Year Ended December 31, 2018
For the year ended December 31, 2018, our net cash used in financing activities was e152 million, primarily
the result of:
(i) e133 million of dividends paid to owners of the parent;
(ii) e100 million related to the repurchase of common shares;
(iii) e8 million related to the net change in other debt;
(iv) e4 million related to the net change in borrowings from banks; and
(v)
e2 million of dividends paid to non-controlling interests in our Chinese distributor, Ferrari International
Cars Trading (Shanghai) Co. Ltd.
(i)
These cash outflows were partially offset by:
e95 million of proceeds net of repayments related to our revolving securitization programs in the United
States.
Financing Activities - Year Ended December 31, 2017
For the year ended December 31, 2017, net cash used in financing activities was e85 million, primarily the
result of:
(i)
e795 million related to the full repayment of the Term Loan, including e100 million of mandatory
scheduled payments in June 2017 and e695 million for the full repayment of the remaining balance in
November 2017, primarily with the proceeds of the 2021 Bond;
(ii) e120 million related to a cash distribution of reserves to holders of our common shares;
(iii) e8 million related to the net change in other debt; and
(iv) e1 million of dividends paid to non-controlling interests in our Chinese distributor, Ferrari International
Cars Trading (Shanghai) Co. Ltd.
(i)
These cash outflows were partially offset by:
e694 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) e141 million of proceeds net of repayments related to our revolving securitization programs in the USA;
and
(iii) e4 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 e411 million, primarily the
result of:
(i)
e701 million related to principal repayments of the Term Loan, including voluntary prepayments of
e600 million (e300 million in September 2016 and e300 million in December 2016) and mandatory
scheduled repayments of e92 million and $9 million in December 2016;
(ii) e500 million related to the full repayment of the Bridge Loan;
(iii) e212 million related to net repayments of other bank borrowings;
(iv) e87 million cash distribution of reserves to holders of our common shares; and
(v)
e17 million of dividends paid to non-controlling interests in our Chinese distributor, Ferrari International
Cars Trading (Shanghai) Co. Ltd;
These cash outflows were partially offset by:
(i) e491 million of net proceeds related to the issuance of the 2023 Bond (see “Bonds” below);
(ii) e463 million of proceeds net of repayments related to revolving securitization programs in the USA;
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
(iii) e135 million in net proceeds from the settlement of the deposits in FCA Group cash management pools
and liabilities with FCA;
(iv) e16 million related to net change in other debt; and
(v)
e1 million of proceeds from the share premium contribution made by FCA in connection with the
Restructuring.
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, 2018 and 2017.
(e million)
Cash and cash equivalents
Total liquidity
Bonds
Securitizations
Borrowings from banks
Other debt
Total debt
Net Debt
Funded portion of the self-liquidating financial receivables portfolio
Net Industrial Debt
At December 31,
2018
794
794
(1,198)
(683)
(36)
(10)
(1,927)
(1,133)
793
(340)
2017
648
648
(1,194)
(556)
(38)
(18)
(1,806)
(1,158)
685
(473)
For further details on total debt, see Note 25 “Debt” to the Consolidated Financial Statements included
elsewhere in this Annual Report.
Cash and cash equivalents
Cash and cash equivalents were e794 million at December 31, 2018 compared to e648 million at December
31, 2017. See “Cash Flows” above for further details.
Approximately 78 percent of our cash and cash equivalents were denominated in Euro at December 31, 2018
(approximately 67 percent 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 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 e78 million at December
31, 2018 (e66 million at December 31, 2017), is subject to certain repatriation restrictions and may only be
repatriated as dividends. We do not currently believe that such transfer restrictions have an adverse impact on
our ability to meet our liquidity requirements.
99
Annual Report 2018
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 related funding. Such
cash amounted to e26.5 million and e28.2 million at December 31, 2018 and 2017, respectively.
The following table sets forth an analysis of the currencies in which our cash and cash equivalents were
denominated at the dates presented:
(e million)
Euro
Chinese Yuan
U.S. Dollar
Japanese Yen
Other currencies
Total
At December 31,
2018
616
73
50
24
31
794
2017
435
62
88
26
37
648
Total Available Liquidity
Our total available liquidity (defined as cash and cash equivalents plus undrawn committed credit lines) at
December 31, 2018 was e1,294 million (e1,148 million at December 31, 2017).
The following table summarizes our total available liquidity:
(e million)
Cash and cash equivalents
Undrawn committed credit lines
Total available liquidity
At December 31,
2018
794
500
1,294
2017
648
500
1,148
The undrawn committed credit lines relate to a revolving credit facility. For further details see Note 25 “Debt”
to the Consolidated Financial Statements included elsewhere in this Annual Report.
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, 2018, 2017 and 2016.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
(e million)
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,
2018
934
(637)
297
107
404
2017
663
(379)
284
44
328
2016
1,005
(320)
685
(405)
280
Free Cash Flow for the year ended December 31, 2018 was e297 million compared to e284 million for the
year ended December 31, 2017 and e685 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, 2018 was e404 million, an increase
of e76 million compared to e328 million for the year ended December 31, 2017. The increase was primarily
attributable to an increase in EBITDA, a decrease in tax payments due to the Patent Box benefit and the positive
impact from changes in working capital, partially offset by an increase in capital expenditures.
Free Cash Flow from Industrial Activities for the year ended December 31, 2017 was e328 million compared
to e280 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.
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, which 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, 2018, 2017 and 2016, 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
101
Annual Report 2018 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.
(e million)
For the years ended December 31,
Net profit
Income tax expense
Net financial expenses
Amortization and depreciation
EBITDA
(Release of charges)/Charges for Takata airbag inflator recalls
Adjusted EBITDA
Adjusted EBIT
2018
787
16
23
289
1,115
(1)
1,114
2017
537
209
29
261
1,036
—
1,036
2016
400
167
28
248
843
37
880
Adjusted EBIT represents EBIT as adjusted for income and costs, which 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, 2018, 2017 and 2016.
(e million)
EBIT
(Release of charges)/Charges for Takata airbag inflator recalls
Adjusted EBIT
For the years ended December 31,
2018
826
(1)
825
2017
775
—
775
2016
595
37
632
Adjusted Net Profit
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 percent for the years ended December 31, 2018 and 2017, and 27.5 percent for the
year ended December 31, 2016, and the Italian Regional Income Tax (“IRAP”), which was 3.9 percent for all years
presented. We provide 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, 2018, 2017 and 2016.
(e million)
Net profit
Patent box benefit for the period 2015-2017
(Release of charges)/Charges for Takata airbag inflator recalls (net of tax effect)
Adjusted Net Profit
For the years ended December 31,
2018
787
(141)
(1)
645
2017
537
—
—
537
2016
400
—
25
425
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 percent for the years ended December 31,
2018 and 2017, and 27.5 percent for the year ended December 31, 2016, and the Italian Regional Income Tax
(“IRAP”), which was 3.9 percent for all years presented. We provide 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, 2018, 2017 and 2016.
Net profit attributable to owners of the Company
Patent box benefit for the period 2015-2017
(Release of charges)/Charges for Takata airbag inflator recalls
(net of tax effect)
Adjusted profit attributable to owners of the Company
e million
e million
e million
e million
For the years ended December 31,
2018
785
(141)
(1)
643
2017
535
—
—
535
2016
399
—
25
424
Weighted average number of common shares
thousand
188,606
188,951
188,923
Adjusted basic earnings per common share
Weighted average number of common shares for diluted
earnings per common share
Adjusted diluted earnings per common share (1)
e
3.41
2.83
2.25
thousand
189,394
189,759
188,946
e
3.40
2.82
2.24
(1) 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 for the years ended December 31, 2018 and 2017, and
(ii) the potential common shares that would have been issued for the Non-Executive Directors’ compensation agreement for the years ended
December 31, 2017 and 2016.
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, 2018,
and 2017.
(e million)
Cash and cash equivalents
Debt
Net Debt
Funded portion of the self-liquidating financial receivables portfolio
Net Industrial Debt
At December 31,
2018
794
(1,927)
(1,133)
793
(340)
2017
648
(1,806)
(1,158)
685
(473)
103
Annual Report 2018 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, 2018, 2017 and 2016.
(e million)
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,
2018
934
(637)
297
107
404
2017
663
(379)
284
44
328
2016
1,005
(320)
685
(405)
280
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 in November 2016.
Constant Currency Information
The “Results of Operations” discussion above includes information about our net revenues on a constant
currency basis, which excludes the effects of foreign currency translation from our subsidiaries with functional
currencies other than Euro, as well as the effects of foreign currency transaction impact and foreign currency
hedging. We use this information to assess how the underlying revenues changed independent of fluctuations
in foreign currency exchange rates and hedging. We calculate constant currency by (i) applying the prior-period
average foreign currency exchange rates to translate current period revenues of foreign subsidiaries expressed in
local functional currency other than Euro, (ii) applying the prior-period average foreign currency exchange rates
to current period revenues originated in a currency other than the functional currency of the applicable entity,
and (iii) eliminating the variances of any foreign currency hedging (see Note 2 “Significant Accounting Policies”
to the Consolidated Financial Statements, included elsewhere 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 revenues excluding the impact of currency fluctuations year-on-year and the
impacts of hedging provide additional useful information to investors regarding the operating performance on
a local currency basis.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Subsequent Events and 2019 Outlook
Subsequent Events
Under a new common share repurchase program announced by Ferrari on December 28, 2018, the Company
has purchased 335,346 common shares for a total consideration of e33.4 million. As a result, as of February
22, 2019 the Company held an aggregate of 6,338,189 common shares in treasury.
On February 26, 2019, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders
that the Company declare a dividend of e1.03 per common share, totaling approximately e194 million.
The proposal is subject to the approval of the Company’s shareholders at the Annual General Meeting to be held
on April 12, 2019.
2019 Outlook
The Group targets the following performance in 2019:
• Net revenues: > Euro 3.5 billion, over 3% growth versus 2018
• Adj. EBITDA: Euro 1.2-1.25 billion, approx. 10% growth versus 2018
• Adj. EBIT: Euro 0.85-0.9 billion, approx. 6% growth versus 2018
• Adj. diluted EPS: Euro 3.50-3.70 per share, approx. 6% growth versus 2018
• Industrial free cash flow: ~ Euro 0.45 billion, over 10% growth versus 2018
February 26, 2019
Board of Directors
John Elkann
Louis C. Camilleri
Piero Ferrari
Sergio Duca
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
105
Annual Report 2018 Major Shareholders
Exor is the largest shareholder of Ferrari through
its approximately 23.7 percent shareholding interest
in our outstanding common shares (as of February
15, 2019). See “Overview-History of the Company.”
As a result of the loyalty voting mechanism, Exor’s
voting power is approximately 33.6 percent (as of
February 15, 2019). In addition, as of February 15,
2019, Mr. Piero Ferrari holds approximately 10.1
percent of our outstanding common shares and, as
a result of the loyalty voting mechanism, his voting
power is approximately 15.5 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, based
on regulatory filings with the Netherlands Authority for
the Financial Markets (stichting Autoriteit Financiële
Markten, the “AFM”). G.A. is a Dutch private company
with limited liability (besloten vennootschap 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.,
as of February 20, 2019, were 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 AFM and the
SEC and other sources available to us, the following
shareholders owned, directly or indirectly, in excess of
three percent of the common shares holding voting
rights of Ferrari, as of February 15, 2019:
Shareholder
Exor N.V. (2)
Piero Ferrari (2)
BlackRock, Inc. (3)
T. Rowe Price Associates, Inc. (4)
Other public shareholders
Number of
common shares
44,435,280
18,894,295
9,877,693
6,762,433
107,658,623
Percentage
owned (1)
23.7%
10.1%
5.3%
3.6%
57.3%
(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”),
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, BlackRock, Inc. is a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) and,
out of the common shares beneficially owned as set forth in the table, it has sole voting power over 8,933,118 common shares.
(4) 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 2,832,321 common shares.
Based on the information in Ferrari’s shareholder
register and other sources available to us, as of
February 15, 2019, approximately 44.5 million
Ferrari common shares, or 23.7 percent of the
outstanding Ferrari common shares, were held in the
United States. As of the same date, approximately
1,700 record holders had registered addresses in the
United States.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 Shareholders’ 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 G.A., to a successor in
business of G.A. and to any affiliate of a successor
in business of G.A., 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.
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.
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Annual Report 2018 108
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Corporate Governance
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”). 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 company 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 rules, the
Company is permitted to follow its so called home
country practice with regard to certain corporate
governance standards. Therefore, the Company
has adopted, except as discussed below under
“Compliance with Dutch Corporate Governance
Code”, 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 this and in its
future annual reports.
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”). At the
extraordinary general meeting of shareholders held
on September 7, 2018, the number of the Directors
was set at twelve and the current slate of Directors
was appointed on April 13, 2018, although
Mr. Louis C. Camilleri, who was previously a non-
executive Director, was then appointed executive
Director by the extraordinary general meeting of
shareholders on September 7, 2018, to replace
Mr. Marchionne, who passed away in July 2018.
The term of office of the current Directors will
expire following the Company’s 2019 annual general
meeting of shareholders. Each Director may be
reappointed at any subsequent annual general
meeting of shareholders; the next annual general
meeting of shareholders is currently expected to be
held on April 12, 2019.
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. Camilleri, Chief Executive Officer) and eleven
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, 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.
109
Annual Report 2018 Name
John Elkann (1)
Louis C. Camilleri
Piero Ferrari
Sergio Duca
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
Year of Birth
Position
1976
1955
1945
1947
1975
1969
1964
1977
1946
1952
1973
1964
Chairman and Non-Executive Director
Chief Executive Officer and Executive Director
Vice Chairman and Non-Executive Director
Senior Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
(1) On February 26, 2019, the Board of Directors resolved to submit to the Shareholders’ vote at the next Annual General Meeting of Shareholders (which is
currently expected to be held on April 12, 2019) the appointment of Mr. John Elkann, our current Chairman and Non-Executive Director, as Executive Director.
The Board of Directors appointed the following
internal committees: (i) an Audit Committee, (ii) a
Governance and Sustainability Committee, and (iii) a
Compensation Committee. On certain key industrial
matters, the CEO is supported by the Senior
Management Team (the “SMT”), which is responsible
for reviewing the operating performance of the
businesses, collaborating on certain operational
matters, supporting the Chief Executive Officer with
his tasks and executing decisions of the Board of
Directors and the day-to-day management of the
Company, primarily to the extent it relates to the
operational management.
Set forth below is the name, year of birth and
position of each of the persons currently serving as
Directors of Ferrari N.V. Unless otherwise indicated,
the business address of each person listed below will
be c/o Ferrari, Via Abetone Inferiore n. 4, I-41053
Maranello (MO), Italy.
Eight Directors currently qualify as independent
(representing a majority) for purposes of NYSE rules
and Rule 10A-3 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and seven
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:
• John Elkann: Chairman;
• Louis C. Camilleri: Chief Executive Officer;
• Piero Ferrari: Vice-Chairman; and
• Sergio Duca: Senior Non-Executive Director.
The Board of Directors has also resolved to
appoint Sergio Duca 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 and NYSE rules:
• Delphine Arnault;
• Giuseppina Capaldo;
• Eddy Cue;
• Sergio Duca;
• Maria Patrizia Grieco;
• Adam Keswick; and
• Elena Zambon.
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In addition, Piero Ferrari is considered
independent within the meaning of the NYSE rules.
the understanding that, on occasion, a Director may
be unable to attend a meeting.
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
From January 1, 2018 to the year-end there
were three meetings of the Board of Directors.
The attendance rate at these meetings was 91.88
percent.
The current composition of the Board of Directors is the following:
John Elkann (Chairman of the Company and non-executive Director)
Mr. John Elkann is Chairman and Chief Executive Officer of EXOR and Chairman of Fiat Chrysler
Automobiles N.V.. Mr. Elkann obtained a scientific baccalaureate from the Lycée Victor Duruy in Paris and
graduated 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
Corporate Audit Staff, with assignments in Asia, the USA and Europe. John Elkann is Chairman of Giovanni
Agnelli B.V. He is Vice Chairman of GEDI Gruppo Editoriale S.p.A. and board member of The Economist
Group. Mr. Elkann is a trustee of MoMA. He also serves as Chairman of the Giovanni Agnelli Foundation.
Mr. John Elkann is the brother of Mr. Lapo Elkann (non-executive Director).
Born in 1976, Italian citizenship.
Louis C. Camilleri (Chief Executive Officer and Executive Director)
Mr. Camilleri currently serves as 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 President and CEO of Kraft Foods International in 1995 and then he 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.
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Annual Report 2018 Piero Ferrari (Vice Chairman and non-executive Director)
Mr. Piero Ferrari has been Vice Chairman of Ferrari S.p.A. since 1988. He also serves as Chairman of HPE-COXA,
is board member and Vice President 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.
Sergio Duca (Chairman of the Board of Directors and Senior Non-Executive Director)
Mr. Duca is the Chairman of the Board of Statutory Auditors of Enel S.p.A. since April 2010 and member
of the Statutory Auditors of BasicNet S.p.A. since 2017. He is also a director of Tofaþ Türk Otomobil Fabrikasý
Anonim Þirketi and member of the corporate governance committee, risk management committee and audit
committee of the board of directors of Tofaþ Türk Otomobil Fabrikasý Anonim Þirketi. 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, 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.
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Delphine Arnault (non-executive Director)
Born on April 4th 1975, 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 in 2008. 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. Delphine Arnault has served as a director of Havas since May 2013.
Born in 1975, French 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 TIM S.p.A. (2018-present). She
was an independent member of the Board of Directors of Exor S.p.A. from 2012 to 2015, Credito Fondiario S.p.A.
(2014-2017) and Banca Monte dei Paschi di Siena S.p.A (December 2017-2018). She was 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.
Born in 1969, 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.
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Annual Report 2018 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 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 (Chairman of the Company and non-
executive Director).
Born in 1977, Italian citizenship.
Amedeo Felisa (non-executive Director)
Mr. Felisa currently serves as Chairman and CEO of Atop S.p.A. Mr Felisa has been 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
of Ferrari. 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 of Ferrari, 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 CIR and she is currently
on the boards of Anima Holding, Ferrari and Amplifon. Mrs. Grieco is also a member of the steering committee
of Assonime and of the board of directors of Bocconi University. 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.
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Adam Keswick (non-executive Director)
Mr. Keswick 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 vice chairman
of the supervisory board of Rothschild & Co.
Born in 1973, British citizenship.
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, Board Member of FBN, Family
Business Network, and Vice President of Aspen Institute Italia. 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.
115
Annual Report 2018 Composition of the Board
of Directors
Pursuant to Dutch law, as from the 2017
financial year, Ferrari should strive to achieve that its
Board of Directors contain a minimum of 30% male
and 30% female board members and should explain
in its annual report if this requirement is not met.
Four of our current twelve Directors are female and
eight are male, 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 related to
the Company’s business and therefore adopted a
Diversity Policy effective as of 31 December 2017
and a profile for non-executive Directors.
The Diversity Policy 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
deal with matters that concern the Board of Directors
and its committees internally.
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.
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.
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 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 against 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 application 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 functioning 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 Mrs. 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
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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, which must be disclosed in the
Company’s annual report. Unless decided otherwise
by the Audit Committee, the independent auditors
of the Company, the Chief Financial Officer and the
Head of Internal Audit are required to attend its
meetings, while the Chief Executive Officer is free,
but not required, to attend the meetings of the Audit
Committee, unless the Audit Committee determines
otherwise, and shall attend the meetings of the Audit
Committee if the Audit Committee so requires. The
Audit Committee shall meet with the independent
auditor at least once per year outside the presence of
the executive Directors and management.
In 2018 the Audit Committee met seven times
and the average attendance rate was 95.24
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.
The Compensation Committee
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 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 Ms. Zambon (Chairperson), Mr. Cue and Mr.
Ferrari. The Compensation Committee is elected by
the Board of Directors and is comprised of at least
three non-executive Directors, at most one of whom
may not be independent under Dutch Corporate
Governance Code. Unless decided otherwise by the
Compensation Committee, the Head of Human
Resources of the Company attends its meetings.
In 2018 the Compensation Committee met twice
with 100 percent attendance of its members at such
meetings. The Compensation Committee reviewed
the remuneration report and the implementation
of the Remuneration Policy. Further information on
the activities of the Compensation Committee are
included in the remuneration report.
The Governance and
Sustainability Committee
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) periodic assessment of the size and
composition of the Board of Directors, (iii) periodic
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.
117
Annual Report 2018 The Governance and Sustainability Committee
currently consists of Mr. John Elkann (Chairperson),
Ms. Capaldo and Mr. Duca. The Governance and
Sustainability Committee is elected by the Board of
Directors and is comprised of at least three Directors.
More than half of the members shall be independent
under the Dutch Corporate Governance Code, and
at most one of the members may be an executive
Director.
In 2018 the Governance and Sustainability
Committee met once with 100 percent attendance
of its members at such meeting. The Committee
reviewed the Board of Directors’ 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 Articles of Association, the
Company is required to indemnify any and all of
its Directors, 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.
Conflict of Interest
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”),
which shall be determined outside the presence of the
director concerned. All transactions, where there is a
Conflict of Interest, must be concluded on terms that
are customary in the branch concerned and approved
by the Board of Directors. 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
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FERRARI N.V.Annual Report 2018> Corporate Governance 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.
Mr. Elkann is Chief Executive Officer of Exor, our
and FCA’s largest shareholder, and an executive
director of FCA. 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 engineering services to
Ferrari, see Note 29 to our Consolidated Financial
Statements.
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Loyalty Voting Structure
In connection with the separation from Fiat
Chrysler Automobiles N.V., Ferrari issued special
voting shares with a nominal value of one Euro cent
(e0.01) 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.
As of February 15, 2019, Exor held approximately
23.7 percent of our outstanding common shares and
approximately 33.6 percent of the voting power in
us, Piero Ferrari held approximately 10.1 percent of
our outstanding common shares and approximately
15.5 percent of the voting power in us and public
shareholders hold approximately 50.9 percent of the
voting power in us.
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 of the Special
Voting Shares (“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
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Annual Report 2018 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
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Company Financial Statements and Notes
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 (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 issuance
of common shares, the entitlement to attend to
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
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Annual Report 2018 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 2018,
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 Act (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 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
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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 Act (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
with a director or employee of the Company
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 Act.
General Meeting of Shareholders
At least one general meeting of shareholders shall
be held every year, which meeting shall be held within
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 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.
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Annual Report 2018 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.
The agenda of the annual general meeting of
shareholders shall contain, inter alia, the following
items:
a. adoption of the annual accounts;
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
h. any matters decided upon by the person(s)
convening the meeting and any matters placed
on the agenda with due observance of applicable
Dutch law.
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.
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.
If an official notarial record is made of the
business transacted at the meeting then minutes need
not 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
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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.
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 Company is exempt from the proxy rules
under the Exchange Act.
The chairman of the meeting shall decide on the
admittance to the meeting of persons other than
those who are entitled to attend.
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.
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.
Every share (whether common or special voting)
shall confer the right to cast one vote.
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 in the Articles of Association. 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.
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
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 was created before the
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Annual Report 2018 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.
Issuance of shares
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.
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.
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.
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.
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
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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.
Corporate offices
The Company is incorporated under the laws of
the Netherlands. It has its official 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;
• Level 2: departments responsible for risk control,
which define methodologies and instruments for
managing risk and monitoring such risk;
• Level 3: Internal Audit department, which conducts
independent evaluations of the System in its entirety.
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
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Annual Report 2018 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;
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.
• assessment of the adequacy of key controls in
An assessment of the design and operating
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.
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 cross-sector controls carried
out by captive service providers. These controls can
be preventive (i.e., designed to prevent errors or
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 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
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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.
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.
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 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 mean of promoting debate, balanced
decision making and independent actions of the
Board of Directors.
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
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
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Annual Report 2018 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.
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• 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 follows certain common
U.S. governance practices, 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.
• 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 Chairman, the
Chief Executive Officer and the Vice-Chairman will
therefore be present at the general meeting.
• Best practice provision 5.1.4 of the Dutch Corporate
Governance Code: Neither the audit committee nor the
remuneration committee can be chaired by the chairman
of the management board or by a former executive director
of the company.
Our Senior Non-Executive Director,
Mr. Sergio Duca, is also the Chairperson of the
Audit Committee, which is not in line with best
practice provision 5.1.4 of the Dutch Corporate
Governance Code. The Company believes that Mr.
Duca, in light of his extensive experience with audits
and his knowledge in this respect, brings a valuable
contribution to the Audit Committee and therefore
believes it is in Ferrari’s best interest and appropriate
for Mr. Duca to chair the Audit Committee.
• Best practice provision 5.1.4 of the Dutch Corporate
Governance Code: The committees referred to in best
practice 2.3.2 should be comprised exclusively of non-
executive directors.
On February 26, 2019, the Board of Directors
resolved to submit to the Shareholders’ vote at
the next Annual General Meeting of Shareholders
(which is currently expected to be held on April 12,
2019) the appointment of Mr. John Elkann, our
current Chairman and Non-Executive Director, as
Executive Director. Mr. John Elkann has a position
on the Governance and Sustainability Committee,
to which best practice provision 5.1.4 of the Dutch
Corporate Governance Code applies. The position
of Mr. Elkann as executive Director (subject to the
Shareholders’ approval at the next Annual General
Meeting) 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
and include duties that warrant participation of an
executive Director in the view of the Company.
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Annual Report 2018 Report of the non-executive Directors
Introduction
Supervision by the non-executive Directors
This is the report of the non-executive Directors of
the Company over the financial year 2018, 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 Director 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 of 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.
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 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).
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.
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.
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”.
During 2018, there were three meetings of the
Board of Directors. Portions of these meetings took
place without the executive Directors being present.
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The average attendance at those meetings was 91.88 percent. 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:
Name
Meeting Board
of Directors
Audit
Committee
John Elkann (1)
Louis C. Camilleri (1)
Piero Ferrari (1) (2)
Sergio Duca
Delphine Arnault
Giuseppina Capaldo
Eddy Cue (1) (2)
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
3/3
3/3
3/3
3/3
2/3
3/3
2/3
2/3
3/3
3/3
3/3
3/3
0
0
0
7/7
0
7/7
0
0
0
6/7
0
0
Governance and
Sustainability
Committee
1/1
0
1/1
1/1
0
0
1/1
0
0
0
0
0
Compensation
Committee
1/1
1/1
1/1
0
0
0
1/1
0
0
0
0
2/2
(1) In 2018, the Compensation Committee held two meetings, on February 23 and September 12. As of September 7, 2018, Louis C. Camilleri and
John Elkann ceased to be members of the Compensation Committee. On the same date, Piero Ferrari and Eddy Cue were appointed as members
of the Compensation Committee.
(2) In 2018, the Governance and Sustainability Committee held one meeting, on February 23. As of September 7, 2018, Piero Ferrari and Eddy Cue
ceased to be members of the Governance and Sustainability Committee. On the same date, Giuseppina Capaldo was appointed as a member of
the Governance and Sustainability Committee.
reporting,
results and
During these meetings, key topics discussed were,
amongst others: the Group’s strategy, the Group’s
sustainability,
financial
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, eight out of eleven non-executive
Directors are considered to be independent under the
NYSE definition while seven 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. Sergio Duca, the
Senior Non-Executive 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.
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-
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Annual Report 2018 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 2018, the Governance and Sustainability
Committee’s periodic assessments took place during
the meeting held on February 23. 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.
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”.
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.
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 director and nominate
candidates for the Director appointments.
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
The non-executive Directors have supervised
the performance of the Audit Committee, the
Compensation Committee and the Governance and
Sustainability Committee.
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Statement by the Board
of Directors
Responsibilities in respect
to the Annual Report
Based on the assessment performed, the Board
of Directors believes that, as of December 31, 2018,
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
(please refer to section “Principal Characteristics
of the Internal Control System and Internal
Control over Financial Reporting” of this Annual
Report), (ii) the internal risk management and
control systems are designed to provide reasonable
assurance that the financial reporting does not
contain any material inaccuracies (please refer to
section “Principal Characteristics of the Internal
Control System and Internal Control over Financial
Reporting” of this Annual Report), (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 (please refer to
Note 2 to the Consolidated Financial Statements
of this Annual Report and Note 2 to the Company
Financial Statements of this Annual Report for
additional information on the basis of preparation),
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
(please refer to the chapter “Risk Factors” of this
Annual Report).
February 26, 2019
Louis C. Camilleri
Chief Executive Officer
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 26, 2019
Board of Directors
John Elkann
Louis C. Camilleri
Piero Ferrari
Sergio Duca
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
135
Annual Report 2018 136
FERRARI N.V.Annual Report 2018> Non Financial Statement Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Non Financial Statement
FERRARI GROUP
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 235 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 167 authorized dealers operating 190 points of sale as of the end of 2018.
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
• Regular new model introductions and enhancements
• Pursue excellence in racing
• Controlled growth in adjacent luxury and lifestyle categories
137
Annual Report 2018 Materiality Matrix of Ferrari Group
In 2018, we updated the analysis of the most relevant sustainability topics (materiality analysis), for our
Group and our stakeholders, to better reflect sustainability context developments, changes in our drivers and
goals and our 2019-2022 plan. This was done by also taking into account various stakeholder engagement
initiatives carried out during the year. These initiatives have shown a significant convergence on the assessment
of the most material topics for our stakeholders with respect to the Group’s vision.
The potentially relevant topics were identified by taking into consideration sector benchmarking analyses,
UN Sustainable Development Goals (SDGs), international studies and publications.
The Senior Management Team (SMT) assessed through a questionnaire the relevance of the sustainability
topics for our Group and our stakeholders. Furthermore, a sample of stakeholders was engaged in order
to have a perception of the relative importance of the identified topics (as described in the Stakeholder
engagement paragraph). This process has been complemented through a qualitative analysis by our SMT,
which resulted in the materiality matrix below.
Materiality Matrix of Ferrari Group
t
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o
p
m
i
y
r
e
V
t
n
a
t
r
o
p
m
I
S
R
E
D
L
O
H
E
K
A
T
S
R
O
F
E
C
N
A
V
E
L
E
R
Quality and safety
of products
and customers
Innovation:
technology and design
Image
and brand
reputation
Customer
satisfaction
Human capital
Ethical
business
conduct
Health and
safety
Emissions
Supply chain
responsible
management
Risk
management
& Compliance
Economic and
financial
performance
Attention to
enthusiasts
Environmental
commitment
Education
Responsible
communication
and marketing
Diversity,
inclusion and
non-discrimination
Work-life balance and
employees wellness
Sport
fair play
Important
Local
communities
Industrial
relations
Relationship
with sponsors
Relationship with
Institutions and Authorities
RELEVANCE FOR FERRARI GROUP
Legend:
Governance and Economic Responsibility
Product Responsibility
People Responsibility
Environmental Responsibility
Social Responsibility
Very important
The materiality matrix highlights the assessed topics that are most relevant for our Group and our
stakeholders and therefore represent our strategic sustainability priorities.
138
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Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Specifically, the most relevant topics are related to product responsibility: image and brand reputation,
innovation, quality and safety of products and customers, customer satisfaction and supply chain responsible
management. Special attention is also paid to ethical business conduct and risk management and compliance.
The analysis also confirmed the importance of the development of human capital and the commitment to
employees’ health and safety. With a particular focus on reducing emissions, the environmental responsibility is
also a key aspect.
This materiality matrix translated into our sustainability approach characterized by:
MATERIAL TOPIC
RELEVANT UNITED NATIONS SUSTAINABLE
DEVELOPMENT GOALS (SDGs)
1. A high attention and care for products and relationships with clients
Image and brand reputation
Innovation: technology and design
Quality and safety of products and customers
Customer satisfaction
Responsible communication and marketing
2. Focus on the well-being and development of all Ferrari employees
Human capital
Health and safety
Work-life balance and employees’ wellness
Diversity, inclusion and non-discrimination
Industrial relations
3. A specific focus on compliance and a strong business ethic
Ethical business conduct
Risk management & Compliance
Emissions
Environmental commitment
Supply chain responsible management
Relationship with Institutions and Authorities
4. Keeping the essence of Ferrari alive
Economic and financial performance
Attention to enthusiasts
Education
Local communities
Sport fair play
Relationship with sponsors
The abovementioned material topics have been linked to those Sustainable Development Goals (SDGs) that
are impacted by our business. For the most material topics, the table below shows the pursued policies, the
related key risks and risk trends and the relevant chapters within this Annual Report.
139
Annual Report 2018 MOST SIGNIFICANT
MATERIAL
TOPICS
PURSUED
POLICIES
KEY RISKS
AND
RISK TRENDS
Image and
brand reputation
Enhancing and protecting the value and
exclusivity of the Ferrari brand.
• Brand image
Ethical business
conduct
Maintaining a culture dedicated to
integrity, responsibility and ethical
behavior.
• Non-compliance with laws,
regulations, local standards
(including tax) and codes
RELEVANT
CHAPTERS
OF THE ANNUAL
REPORT
Overview of
our business
Integrity of
Business Conduct;
Anti-Bribery
and Corruption;
Whistleblowing
Product Responsibility
Innovation:
technology and
design
Human capital
Emissions
Being focused on developing new
technologies and distinctive designs.
• Brand image
• Competition
Redesigning the working environment,
enabling individual development,
enhancing teamwork.
Developing hybrid powertrains and
other innovations to meet specific
regulatory requirements and preparing
for a low-emission future.
• Attraction, development and
Our People
retention of talents
• Non-compliance with laws,
regulations, local standards
(including tax) and codes
Our Environmental
Responsibility
Quality and safety
of products and
customers
Designing and manufacturing with the
safety of our customers and other road
users in mind.
• Non-compliance with laws,
regulations, local standards
(including tax) and codes
Product Responsibility
Risk management &
Compliance
Taking an integrated approach to risk
management.
Acting with the highest level of
integrity, complying with applicable
laws.
• Non-compliance with laws,
regulations, local standards
(including tax) and codes
Integrity of
Business Conduct;
Sustainability Risks
Customer
satisfaction
Being devoted to the highest level of
customer satisfaction.
Assessing product and service
satisfaction.
• Brand image
• Competition
Product Responsibility
Health and safety
Enforcing a safety-first culture.
• Attraction, development and
Our People
Supply chain
responsible
management
Implementing a responsible and
efficient supply chain management.
Encouraging adoption of sustainable
practices and sharing among our
business partners and suppliers.
retention of talents
• Non-compliance with laws,
regulations, local standards
(including tax) and codes
Product Responsibility
140
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
This Statement is addressed to all stakeholders involved in our activities, as shown in the following image:
Enthusiasts
Environment
Dealers
Clients
Investors
and
Shareholders
Suppliers
Business
and Licensing
Partners
Government,
Regulators
and Sport
Institutions
Media and
Influencers
Employees and
Trade Unions
Community
and University
Sponsors
In 2018, we carried out various stakeholder engagement activities in order to enhance the voice of our
stakeholders. We held a workshop with our employees where we explained what sustainability stands for
within Ferrari while discussing their priorities connected to the sustainability topics. We also engaged with our
top investors to better understand what they believe are the main ESG drivers for Ferrari. Finally, to reach a
significant number of stakeholders we conducted an online questionnaire, with over 3,000 responses, assessing
their sustainability priorities. Another specific sustainability questionnaire was addressed to the Presidents of
all the Scuderia Ferrari Clubs. All these activities allowed us to further strengthen our materiality analysis.
Considering the rising environmental and social changes, these engagement activities are an important
part of the sustainability approach to help us identify our sustainability risks and opportunities, as well as to
support management in reaching our objectives.
141
Annual Report 2018 Our Governance and
Sustainability Committee
Integrity of
Business Conduct
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) periodic assessment of the size and
composition of the Board of Directors, (iii) periodic
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),
Ms. Capaldo and Mr. Duca. The Governance and
Sustainability Committee is elected by the Board of
Directors and is comprised of at least three Directors.
More than half of the members shall be independent
under the Dutch Corporate Governance Code, and
at most one of the members may be an executive
Director.
In 2018, the Governance and Sustainability
Committee met once with 100 percent attendance of
its members at such meeting. The Committee reviewed
the Board of Directors’ and Committee’s assessments,
the Sustainability achievement and objectives, and the
recommendations for Directors’ election.
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, 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. The complete Code of
Conduct can be found on our website at
http://corporate.ferrari.com/en/governance/code-conduct
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.
Internal Audit investigates possible violations of
the Code of Conduct during standard periodic audits
and through specific Business Ethics Compliance
(BEC) Audits.
142
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The Company’s governance model includes
policies for respecting Human Rights, which prohibit
child and forced labor and pay attention to safe
working environment for our employees.
Anti-Bribery and Corruption
Ferrari’s Code of Conduct includes, 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.
A violation of anti-bribery and anti-corruption
laws is a serious offense for both companies
and 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, 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 if permitted
by local law. 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.
Internal Audit with the support of the Legal
Department, Human Resources and other business
functions possibly involved assesses all the allegations
received, 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 in
line with the 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
143
Annual Report 2018 Our Communities. Conducting Business covers
Sustainably Purchasing Goods or Services,
Transacting Business Legally and Engaging
in Sustainable Practices. Finally, Protecting
Our Workforce includes behaviors 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, 2018
Category
Conducting business
Interacting with external parties
Managing our assets and information
Protecting our workforce
Total
* including 5 WB received in 2017
Reports received
in 2018
Total 2018
reports closed*
13
4
3
8
28
13
4
2
12
31
Reports in which
a violation was
confirmed
6
2
0
3
11
Periodic reporting is provided to the CEO as well as to the Audit Committee.
Sustainability Risks
We are committed to creating 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 assessment are at the core
of the leadership team agenda. The Board of
Directors is responsible for considering the ability
to control and manage 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) as the foundation of its
enterprise risk management (ERM) and is currently
in the process of reviewing its ERM model to be in
line with the last COSO publication (“Enterprise
Risk Management - Integrating Strategy and
Performance”). The Senior Management Team
(“SMT”) 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 Matrix of Ferrari Group”.
144
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
The preservation and enhancement of the value of the Ferrari brand is crucial in driving demand for our cars
and 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
Ethical business conduct
Emissions
Risk management and Compliance
Quality and safety of products and customers
Supply chain responsible management
Key risks and risk trends
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, United States and China, 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
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”.
145
Annual Report 2018 Technological breakthroughs are further 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. A guiding principle of the Ferrari style
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. Our designers,
modelers and engineers work together to create
car bodies that incorporate the most innovative
aerodynamic solutions within the slick and powerful
lines typical of Ferrari cars.
We continue to regularly launch new cars with
enhanced technological innovations and design
improvements. Our plan is to launch 15 new models
between 2019-2022 with the purpose of maintaining
the product portfolio’s leading position and to
respond quickly to market demand and technological
breakthroughs.
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 our road cars. Moreover, our
development efforts take into account the three
defining dimensions of Ferrari cars: performance,
versatility and comfort, as well as driving emotions. In
addition to these internally driven factors, regulation
is key in determining the direction of technical
innovation.
One of our other main 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 2018, we received more than 9,200 suggestions
from employees (+21% vs. 2017).
Our focus on excellence requires a strong
collaboration with our suppliers, and a handful
of them are considered “key strategic innovation
partners”. Collaborations with leading universities are
also in place to foster the development of new ideas.
146
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The R&D investments and expenses to fuel the growth of our Group are represented in the charts below.
EXPENSED R&D AND CAPEX
GROSS CAPEX
R&D AND CAPEX (€M)
1,167
803
852
948
745
630
639
392
342
271
330
356
342
392
330
356
271
359
415
447
510
556
528
16
93
162
16
145
169
17
154
185
25
141
18
185
176
189
639
20
318
301
2013
2014
2015
2016
2017
2018
2013
2014
2015
2016
2017
2018
R&D expensed to the P&L
CAPEX
PP&E
Captalised R&D
Other Intangible Assets
147
Annual Report 2018 148
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
intelligence 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 adopted for evaluating the quality of service and
satisfaction of our events.
The results of the product and service satisfaction
analyses are used to outline any necessary action
plans 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.
DEVELOPMENT
for future models
CUSTOMER
CARE
Questionnaries
?
Inquiries
&
&
PRODUCTION
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.
MARKETING
INTELLIGENCE
DEPARTMENT
Scorecards
Reports
Reports
Feedback
AREA
MANAGER
Replies
Inquiries
DEALERS
FERRARI
CLIENTS
149
Annual Report 2018 Privacy and data protection
Vehicle Safety
Customer personal data and information are
some of Ferrari’s cornerstones and a key component
of our competitive advantage.
We care about processing personal data in a safe
and transparent manner as it is a fundamental part
of our accountability to our customers. We strive
for safeguarding our network against security risks
and incidents, preventing cyberattacks in order to
guarantee the security and confidentiality of our
Customers’ information.
We act in accordance with the current legislative
framework that governs the processing of personal
data at a global scale, including but not limited to the
General Data Protection Regulation “GDPR”
(EU Regulation 2016/679), which came into force on
25 May 2018.
Data protection law requires, among others, the
application of increased transparency obligations,
the introduction of common records of processing
activities, the appointment of a Data Protection
Officer “DPO” and - where advisable - privacy impact
assessments before processing personal data.
Within this context, we have adopted a progressive
approach to ensure compliance with data protection
law requirements, such as the implementation of ICT
and security systems (eg. system collecting consents
and privacy notices, back-end systems managing
direct personal data) as well as the guarantee of an
effective and prompt response to requests from data
subjects.
Regular theoretical and practical training
sessions, aimed at raising the awareness on the data
privacy regulations and requirements, are organized
and addressed to those employees involved in the
processing of personal data.
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 the
Ferrari 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.
To guarantee the highest level of passenger safety,
we develop both passive and active safety systems.
Passive safety requirements are the initial guidelines
assigned to the engineers in order to define the design
of every component, from car framework to all the
retain components (airbags, seat belts, etc.). Moreover,
specific devices are installed in racing cars to obtain FIA
(Federation International de l’Automobile) approval.
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 conducting them with real cars.
Regarding Active safety, we believe that the
future developments of vehicle safety will be linked
to advanced driver assistance systems (ADAS) and
human-machine interface (HMI), capable of preventing
or mitigating crash occurrences. We are currently
assessing the implementation of the most recent trends
and developments in terms of simplifying and easing
the interaction between the car and the driver to avoid
any distraction. For this reason, we have also developed
a specific methodology in a simulator that allows us to
measure in-depth the level of distraction caused by the
use of on-board instrumentation and guarantee a safe
utilization of HMIs solutions. Moreover, in 2018 we
have introduced our first advanced assistance systems
(ADAS) on the GTC4Lusso.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Responsible Supply Chain
Conflict Minerals
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. Notwithstanding the low volume of cars
manufactured, our production process requires
a great variety of inputs entailing a complex
supply chain management to ensure continuity of
production. We source a variety of components
(among which transmissions, brakes, driving-
safety systems and others), raw materials (such
as aluminum or special steel), supplies, utilities,
logistics and other services from numerous
suppliers.
Ferrari encourages the adoption and sharing of
sustainable practices among our business partners,
suppliers and dealers. All suppliers must respect the
Ferrari Code of Conduct, which includes the set of
values recognized, adhered to and promoted by our
Company. The Code of Conduct was updated to
include specific guidelines relating to the respect of
human rights and conflicts of interest. Our Group
made its best effort to ensure that the Code of
Conduct 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. The selection
of suppliers is based not only on the quality and
competitiveness of their products and services,
but also their adherence to social, ethical and
environmental principles.
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.
Many geopolitical experts believe that conflicts
may increasingly arise over access to raw materials.
For this reason, Ferrari places a high priority on
responsible sourcing and the integrity of its suppliers.
The cars we produce contain various metals,
which may include tantalum, tin, tungsten and/or
gold (collectively, “3TG” or “Conflict Minerals”).
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 (collectively, the “Conflict
Mineral Rules”), requiring companies to determine
whether 3TG in their supply chain originated from the
Democratic Republic of the Congo and its adjoining
countries (collectively, the “Covered Countries”),
and whether the procurement of those minerals
supported the armed conflict in this region. Due to
the complexity of our supply chain, we are dependent
upon suppliers to provide the information necessary
to correctly identify the smelters and refiners that
produce the 3TG contained in our products and take
appropriate action to determine that these smelters
and refiners source responsibly.
We strive to ensure that legitimate business
activities and the livelihoods of individuals in Covered
Countries are not harmed by our efforts. To this
end, we promote responsible sourcing in Covered
Countries.
In accordance with the Organization for Economic
Co-operation and Development (OECD) Guidance,
we have established an internal management system
in relation to the supply of Conflict Minerals, with
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Annual Report 2018 the objective, inter alia, (1) to minimize the trade in
Conflict Minerals that directly or indirectly finance
or benefit armed groups anywhere in the world; and
(2) to enable minerals from conflict and high risk
regions to enter Ferrari’s global supply chain, thereby
supporting the economies and the local communities
that depend on the export of such minerals.
We have communicated our position on
responsible sourcing to our suppliers. In addition,
we have established a control and transparency
system over our 3TG supply chain. Such system
includes surveying our suppliers about the 3TG in
their supply chain.
Among other things, we:
• expect our suppliers to assure that the 3TG
in their products do not directly or indirectly
finance or benefit armed groups in the Covered
Countries; and
• require all our 3TG suppliers to conduct the
necessary due diligence and provide us with
adequate information on the country of origin
and source of the materials used in the products
they supply to us.
In 2017 more than 90% of direct suppliers by
purchased value submitted responses to Ferrari’s
survey.
152
FERRARI N.V.Annual Report 2018> Non Financial Statement 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 48 different
nationalities.
Working Environment
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 important priorities.
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.
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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 ophthalmic,
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,
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Annual Report 2018 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 100 professional educators and is organized
in collaboration with the local community.
Education is also the focus of a series of different
initiatives that provide scholarships to talented junior
high, high school and university students. In 2018,
we reimbursed 603 employees for the cost of their
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 2018, we
provided 42 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 personalized loans at competitive rates
in the internal bank branch, special rates for the
employees’ housing needs, vehicle purchase and
insurance policies as well as discounts at the Ferrari
Stores and at the Ferrari company outlet. To foster
the sense of belonging, the Company organizes
multiple events. In 2018 more than 2,000 among
employees and their guests attended the Ferrari
Challenge championship event Finali Mondiali at the
Monza Circuit. Approximately 3,600 people among
employees and their family members attended the
2018 edition of Natale Bimbi.
All these benefits are provided to all of 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, based on their
ability, determination, and expectations. This is why
we provide career progression opportunities tailored
to each individual’s strength and ambition, and our
company’s requirements, underpinned by substantial
investments in training. A total of over 51,500 hours
of training have been delivered right across the
company’s employees in 2018.
Human capital development ensures that our
company has the appropriate skill set to execute the
business strategy and improve employee attraction,
retention, as well as motivation, and, as a result,
enhance productivity and the quest for innovation.
Training requests, for employees who receive a
regular performance and career development review,
are identified during this review process in order
to address the needs of both our company and
employees.
In 2018, a Training Plan with three specific
objectives was implemented:
• To protect and pass on the strategic and specific
know-how of Ferrari
- Among all training initiatives, in Ferrari we are
very proud of our “Scuola dei mestieri”, started
in 2009. It is a unique in-house technical training
project which increases the professionalism of
junior talents and motivates senior employees,
recognizing their competencies by asking them
to become Maestri and pass on Ferrari’s unique
heritage to the next generation. The initiative
combines different didactic methodologies,
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FERRARI N.V.Annual Report 2018> Non Financial Statement including on the job sessions and in-classroom
training, both focused on the consolidation of
competencies and skills with a particular focus on
innovation.
While the Maestri transfer their know-how to
other employees, we have also internally developed
the “Department Team Leaders”, who are expert
workers in our R&D and Manufacturing processes.
In the last few years, we have decided to invest
strongly in the team leaders’ professional and soft
skills. We are creating a cross-functional group
with the objective to become the point of reference
for the rest of the team. Department Team Leaders
(now around 116 employees) are also responsible
for the Pit Stop and Pole Position programs
among their shift colleagues.
In 2018, we have increased again the number of
participations and training hours provided within
this initiative. The three main areas of focus have
been: product innovation (mainly with regard
to hybridization, HMI and new components, in
a cross functional training), process innovation
(as in the case of low bake painting and additive
manufacturing) as well as support and induction
of new colleagues. This has been implemented in
order to be ready to meet the 15 new car launches
between 2019-2022, as outlined in our recently
presented strategic plan.
• To shape and prepare the managerial class of the
future for the business, innovation, management
and human capital development challenges.
- In 2018, in partnership with Bologna Business
School, we launched the first edition of the
Ferrari Corporate Executive MBA, which saw
the participation of 28 Ferrari managers from
different business functions. The objective of the
master is to improve the management skills of the
attendees, to let them gain experience on the most
recent innovation trends and to convey the Ferrari
leadership model. This master’s degree offers a
unique, tailor-made program to form a critical
mass within the management class that will be
able to grasp the challenges of the future, while at
the same time preserving the tradition of Ferrari.
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During the course of studies, innovation talks,
leadership scrums and site visits to production
plants are carried out. This master’s degree will
help to develop a group of managers with a shared
approach to leadership, while respecting and
valuing individual differences. A group on which
Ferrari can rely on to tackle future challenges.
• To foster and support the inclusion, growth and
development of our people.
- In line with business and company requirements
and coherently with the needs expressed in the
Performance & Leadership Management system,
training activities were provided in the managerial,
technical and linguistic fields, using various
training tools such as: online courses, classroom
courses, coaching programs and teambuilding
activities. More specifically, an online training
campaign is launched every 4 months and includes
all the corporate mandatory trainings dedicated
to new employees. These kind of campaigns
are repeated periodically to provide a training
update to all employees. Among the mandatory
courses, a session is dedicated to our Code of
Conduct that covers also anti-corruption and
human rights topics. In 2018, a similar mandatory
online campaign was launched on Cyber Security
Training Basic Rules and Data Classification and
Protection.
The combination of all these activities contributed
to a strong increase of 45% in total training hours
compared to last year. This was done to build our
skills in order to meet the challenges of the future:
15 car new launches between 2019-2022.
AVERAGE HOURS OF TRAINING
Total
2018
13.40
2017
10.51
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Annual Report 2018 Talent Recruitment and
Employee Retention
The excellence, that our products embody, is what
attracts the best talents worldwide.
At Ferrari, recruitment and selection is about
sourcing the right qualities and skills that will
represent the backbone of future success. 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.
The mission of the recruitment team is to identify,
evaluate and onboard the individuals which are
aligned with our technical requirements and values.
We organize regular meetings with several universities
to present our company and values to students who
might be interested in becoming part of Ferrari.
We also undertook an exchange program with top
universities around the world. In 2018, our graduate
project “Ferrari F1 Engineering Academy” received
more than 250 applications and at the end of the
program, six people became part of the Scuderia
Ferrari F1 racing team.
To ease employees into the new job, Ferrari
provides a two-day induction program. The first day
is dedicated to introducing the company culture
and mission, as well as guiding new joiners through
the corporate offices and production plants. The
following day is focused on health and safety training.
To promote a responsible behavior during the
assembling phase of cars and engines, we launched
many years ago the “Pit Stop” and “Fiorano Race”
initiatives, where 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 these data, with the best performers being
rewarded. Furthermore, we organize the “Pole Position
Evo” program to evaluate individual performances.
We reward our employees, excluding senior
management, through a productivity bonus called
“Premio di Competitività” based on yearly shipments
and adj. EBITDA results, as well as a product quality
index adjusted on individual absenteeism rate.
In 2018, we paid around Euro 5,200 each.
A portion of our employees receive a regular
performance review, based on performance and
leadership behaviors, which ends with a final
evaluation from their assessors at the end of the year.
This evaluation also constitutes part of the variable
remuneration calculation. Workers instead are
subjected to a different kind of review, which is based
on regular assessments aimed at developing their
internal career path.
In 2018, we increased the number of employees
who received a performance evaluation through
our specific online tool: around 1,000 employees
were evaluated on our system. This online tool
allows us to track and share, with the employees
and management, their results of the assessment,
strengths and improvement areas as well as their
professional aspirations and their final evaluation.
EMPLOYEES WHO RECEIVED A REGULAR
PERFORMANCE AND CAREER DEVELOPMENT
REVIEW BY EMPLOYEE CATEGORY
Employee category
Senior Managers
Managers and Professionals
White Collars
Workers
2018
88%
72%
44%
0%
2017 (1)
86%
69%
35%
0%
(1) The 2017 data by employee category has been restated to align the
subsidiaries’ categories to the headquarters’ definition.
Thanks to our career development program, Ferrari
encourages the professional growth of its employees and
tries to fill key positions with talented internal candidates
before tapping into the external market. The analysis of
the key positions covered by our employees carried out
in 2017 has been updated: results are 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.
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FERRARI N.V.Annual Report 2018> Non Financial Statement Occupational Health and Safety
We are particularly focused on the safety of our
people.
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. Ferrari S.p.A. has obtained
the OHSAS 18001 certification. We are currently
working to certify our occupational health & safety
management system in accordance with the new
ISO 45001:2018 requirements: we expect to obtain
the certification in the first half of 2019, two years
in advance of the mandatory migration from the
OHSAS 18001 standard (March 2021).
HOURS OF HEALTH AND SAFETY TRAINING PER
YEAR AND NUMBER OF PARTICIPANTS (2)
Training hours
Number of participants
2018
21,358
2,439
2017
2016
15,386
14,319
1,656
703
(2) The figures provided are referred to all the employees and external
staff of Ferrari S.p.A.
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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
2018 the hours of training significantly increased
compared to previous years, mainly due to the
mandatory periodic training update for employees
started this year. In 2018 we introduced a dynamic
health protocol that is constantly updated and a
specific health and safety section was added to the
training program of the Department Team Leaders.
The table below shows the trend in accidents
over last three years. In 2018, the injury rate was
1.6, with 9 occurrences (5 in 2017), and the lost
day rate, which measures the days of absence for
every thousand hours worked, was 0.11. Each work-
related injury is analyzed to determine the cause and
appropriate measures to avoid recurrence have been
implemented.
INJURY AND LOST DAY RATE (3)
Injury rate (4)
Lost day rate (5)
2018
1.6
0.11
2017
0.9
0.05
2016
1.2
0.05
(3) The figures provided are referred to all the employees and external
staff of Ferrari S.p.A., with the exception of Senior Managers; this
category of employees didn’t incur any injuries in 2018.
(4) 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.
(5) 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 excluding commuting accidents. The days of
absence are related to calendar days and are considered from the
date of release of medical certificate.
During the course of 2018, no accidents with fatal
consequences have been recorded for employees
and external workers in the Maranello and Modena
plants.
157
Annual Report 2018 Our employees in numbers
As of December 31, 2018, the number of our Group (6) employees was 3,851, an increase of 14% compared
to December 31, 2017 (3,380). We expect to continue to grow over the next few years in order to meet the
target to deliver 15 new car launches between 2019-2022, as outlined in our recently presented strategic plan.
NUMBER OF EMPLOYEES
Total
of which women
December 31, 2018
December 31, 2017 December 31, 2016
3,851
13.0%
3,380
12.3%
3,248
11.5%
(6) In this chapter, “Our Group” refers to all the legal entities indicated as consolidated line by line by Ferrari N.V. in 2018 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
Employee category
December 31, 2018
December 31, 2017 (7)
Senior Managers
Middle Managers and Professionals
White Collars
Workers
Total
Male
90.0%
85.9%
78.3%
92.0%
87.0%
Female
10.0%
14.1%
21.7%
8.0%
13.0%
Total
110
545
1,146
2,05
3,851
Male
91.3%
87.5%
79.1%
92.5%
87.7%
Female
8.7%
12.5%
20.9%
7.5%
12.3%
Total
104
513
1,006
1,757
3,380
(7) The 2017 data by employee category has been restated to align the subsidiaries’ categories to the headquarters’ definition.
As indicated in the table above, in the last year the percentage of females in the “Senior Managers” category
has increased from 8.7% to 10%, females in “Middle Managers and Professionals” positions also increased by
around one and a half percentage point. The proportion of women in the other categories has remained relatively
constant.
PERCENTAGE OF EMPLOYEES BY AGE GROUP
Total
<30
13.7%
30-50
70.4%
>50
Total
15.9%
3,851
<30
9.8%
30-50
73.7%
>50
Total
16.5% 3,380
December 31, 2018
December 31, 2017
The majority of the workforce is between the age of 30 and 50 (70.4%). The percentage of workers under 30
has increased of approximately 4 percentage points, from 9.8% to 13.7%.
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FERRARI N.V.Annual Report 2018> Non Financial Statement
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NEW EMPLOYEE HIRES AND EMPLOYEE TURNOVER
GROUP
EMPLOYEE HIRED
Number of employees
Turnover %
EMPLOYEE TURNOVER
Number of employees
Turnover %
ABSENTEE RATE IN ITALY (8)
Employees
2018
639
16.6%
2018
168
4.4%
2017
296
8.8%
2017
150
4.4%
2018
1.60%
2017
1.60%
(8) 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. employees.
The absenteeism rate for 2018 was 1.60% and has been stable over the past few years.
159
Annual Report 2018 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.
Plants and Circuits
Environmental Management Systems
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 (9) (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 698,000 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).
We 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 and the Ferrari museum
in Maranello. The environmental impact of these
additional facilities is deemed negligible and is
excluded in this chapter’s data.
Part of the environmental impact of our activities
are related to the product lifecycle. Ferrari cars are
perceived as collectibles and therefore the number of
cars demolished each year is very scarce. In addition,
the products are generally not considered means of
transportation.
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
Authorization. As mentioned in our Environmental
Policy, our effort is to minimize the negative impacts
of our activities on natural resources and the global
environment.
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 (subsequently
increased capacity in 2011 and 2015) and from 2009
we started using electricity along with hot and cold
water generated by the trigeneration plant (10).
In 2018, the trigeneration plant produced 87% of the
electricity needed for the Maranello plant, while
the remaining 13% was generated from renewable
sources (11).
(9) Maranello production facility is composed by the main offices and production buildings, the “Nuova Gestione Sportiva” building and the
adjacent Fiorano track (of approximately 3,000 meters).
(10) Even if the trigenerator plant was bought by Ferrari in September 2016, data referring to energy consumption and emissions consolidate
trigenerator plant data for the whole 2016 for comparative reasons.
(11) Thanks to a photovoltaic system and purchases of Guarantee of Origin certificates.
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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.
As of today, all our new buildings in Maranello are
Class A-ranked and the Formula 1 team headquarters
comply with the new net zero energy building
protocol (NetZeb), meaning that the total amount of
energy used by the building is approximately equal to
the amount of renewable energy it generates.
In 2018, we completed the construction of two new
buildings: “Nuova Gestione Sportiva” and “New
Design Department”.
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
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
From renewable sources
From non-renewable sources
Electricity self-produced for consumption (13)
Electricity sold
Total
2018
1,567,315
1,126,067
392,995
46,848
1,405
92,190
86,355
5,835
3,142
(7,752)
1,654,895
2017 (12)
1,551,629
1,116,343
384,323
49,666
1,297
98,219
92,027
6,192
3,117
(11,910)
1,641,055
(12) The 2017 data have been re-calculated using the same conversion factors used for 2018 data.
(13) From photovoltaic.
The total energy consumption within the Group for 2018 is 1,654,895 GJ, in line with 2017 (1,641,055 GJ)
and 2016 (1,643,012 GJ)(14), notwithstanding a production increase.
(14) The 2016 and 2017 data have been restated using the same conversion factors used for 2018.
161
Annual Report 2018 Air Emissions
The emissions of CO2eq deriving from the Maranello and Modena plants and from the Mugello racing circuit
(Scope 1 and Scope 2 market-based) are equal to 91,773 tCO2eq in 2018, in line with 92,609 tCO2eq in 2017
and 93,086 tCO2eq in 2016 (15).
DIRECT AND ENERGY INDIRECT GHG EMISSIONS
Unit of measurement: tCO2eq
Scope 1(16)
Scope 2 (market-based method) (17)
Scope 2 (location-based method) (18)
GHG Protocol (WRI, WBCSD) definitions
2018
91,001
772
9,219
2017
91,789
820
9,822
2016
92,319
767
9,105
(15) Regarding Scope 2 emissions, measured in tons of CO2,the percentage of methane and nitrous oxide has a negligible effect on the total
greenhouse gas emissions (CO2 equivalent) as indicated into the ISPRA Report “Atmospheric emission factors of CO2 and other greenhouse
gases in the electricity sector”.
(16) Direct greenhouse gas emissions, measured in tons of CO2 equivalent, were calculated using emission factors indicated in “Emission Factors
from Cross-Sector Tools; March 2017” and “Global Warming Potential Values Guidance; May 2015”, published by The Greenhouse Gas
Protocol. Gases included in the calculation of the Scope 1 GHG emissions: CO2, CH4, N2O, HFCs and other refrigerant gases.
(17) Market-based indirect greenhouse gas emissions, measured in tons of CO2, were calculated using the Residual Mix emission factors indicated
in “2017 European Residual Mixes, V.1.3”, published by AIB. The Group purchases Guarantee of Origin (GO) certificates in order to reduce
the impact of CO2 emissions in the atmosphere. The 2016 and 2017 data have been re-calculated using the same emission factors used for
2018 data.
(19) 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.
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 2018 in a reduction
of 8,447 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.
OTHER SIGNIFICANT AIR EMISSIONS (19)
Unit of measurement: Kg
NOX
SOX
Volatile Organic Compounds (VOCs)
Dusts
Total other significant air emissions
2018
59,613
1,378
50,913
4,100
116,004
2017
69,610
995
55,980
2,432
129,017
(19) Only air emissions of the plants of Maranello and Modena have been considered.
Furthermore, a water-based painting process was introduced in 2004 with the aim of reducing VOC
emissions. To further underscore our ongoing commitment to pursuit energy efficiencies, in 2018 we
introduced a low-bake paint technology.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Waste management
We acknowledge that rational use of raw materials, together with careful waste management, helps reduce
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 (20) 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 (by weight) used 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 AND DISPOSAL METHOD
NON HAZARDOUS WASTE
Unit of measurement: tons
Total
HAZARDOUS WASTE
Unit of measurement: tons
Total
2018
8,204.7
2018
2,799.7
2017
8,839
2017
3,430.2
Total waste for 2018 was equal to 11,004.2 tons, down 10.5% from 2017. Total waste recovery increased
by 1.5% from 43.3% in 2017 to 44.8% in 2018. This reduction was achieved, among others, by two initiatives
started in 2018: the first is that we started to recover sand from the foundry by selling it as a by-product to
a third party player that transforms it in a new product following a circular economy principle. The second
activity is the use of a more long-lasting cooling lubricant. Combined, these two activities amounted to a
4.6% reduction of the total waste. 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 190 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.
(20) 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.
163
Annual Report 2018 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 (21), 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.
WATER WITHRDRAWAL BY SOURCE
Unit of measurement: m3
Surface water
Wells
Municipal water or other water utilities
Total
2018
0
501,665
166,900
668,565
2017
0
524,428
227,138
751,566
We treat our wastewater in accordance with all applicable laws and regulations. All the wastewater of our
plants is always monitored and channeled 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.
WATER DISCHARGE BY DESTINATION
Unit of measurement: m3
Effluents / Water bodies
Public sewer system
Total
2018
0
383,861
383,861
2017
0
378,895
378,895
(21) Source: WRI Aqueduct 2014 (World Resources Institute, 2014).
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FERRARI N.V.Annual Report 2018> Non Financial Statement Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Biodiversity
Ferrari plants and Mugello racing circuit, as of December 2018, 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 (22) to any protected or highly biodiverse areas.
This analysis is conducted annually and is based on the World Database on Protected Areas (23).
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).
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%(24) (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. The expertise acquired in these fields has
recently guided our efforts to combine improved performance with reductions in CO2 emissions.
(22) For this analysis, a distance of 3 km or less has been considered as “adjacent”.
(23) 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.
(24) The target considered the expectations until 2020 of Group’s homologated shipments and the CO2 emissions values according to requirements
set by the European Union.
165
Annual Report 2018 We are undertaking an important program to develop hybrid technology and we 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 - Ferrari EU Fleet (25)
(E) Estimate
]
m
k
/
g
[
s
n
o
i
s
s
i
m
E
2
O
C
430
410
390
370
350
330
310
290
270
250
404
357
322
321
317
323
316
299
281
283
280
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018E
Registration year
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.
(25) 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. 2018: provisional fleet average emissions of CO2.
166
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Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
Ferrari & Education
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.
Ferrari is partner of the Motorvehicle University of Emilia-Romagna (MUNER), an association which was
strongly advocated by the Emilia-Romagna region. It was created thanks to a synergistic 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.
Scuderia Ferrari Club
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.
Scuderia Ferrari Club is a not-for-profit consortium company founded in 2006 by Ferrari S.p.A. to
coordinate the activities of the Scuderia’s many Tifosi which had formed clubs around the world. Today, the
company has over 202 officially-recognized Clubs in 22 nations. An incredible mix of different nationalities,
cultures and lifestyles all united by one enduring passion: Ferrari.
167
Annual Report 2018 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 2018 (from January 1st,
2018 to December 31st, 2018) to ensure transparent and structured communication with our stakeholders.
DUTCH DECREE ASPECTS
INTERNAL REFERENCE - CHAPTER / PARAGRAPH
Business model
Overview of Our Business
Policies and due diligence
• Corporate Governance
• Integrity of Business Conduct
• Anti-Bribery and Corruption
• Whistleblowing
• Our People
• Our Environmental Responsibility
Principal risks and their management
• Risk Factors
• Sustainability Risks
• Risk, Risk Management and Control Systems
Thematic aspects
Environmental matters
Social matters
Employee matters
Respect for human rights
Fight against corruption and bribery
Supply Chain
Conflict minerals
• Our Environmental Responsibility / Plants and circuits
• Our Environmental Responsibility / Vehicles environmental impact
• Overview of our Business
• Integrity of business conduct
• Product Responsibility / Research innovation technology
• Product Responsibility / Customer Satisfaction
• Product Responsibility / Vehicle safety
• Product Responsibility / Responsible supply chain
• Ferrari contributes towards the community
• Our People/Working environment
• Our People/Training and talent development
• Our People/Talent recruitment and Employee Retention
• Our People/Occupational Health and Safety
• Our People/Our employees in numbers
• Integrity of Business Conduct
• Product Responsibility /Responsible supply chain
• Product Responsibility /Conflict Minerals
• Integrity of Business Conduct
• Anti-Bribery and Corruption; Whistleblowing
• Integrity of Business Conduct
• Product Responsibility /Responsible Supply Chain
• Integrity of Business Conduct
• Product Responsibility/Conflict Minerals
168
FERRARI N.V.Annual Report 2018> Non Financial Statement Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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. The table below shows the
internal references to the chapter(s) or paragraph(s) of this Annual Report where the relevant aspects of the
Dutch Decree are discussed in particular.
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 with 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 Statements.
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 “Note 3 -
Scope of consolidation”). 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.
169
Annual Report 2018 Risk, 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
and manage 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) as the foundation of its
enterprise risk management (ERM) and is currently
in the process of reviewing its ERM model to be in
line with the last COSO publication (“Enterprise
Risk Management - Integrating Strategy and
Performance”). The Senior Management Team
(“SMT”) 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
SMT reviews the risk management framework and the
Company’s key global risks on a regular basis.
For those risks deemed to be significant,
comprehensive risk response plans are developed
and reviewed on a regular basis to ensure the actions
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:
Strategic risks (S)
Operational risks (O)
Compliance risks (C)
Reputational risks (RR)
Financial risks (F)
Financial reporting risks (FR)
Risks which affect or are created by Ferrari’s business strategy
and could affect Ferrari’s long-term positioning and performance.
Risks impacting the internal processes, people, systems
and/or external resources of the organization and 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 which affect Ferrari’s Brand image,
credibility and/or integrity.
Risks include areas such as valuation, currency,
liquidity and impairment risks.
Risks primarily relate to internal controls.
Risk appetite
Moderate
Moderate
Zero tolerance
Zero tolerance
Low
Zero tolerance
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Key Risks and Risk Trends
Ferrari assesses risks according to their potential impact, likelihood and entity’s preparedness, that properly
combined, determine an overall risk exposure to prioritize risks and focus the efforts on the most important
ones. Ferrari expects that the risk responses which have been implemented or that will be deployed when
activated by ad-hoc triggers, will mitigate the risks up to the level defined within the risk appetite. 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.
Brand Image (R/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
Preserving brand value
Success of the Formula 1 team
Response plans:
Selective licensees of the Ferrari brand.
Monitor and maximize residual values of Ferrari cars.
Selective franchising partners.
Dealer score card.
Ferrari Academy.
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.
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.
Key aspects
Response plans:
Dependency on mature economies,
particularly in EMEA and the United States
Global economic developments
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.
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.
171
Annual Report 2018 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:
Support residual values with the financing of pre-owned cars.
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).
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 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.
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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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Key aspects
Response plans:
Dependence on two manufacturing
facilities located in close proximity
to each other
Single source suppliers for components
Dependence on limited number
of suppliers for raw materials
Designing of business continuity plan.
Identifying alternative suppliers.
Investments in the last 15 years to reduce the effect
of possible damage from earthquakes.
Insurance coverage.
High quality reputable suppliers assessed through
the “Supplier Risk Committee”.
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
Requirement to attract and retain
the best drivers
Management potential
Labor unions
Preparing current successful employees for future key positions.
Improving talent development program for key resources.
Succession plan.
Retention plan.
Training.
173
Annual Report 2018 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, United States and China, 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
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.
Key aspects
Response plans:
Requirement to be compliant with
changes in Formula 1 regulations
and ability to adapt on a timely
HSE (Health, Safety
and Environment)
Tax
Continuous monitoring of changes in the Formula 1 regulations
and identification of early remediation plans.
Participation in Formula 1 Strategic Group.
Increasing knowledge and awareness of laws, regulations, standards and codes.
Monitoring, reviewing, reporting and adapting to relevant changes
in rules and regulations.
Strengthening IT infrastructure for standard operational procedures
and guidance.
Human Resources
Implement and update global HSE system.
Legal
Anti-Bribery & Corruption
Code of Conduct
Export - Import
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.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 2018, the
value of commercial activity exposed to changes in the Euro/U.S. Dollar exchange rate accounted for about 57
percent of the total currency risk from commercial activity. As a general rule Ferrari enters in 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 translational
exchange risk, in particular the United States, China, Japan, Australia and Singapore. The Group monitors its
principal exposure to translational 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 37 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 asset is cash. It is allocated on bank and deposit accounts with primary
financial institutions. It is a group policy to continuously monitor counterparty risk and limit concentration of
financial asset to 20% of the total with a single financial counterpart. Ferrari owns a financial services portfolio
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
Credit risk of default
or insolvency
Foreign exchange hedging instruments in line with the Company’s risk
management policy.
Monitoring interest rate movements for hedging purposes.
Credit approval policies applied to dealers and retail clients.
Personal guarantees and security of the vehicle.
175
Annual Report 2018 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.
176
FERRARI N.V.Annual Report 2018> Risk, Risk Management and Control Systems Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Remuneration of Directors
Introduction
The description below summarizes the guidelines
and the principles followed by Ferrari in order to
define and implement the remuneration policy
applicable to the executive directors and non-executive
directors of the Company, and members of the
SMT. In addition, the following section provides the
remuneration paid to these individuals for the year
ended December 31, 2018. The form and amount of
compensation received by the directors of Ferrari for
the year ended December 31, 2018 was determined
in accordance with the remuneration policy. Ferrari
aims to provide its stakeholders with a high level of
disclosure in order to strengthen the trust they and
the market place in Ferrari, and provide them with the
tools to assess the Company’s remuneration principles
and exercise shareholders’ rights in an informed
manner. The Company may from time to time amend
the remuneration policy, subject to our Shareholders’
approval when necessary.
The remuneration policy is approved by our
shareholders and is published on our corporate
website
http://corporate.ferrari.com/it/remuneration-policy.shareholders.
Remuneration principles
The main goal of Ferrari’s remuneration policy
is to develop a system which consistently supports
the business strategy and value creation for all
shareholders, establishing a compensation structure
that allows us to attract and retain the most
highly qualified executive talent and motivate 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, as outlined below.
The main principles of Ferrari’s remuneration
policy are outlined in the chart below.
1
2
3
4
5
ALIGNMENT WITH
FERRARI’S STRATEGY
Compensation is strongly linked to the achievement of targets
aligned with the Company’s publicly disclosed strategic objectives
PAY FOR
PERFORMANCE
Compensation must reinforce our performance driven culture
and meritocracy
COMPETITIVENESS
Compensation is set with the objective of attracting, retaining and
motivating highly qualified executives and effective leaders
LONG-TERM SHAREHOLDER
VALUE CREATION
Targets triggering any variable compensation are aligned to the
long-term interests of shareholders
COMPLIANCE
Ferrari compensation policies and plans are designed to comply with
applicable laws and corporate governance requirements
177
Annual Report 2018 Overview of remuneration elements
The structure of the remuneration applicable to our executive directors, non-executive directors and
SMT members under the Ferrari remuneration policy consists of some or all of the following elements: fixed
remuneration, short-term incentives, long-term incentives and non-monetary benefits. The purpose and
features of the different elements of our remuneration structure are outlined in the table below:
Component
Purpose
Terms and Conditions
Amounts
Remuneration
Structure
• Attract, retain and motivate
highly qualified executives to
achieve challenging results
• Competitively position
our compensation
package compared to
the compensation of
comparable companies,
mainly represented by the Peer
Group as defined in “Long
Term Incentives” below, and
companies that compete for
similar talent
• Reinforce our performance
driven culture and meritocracy
Fixed
Remuneration
• Reward skills, contribution
and experience required for
the position held
Ferrari’s remuneration structure
is organized as follows:
- Fixed remuneration
- Short-term incentives
- Long-term incentives
- Non-monetary benefits
- Offer a highly competitive
compensation package
compared to the Reference
Market
- Reference Market: Roles
with the same managerial
complexity and responsibilities
within comparable
companies, including those
represented by the Peer Group
- CEO: Fixed remuneration is
set in relation to the delegated
powers assigned over the term
and positions held in line with
the Reference Market
- SMT Members: annual
remuneration is based on
the role assigned, in line with
Reference Market offering for
roles of similar responsibility
and complexity
- CEO: e500,000 annually
- Non-Executive Directors:
$75,000 annually
- SMT Members: the fixed
remuneration is related to
the position held and the
responsibilities attributed,
as well as the experience
and strategic nature of the
resource
• Achieve the annual financial,
operational and other targets
and additional business
priorities
• Motivate and guide executives’
activities over the short-term
period
2018 Short-term incentives
targets:
- Based on achievement of
annually predetermined
performance objectives
- Annual financial, operational
and other identified objectives
- CEO: The CEO compensation
package for 2018 did not
include short-term incentives
- SMT Members: variable
incentive percentage of fixed
remuneration based on the
position held
Short-Term
Incentive Plan
Long-Term
Incentive Plan
• Align the behavior of
executives critical to the
business with shareholders’
interests
• Motivate executives to achieve
long-term strategic objectives
• Enhance retention of key
resources
- Equity awards to promote
creation of value for the
shareholders
- PSUs and RSUs: vesting in
installments
- PSUs: 100% linked to Total
Shareholder Return compared
to Peer Group (defined below)
- CEO: Target pay-opportunity
is 900% and maximum pay-
opportunity is 1200% of base
salary, in accordance with
the long-term shareholder
value creation and pay for
performance principles of
Ferrari’s remuneration policy
- SMT Members: variable
incentive percentage of fixed
remuneration based on the
position held
- Customary fringe benefits such
as personal use of aircraft,
company cars and drivers,
personal/home security,
medical insurance, accident
insurance, tax preparation and
financial counseling
Non-monetary
Benefits
• Retain executives through
a total reward approach
• Enhance executive and
employee security and
productivity
Represent an integral part of
the remuneration package with
welfare and retirement-related
benefits
178
FERRARI N.V.Annual Report 2018> Remuneration of Directors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
CEO pay-mix
In light of the foregoing considerations, our CEO’s compensation package is structured as follows:
Target Amounts
Maximum Amounts
10
8
%
%
90
92
Fixed Remuneration
Long-Term Incentives
As shown in the charts above, the CEO compensation package for 2018 did not include short-term
incentives.
Our remuneration policy is aligned with Dutch law and the Dutch Corporate Governance Code.
2018 Remuneration of Executive Directors and SMT Members
The Board of Directors determines the compensation for our executive directors following the
recommendation of the Compensation Committee and with reference to the remuneration policy. The
compensation structure for executive directors and SMT members 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 and
SMT members 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 competitors, as well as monitor compensation levels and trends in the market.
On the basis of the remuneration policy objectives, compensation of executive directors and SMT members
consists, inter alia, of the following elements discussed below. Only the long-term incentives element of variable
compensation was applicable to Executive Directors in 2018.
179
Annual Report 2018 Fixed component
The primary objective of the base salary (the fixed part of the annual cash compensation) for executive
directors and SMT members 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 and SMT members 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’ and SMT members’ variable remuneration are linked to predetermined,
assessable targets in order to create long-term value for the shareholders.
Short-term incentives
The primary objective of our performance-based short-term variable cash-based incentives is to incentivize
the executive directors and SMT members to focus on the business priorities for the current or next year. The
2018 short-term incentive plan was designed to motivate its beneficiaries to achieve challenging targets, by
recognizing individual contributions to the Group’s results on an annual basis. The variable remuneration is
linked to the achievement of short-term (i.e. annual) financial and other identified objectives.
To determine the executive directors’ annual performance bonus, the non-executive directors, upon
proposal of the Compensation Committee:
• approves the executive directors’ targets and maximum allowable bonuses;
• selects the appropriate metrics and their weighting;
• sets the stretch objectives;
• considers any unusual items in a performance year to determine the appropriate measurement of
achievement; and
• approves the final bonus determination.
In addition, upon proposal of the Compensation Committee, the non-executive directors have authority to
grant special 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
We believe that the equity incentive plan discussed below 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.
180
FERRARI N.V.Annual Report 2018> Remuneration of Directors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Equity Incentive Plan 2016-2020
Following the approval of the equity incentive plan 2016-2020 by the Board of Directors, upon the
recommendation of the Compensation Committee, in March 2017, the Shareholders approved in April 2017 an
award of 450 thousand performance share units (“PSUs”) to the former Chief Executive Officer,
Mr. Marchionne under the Company’s equity incentive plan. In September 2018, Mr. Camilleri was appointed
as Executive Director and the new Chief Executive Officer of Ferrari, becoming eligible (subject to the
Shareholders’ approval at the next Annual General Meeting, which is currently expected to be held on April
12, 2019) for the current long-term incentive plan, which is comprised of a performance-based component
represented by PSUs, equal to two thirds of the total share units granted, and a service-based component
represented by restricted share units (“RSUs”) covering the remaining one third of share units granted.
The original grant of PSUs to Mr. Marchionne, which each represent the right to receive one common share
of the Company, cover a five-year performance period from 2016 to 2020. Mr. Camilleri has been granted
approximately 11 thousand PSUs and approximately 6 thousand RSUs equal to a pro-rata amount (starting
from the date of appointment as CEO) of the above-mentioned plan and covering a three-year performance
period from 2016 to 2018 (subject to the Shareholders’ approval at the next Annual General Meeting of
Shareholders).
Subject to the achievement of a market performance condition related to Total Shareholder Return
(“TSR”), the original PSUs granted to Mr. Marchionne vest in three equal tranches in 2019, 2020 and 2021,
while the PSUs granted to Mr. Camilleri vest in 2019. 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 companies, including the Company, (“Peer Group”):
Ferrari TSR Ranking
% of Target Awards that Vest
1
2
3
4
5
>5
150%
120%
100%
75%
50%
0%
The defined Peer Group is as follows:
Ferrari
Hermes
Brunello Cucinelli
LVMH
Burberry
Moncler
Ferragamo
Richemont
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 granted to Mr. Marchionne in 2017 is e68.18 to e72.06 per share and the
range of the provisional fair value of the PSUs that were granted to Mr. Camilleri in 2018 is e80.32 to e111.92.
181
Annual Report 2018 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
PSU Awards Granted to
Mr. Marchionne in 2017
e66.85
17.4%
1.2%
0%
PSU Awards Granted to
Mr. Camilleri in 2018
e113.70
16.7%
0.9%
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.
The RSUs granted to Mr. Camilleri will vest in 2019, subject to continued employment with the Company.
The range of the provisional fair value of the RSUs granted is e110.76 to e112.99.
New Equity Incentive Plan 2019-2021
On February 26, 2019, the Board of Directors approved a new equity incentive plan. This new plan is
consistent with the Company’s business plan presented at Capital Markets Day in September 2018. Under
the new equity incentive plan 2019-2021, a combination of PSUs and RSUs, which each represent the right
to receive one Ferrari common share, will be awarded to the Chairman and the Chief Executive Officer of
the Company (subject to the Shareholders’ approval at the next Annual General Meeting, which is currently
expected to be held on April 12, 2019), as well as to members of the SMT and other key members of the
Group.
Other benefits
Executive directors may also be entitled to customary fringe benefits such as personal use of aircraft,
company cars and drivers, 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.
CEO severance
We offer customary perquisites to our CEO. If the Company terminates his services for reasons other than
for cause (as defined) or if he terminates his services for good reason (as defined), the Company will pay
the CEO an amount equal to his annual base salary, in the amount received for the last fiscal year prior to
termination of his services (the “Severance”). If within twenty-four months following a change of control (as
defined), the CEO’s services are terminated by the Company (other than for cause), or are terminated by the
CEO for good reason, the CEO is entitled to receive the Severance and accelerated vesting of awards under his
long-term incentive plan.
182
FERRARI N.V.Annual Report 2018> Remuneration of Directors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Internal pay ratios
In line with the Dutch Corporate Governance Code, internal pay ratio is an important input for determining
the Remuneration Policy for the Board of Directors. The ratio between the CEO’s annual fixed remuneration
and the average fixed remuneration for an employee was 16 to 1 for the 2018 financial year.
The methodology applied to calculate the above ratio only takes the fixed remuneration component and
not the variable components of compensation for two reasons. First, the overall compensation package
(including fixed and variable components) depends on the results achieved. Therefore, poor performance
would imply low or null variable remuneration, thereby reducing the CEO’s pay ratio, with less efficient
performance resulting in a lower ratio, which may wrongly signal a virtuous development. Secondly, we exclude
variable compensation to ensure comparability of the ratio over time, and avoid the ratio being skewed in
different periods by the vesting features of the plan. The development of this ratio will be monitored and
disclosed going forward.
Recoupment of incentive compensation (claw back policy)
The long-term incentive plans include a claw back clause, which allows the Company to claim the refund
of part or all of the variable component of remuneration awarded or paid on the basis of information or data
that subsequently prove manifestly incorrect, if the Board of Directors determines that circumstances that
would have constituted “cause” (as defined) existed while the remuneration remained unvested or due to the
beneficiaries’ fraud or negligence (each, a “Recovery Event”).
In particular, if a Recovery Event occurs within 2 years after the payment of cash or delivery of any shares in
respect of the PSUs or RSUs, a participant will be required to repay the net amount received, as determined by
the Board of Directors in its discretion.
Stock ownership
In 2018 the Board of Directors determined stock ownership guidelines applicable to Ferrari’s directors and
certain employees, recognizing the critical role that stock ownership has in aligning the interests, in particular,
of Ferrari’s Chief Executive Officer, SMT members and senior leaders and key employees with those of the
shareholders. As of the end of the 2018 financial year, covered employees should own Ferrari common shares
in the following minimum amounts (as multiple of net base salary):
Incumbent
Chief Executive Officer
Other SMT Members
Other senior leaders and key employees
Share Ownership Guideline
6 times net base salary
2 times net base salary
1 time net base salary
The above listed covered employees are required to achieve the applicable ownership threshold within
5 years, through acquisitions of Ferrari common shares as a result of the vesting of PSUs or RSUs until the
required ownership level has been met, excluding any shares sold to pay taxes in connection with the granting
of those shares.
183
Annual Report 2018 Scenario analysis
On an annual basis, the non-executive directors, upon proposal of the Compensation Committee,
examined the relationship between the performance criteria chosen and the possible outcomes for the variable
remuneration of our CEO (scenario analysis). To date, the non-executive directors believe the remuneration
policy has proven effective in terms of establishing a correlation between Ferrari’s strategic goals and the
chosen performance criteria, as the main key performance criteria of our CEO’s long-term incentive plan
(i.e. the Total Shareholder Return), which represents a significant part of the CEO compensation package,
supports both Ferrari’s business strategy and value creation for our shareholders.
Remuneration policy for Non-Executive Directors
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 13, 2018) is:
• $75,000 for each non-executive director.
• 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 senior non-executive director.
All remuneration of the non-executive directors is paid in cash.
184
FERRARI N.V.Annual Report 2018> Remuneration of Directors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Implementation of Remuneration Policy in 2018
Directors’ Compensation
The following table summarizes the remuneration received by the members of the Board of Directors for the
year ended December 31, 2018 from Ferrari and its subsidiaries.
Name
Office held
In office from/to
Annual
fee (e)
Other
compensation (e)
Total (5)
John Elkann
Louis C. Camilleri
Piero Ferrari
Chairman and
Non-Executive Director
Chief Executive Officer
and Executive Director
Vice Chairman and
Non-Executive Director
01/01/18 - 12/31/18 (1)
79,554
13,025 (2)
92,579
01/01/18 - 12/31/18 (3)
270,412
—
270,412
01/01/18 - 12/31/18
68,149
12,397 (2)
80,546
Sergio Duca
Non-Executive Director
01/01/18 - 12/31/18 (4)
94,890
Delphine Arnault
Non-Executive Director
01/01/18 - 12/31/18
63,889
Giuseppina Capaldo
Non-Executive Director
01/01/18 - 12/31/18
73,781
Eddy Cue
Non-Executive Director
01/01/18 - 12/31/18
68,149
Lapo Elkann
Non-Executive Director
01/01/18 - 12/31/18
63,889
Amedeo Felisa
Non-Executive Director
01/01/18 - 12/31/18
63,889
Maria Patrizia Grieco
Non-Executive Director
01/01/18 - 12/31/18
72,408
Adam Keswick
Non-Executive Director
01/01/18 - 12/31/18
63,889
Elena Zambon
Non-Executive Director
01/01/18 - 12/31/18
72,030
(1) From 01/01/2018 to 07/21/2018: Vice Chairman and Non-Executive Director. From 07/21/2018 to 12/31/2018:
Chairman and Non-Executive Director.
(2) Relate to car benefits provided to Mr. Elkann and Mr. Ferrari in accordance with the remuneration policy.
(3) From 01/01/2018 to 07/21/2018: Senior Non-Executive Director.
From 09/07/2018 to 12/31/2018: Chief Executive Officer and Executive Director.
(4) From 07/21/2018 to 12/31/2018: Senior Non-Executive Director.
(5) Certain amounts have been translated from U.S. Dollars to Euro.
—
—
—
—
—
—
—
—
—
94,890
63,889
73,781
68,149
63,889
63,889
72,408
63,889
72,030
Mr. Marchionne was Chairman of the Company, Chief Executive Officer and executive Director
from January 1, 2018 to July 21, 2018. He did not receive any compensation for such positions in 2018.
For information on Mr. Marchionne’s awards under the Ferrari long-term incentive plan, see “Share-Based
Compensation of Executive Directors” below.
185
Annual Report 2018 Share-Based Compensation of Executive Directors
The following table gives an overview of the awards granted to the Chief Executive Officer in 2018 under the
equity incentive plan.
Name
Grant
Date
Louis C. Camilleri
September 12, 2018
Vesting
Date
2019
Fair Value on
Grant Date
e80.32 - e112.99
Awards
Granted
17,108
Awards
Vested
—
The above awards relate to approximately 11 thousand PSUs and approximately 6 thousand RSUs awarded
to the CEO (subject to the Shareholders’ approval at the next Annual General Meeting, which is currently
expected to be held on April 12, 2019) under the equity incentive plan, which are equal to a pro-rata amount of
the plan originally approved by the Shareholders on April 14, 2017. The PSU awards vest in 2019, subject to the
achievement of a market performance condition related to Total Shareholder Return.
The RSU awards vest ratably in 2019, subject to the beneficiary being continuously and actively employed by
the Company. At December 31, 2018 none of the PSU or RSU awards had vested.
The former Chairman and Chief Executive Officer of the Company, Mr. Marchionne, was the beneficiary
of PSU awards under the Company’s equity incentive plan. Under the terms and conditions of the applicable
award agreement, such PSUs remain outstanding following Mr. Marchionne’s death in July 2018 for the benefit
of his heirs, and are eligible to be earned based on the actual performance of the Company and in accordance
with the other terms and conditions of the award agreement. The table here below provides an overview of the
above mentioned share plan:
Name
Grant
Date
Vesting
Date
Sergio Marchionne
April 14, 2017
2019 / 2020 / 2021
Fair Value on
Grant Date
e68.18 - 72.06
Awards
Granted
450,000
Awards
Vested
—
The total cost recognized in 2018 for share-based compensation of Executive Directors amounted to
approximately e16.0 million, of which e1.1 million related to Mr. Camilleri and e14.9 million related to
Mr. Marchionne (including an acceleration of the costs relating to the grants made to the former Chairman
and Chief Executive Officer under the equity incentive plan).
186
FERRARI N.V.Annual Report 2018> Remuneration of Directors Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Compensation of the members of the SMT
The compensation paid to or accrued during the year ended December 31, 2018 by Ferrari and its
subsidiaries to the members of the SMT (excluding the CEO) amounted to e16.7 million in aggregate,
including e3.8 million for short-term incentives and e2.8 million for share-based compensation in relation to
PSUs and RSUs granted under the equity incentive plan for the performance period covering 2016, 2017 and
2018. The PSU and RSU awards vest in three equal tranches in 2019, 2020 and 2021, subject to continued
employment and, for the PSU awards, the achievement of a market performance condition related to Total
Shareholder Return, according to the following scheme:
Ferrari TSR Ranking
% of Target Awards that Vest
1
2
3
150%
120%
100%
At December 31, 2018 none of the PSU or RSU awards had vested.
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. John Elkann our Chairman, is also the Chairman of FCA and the Chairman and Chief
Executive Officer of Exor. At February 15, 2019, Exor held approximately 23.7 percent of our outstanding
common shares and approximately 33.6 percent of the voting power in the Company, while it holds
approximately 29.0 percent of the outstanding common shares and 42.1 percent of the voting power in FCA,
based on SEC filings. See “Risk Factors-Risks related to our Common Shares-We may have potential conflicts of interest
with FCA and Exor and its related companies.”
187
Annual Report 2018 188
FERRARI N.V.Annual Report 2018> Risk Factors Consolidated Financial Statements
Index to Consolidated Financial Statements
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
191
192
193
194
195
196
190
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Consolidated Income Statement
for the years ended December 31, 2018, 2017 and 2016
(e thousand)
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 e)
Diluted earnings per common share (in e)
For the years ended December 31,
Note
2018
2017
2016
4
5
6
7
8
9
10
11
3
13
13
3,420,321
3,416,890
3,105,084
1,622,905
1,650,860
1,579,690
327,341
643,038
3,195
2,665
826,507
23,563
802,944
16,317
786,627
329,065
657,119
6,867
2,437
295,242
613,635
24,501
3,066
775,416
595,082
29,260
746,156
208,760
537,396
27,729
567,353
167,635
399,718
784,678
535,393
398,762
1,949
4.16
4.14
2,003
2.83
2.82
956
2.11
2.11
The accompanying notes are an integral part of the Consolidated Financial Statements.
191
Annual Report 2018 Consolidated Statement of Comprehensive Income
for the years ended December 31, 2018, 2017 and 2016
(e thousand)
Net profit
Items that will not be reclassified to the consolidated
income statement in subsequent periods:
Gains/(Losses) 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:
(Losses)/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 (loss)/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
2018
2017
2016
786,627
537,396
399,718
21
21
21
21
21
385
(88)
297
(13,034)
5,986
3,608
(3,440)
(3,143)
783,484
781,585
1,899
(730)
203
(1,448)
(18)
(527)
(1,466)
34,971
(15,346)
51,086
4,118
(9,757)
(16,943)
9,868
9,341
38,261
36,795
546,737
436,513
545,071
435,691
1,666
822
The accompanying notes are an integral part of the Consolidated Financial Statements.
192
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Consolidated Statement of Financial Position
at December 31, 2018 and 2017
(e thousand)
Assets
Goodwill
Intangible assets
Property, plant and equipment
Investments and other financial assets
Deferred tax assets
Total non-current assets
Inventories
Trade receivables
Receivables from financing activities
Current tax receivables
Other current assets
Current financial assets
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Employee benefits
Provisions
Deferred tax liabilities
Debt
Other liabilities
Other financial liabilities
Trade payables
Current tax payables
Total equity and liabilities
At December 31,
Note
2018
2017
14
15
16
17
11
18
19
19
19
19
20
3
21
23
24
11
25
26
20
27
785,182
645,797
850,550
32,134
60,744
785,182
440,456
710,260
30,038
94,091
2,374,407
2,060,027
391,064
211,399
878,496
128,234
64,295
10,174
393,765
239,410
732,947
6,125
45,441
15,683
793,664
647,706
2,477,326
2,081,077
4,851,733
4,141,104
1,348,722
778,678
5,117
5,258
1,353,839
783,936
86,575
182,539
39,142
84,159
197,392
10,977
1,927,167
1,806,181
589,743
620,350
11,342
653,751
7,635
1,444
607,505
29,160
4,851,733
4,141,104
The accompanying notes are an integral part of the Consolidated Financial Statements.
193
Annual Report 2018 Consolidated Statement of Cash Flows
for the years ended December 31, 2018, 2017 and 2016
(e thousand)
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
For the years ended December 31,
2018
2017
2016
647,706
457,784
182,753
802,944
288,748
15,573
(2,665)
23,563
33,012
(283)
(4,638)
26,890
40,317
(107,353)
(83,013)
2,657
(13,966)
(87,745)
934,041
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)
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)
662,799 1,005,299
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
Total
(300,794)
(337,542)
1,392
—
—
(636,944)
(188,904)
(202,506)
3,663
8,307
—
(379,440)
(175,647)
(166,340)
2,931
—
18,595
(320,461)
Cash flows used in financing activities:
Proceeds from securitizations, net of repayments
Net change in other bank borrowings
Net change in other debt
Proceeds from bonds
Repayment of Term Loan
Repayment of Bridge Loan
Net change in deposits in FCA Group cash management pools
and financial liabilities with FCA Group
Dividends paid to owners of the parent
Cash distribution of reserves
Share repurchases
Dividends paid to 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
The accompanying notes are an integral part of the Consolidated Financial Statements.
194
94,709
(3,584)
(7,988)
—
—
—
—
(133,095)
—
(100,093)
(2,040)
—
(152,091)
952
145,958
793,664
141,115
4,385
(8,280)
694,172
(795,254)
462,700
(211,832)
15,847
490,729
(700,846)
— (500,000)
—
135,094
—
(119,985)
—
(1,218)
—
(85,065)
—
(86,905)
—
(17,207)
1,384
(411,036)
(8,372)
189,922
647,706
1,229
275,031
457,784
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Consolidated Statement of Changes in Equity
for the years ended December 31, 2018, 2017 and 2016
(e thousand)
Share
capital
Retained
earnings
and other
reserves
Cash flow
hedge
reserve
Currency
translation
differences
Remeasurement
of defined
benefit plans
At January 1, 2016
3,778
(12,127) (52,923)
42,571
(6,422)
Equity
attributable
to owners
of the parent
(25,123)
Non-
controlling
interests
Total
5,720 (19,403)
— 398,762
—
—
—
398,762
956
399,718
—
—
34,143
4,252
(1,466)
36,929
(134)
36,795
— (86,905)
—
—
—
(1,274)
1,110
1,496
—
—
—
—
—
—
—
—
—
—
—
—
At December 31, 2016
2,504
302,336 (18,780)
46,823
(7,888)
— 535,393
—
—
—
(86,905)
— (86,905)
—
(1,732)
(1,732)
1,110
222
324,995
535,393
—
—
1,110
222
4,810
329,805
2,003
537,396
—
—
25,214
(15,009)
(527)
9,678
(337)
9,341
— (119,985)
—
—
—
—
—
—
—
—
(119,985)
— (119,985)
—
(1,218)
(1,218)
—
2,504
28,597
746,341
— 784,678
—
6,434
—
—
31,814
—
—
(8,415)
28,597
778,678
—
5,258
28,597
783,936
—
784,678
1,949
786,627
—
— (9,426)
6,036
297
(3,093)
(50)
(3,143)
— (133,939)
—
—
— (100,093)
—
—
—
—
—
—
— (133,939)
— (133,939)
—
—
— (100,093)
(2,040)
(2,040)
— (100,093)
—
22,491
2,504 1,319,478
—
(2,992)
—
37,850
—
(8,118)
22,491
1,348,722
—
22,491
5,117 1,353,839
(1) Reflects the effects of the Separation.
The accompanying notes are an integral part of the Consolidated Financial Statements.
Annual Report 2018
195
Net profit
Other comprehensive
income/(loss)
Cash distribution
of reserves
Dividends to non-
controlling interests
Share-based
compensation
Separation (1)
Net profit
Other comprehensive
income/(loss)
Cash distribution
of reserves
Dividends to non-
controlling interests
Share-based
compensation
At December 31, 2017
Net profit
Other comprehensive
(loss)/income
Dividends to owners
of the parent
Dividends to non-
controlling interests
Share repurchases
Share-based
compensation
At December 31, 2018
Notes to the Consolidated
Financial Statements
at December 31, 2018 and 2017
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 167 authorized dealers operating 190 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 17 franchised stores (including 5 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.
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 26, 2019.
The consolidated financial statements have been prepared in accordance with the International Financial
Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), as well as IFRS as
adopted by the European Union. There is no effect on these consolidated financial statements resulting from
differences between IFRS as issued by the IASB and IFRS as adopted by the European Union. 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.
196
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
2. SIGNIFICANT ACCOUNTING POLICIES
Format of the financial statements
The consolidated financial statements include the consolidated income statement, consolidated statement
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 arising
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 and financial services activities. Receivables from financing
activities are included in current assets as the investments will be realized in their normal operating cycle. The
funding for financial services activities is obtained through securitization programs and funding from certain
of the Group’s operating companies. 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.
New standards and amendments effective from January 1, 2018
The following new standards and amendments that are applicable from January 1, 2018 were adopted by
the Group for the preparation of these Consolidated Financial Statements.
IFRS 15 - Revenue from Contracts with Customers
IFRS 15 applies to all revenues arising from contracts with customers (unless those contracts are in
the scope of other standards) and replaces IAS 18 - Revenue, IAS 11 - Construction Contracts and related
interpretations. The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration the entity expects to
receive in exchange for those goods or services. The new standard establishes a five step model to recognize
revenue in accordance with this core principle. The Group adopted IFRS 15 and related amendments using
Annual Report 2018
197
> 2. SIGNIFICANT ACCOUNTING POLICIES
the modified retrospective approach with the cumulative effect of initial adoption (if any) recognized at the
date of initial application of January 1, 2018. The Group analyzed each of its revenue streams by applying the
five-step model and concluded that its accounting for revenue under IFRS 15 did not result in the recognition
of a cumulative adjustment to opening retained earnings under the modified retrospective approach, nor
did it have a material effect on the Group’s financial position or results of operations. The Group’s updated
accounting policy for revenue recognition is provided further below.
IFRS 9 - Financial Instruments
The Group adopted IFRS 9 - Financial Instruments, which includes a logical approach for:
• the 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 Group analyzed each of its classes of financial assets, financial liabilities and derivative instruments
and concluded that its accounting for financial instruments under IFRS 9 does not result in material changes
compared to its accounting for financial instruments under IAS 39, therefore, there was no impact on the
Group’s consolidated financial statements upon initial adoption of the standard and related amendments.
The Group’s updated accounting policy for financial instruments is provided further below.
Amendments to IFRS 2 - Share-Based Payment
The Group adopted Amendments to IFRS 2 - Share-Based Payment. The amendments 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 has applied 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. There were no other effects from the adoption of these amendments.
IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration
The Group adopted IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration. The
interpretation 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. There was no effect
from the adoption of this interpretation.
198
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Annual Improvements to IFRSs 2014-2016 Cycle
The Group adopted Annual Improvements to IFRSs 2014-2016 Cycle. The improvements have amended
two standards with effective date of January 1, 2018: i) IFRS 1 - First-time Adoption of International Financial
Reporting Standards and ii) IAS 28 - Investments in Associates and Joint Ventures. The amendments clarify, correct
or remove redundant wording in the related IFRS Standards. There was no effect from the adoption of these
amendments.
New standards, amendments and interpretations not yet effective
The standards, amendments and interpretations issued by the International Accounting Standards Board
(“IASB”) that will have mandatory application in 2019 or subsequent years are listed below:
IFRS 16 - Leases
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.
The Group will apply IFRS 16 from its mandatory adoption date of January 1, 2019. The Group intends to
apply the simplified transition approach and not restate comparative amounts for the year prior to adoption.
Upon adoption, right-of-use assets are measured at the amount of the related lease liabilities, adjusted for
any prepaid or accrued lease expenses. The Group elected to use the exemptions permitted by the standard
on lease contracts for which the lease terms ends within 12 months of the date of initial application, and lease
contracts for which the underlying asset is of low value.
The main contracts of the Group within the scope of IFRS 16 relate to Ferrari stores and industrial
equipment. As of January 1, 2019, after considering the exemptions mentioned above, the Group has non-
cancellable operating lease commitments of approximately e72 million. Of these commitments, the Group
expects to recognize right-of-use assets (after adjustments for prepayments and accrued lease payments
recognized as at December 31, 2018) and related lease liabilities of e61 million. The Group expect no
significant impact from the application of the new standard on net profit and cash flow from operating
activities. Lease liabilities are measured at the present value of the fixed or in substance fixed lease payments
over the lease term that have not been paid at the date of adoption. The lease term includes both the non-
cancellable periods for which the Group has the right to use the underlying assets and also any renewal periods
199
Annual Report 2018 > 2. SIGNIFICANT ACCOUNTING POLICIES
if the Group is reasonably certain to exercise the related renewal option. The discount rate was determined
taking into consideration country risk, currency, lease term and the Group’s credit spread. Lease liabilities do
not include any non-lease components that may be included in the related contracts.
The Group does not expect to recognize any deferred tax assets or liabilities in respect of temporary
differences arising on initial recognition of right-of-use assets and lease liabilities as the recognition does not
affect accounting profit or taxable profit. No significant impact is expected on the financial statements for i)
the Group’s lease agreements previously classified as finance leases under IAS 17 and ii) the Group’s activities
as lessor.
Other amendments and interpretations not yet effective
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 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 does not expect any material impact from the 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 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 does not expect any
material impact from the adoption of these amendments.
200
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
In October 2018 the IASB issued narrow scope amendments to IFRS 3 - Business Combinations to improve the
definition of a business. The amendments aim to help companies determine whether an acquisition made is of
a business or a group of assets. The amended definition emphasizes that the output of a business is to provide
goods and services to customers, whereas the previous definition focused on returns in the form of dividends,
lower costs or other economic benefits to investors and others. In addition to amending the definition of a
business, supplementary guidance is provided. These amendments are effective on or after January 1, 2020.
The Group does not expect any material impact from the adoption of these amendments.
In October 2018 the IASB issued amendments to IAS 1 - Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors to clarify the definition of ‘material’, as well as
how materiality should be applied by including in the definition guidance that is included elsewhere in
IFRS standards. In addition, the explanations accompanying the definition have been improved and the
amendments ensure that the definition of material is consistent across all IFRS standards. These amendments
are effective on or after January 1, 2020. The Group does not expect any material impact from the adoption of
these amendments.
Review of the Conceptual Framework for Financial Reporting
In March 2018 the IASB revised the Conceptual Framework for Financial Reporting, effective immediately for the
IASB and the IFRS Interpretations Committee when setting future standards, and effective for annual reporting
periods on or after January 1, 2020 for companies that use the Conceptual Framework to develop accounting
policies when no IFRS Standard applies to a particular transaction, with early application permitted. Key
changes include (i) increasing the prominence of stewardship in the objective of financial reporting; (ii)
reinstating prudence as a component of neutrality, defined as the exercise of caution when making judgements
under conditions of uncertainty; (iii) defining a reporting entity; (iv) revising the definitions of an asset and
a liability; (v) removing the probability threshold for recognition, and adding guidance on derecognition;
(vi) adding guidance on the information provided by different measurement bases, and explaining factors to
consider when selecting a measurement basis; and (vii) stating that profit or loss is the primary performance
indicator and income and expenses in other comprehensive income should be recycled where the relevance or
faithful representation of the financial statements would be enhanced. The Group does not expect a material
impact from the adoption of the revised Conception Framework for Financial Reporting.
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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.
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Company Financial Statements and Notes
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.
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.
Consolidation of foreign entities
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.
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The principal foreign currency exchange rates used to translate other currencies into Euro were as follows:
2018
2017
2016
Average
At December 31,
Average
At December 31,
Average At December 31,
1.1810
0.8847
1.1550
1.1450
0.8945
1.1269
1.1297
0.8767
1.1117
1.1993
0.8872
1.1702
1.1069
0.8194
1.0901
1.0541
0.8562
1.0739
130.3959
125.8500
126.7112
135.0100
120.2169
123.4000
7.8081
1.5797
1.5294
1.5926
9.2559
7.8751
1.6220
1.5605
1.5591
8.9675
7.6290
1.4732
1.4647
1.5588
8.8045
7.8044
1.5346
1.5039
1.6024
9.3720
7.3519
1.4883
1.4659
1.5275
8.5924
7.3202
1.4596
1.4188
1.5234
8.1751
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.
Development costs
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.
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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.
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’.
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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
Current financial assets include trade receivables, receivables from financing activities, derivative financial
instruments, other current financial assets and cash and cash equivalents.
Investments and other financial assets include investments accounted for using the equity method as well as
other securities and non-current financial assets.
Financial liabilities include debt (which primarily includes bonds, securitizations and borrowings from
banks), trade payables and other financial liabilities, which mainly include derivative financial instruments.
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Measurement
Financial assets, other than investments accounted for using the equity method, and financial liabilities are
measured in accordance with IFRS 9.
Except for investments accounted for using the equity method, the Group initially measures financial
assets at fair value plus, in the case of financial assets not measured at fair value through profit or loss,
transaction costs.
Equity instruments held by the Group are recognized at fair value through profit or loss. When market prices
are not directly available, the fair value is measured using appropriate valuation techniques (e.g. discounted
cash flow analysis based on market information available at the balance sheet date).
As permitted by IFRS 9, equity investments for which there is no quoted market price in an active market
and there is insufficient financial information in order to determine fair value may be measured at cost as an
estimate of fair value.
Trade receivables and receivables from financing activities are originated in the ordinary course of business
and held within a business model with the objective to hold the receivables in order to collect contractual
cash flows that meet the ‘solely payments of principal and interest’ criterion under IFRS 9, therefore they are
measured at amortized cost using the effective interest rate method. Receivables with maturities greater than
one year are discounted to present value. Assessments are made regularly as to whether there is any objective
evidence that a financial asset or group of financial assets may be impaired. Under IFRS 9, a forward-looking
expected credit loss model must be applied when assessing impairment. In making impairment assessments,
the Group applies the standard simplified approach to estimate the lifetime expected credit losses and
considers its historical credit loss experience, adjusted for forward-looking factors specific to the nature of the
Group’s receivables and economic environment. If any such evidence exists, an impairment loss is recognized
within financial expenses.
Financial liabilities, with the exception of derivative financial instruments, are measured at amortized cost
using the effective interest rate method.
Derivative financial instruments
Derivative financial instruments are used for economic hedging purposes only in order to reduce currency
risks. 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.
When derivative financial instruments qualify for hedge accounting, the following accounting treatments apply:
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
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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/expenses. When
a hedging instrument or hedge relationship is terminated 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 does not use fair value hedges or hedges of a net investment.
If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative
financial instruments are recognized immediately within financial expenses.
Transfers of financial assets
The Group sells certain of its receivables from financing activities under securitization programs.
Securitization transactions involve the sale 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 receivables sold as part of securitization programs are still consolidated until
collection from the customer.
The Group may also sell certain of its trade receivables through factoring transactions without recourse.
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
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 within cost of sales in the consolidated income statement.
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.
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Company Financial Statements and Notes
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.
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.
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Other long-term employee benefits
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.
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 Senior Management Team (“SMT”) 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.
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.
See “Use of estimates” below for further details.
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Deferred income
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.
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
Revenue is recognized when control over a product or service is transferred to a customer. Revenue is
measured at the transaction price which is based on the amount of consideration that the Group expects to
receive in exchange for transferring the promised goods or services to the customer and excludes any sales
incentives as well as taxes collected from customers that are remitted to government authorities.
The transaction price will include estimates of variable consideration to the extent it is probable that a
significant reversal of revenue recognized will not occur. The Group enters into contracts that may include
both products and services, which are generally capable of being distinct and accounted for as separate
performance obligations.
The Group generates revenue from the sale of cars, spare parts and engines as well as from sponsorship,
commercial and brand activities. The Group accounts for a contract with a customer when there is a legally
enforceable contract between the Group and the customer, the rights of the parties are identified, the contract
has commercial substance, and collectability of the contract consideration is probable. Payments from
customers are typically due within 30 and 40 days of invoicing.
The Group does not recognize any assets associated with the incremental costs of obtaining a contract with
a customer that are expected to be recovered. The majority of revenue is recognized at a point-in-time or over a
period of one year or less, and the Group applies the practical expedient to recognize the incremental costs of
obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise
be recognized is one year or less.
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Cars, spare parts and engines
The sales of cars, spare parts and engines have multiple performance obligations that include products,
services, or a combination of products and services as contracts may include maintenance programs and
extended warranties that are separately priced or not separately priced. Contracts may also include variable
consideration for discounts such as sales incentives and performance based bonuses and product returns.
The cost of incentives is estimated at the inception of a contract at the expected amount that will ultimately
be paid and is recognized as a reduction to revenue at the time of the sale. Revenues recognized are limited to
the amount of consideration the Group expects to receive. The Group allocates the transaction price to the
performance obligations based on the stand alone selling prices (SSP) for each obligation. When the SSP does
not exist, the Group estimates the SSP based on the adjusted market approach.
Revenues for the sale of cars, spare parts and engines are recognized at a point in time when control
of the cars, spare parts or engines is transferred to the customer based on shipping terms, which generally
corresponds to the date when the cars, spare parts and engines are released to the carrier responsible for
transportation to dealers or Maserati. Revenues relating to the maintenance program or extended warranty
are recognized over time as the maintenance program or extended warranty is provided. Revenues from the
supply of engines and related services to other Formula 1 racing teams are recognized over time on a time and
materials basis when the services are provided.
Management has exercised judgment in determining performance obligations, variable consideration,
allocation of transaction price and the timing of revenue recognition.
Sponsorship, commercial and brand activities
Revenues from sponsorship agreements are generally recognized ratably over the contract term as the
customer benefits from the service throughout the service period. For sponsorship agreements that contain
variable consideration based on performance of the racing team, the related revenues are estimated and
recognized over the relevant period to the extent that it is highly probable that a significant reversal in the
amount of the cumulative revenue recognized will not occur, which is typically when it is considered highly
probable that the related conditions associated with the variable consideration will be achieved.
Revenues from commercial activities primarily relate to the revenues 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 ratably over the contract term.
Revenues from brand licensing agreements where the customer has a right to access the Group’s brands or
the contract includes minimum guaranteed payments are recognized on a straight-line basis over the contract
term. Licensing revenues in excess of the minimum guaranteed payments are recognized when the related
conditions are satisfied. Revenues from sales-based licensing agreements are recognized when the sales occur.
Management has exercised judgment in determining variable consideration.
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Company Financial Statements and Notes
Other revenues
Interest income generated by our financial service activities from the provision of client and dealer financing is
reported within revenues using the effective interest rate method and not within net financial income/expenses.
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
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Annual Report 2018 > 2. SIGNIFICANT ACCOUNTING POLICIES
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.
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, 2018, 2017 and 2016.
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.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2018 and 2017 was as follows:
Name
Directly held interests
Ferrari S.p.A.
Country
Nature
of business
At December 31, 2018
At December 31, 2017
Shares
held by
the Group
Shares
held
by NCI
Shares
held by
the Group
Shares
held
by NCI
Italy Manufacturing
100%
—%
100%
—%
Indirectly held through Ferrari S.p.A.
Ferrari North America Inc.
Ferrari Japan KK
USA
Japan
Ferrari Australasia Pty Limited
Australia
Ferrari (HK) Limited
Hong Kong
Ferrari International Cars Trading
(Shanghai) Co. L.t.d.
China
Ferrari Far East Pte Limited
Singapore
Ferrari Management Consulting
(Shanghai) Co. L.t.d.
Ferrari South West Europe S.a.r.l.
China
France
Ferrari Central East Europe GmbH
Germany
G.S.A. S.A.
Switzerland
Mugello Circuit S.p.A.
Ferrari Financial Services Inc.
Indirectly held through other Group entities
Ferrari Auto Securitization
Transaction, LLC (1)
Ferrari Auto Securitization
Transaction - Lease, LLC (1)
Ferrari Auto Securitization
Transaction - Select, LLC (1)
Ferrari Financial Services Titling Trust (1)
410, Park Display Inc. (2)
(1) Shareholding held by Ferrari Financial Services Inc.
(2) Shareholding held by Ferrari North America Inc.
Italy
USA
USA
USA
USA
USA
USA
Importer and
distributor
Importer and
distributor
Importer and
distributor
Importer and
distributor
Importer and
distributor
Service
company
Service
company
Service
company
Service
company
Service
company
Racetrack
management
Financial
services
Financial
services
Financial
services
Financial
services
Financial
services
Retail
100%
100%
100%
100%
—%
—%
—%
—%
100%
100%
100%
100%
—%
—%
—%
—%
80%
20%
80%
20%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
—%
—%
—%
—%
%
—%
—%
—%
—%
—%
—%
—%
Ferrari Financial Services S.p.A., which at December 31, 2017 was a fully-owned indirect subsidiary, was
merged into Ferrari S.p.A. effective May 31, 2018. As a consequence, Ferrari Financial Services Inc., previously
a wholly-owned subsidiary of Ferrari Financial Services S.p.A., became a direct wholly-owned subsidiary of
Ferrari S.p.A. effective May 31, 2018.
215
Annual Report 2018
> 3. SCOPE OF CONSOLIDATION
Non-controlling interests
The non-controlling interests at December 31, 2018 and 2017 and the net profit attributable to
non-controlling interests for the years ended December 31, 2018, 2017 and 2016 relate to Ferrari International
Cars Trading (Shanghai) Co. L.t.d. (“FICTS”), in which the Group holds an 80 percent interest.
(e thousand)
Equity attributable to non-controlling interests
At December 31,
2018
5,117
2017
5,258
(e thousand)
Net profit attributable to non-controlling interests
For the years ended December 31,
2018
1,949
2017
2,003
2016
956
The non-controlling interests in FICTS 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. The Group does not believe that such transfer restrictions have any adverse impacts
on its ability to meet liquidity requirements. Cash held in China at December 31, 2018 amounted to e77,790
thousand (e66,456 thousand at December 31, 2017).
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 related funding.
Such cash amounted to e26,497 thousand at December 31, 2018 (e28,230 thousand at December 31, 2017).
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 the allocation of resources and to assess performance.
Use of estimates
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.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
Recoverability of goodwill
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.
For the period covered by these Consolidated Financial Statements, the Group has not recognized any
impairment charges for goodwill.
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
217
Annual Report 2018 > 3. SCOPE OF CONSOLIDATION
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.
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
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.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
Other contingent liabilities
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.
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
219
Annual Report 2018 > 3. SCOPE OF CONSOLIDATION
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:
(e thousand)
Cars and spare parts
Engines
Sponsorship, commercial and brand
Other
Total net revenues
For the years ended December 31,
2018
2017
2016
2,535,245
2,455,955
2,180,045
284,546
505,701
94,829
3,420,321
373,313
494,082
93,540
3,416,890
337,924
488,514
98,601
3,105,084
Other net revenues primarily include interest income generated by financial services activities and net
revenues from the management of the Mugello racetrack.
5. COST OF SALES
Cost of sales in 2018, 2017 and 2016 amounted to e1,622,905 thousand, e1,650,860 thousand and
e1,579,690 thousand, respectively, mainly comprising 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
primarily relate to 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.
Interest and other financial expenses from financial services companies included within cost of sales in 2018,
2017 and 2016 amounted to e33,828 thousand, e30,945 thousand and e21,307 thousand, respectively.
Cost of sales in 2016 included e36,994 thousand related to the charges for Takata airbag inflator recalls
and cost of sales in 2018 included e1,451 thousand related to a partial release of the provision for charges to
Takata airbag inflator recalls. See Note 24 “Provisions” for additional details.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
6. SELLING, GENERAL AND ADMINISTRATIVE COSTS
Selling costs in 2018, 2017 and 2016 amounted to e167,819 thousand, e173,484 thousand and e146,430
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.
General and administrative costs in 2018, 2017 and 2016 amounted to e159,522 thousand, e155,581
thousand and e148,812 thousand, respectively, and mainly consist of administration expenses and other
general expenses that are not directly attributable to sales, manufacturing or research and development
activities.
7. RESEARCH AND DEVELOPMENT COSTS
Research and development costs are as follows:
(e thousand)
Research and development costs expensed during the year
Amortization of capitalized development costs
Total net revenues
For the years ended December 31,
2018
527,847
115,191
643,038
2017
556,617
100,502
657,119
2016
509,580
104,055
613,635
The main component of research and development costs expensed during the period relate to research and
development to support the innovation of our product range and components, and in particular, in relation
to hybrid technology and Formula 1 activities. Research and development costs also include amortization of
capitalized development costs.
221
Annual Report 2018 8. OTHER EXPENSES, NET
Other expenses, net are as follows:
(e thousand)
Other expenses
Other income
Other expenses, net
For the years ended December 31,
2018
18,257
(15,062)
3,195
2017
11,830
(4,963)
6,867
2016
30,249
(5,748)
24,501
Other expenses primarily include indirect taxes, provisions and other miscellaneous expenses. In 2016
provisions recorded within other expenses were higher due to disputes with a distributor.
Other income primarily include rental income, gains on the disposal of property plant and equipment and
other miscellaneous income. In 2018 other income was higher due to a favorable ruling on a prior year’s legal
dispute.
9. RESULT FROM INVESTMENTS
Result from investments of e2,665 thousand and e2,437 thousand in 2018 and 2017, respectively, related
to the Group’s proportionate share of Ferrari Financial Services GmbH (“FFS GmbH”)’s net profit for the
relevant year. Result from investments of e3,066 thousand in 2016 related to gains resulting from the sale of a
majority stake in FFS GmbH to FCA Bank on November 7, 2016, as well as the Group’s proportionate share
of FFS GmbH’s net profit for the period from November 7, 2016 to December 31, 2016.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
(e thousand)
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:
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
For the years ended December 31,
2018
2017
2016
1,445
677
2,122
52,702
54,824
1,153
5,284
6,437
50,254
56,691
843
1,841
2,684
58,236
60,920
2,122
52,702
6,437
50,254
2,684
58,236
2,884
(1,046)
1,838
(21,486)
(12,386)
(3,326)
—
1,578
(3,775)
(2,197)
1,519
(4,090)
(2,571)
(23,057)
(27,042)
(9,231)
(3,530)
—
(6,937)
(3,864)
(389)
(5,831)
(8,494)
(12,008)
(43,854)
(50,023)
(46,634)
Net expenses from derivative financial instruments and foreign
currency exchange rate differences
(15,659)
(16,619)
(5,086)
Total financial expenses and net expenses from derivative financial
instruments and foreign currency exchange rate differences
(59,513)
(66,642)
(51,720)
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)
(25,685)
(33,828)
(35,697)
(30,945)
(30,413)
(21,307)
Net financial expenses relating to industrial companies (A+B)
(23,563)
(29,260)
(27,729)
223
Annual Report 2018
11. INCOME TAXES
Income tax expense is as follows:
(e thousand)
Current tax expense
Deferred tax expense/(income)
Taxes relating to prior periods
Total income tax expense
For the years ended December 31,
2018
95,076
66,325
(145,084)
16,317
2017
201,274
8,718
(1,232)
208,760
2016
189,492
(18,290)
(3,567)
167,635
The Group’s entities participate in a group Italian tax consolidation under Ferrari N.V..
In September 2018, the Group signed an agreement with the Italian Revenue Agency in relation to the
Patent Box tax regime, which provides tax benefits for companies that generate income through the use, both
direct and indirect, of copyrights, patents, trademarks, designs and know-how. The agreement relates to the
five-year period from 2015 to 2019. The Group applied the Patent Box tax regime for the calculation of income
taxes starting in the third quarter of 2018. The Patent Box tax benefit relating to the years 2015 to 2017 was
recorded within taxes relating to prior periods in 2018 and amounted to e141 million, of which e139 million
was from direct use and e2 million was from indirect use of copyrights, patents, trademarks, designs and
know-how. The estimated Patent Box tax benefit relating to the year 2018 amounted to e61 million and is
recorded within current tax expense for 2018.
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:
(e thousand)
For the years ended December 31,
Theoretical income tax expense, net of IRAP
Tax effect on:
Permanent and other 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 (benefit)/expense, net of IRAP
Effective tax rate, net of IRAP
IRAP (current and deferred)
Total income tax expense
2018
192,706
(58,877)
—
1,216
(145,084)
1,514
(8,525)
(1.1%)
24,842
16,317
2017
2016
179,077
156,022
(7,061)
4,862
2,344
(1,232)
2,420
180,410
24.2%
28,350
208,760
(10,219)
1,280
853
(3,567)
2,017
146,386
25.8%
21,249
167,635
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 years ended December 31, 2018 and 2017, and 27.5 percent for the year
ended December 31, 2016 (a change in Italian tax law approved a reduction in the corporate income tax rate
from 27.5 percent to 24 percent, effective from 2017).
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FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2018, 2017 and 2016.
The decrease in the effective tax rate net of IRAP from 24.2 percent in 2017 to (1.1) percent in 2018 was
primarily attributable to the positive impact of the Patent Box, as described above, including the benefit
relating to the years 2015 to 2017 which was recognized in 2018. The Patent Box benefit relating to the years
2015 to 2017 is included within “taxes relating to prior years” and the Patent Box benefit relating to 2018 is
included within “permanent and other differences” in the tax rate reconciliation above.
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 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 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 percent to 21 percent 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 e4,646 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 analysis of deferred tax assets and deferred tax liabilities at December 31, 2018 and 2017, is as follows:
(e thousand)
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,
2018
2017
27,297
33,447
60,744
(14,497)
(24,645)
(39,142)
21,602
63,286
30,805
94,091
(9,885)
(1,092)
(10,977)
83,114
225
Annual Report 2018
> 11. INCOME TAXES
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,
2017
Recognized in
consolidated
income
statement
Charged
to equity
Translation
differences
and other
changes
At December 31,
2018
102,243
46,198
2,562
(2,432)
740
37,615
3,999
16,570
12,383
—
—
(88)
3,608
—
—
—
—
5,249
3,131
—
—
119
521
303
399
1,876
219,878
11,598
3,520
(8,930)
(24)
(1,868)
(647)
(1)
(161)
501
—
(10,652)
(5,180)
—
—
(136,873)
(16,371)
244
(77,923)
—
—
—
—
—
—
—
—
—
109
83,114
—
(66,325)
—
3,520
655
2,249
—
—
—
139
(1)
272
(3,112)
202
(349)
—
1,359
(3)
—
—
—
193
1,200
(109)
1,293
108,147
51,578
2,474
1,176
859
38,275
4,301
17,241
11,147
235,198
(9,303)
(171,707)
(670)
(149)
(1)
(15,832)
(16,371)
437
(213,596)
—
21,602
Capitalization of development costs
(114,775)
(56,932)
(e 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
Total deferred tax assets
Deferred tax liabilities arising on:
Depreciation
Employee benefits
Exchange rate differences
Cash flow hedge reserve
Lease accounting
Withholding tax on undistributed
earnings
Other
Total deferred tax liabilities
Deferred tax assets arising
on tax loss carry-forward
Total net deferred tax assets
226
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
(e 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
Total deferred tax assets
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 assets arising
on tax loss carry-forward
Total net deferred tax assets
At December 31,
2016
Recognized in
consolidated
income
statement
Charged
to equity
Translation
differences
and other
changes
At December 31,
2017
111,321
43,549
2,370
7,325
3,028
24,569
4,107
19,853
13,833
(6,959)
2,649
(11)
—
—
203
— (9,757)
(2,288)
13,515
(94)
(3,283)
2,007
—
—
—
—
—
229,955
5,536
(9,554)
(17,592)
(90,480)
(1,745)
(3,547)
(1)
(11,004)
7,408
(24,295)
(123)
2,900
—
352
(1,150)
(125,519)
1,150
(12,608)
—
—
—
—
—
—
—
—
(2,119)
—
—
—
—
(469)
(14)
—
(3,457)
(6,059)
1,254
—
—
—
—
—
—
1,254
1,810
106,246
(1,646)
(8,718)
—
(9,554)
(55)
(4,860)
102,243
46,198
2,562
(2,432)
740
37,615
3,999
16,570
12,383
219,878
(8,930)
(114,775)
(1,868)
(647)
(1)
(10,652)
—
(136,873)
109
83,114
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. For additional information, at December
31, 2018, the aggregate amount of temporary differences related to remaining distributable earnings of the
Group’s subsidiaries where deferred tax liabilities have not been recognized amounted to e92,437 thousand.
227
Annual Report 2018
12. OTHER INFORMATION BY NATURE
Personnel costs in 2018, 2017 and 2016 amounted to e323,936 thousand, e313,471 thousand and
e294,047 thousand, respectively. These amounts include costs that were capitalized mainly in connection with
product development activities.
In 2018, 2017 and 2016 the Group had an average number of employees of 3,651, 3,336 and 3,115,
respectively.
13. EARNINGS PER SHARE
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, 2018, 2017 and 2016:
Profit attributable to owners of the Company
Weighted average number of common shares
Basic earnings per common share
e thousand
thousand
e
For the years ended December 31,
2018
784,678
188,606
4.16
2017
535,393
188,951
2.83
2016
398,762
188,923
2.11
Diluted earnings per share
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) for the years ended December
31, 2018 and 2017, and (ii) the potential common shares that would have been issued for the Non-Executive
Directors’ compensation agreement for the years ended December 31, 2017 and 2016.
The following table provides the amounts used in the calculation of diluted earnings per share for the years
ended December 31, 2018, 2017 and 2016:
(e thousand)
Profit attributable to owners of the Company
Weighted average number of common shares
for diluted earnings per common share
Diluted earnings per common share
e thousand
thousand
e
For the years ended December 31,
2018
784,678
189,394
4.14
2017
2016
535,393
398,762
189,759
2.82
188,946
2.11
228
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
14. GOODWILL
At December 31, 2018 and 2017 goodwill amounted to e785,182 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 2019 through 2023 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 2018 (2.0 percent in 2017 and 2016).
• 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 2018 (7.0 percent in 2017
and 2016). 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.
229
Annual Report 2018 15. INTANGIBLE ASSETS
(e thousand)
Externally
acquired
development
costs
Development
costs
internally
generated
Patents,
concessions
and licenses
Other
intangible
assets
Total
Gross carrying amount
at January 1, 2017
Additions
Reclassification
Translation differences
and other movements
Balance at December 31, 2017
Additions
Reclassification
Translation differences
and other movements
Balance at December 31, 2018
Accumulated amortization
at January 1, 2017
Amortization
Translation differences
and other movements
Balance at December 31, 2017
Amortization
Translation differences
and other movements
Balance at December 31, 2018
Carrying amount at:
January 1, 2017
December 31, 2017
December 31, 2018
938,492
142,795
—
—
1,081,287
242,753
—
—
1,324,040
774,151
72,978
—
847,129
83,427
—
930,556
164,341
234,158
393,484
474,641
42,320
—
—
516,961
75,109
—
—
592,070
315,824
27,524
—
343,348
31,764
—
375,112
158,817
173,613
216,958
144,192
12,416
12,289
(1,011)
167,886
14,052
508
1,168
183,614
130,801
14,312
(3,307)
141,806
14,914
1,196
157,916
13,391
26,080
25,698
53,842
4,975
(12,289)
(1,443)
45,085
5,628
(508)
143
50,348
35,997
2,308
175
38,480
2,259
(48)
40,691
17,845
6,605
9,657
1,611,167
202,506
—
(2,454)
1,811,219
337,542
—
1,311
2,150,072
1,256,773
117,122
(3,132)
1,370,763
132,364
1,148
1,504,275
354,394
440,456
645,797
Additions of e337,542 thousand in 2018 (e202,506 thousand in 2017) primarily relate to externally acquired
and internally generated costs for the development of new and existing models.
230
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
16. PROPERTY, PLANT AND EQUIPMENT
(e thousand)
Gross carrying amount
at January 1, 2017
Additions
Divestitures
Reclassification
Translation differences
and other movements
Balance at December 31, 2017
Additions
Divestitures
Reclassification
Translation differences
and other movements
Balance at December 31, 2018
Accumulated amortization
at January 1, 2017
Depreciation
Divestitures
Translation differences
and other movements
Balance at December 31, 2017
Depreciation
Divestitures
Translation differences
and other movements
Balance at December 31, 2018
Carrying amount at:
January 1, 2017
December 31, 2017
December 31, 2018
Land
Industrial
buildings
Plant,
machinery and
equipment
Other
assets
Advances and
assets under
construction
Total
22,681
337,503
1,786,156
132,622
88,473
2,367,435
892
—
—
(36)
23,537
25
—
—
4,691
(77)
355
(723)
341,749
14,710
(641)
17,225
131,981
(31,877)
73,160
11,855
(3,101)
(2,685)
39,485
188,904
(368)
(35,423)
(70,830)
—
42
1,959,462
(1,700)
136,991
—
56,760
(2,417)
2,518,499
81,936
9,679
194,444
300,794
(16,684)
(2,740)
(238)
(20,303)
16,853
1,137
(35,215)
—
12
23,574
330
373,373
(3,130)
2,038,437
(593)
144,474
(560)
215,191
(3,941)
2,795,049
—
—
—
—
—
—
—
—
—
132,822
9,860
1,460,995
124,629
104,335
8,995
(69)
(29,761)
(2,469)
(353)
142,260
10,407
(627)
2,864
154,904
(94)
1,555,769
(651)
110,210
136,793
9,184
(15,976)
(2,621)
(1,050)
1,675,536
(2,714)
114,059
— 1,698,152
143,484
—
—
(32,299)
—
(1,098)
— 1,808,239
—
—
156,384
(19,224)
—
(900)
— 1,944,499
22,681
23,537
23,574
204,681
199,489
218,469
325,161
403,693
362,901
28,287
26,781
30,415
88,473
56,760
669,283
710,260
215,191
850,550
Additions of e300,794 thousand in 2018 were mainly comprised of additions of e81,936 thousand to
plant, machinery and equipment and additions of e194,444 thousand related to advances and assets under
construction. Additions of e188,904 thousand in 2017 were mainly comprised of additions of e131,981
thousand to plant, machinery and equipment and additions of e39,485 thousand related to advances and
assets under construction. Additions mainly relate to car production and engine assembly lines (including
those for models to be launched in future years), industrial tools used for the production of cars, and our
personalization programs.
At December 31, 2018, the Group had contractual commitments for the purchase of property, plant and
equipment amounting to e146,281 thousand (e37,844 thousand at December 31, 2017).
231
Annual Report 2018 17. INVESTMENTS AND OTHER FINANCIAL ASSETS
(e thousand)
Investments accounted for using the equity method
Other securities and financial assets
Total investments and other financial assets
For the years ended December 31,
2018
25,972
6,162
32,134
2017
23,340
6,698
30,038
Investments accounted for using the equity method
Investments accounted for using the equity method relates to the Group’s investment in FFS GmbH.
Changes in the investments accounted for using the equity method were as follows:
(e thousand)
Balance at January 1, 2017
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
Proportionate share of net profit for the year ended December 31, 2018
Proportionate share of remeasurement of defined benefit plans
Balance at December 31, 2018
20,948
2,437
(45)
23,340
2,665
(33)
25,972
Summarized financial information relating to FFS GmbH at and for the years ended December 31, 2018
and 2017 were as follows:
(e thousand)
Assets
Non-current assets
Receivables from financing activities
Other current assets
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Debt
Other liabilities
Total equity and liabilities
232
At December 31,
2018
2017
1,402
591,482
12,630
5,957
611,471
49,969
546,595
14,907
611,471
2,690
493,985
10,012
8,109
514,796
44,705
457,787
12,304
514,796
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
For the year ended December 31,
2018
29,446
12,183
8,720
239
8,304
2,974
5,330
2017
26,505
11,525
8,173
245
6,562
1,689
4,873
(e thousand)
Net revenues
Cost of sales
Selling, general and administrative costs
Other expenses, net
Profit before taxes
Income tax expense
Net profit
Other securities and financial assets
Other securities and financial assets primarily include Series C Liberty Formula One shares (the “Liberty
Media Shares”) of Liberty Media Corporation (the group responsible for the promotion of the Formula 1
World Championship), which are measured at fair value and amounted to e5,142 thousand at December 31,
2018 (e5,705 thousand at December 31, 2017).
18. INVENTORIES
(e thousand)
Raw materials
Semi-finished goods
Finished goods
Total inventories
At December 31,
2018
74,053
84,576
232,435
391,064
2017
67,547
87,678
238,540
393,765
Finished goods includes cars and spare parts, and certain amounts in the comparative period were reclassified
in the breakdown above in order to provide a more representative presentation of the Group’s inventories.
The accrual to the provision for slow moving and obsolete inventories recognized within cost of sales during
2018 was e11,062 thousand (e10,140 thousand in 2017 and e2,120 thousand in 2016).
Changes in the provision for slow moving and obsolete inventories were as follows:
(e thousand)
At January 1,
Provision
Use and other changes
At December 31,
2018
66,989
11,062
(4,625)
73,426
2017
60,548
10,140
(3,699)
66,989
233
Annual Report 2018 19. CURRENT RECEIVABLES AND OTHER CURRENT ASSETS
(e thousand)
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:
(e thousand)
Trade receivables due from:
Dealers
FCA Group companies
Sponsorship and commercial activities
Brand activities
Other
Total
At December 31,
2018
211,399
878,496
128,234
64,295
2017
239,410
732,947
6,125
45,441
1,282,424
1,023,923
At December 31,
2018
2017
64,739
47,882
43,500
26,247
29,031
48,166
75,245
30,058
33,283
52,658
211,399
239,410
Trade receivables due from dealers relate to receivables for the sale of cars across the dealer network and
are generally settled within 30 to 40 days from the date of invoice.
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 sponsorship and commercial activities mainly relate to amounts receivable
from sponsorship agreements and commercial activities relating to the Group’s participation in the Formula
1 World Championship. 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.
234
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The following table sets forth a breakdown of trade receivables by currency:
(e thousand)
Trade receivables denominated in:
Euro
U.S. Dollar
Pound Sterling
Chinese Yuan
Japanese Yen
Other
Total
At December 31,
2018
2017
128,396
68,410
3,440
1,777
1,571
7,805
172,492
53,618
2,915
2,947
3,151
4,287
211,399
239,410
Trade receivables are shown net of an allowance for doubtful accounts determined on the basis of
insolvency risk and historical experience, adjusted for forward-looking factors specific to the receivables and
economic environment. 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
of trade receivables during the year were as follows:
(e thousand)
At January 1,
Provision
Use and other changes
At December 31,
Receivables from financing activities
Receivables from financing activities are as follows:
(e thousand)
Client financing
Dealer financing
Total receivables from financing activities
2018
21,993
2,737
(384)
24,346
2017
19,174
3,231
(412)
21,993
At December 31,
2018
851,209
27,287
878,496
2017
704,014
28,933
732,947
235
Annual Report 2018
> 19. CURRENT RECEIVABLES AND OTHER CURRENT ASSETS
Receivables from financing activities are shown net of an allowance for doubtful accounts determined on
the basis of insolvency risks, adjusted for forward-looking factors specific to the receivables and economic
environment. 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:
(e thousand)
At January 1,
Provision
Use and other changes
At December 31,
Client financing
2018
6,948
2,687
(3,178)
6,457
2017
11,556
3,530
(8,138)
6,948
Client financing relates to financing provided by the Group to Ferrari clients to finance their car acquisition.
During 2018 the average contractual duration at inception of such contracts was approximately 67 months
and the weighted average interest rate was approximately 5.7 percent (approximately 5.1 percent in 2017).
Receivables for client financing are generally secured on the titles of cars or other personal guarantees.
Client financing relates entirely to financial services 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 financial services activities. In 2018 these receivables were interest bearing at a rate between 4.1 percent and
7.0 percent (between 3.3 percent and 6.0 percent in 2017), with the exception of an initial limited, non-interest
bearing period. The contractual terms governing the relationships with the dealer network may vary, 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.
Current tax receivables
The increase in current tax receivables primarily related to the Patent Box benefit.
236
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Other current assets
Other current assets are as follows:
(e thousand)
Prepayments
Italian and foreign VAT credits
Due from personnel
Security deposits
Other receivables
Total other current assets
At December 31,
2018
35,758
20,466
803
806
6,462
64,295
2017
27,980
11,988
959
1,014
3,500
45,441
At December 31, 2018, the Group had provided guarantees through third parties amounting to e133,175
thousand (e132,014 thousand at December 31, 2017), principally to banks and relevant tax authorities 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:
(e thousand)
Trade receivables
Receivables from financing activities
Client financing
Dealer financing
Current tax receivables
Other current receivables
Total
(e thousand)
Trade receivables
Receivables from financing activities
Client financing
Dealer financing
Current tax receivables
Other current receivables
Total
At December 31, 2018
Due within
one year
174,627
Due between one
and five years
—
Due beyond
five years
—
600,615
600,615
—
661
494
52,032
52,032
—
—
7
At December 31, 2017
Due within
one year
207,074
Due between one
and five years
—
Due beyond
five years
—
529,489
513,079
16,410
458
682
46,894
44,020
2,874
—
7
172,049
144,762
27,287
127,573
28,036
502,285
144,621
134,972
9,649
5,667
16,767
374,129
Overdue
Total
36,772
53,800
53,800
—
—
—
211,399
878,496
851,209
27,287
128,234
28,537
Overdue
Total
32,336
11,943
11,943
—
—
5
239,410
732,947
704,014
28,933
6,125
17,461
530,629
46,901
44,284
995,943
601,770
52,039
90,572
1,246,666
Receivables from financing activities at December 31, 2018 and 2017 relate entirely to the financial services
portfolio in the United States and are generally secured on the titles of cars or other guarantees.
237
Annual Report 2018
20. CURRENT FINANCIAL ASSETS AND OTHER FINANCIAL LIABILITIES
(e thousand)
Financial derivatives
Other financial assets
Current financial assets
At December 31,
2018
6,788
3,386
10,174
2017
11,686
3,997
15,683
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, 2018 and 2017.
Cash flow hedge:
Foreign currency forwards
Interest rate caps
Total cash flow hedges
Other foreign exchange derivatives
Interest rate caps
Total
At December 31,
2018
2017
Positive
fair value
Negative
fair value
Positive
fair value
Negative
fair value
3,240
555
3,795
1,023
1,970
6,788
(10,853)
—
(10,853)
(489)
—
8,848
—
8,848
1,729
1,109
(11,342)
11,686
(1,136)
—
(1,136)
(308)
—
(1,444)
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 required as part of certain of the funding from
securitization programs.
The following tables provide an analysis by foreign currency of outstanding derivative financial instruments
based on their fair value and notional amounts:
Currencies:
U.S. Dollar
Pound Sterling
Japanese Yen
Swiss Franc
Chinese Yuan
Other (1)
Total amount
At December 31, 2018
At December 31, 2017
Fair Value Notional Amount
Fair Value Notional Amount
(1,324)
613
(2,901)
(1,182)
(82)
322
(4,554)
487,336
138,609
113,596
64,229
45,434
116,476
965,680
2,637
510
4,402
1,999
(97)
791
114,317
110,032
81,890
43,552
18,095
95,738
10,242
463,624
(1) Other mainly includes the Australian Dollar, the Hong Kong Dollar and the Canadian Dollar.
238
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
At December 31, 2018 and 2017, all derivative financial instruments had a maturity of twelve months
or less.
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.
The Group reclassified gains and losses, net of the tax effect, from other comprehensive income/(loss) to the
consolidated income statement as follows:
(e thousand)
Net revenues/(costs)
Income tax (expense)/benefit
Total recognized in the consolidated income statement
For the years ended December 31,
2018
3,777
(1,054)
2,723
2017
19,724
(5,503)
14,221
2016
(69,368)
19,354
(50,014)
The ineffectiveness of cash flow hedges was not material for the years 2018, 2017 and 2016.
239
Annual Report 2018 21. EQUITY
Share capital
At December 31, 2018 and 2017, the fully paid up share capital of the Company was e2,504 thousand,
consisting of 193,923,499 common shares and 56,497,618 special voting shares, all with a nominal value of
e0.01 per share. At December 31, 2018, the Company had 6,002,843 common shares and 4,744 special voting
shares held in treasury, while at December 31, 2017, the Company had 4,969,625 common shares and 4,099
special voting shares held in treasury.
The following table provides a reconciliation of the opening and closing number of outstanding common
shares and outstanding special voting shares:
Outstanding shares at January 1, 2018
Shares repurchased under share repurchase program (1)
Other changes (2)
Common
Shares
188,953,874
(1,033,218)
Special Voting
Shares
56,493,519
Total
245,447,393
—
(1,033,218)
—
(645)
(645)
Outstanding shares at December 31, 2018
187,920,656
56,492,874
244,413,530
(1) Includes shares repurchased between January 1, 2018 and December 31, 2018 based on the transaction trade date.
(2) Relates to the deregistration of special voting shares from the loyalty register.
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.
240
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Retained earnings and other reserves
Retained earnings and other reserves includes:
• a share premium reserve of e5,768,544 thousand at December 31, 2018 (e5,768,544 thousand at
December 31, 2017), which primarily originated from the issuance of common shares pursuant to the
restructuring activities undertaken as part of the Separation.
• a legal reserve of e29 thousand at December 31, 2018 and e8 thousand at December 31, 2017, determined
in accordance with Dutch law.
• a treasury reserve of e100,143 thousand at December 31, 2018 and e50 thousand at December 31, 2017.
• a share-based compensation reserve of e52,198 thousand at December 31, 2018 and e29,707 thousand at
December 31, 2017.
Following approval of the annual accounts by the shareholders at the Annual General Meeting of
the Shareholders on April 13, 2018, a dividend distribution of e0.71 per common share was approved,
corresponding to a total distribution of e133,939 thousand (of which e133,095 thousand was paid in 2018).
The distribution was made from the retained earnings reserve.
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 e0.635 per common share was approved, corresponding
to a total distribution of e119,985 thousand. The distribution was made from the share premium reserve
which is a distributable reserve under Dutch law.
Following approval of the annual accounts by the shareholders at the Annual General Meeting of the
Shareholders on April 15, 2016, a cash distribution of e0.46 per common share was approved, corresponding
to a total distribution of e86,905 thousand. The distribution was made from the share premium reserve which
is a distributable reserve under Dutch law.
On February 9, 2018, the Company announced its intention to launch a share repurchase program.
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. As of December
31, 2018 the Company had repurchased 1,033,218 common shares for a total consideration of e100,093
thousand under the program.
241
Annual Report 2018 > 21. EQUITY
Other comprehensive income
The following table presents other comprehensive income:
(e thousand)
Items that will not be reclassified to the consolidated income
statement in subsequent periods:
Gains/(Losses) 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:
(Losses)/Gains on cash flow hedging instruments
arising during the period
(Gains)/Losses on cash flow hedging instruments
reclassified to the consolidated income statement
(Losses)/Gains on cash flow hedging instruments
Exchange differences on translating foreign operations
arising during the period
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
For the years ended December 31,
2018
2017
2016
385
385
(730)
(1,448)
(730)
(1,448)
(9,257)
54,695
(18,282)
(3,777)
(13,034)
(19,724)
34,971
69,368
51,086
5,986
(15,346)
4,118
(7,048)
(6,663)
3,520
(3,143)
19,625
18,895
(9,554)
9,341
55,204
53,756
(16,961)
36,795
(1) For the year ended December 31, 2018 includes e33 thousand (e45 thousand for the year ended December 31, 2017) related to the Group’s
proportionate share of the loss on remeasurement of defined benefit plans of FFS GmbH, for which the Group holds a 49.9 percent interest.
Gains and losses on the remeasurement of defined benefit plans include actuarial gains and losses arising
during the period and are offset against the related net defined benefit liabilities.
The tax effects relating to other comprehensive income/(loss) are summarized in the following table:
(e thousand)
For the years ended December 31,
2018
2017
2016
Pre-tax
balance
Related
tax impact
Net
balance
Pre-tax
balance
Related
tax impact
Net
balance
Pre-tax
balance
Related
tax impact
Net
balance
(Losses)/Gains on
remeasurement of
defined benefit plans
Gains on cash flow
hedging instruments
Exchange gains on
translating foreign
operations
Total other
comprehensive
income/(loss)
385
(88)
297
(730)
203
(527)
(1,448)
(18)
(1,466)
(13,034)
3,608
(9,426)
34,971
(9,757)
25,214
51,086 (16,943)
34,143
5,986
—
5,986 (15,346)
— (15,346)
4,118
—
4,118
(6,663)
3,520
(3,143)
18,895
(9,554)
9,341
53,756 (16,961)
36,795
242
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2018, 2017 or 2016.
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 in March 2017, the
Shareholders approved in April 2017 an award to the former Chief Executive Officer under the Company’s
equity incentive plan, which is applicable to members of the Senior Management Team (“SMT”) and key
leaders of the Group. 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. In 2018 additional PSU and RSU awards were granted, subject to the
Shareholders’ approval at the Annual General Meeting of Shareholders (which is currently expected to be held
on April 12, 2019), to the new Chief Executive Officer and certain key employees of the Group under the equity
incentive plan.
At December 31, 2018, none of the PSUs or RSUs were vested, and 33 thousand PSUs and 16 thousand
RSUs were forfeited. Under the equity incentive plan, the total number of PSUs and RSUs outstanding at
December 31, 2018 were 675 thousand and 113 thousand, respectively.
For the years ended December 31, 2018 and 2017, the Company recognized e22,491 thousand and
e28,179 thousand, respectively, as share-based compensation expense and an increase to other reserves in
equity for the PSU awards and RSU awards. At December 31, 2018, unrecognized compensation expense
amounted to e5,572 thousand and will be recognized over the remaining vesting period through 2020.
Performance Share Units
The Company awarded members of the SMT and key leaders a total target of approximately 237 thousand
PSUs and 450 thousand PSUs to its Chief Executive Officer in 2017, and an additional total of approximately
21 thousand PSUs were awarded in 2018. The PSUs vest in three equal tranches in 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”):
243
Annual Report 2018 > 22. SHARE-BASED COMPENSATION
Ferrari TSR Ranking
% of Target Awards that Vest
1
2
3
4
5
>5
CEO
150%
120%
100%
75%
50%
0%
SMT and Key Leaders
150%
120%
100%
—
—
—
The defined Peer Group is as follows:
Ferrari
Hermes
Brunello Cucinelli
LVMH
Burberry
Moncler
Ferragamo
Richemont
The total number of shares that will eventually be issued upon vesting of the PSUs may vary from the
original award, 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 in 2017 is e59.36 to e72.06 per share and the range of the fair value
of the PSUs that were awarded in 2018 is e61.30 and e111.92.
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
PSU Awards Granted in 2017
e66.85
17.4%
PSU Awards Granted in 2018
e113.70
16.7%
1.2%
0%
0.9%
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 SMT and key leaders a total of approximately 119 thousand RSUs in
2017, and an additional 10 thousand RSUs were awarded in 2018, including to the Chief Executive Officer. The
RSU awards granted 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 2019, 2020 and 2021, subject to continued employment with the Company at the time of vesting.
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 in 2017 is
e63.00 to e64.64 per share and the range of the fair value of the RSUs awarded in 2018 is e110.76 to e112.99.
244
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
23. EMPLOYEE BENEFITS
The Group’s provisions for employee benefits are as follows:
(e thousand)
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,
2018
2017
21,195
485
21,680
64,895
86,575
22,641
604
23,245
60,914
84,159
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, 2018, 2017 and 2016 was e11,930 thousand, e11,987 thousand and e9,719 thousand,
respectively.
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.
245
Annual Report 2018
> 23. EMPLOYEE BENEFITS
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:
(e thousand)
2019
2020
2021
2022
2023
Beyond 2023
Total
Expected benefit payments
TFR
Pension plans
1,167
1,413
1,754
1,649
1,746
6,750
14,479
47
48
48
3,787
4
685
4,619
Total
24,611
142
685
(2,193)
(2,128)
(65)
23,245
55
(418)
(1,202)
(1,789)
587
21,680
The following table summarizes the changes in the defined benefit obligations:
(e thousand)
Amounts at December 31, 2016
Included in the consolidated income statement
Included in other comprehensive income/loss (*)
Other
Benefits paid
Other changes
Amounts at December 31, 2017
Included in the consolidated income statement
Included in other comprehensive income/loss (*)
Other
Benefits paid
Other changes
Amounts at December 31, 2018
(*) Relates to actuarial losses/(gains) from financial assumptions.
TFR liability
Pension plans
23,783
—
820
(1,962)
(1,964)
2
22,641
—
(390)
(1,056)
(1,620)
564
21,195
828
142
(135)
(231)
(164)
(67)
604
55
(28)
(146)
(169)
23
485
246
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Amounts recognized in the consolidated income statement are as follows:
(e thousand)
Current service cost
Interest expense
Total recognized
in the consolidated
income statement
For the years ended December 31,
2018
Pension
plans
55
—
55
TFR
—
—
—
Total
TFR
55
—
55
—
—
—
2017
Pension
plans
141
1
Total
141
1
2016
Pension
plans
(41)
4
TFR
31
360
Total
(10)
364
142
142
391
(37)
354
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 2018 is equal to 1.7
percent (1.5 percent in 2017 and 1.3 percent in 2016). 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.
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 2018 was equal to approximately 0.8 percent (0.7 percent
2017 and 1.3 percent in 2016). The average duration of the obligations is approximately 9 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:
(e thousand)
Impact on defined benefit obligation
At December 31,
2018
2017
Changes in
assumption of +1%
discount rate
(1,647)
Changes in
assumption of -1%
discount rate
1,891
Changes in
assumption of +1%
discount rate
(1,771)
Changes in
assumption of -1%
discount rate
2,036
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.
247
Annual Report 2018 > 23. EMPLOYEE BENEFITS
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, 2018, other provisions for employees comprised long term bonus benefits amounting to
e61,885 thousand (e58,090 thousand at December 31, 2017), jubilee benefits granted to certain employees
by the Group in the event of achieving 30 years of service amounting to e2,955 thousand (e2,745 thousand at
December 31, 2017), and other provisions for employees benefits amounting to e55 thousand (e79 thousand
at December 31, 2017).
24. PROVISIONS
Changes in provisions were as follows:
(e thousand)
Warranty and recall
campaigns provision
Legal proceedings
and disputes
Other risks
Total provisions
At December 31,
2017
Additional
provisions
Utilization
Translation
differences and other
At December 31,
2018
123,136
12,301
(23,561)
50,375
23,881
197,392
4,774
11,420
28,495
(17,589)
(2,295)
(43,445)
(747)
(406)
1,250
97
111,129
37,154
34,256
182,539
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.
248
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
As a result of these developments and due to the uncertainty of recoverability of the costs from Takata, an
aggregate provision of e36,994 thousand was recognized within cost of sales in the year ended December 31,
2016. At December 31, 2018, the provision amounted to e24,513 thousand (e34,567 thousand at December
31, 2017), reflecting the current best estimate for future costs related to the entire recall campaign to be carried
out by the Group. The decrease in the provision relates to ongoing recall activities as well as a partial release.
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 2019
or beyond, 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 of the provision for legal proceedings and disputes mainly relates to a pronouncement on
a prior year’s legal dispute. 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 following table sets forth additional provisions to other risks recognized for the years ended
December 31, 2018, 2017 and 2016.
(e thousand)
Recorded in the consolidated income statement within:
Cost of sales
Selling, general and administrative costs
Other expenses, net
For the years ended December 31,
2018
2017
2016
11,420
—
—
11,420
8,065
274
—
8,339
4,499
2,604
14,559
21,662
249
Annual Report 2018 25. DEBT
(e thousand)
Bonds
Securitizations
Borrowings from banks
Other debt
Total debt
Balance at
December 31,
2017
1,193,517
556,276
38,059
18,329
1,806,181
Proceeds
from
borrowings
—
183,727
—
21,121
204,848
Repayments of
borrowings
—
(89,018)
(3,584)
(29,109)
Interest
accrued
and other
4,592
337
113
—
Translation
differences
—
31,259
1,396
152
Balance at
December 31,
2018
1,198,109
682,581
35,984
10,493
(121,711)
5,042
32,807
1,927,167
The breakdown of debt by nature and by maturity is as follows:
(e thousand)
Bonds
Securitizations
Borrowings
from banks
Other debt
2018
Due
within
one year
7,616
Due between
one and
five years
1,190,493
300,051
382,530
34,249
10,493
1,735
—
At December 31,
2017
Due
beyond
five years
Total
— 1,198,109
Due
within
one year
6,159
Due between
one and
five years
694,402
Total
Due
beyond
five years
492,956 1,193,517
—
—
—
682,581
254,891
301,385
35,984
10,493
32,811
18,329
5,248
—
—
—
—
556,276
38,059
18,329
Total debt
352,409
1,574,758
— 1,927,167
312,190
1,001,035
492,956 1,806,181
Bonds
2023 Bond
On March 16, 2016, the Company issued 1.5 percent coupon notes due March 2023, having a principal of
e500 million. The bond was issued at a discount for an issue price of 98.977 percent, resulting in net proceeds
of e490,729 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 e500 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, 2018 of e500,197 thousand includes accrued interest of e5,938 thousand
(e498,894 thousand including accrued interest of e5,938 thousand at December 31, 2017).
2021 Bond
On November 16, 2017, the Company issued 0.25 percent coupon notes due January 2021, having a principal
of e700 million. The bond was issued at a discount for an issue price of 99.557 percent, resulting in net proceeds
of e694,172 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, 2018 of e697,912 thousand includes accrued interest of
e1,678 thousand (e694,623 thousand including accrued interest of e221 thousand at December 31, 2017).
250
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 (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, 2018 and 2017, Ferrari was
in compliance with the covenants of the notes.
Securitizations
Starting in 2016, 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. As of December 31, 2018, FFS Inc had the following revolving securitization programs:
• revolving securitization program for funding, which was increased up to $450 million in December 2018, by
pledging retail financial receivables in the United States as collateral. 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, 2018 total
proceeds net of repayments from the sales of financial receivables under the program were $424 million
($325 million at December 31, 2017). The securitization agreement requires the maintenance of an interest
rate cap.
• revolving securitization program for funding, which was increased up to $250 million in October 2018, by
pledging leasing financial receivables in the United States as collateral. 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, 2018 total
proceeds net of repayments from the sales of financial receivables under the program were $223 million
($222 million at December 31, 2017). The securitization agreement requires the maintenance of an interest
rate cap.
• revolving securitization program for funding of up to $135 million by pledging credit lines to Ferrari customers
secured by personal vehicle collections and personal guarantees in the United States as collateral. 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, 2018 total proceeds net of repayments from the sales of financial receivables under the
program were $134 million ($120 million at December 31, 2017). The securitization agreement does not
require an interest rate cap.
The funding limits of the revolving securitization programs have been increased since inception as the
related receivables portfolios have finished.
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 e26,497 thousand at December 31, 2018 (e28,230 thousand at December 31, 2017).
251
Annual Report 2018 > 25. DEBT
Borrowings from banks
Borrowings from banks at December 31, 2018 mainly relate to financial liabilities of FFS Inc to support the
financial services operations, and in particular (i) e30,694 thousand (e29,189 thousand at December 31,
2017) relating to a U.S. Dollar denominated credit facility for up to $50 million (drawn down for $35 million
at December 31, 2018) and bearing interest at LIBOR plus a range of between 65 and 75 basis points; (ii) other
borrowings from banks of e5,290 thousand (e8,870 thousand at December 31, 2017) relating to various
short and medium term credit facilities.
The Facility
On November 30, 2015, the Company, as borrower and guarantor, and certain other members of the
Group, as borrowers, entered into a e2.5 billion facility with a syndicate of banks (the “Facility”). At inception,
the Facility comprised a bridge loan of e500 million (the “Bridge Loan”), a term loan of e1,500 million (the
“Term Loan”) and a revolving credit facility of e500 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 debt that originated from restructuring activities undertaken as part
of the Separation. 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, 2018 and 2017 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.
Other debt
Other debt primarily relates to funding for operating activities of the Group.
252
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
26. OTHER LIABILITIES
An analysis of other liabilities is as follows:
(e thousand)
Deferred income
Advances and security deposits
Accrued expenses
Payables to personnel
Social security payables
Other
Total other liabilities
At December 31,
2018
271,817
145,394
81,408
25,434
18,209
47,481
2017
274,186
167,293
77,024
38,488
20,553
42,806
589,743
620,350
Deferred income primarily includes amounts received under maintenance and power warranty programs
of e204,987 thousand at December 31, 2018 and e192,705 thousand at December 31, 2017, which are
deferred and recognized as revenues over the length of the related program term. Of the total liability related
to maintenance and power warranty programs as of December 31, 2018, the Group expects to recognize in
net revenues approximately e52 million in 2019, e44 million in 2020, e34 million in 2021 and e75 million
afterwards. 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, 2018 and at December 31, 2017 primarily include advances
received from customers, primarily for the purchase of our hypercars and limited edition cars. Upon shipment
of such cars, the advances are recognized as revenue. Of the total contract liability related to advances as of
December 31, 2018, the Group expects to recognize the entire amount within net revenues in 2019.
Changes in the Group’s contract liabilities for maintenance and power warranties, and advances from
customers, were as follows:
(e thousand)
Maintenance and power
warranty programs
Advances from customers
At January 1,
2018
Additional
amounts arising
during the period
Amounts
recognized
within revenue
Other
changes
At December 31,
2018
192,705
162,347
82,731
272,070
(70,449)
(293,884)
—
(681)
204,987
139,852
An analysis of other liabilities (excluding accrued expenses and deferred income) by due date is as follows:
(e thousand)
At December 31,
2018
2017
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
Total other
liabilities
(excluding accrued
expenses and
deferred income)
223,138
6,960
6,420
236,518
264,380
4,760
— 269,140
253
Annual Report 2018 27. TRADE PAYABLES
Trade payables of e653,751 thousand at December 31, 2018 (e607,505 thousand at December 31, 2017) are
entirely due within one year. The carrying amount of trade payables is considered to be equivalent to their fair value.
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 the assets or
liabilities, either directly or indirectly.
• 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, 2018 and 2017:
(e thousand)
At December 31, 2018
Note
Level 1
Level 2
Level 3
Total
793,664
—
Cash and cash equivalents
Investments and other financial assets -
Liberty Media Shares
Current financial assets
Total assets
Other financial liabilities
Total liabilities
(e thousand)
Cash and cash equivalents
Investments and other financial assets -
Liberty Media Shares
Current financial assets
Total assets
Other financial liabilities
Total liabilities
254
17
20
20
Note
17
20
20
5,142
—
798,806
—
—
Level 1
647,706
5,705
—
653,411
—
—
—
6,788
6,788
11,342
11,342
—
—
—
—
—
—
At December 31, 2017
Level 2
Level 3
—
—
11,686
11,686
1,444
1,444
—
—
—
—
—
—
793,664
5,142
6,788
805,594
11,342
11,342
Total
647,706
5,705
11,686
665,097
1,444
1,444
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
There were no transfers between fair value hierarchy levels between 2017 and 2018.
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 financial
assets and liabilities not measured at fair value on a recurring basis:
(e thousand)
Receivables from financing activities
Client financing
Dealer financing
Total
Debt
At December 31, 2018
2018
2017
Note
19
Carrying
amount
878,496
851,209
27,287
Fair
value
878,496
851,209
27,287
Carrying
amount
732,947
704,014
28,933
Fair
value
732,947
704,014
28,933
878,496
878,496
732,947
732,947
25
1,927,167
1,921,937
1,806,181
1,819,337
255
Annual Report 2018
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 the Exor Group, unconsolidated subsidiaries of the Group, associates and joint ventures.
In addition, members of the Ferrari Board of Directors, Audit Committee 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, which have had an effect on revenues, cost of sales, and trade receivables
and payables 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. The FCA Group is currently in the process
of selling Magneti Marelli and the transaction is expected to be completed in the first half of 2019;
• 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 e18,595 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 e431,958
thousand.
256
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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;
• consultancy services provided by HPE S.r.l., controlled by Piero Ferrari;
• 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.
In accordance with IAS 24, transactions with related parties also include compensation to Directors, the
Audit Committee and managers with strategic responsibilities.
Related party transactions recognized in the consolidated income statement are summarized in the table
below:
(e thousand)
For the years ended December 31,
2018
Costs
(1)
Net
revenues
Net
financial
expenses
Net
revenues
2017
Costs
(1)
Net
financial
expenses
Net
revenues
2016
Costs
(1)
Net
financial
expenses
FCA Group companies
Maserati
FCA US LLC
Magneti Marelli (2)
Other FCA Group
companies
Total FCA
Group companies
217,922
3,982
—
28,486
1,589
40,343
—
—
—
315,407
6
1,866
4,698
44,882
36,670
—
—
—
241,478
—
1,933
37,612
1,735
29,663
12,106
7,193
1,370
6,754
7,007
1,191
5,472
9,163
231,617
80,004
1,370
324,033
93,257
1,191
248,685
78,371
Exor Group companies
(excluding the FCA Group)
311
179
Other related parties
COXA S.p.A.
HPE S.r.l.
Other related parties
Total other related parties
Total transactions
with related parties
13
—
1,694
1,707
5,819
6,832
—
12,651
—
—
—
—
—
283
492
48
—
2,111
2,159
6,141
7,525
—
13,666
—
—
—
—
—
192
173
121
—
1,950
2,071
7,096
6,447
24
13,567
233,635
92,834
1,370
326,475
107,415
1,191
250,948
92,111
471
Total for the Group
3,420,321 1,953,441
23,563 3,416,890 1,986,792
29,260 3,105,084 1,899,433
27,729
(1) Costs include cost of sales, selling, general and administrative costs and other expenses/(income), net.
(2 )The FCA Group is currently in the process of selling Magneti Marelli and the transaction is expected to be completed in the first half of 2019.
257
—
—
—
471
471
—
—
—
—
—
Annual Report 2018 > 29. RELATED PARTY TRANSACTIONS
Assets and liabilities originating from related party transactions are summarized in the table below:
(e thousand)
At December 31,
2018
2017
Trade
receivables
Trade
payables
Other
current
assets
Other
liabilities
Trade
receivables
Trade
payables
Other
current
assets
Other
liabilities
FCA Group companies
Maserati
FCA US LLC
Magneti Marelli (1)
Other FCA Group companies
39,077
135
2,774
5,896
6,099
6,332
9,427
4,689
Total FCA Group companies
47,882
26,547
Exor Group companies
(excluding the FCA Group)
377
13
Other related parties
COXA S.p.A.
HPE S.r.l.
Other related parties
Total other related parties
Total transactions
with related parties
9
—
199
208
812
1,187
—
1,999
—
—
—
1,481
1,481
30,594
71,560
—
—
44
129
899
2,657
3,028
6,848
8,103
4,646
30,638
75,245
22,625
—
—
—
2,097
2,097
37,496
—
—
27
37,523
—
—
—
5
5
4
—
—
—
—
345
202
3
—
268
271
1,142
1,150
—
2,292
—
—
—
—
—
—
—
—
—
—
48,467
28,559
1,486
30,642
75,861
25,119
2,097
37,523
Total for the Group
211,399
653,751
64,295
589,743
239,410
607,505
45,441
620,350
(1) The FCA Group is currently in the process of selling Magneti Marelli and the transaction is expected to be completed in the first half of 2019.
There were financial assets or financial liabilities originating from related party transactions at December
31, 2018 or December 31, 2017.
258
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Emoluments to Directors, Statutory Auditors and Key Management
The fees of the Directors and Statutory Auditors of Ferrari N.V. for carrying out their respective functions,
including those in other consolidated companies, are as follows:
(e thousand)
Directors of Ferrari N.V.
Statutory auditors
Total emoluments
For the years ended December 31,
2018
17,043
118
17,161
2017
17,767
112
17,879
2016
8,617
105
8,722
The aggregate compensation to Directors of Ferrari N.V. for year ended December 31, 2018 was e17,043
thousand (e17,767 thousand in 2017 and e8,617 thousand in 2016), inclusive of the following:
• e1,080 thousand for salary (e1,277 thousand in 2017 and e2,827 thousand in 2016); and
• e15,963 thousand for share-based compensation awarded under the Company’s equity incentive plan,
including an acceleration of the costs relating to the equity incentive plan of the former Chairman and
Chief Executive Officer (Mr. Sergio Marchionne) (e16,490 thousand in 2017). See Note 22 “Share-based
compensation” for information related to the equity incentive plan.
The aggregate compensation to Directors of Ferrari N.V. for year ended December 31, 2016, also included:
• e5,500 thousand for compensation costs related to the retirement of the former CEO (Mr. Amedeo Felisa) of
the Group; and
• e290 thousand as the Group’s contribution to defined benefit obligations and long-term bonus plans.
Non-Executive Directors’ compensation for the years ended December 31, 2017 and 2016 included
e418 thousand and e1,110 thousand, respectively, that was settled in common shares of the Company and
recognized as an increase to equity in the relevant year. There was no equity-settled compensation for Non-
Executive Directors for the year ended December 31, 2018.
The aggregate compensation for members of the Senior Management Team (excluding the CEO) in 2018
was e16,674 thousand (e16,015 thousand in 2017 and e12,290 thousand in 2016), inclusive of the following:
• e13,915 thousand for salary and short-term incentives (e10,964 thousand in 2017 and e11,059 thousand
in 2016);
• e2,759 thousand for share-based compensation awarded under the Company’s equity incentive plan
(e4,737 thousand in 2017).
• The aggregate compensation for members of the Senior Management Team (excluding the CEO) for the year
ended December 31, 2017 and 2016 includes also long-term benefits (e314 thousand in 2017 and e1,231
thousand in 2016).
259
Annual Report 2018 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.
Arrangements with sponsors
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, 2018 were as follows:
(e thousand)
Due within
one year
Minimum purchase obligations
153,303
At December 31, 2018
Due between
one and
three years
43,110
Due between
three and
five years
6,707
Due beyond
five years
Total
1,060
204,180
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:
(e thousand)
At December 31, 2018
Future minimum lease payments under
operating lease agreements
19,062
22,411
11,994
18,708
72,175
Due within
one year
Due between
one and
three years
Due between
three and
five years
Due beyond
five years
Total
During 2018, the Group’s operating lease expenses amounted to e15,358 thousand (e16,964 thousand
in 2017 and e14,820 thousand in 2016).
260
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 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;
• credit risk, arising both from its normal commercial relations with final clients and dealers, and its 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.
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.
261
Annual Report 2018 > 31. QUALITATIVE AND QUANTITATIVE INFORMATION ON FINANCIAL RISKS
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.
Information on the fair value of derivative financial instruments held is provided in Note 20.
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 2018, the total trade flows
exposed to foreign currency exchange rate risk amounted to the equivalent of 49 percent of the Group’s
turnover (51 percent in 2017).
• 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 2018,
the value of commercial activity exposed to fluctuations in the Euro/U.S. Dollar exchange rate accounted for
approximately 57 percent (62 percent in 2017) of the total currency risk from commercial activity. In 2018,
the commercial activity exposed to the Euro/Pound Sterling exchange rate exceeded 10 percent (as in 2017)
of the total currency risk from commercial activity. 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 rate exposure for commercial activity in 2018. It is the Group’s policy to use
derivative financial instruments to hedge up to 90 percent of certain exposures 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, Mainland 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.
The Group monitors its principal exposure to conversion exchange risk, although there was no specific
hedging in this respect at the reporting date.
262
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2018, except for those arising on financial instruments measured at fair value,
amounted to net losses of e13,293 thousand (net losses of e18,059 thousand and net gains of e8,335
thousand for the years ended December 31, 2017 and 2016, respectively).
The impact of foreign currency exchange rate differences arising from financial services activities recognized
under cost of sales, except for those arising on financial instruments measured at fair value, amounted to net
gains of e58,808 thousand in 2016. 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 2018 and 2017 was nil.
Except as noted above, there have been no substantial changes in 2018 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,
2018 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 e106,400 thousand (e45,439 thousand at December 31, 2017). 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.
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, 2018 were cash and cash
equivalents and certain receivables from financing activities (related to client and dealer financing), while 37
percent of the Group’s gross debt bears floating rates of interest. At December 31, 2018, a decrease of 10
basis points 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 e251 thousand on an annual basis (an decrease of
e225 thousand at December 31, 2017). 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.
263
Annual Report 2018 > 31. QUALITATIVE AND QUANTITATIVE INFORMATION ON FINANCIAL RISKS
Liquidity risk
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.
The Group has a revolving credit facility of e500 million, which was entirely undrawn at December 31, 2018
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.
264
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2018 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 e878,496 thousand at December 31, 2018 (e732,947
thousand at December 31, 2017) are shown net of the allowance for doubtful accounts amounting to e6,457
thousand (e6,948 thousand at December 31, 2017). After considering the allowance for doubtful accounts,
e53,800 thousand of receivables were overdue (e11,943 thousand at December 31, 2017). Therefore, overdue
receivables represent a minor portion of receivables from financing activities.
Receivables from financing activities relate entirely to the financial services portfolio in the United States
and such receivables are generally secured on the titles of cars or other guarantees.
Trade receivables amounting to e211,399 thousand at December 31, 2018 (e239,410 thousand at
December 31, 2017) are shown net of the allowance for doubtful accounts amounting to e24,346 thousand
(e21,993 thousand at December 31, 2017). After considering the allowance for doubtful accounts, e36,772
thousand of receivables were overdue (e32,336 thousand at December 31, 2017).
265
Annual Report 2018 32. ENTITY-WIDE DISCLOSURES
The following table presents an analysis of net revenues by geographic location of the Group’s clients:
(e thousand)
Italy
Other EMEA
Americas (1)
Mainland China, Hong Kong and Taiwan
Rest of APAC (2)
Total net revenues
For the years ended December 31,
2018
449,312
1,400,443
922,639
274,268
373,659
2017
563,921
2016
387,184
1,308,261
1,314,788
920,858
282,550
341,300
835,045
272,223
295,844
3,420,321
3,416,890
3,105,084
(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:
(e thousand)
At December 31,
Italy
Other EMEA
Americas (1)
Mainland China,
Hong Kong and Taiwan
Rest of APAC (2)
Total
2018
Goodwill
Property,
plant and
equipment
Intangible
assets
Property,
plant and
equipment
2017
Goodwill
Intangible
assets
844,218
785,182
644,689
704,262
785,182
439,369
2,251
3,327
351
403
—
—
—
—
—
850
—
258
2,368
2,760
264
606
—
—
—
—
—
812
—
275
850,550
785,182
645,797
710,260
785,182
440,456
(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.
266
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
33. SUBSEQUENT EVENTS
The Group has evaluated subsequent events through February 26, 2019, which is the date the Consolidated
Financial Statements were authorized for issuance.
Under a new common share repurchase program announced by Ferrari on December 28, 2018, the
Company has purchased 335,346 common shares for a total consideration of e33.4 million. As a result, as of
February 22, 2019 the Company held an aggregate of 6,338,189 common shares in treasury.
On February 26, 2019, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders
that the Company declare a dividend of e1.03 per common share, totaling approximately e194 million.
The proposal is subject to the approval of the Company’s shareholders at the Annual General Meeting to be
held on April 12, 2019.
Foto
267
Annual Report 2018 268
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Company Financial Statements
Index to Company Financial Statements
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
270
271
272
273
274
269
Annual Report 2018 Income Statement / Statement of Comprehensive Income
for the years ended December 31, 2018 and 2017
(e thousand)
Net revenues
Other income
Dividend income
Cost of sales
Selling, general and administrative costs
Net financial expenses
Profit before taxes
Income tax benefit
Net and comprehensive income
Note
3
3
4
5
6
7
For the years ended December 31,
2018
196
3,401
2017
2,399
5,171
186,700
235,000
930
29,493
25,003
134,871
12,498
147,369
904
26,646
32,210
182,810
9,591
192,401
The accompanying notes are an integral part of the Company Financial Statements.
270
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Statement of Financial Position
at December 31, 2018 and 2017
(e thousand)
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
Total equity
Debt - Non-current
Deferred tax liabilities
Total non-current liabilities
Debt - Current
Trade payables
Tax payables
Employee benefits
Other current liabilities
Ferrari Group cash management pools
Total current liabilities
Total liabilities
Total equity and liabilities
The accompanying notes are an integral part of the Consolidated Financial Statements.
Note
8
9
11
7
10
11
7
11
11
12
13
14
16
7
16
17
7
18
12
At December 31,
2018
106
2017
119
8,778,123
8,778,123
22,871
390
15,417
—
8,801,490
8,793,659
149
7,102
111,590
—
12,384
3,618
75,615
210,458
317
9,999
30,037
54,269
3,472
—
114,922
213,016
9,011,948
9,006,675
2,504
2,504
5,768,544
5,768,544
(67,835)
174,870
5,878,083
1,190,493
—
1,190,493
1,818,337
15,885
100,640
2,192
6,318
—
1,943,372
3,133,865
9,011,948
13,119
160,178
5,944,345
1,619,816
1,206
1,621,022
1,406,733
10,820
19,078
—
1,978
2,699
1,441,308
3,062,330
9,006,675
271
Annual Report 2018 Statement of Cash Flows
for the years ended December 31, 2018 and 2017
(e thousand)
Cash and cash equivalents at beginning of the period
Cash flows from operating activities
Profit before taxes (*)
Net financial expenses
Depreciation
Other non-cash income and expenses
Change in trade payables
Change in trade receivables
Change in inventories
Change in other operating assets and liabilities
Cash received as part of dividend in kind from subsidiaries
Interest paid
Total
Cash flows from/(used in) investing activities
Proceeds from loans to related parties
Loans to related parties
Investments in property, plant and equipment
Total
Cash flows used in financing activities
Proceeds from financial liabilities with related parties
Repayment of financial liabilities with related parties
Proceeds from bonds
Repayment of Term Loan
Change in Ferrari Group cash management pools
Dividends paid to owners
Cash distribution of reserves
Share repurchases
Total
Total change in cash and cash equivalents
Cash and cash equivalents at the end of the period
For the years ended December 31,
2018
114,922
134,871
25,003
8
12,729
5,084
2,891
—
6,349
940
(19,634)
168,241
53,957
—
—
2017
119,372
182,810
32,210
24
14,144
(660)
(4,429)
162
14,034
—
(30,257)
208,038
—
(53,214)
(54)
53,957
(53,268)
165,000
(187,000)
—
—
(6,317)
(133,095)
—
(3,122)
694,172
(733,333)
3,048
—
—
(119,985)
(100,093)
(261,505)
(39,307)
75,615
—
(159,200)
(4,450)
114,922
(*) Dividends received for the years ended December 31, 2018 and 2017 of e186,700 thousand and e235,000 thousand respectively are included
within profit before taxes.
The accompanying notes are an integral part of the Company Financial Statements.
272
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Statement of Changes in Equity
for the years ended December 31, 2018 and 2017
Other
reserves
(15,478)
Retained earnings/
(deficit)
(32,223)
192,401
—
—
160,178
147,369
(133,939)
—
—
1,262
174,870
(e thousand)
At December 31, 2016
Comprehensive income
Cash distribution of reserves
Share-based compensation
At December 31, 2017
Comprehensive income
Dividends to owners
Share repurchase
Share-based compensation
Other changes
Share
capital
2,504
—
—
—
Share
premium
5,888,529
—
(119,985)
—
2,504
5,768,544
—
—
—
—
—
—
—
—
—
—
—
—
28,597
13,119
—
—
(100,093)
22,491
(3,352)
At December 31, 2018
2,504
5,768,544
(67,835)
The accompanying notes are an integral part of the Consolidated Financial Statements.
Total
equity
5,843,332
192,401
(119,985)
28,597
5,944,345
147,369
(133,939)
(100,093)
22,491
(2,090)
5,878,083
273
Annual Report 2018 Notes to the Company
Financial Statements
1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES
Ferrari 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.
The Company is listed under the ticker symbol RACE on the New York Stock Exchange and on the Mercato
Telematico Azionario, the stock exchange managed by Borsa Italiana.
The Company’s official seat (statutaire zetel) is in Amsterdam, the Netherlands, and the Company’s
corporate address 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”) as of and for the
year ended December 31, 2018 were authorized for issuance on February 26, 2019.
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.
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2018 (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, 2018 as noted below.
The amounts in the Company Financial Statements are presented in thousands of Euro (e), except where
otherwise indicated.
Format of the Company Financial Statements
The Company presents the income statement by function and the Company uses a current/non-current
classification for assets and liabilities in the statement of financial position.
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 included as part of
operating activities.
275
Annual Report 2018 > 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
New standards and amendments effective from January 1, 2018
The following amendments were effective from January 1, 2018 and were adopted by the Company for the
purpose of the preparation of the Company Financial Statements.
IFRS 15 - Revenue from Contracts with Customers - The Company adopted IFRS 15 and related amendments using
the modified retrospective approach with the cumulative effect of initial adoption (if any) recognized at the date
of initial application of January 1, 2018. The Company concluded that its accounting for revenue under IFRS 15
did not result in the recognition of a cumulative adjustment to opening retained earnings under the modified
retrospective approach, nor did it have a material effect on the Company’s financial position or results of
operations. The Company’s updated accounting policy for revenue recognition is provided further below.
IFRS 9 - Financial Instruments - IFRS 9 did not result in material changes compared to the Company’s
accounting for financial instruments under IAS 39, therefore, there was no impact on the Company’s
financial statements upon initial adoption of the standard and related amendments. The Company’s updated
accounting policy for financial instruments is provided further below.
Amendments to IFRS 2 - Share-Based Payment - The amendments are effective for annual periods beginning on
or after January 1, 2018 with early application permitted. The Company has applied 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.
There were no other effects from the adoption of these amendments.
IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration - The interpretation is effective on
or after January 1, 2018. There was no effect from the adoption of this interpretation.
Annual Improvements to IFRSs 2014-2016 Cycle - The improvements have amended two standards with effective
date of January 1, 2018: i) IFRS 1 - First-time Adoption of International Financial Reporting Standards and ii) IAS 28 -
Investments in Associates and Joint Ventures. There was no effect from the adoption of these amendments.
Further information on these standards is provided in Note 2 of the Consolidated Financial Statements.
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, 2019:
IFRS 16 - Leases
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
276
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 under 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.
The Company will apply IFRS 16 from its mandatory adoption date of January 1, 2019. The Company
intends to apply the simplified transition approach and not restate comparative amounts for the year prior
to adoption. Upon adoption, right-of-use assets are measured at the amount of the related lease liabilities,
adjusted for any prepaid or accrued lease expenses. The Company elected to use the exemptions permitted
by the standard on lease contracts for which the lease terms ends within 12 months of the date of initial
application, and lease contracts for which the underlying asset is of low value.
The main contracts of the Company within the scope of IFRS 16 relate to buildings. As of January 1,
2019, after considering the exemptions mentioned above, the Company has non-cancellable operating lease
commitments of approximately e3.3 million. Of these commitments, the Company expects to recognize
right-of-use assets (after adjustments for prepayments and accrued lease payments recognized as at December
31, 2018) and related lease liabilities of e2.8 million. The Company expect no significant impact from the
application of the new standard on net income and cash flow from operating activities. Lease liabilities are
measured at the present value of the fixed or in substance fixed lease payments over the lease term that have
not been paid at the date of adoption. The lease term includes both the non-cancellable periods for which the
Company has the right to use the underlying assets and also any renewal periods if the Company is reasonably
certain to exercise the related renewal option. The discount rate was determined taking into consideration
country risk, currency, lease term and the Group’s credit spread. Lease liabilities do not include any non-lease
components that may be included in the related contracts.
The Company does not expect to recognize any deferred tax assets or liabilities in respect of temporary
differences arising on initial recognition of right-of-use assets and lease liabilities as the recognition does not
affect accounting profit or taxable profit.
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
Company does not expect any material impact from the adoption of this interpretation.
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 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 Company
does not expect any impact from the adoption of these amendments.
Further information on these standards is provided in Note 2 of the Consolidated Financial Statements.
277
Annual Report 2018 > 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
New standards, amendments, clarifications and interpretations issued by IASB but not yet
endorsed by the EU
The following standards, amendments and interpretations have been issued by the IASB but not yet
endorsed by the EU:
• IFRS 17 - Insurance Contracts
• 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
• Amendments to IFRS 3 - Business Combinations
• Amendments to IAS 1 - Presentation of Financial Statements and IAS 8 - Accounting Policies
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.
Impairment of investments in subsidiaries
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.
Foreign currency transactions
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
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Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2018 amounted to e23 thousand (e2 thousand at December 31, 2017).
The principal foreign currency exchange rates used to translate other currencies into Euro were as follows:
2018
2017
Average
At December 31,
Average
At December 31,
1.1810
0.8847
1.1450
0.8945
1.1297
0.8767
1.1993
0.8872
U.S. Dollar
Pound Sterling
Property, plant and equipment
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
Trade receivables
Depreciation rates
20% - 22%
20% - 25%
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.
Inventories
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.
279
Annual Report 2018 > 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
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.
Trade payables
Trade payables are amounts payable for services, legal and professional fees and other expenses incurred.
Trade payables are all due within one year.
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
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.
Revenue is recognized when control over a product or service is transferred to a customer. Revenue
is measured at the transaction price which is based on the amount of consideration that the Company
expects to receive in exchange for transferring the promised goods or services to the customer and excludes
any sales incentives as well as taxes collected from customers that are remitted to government authorities.
The transaction price will include estimates of variable consideration to the extent it is probable that a
significant reversal of revenue recognized will not occur. The Company enters into contracts that may include
both products and services, which are generally capable of being distinct and accounted for as separate
performance obligations.
The Company accounts for a contract with a customer when there is a legally enforceable contract between
the Company and the customer, the rights of the parties are identified, the contract has commercial substance,
and collectability of the contract consideration is probable.
280
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
Dividends in kind transaction
At October 1, 2018, a dividend in kind was distributed from the subsidiary Ferrari S.p.A. to the Company.
The dividend in kind relates to the transfer of finance, HR and other personnel, as well as certain liabilities
associated with the personnel transferred, in exchange for cash.
The distribution of the Dividend in Kind represents a transfer of a business from a subsidiary to the
Company. The Company accounts for such transaction as an “under common control” transaction.
EU IFRS currently provide no guidance for the accounting treatment of transactions among entities under
common control. If there is no specifically applicable guidance, IAS 8 requires an entity to develop a policy
that is relevant to the decision-making needs of users and that is reliable. The Company decided to apply the
“Predecessor Accounting Method”, according to which:
• Assets and liabilities of the acquired/transferred business are stated at predecessor carrying values. Fair value
measurement is not required.
• No new goodwill arises in predecessor accounting.
281
Annual Report 2018 > 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
According to the Predecessor Accounting Method, the dividend in kind amounted to e940 thousand and
was recorded as an increase in other liabilities in connection with personnel transferred, with an equal amount
of cash received.
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 Senior Management Team (“SMT”) 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.
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.
282
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
3. NET REVENUES AND OTHER INCOME
Net revenues for the year ended December 31, 2018 amounted to e196 thousand (e2,399 thousand for the
year ended December 31, 2017) and primarily 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, 2018 amounted to e3,401 thousand (e5,171 thousand for
the year ended December 31, 2017) and primarily relates to costs recharged to Ferrari S.p.A.
4. DIVIDEND INCOME
Dividend income for the year ended December 31, 2018 amounted to e186,700 thousand and related
entirely to a dividend from Ferrari S.p.A, approved on April 5, 2018 and received on May 11, 2018.
Dividend income for the year ended December 31, 2017 amounted to e235,000 thousand and related
entirely to a dividend from Ferrari S.p.A, approved on November 2, 2017 and received on November 23, 2017.
5. SELLING, GENERAL AND ADMINISTRATIVE COSTS
Selling, general and administrative costs consisted of the following:
(e thousand)
For the years ended December 31,
Personnel expenses
Shared services provided by Ferrari S.p.A.
Legal and professional services
Insurance
Other expenses
Total selling, general and administrative costs
2018
17,112
5,272
3,566
2,321
1,222
29,493
2017
11,808
7,436
4,061
2,043
1,298
26,646
Personnel expenses include costs related to the equity incentive plan (see Note 15), compensation for Non-
Executive Directors and employees. 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, 2018 the Company had 22 full time equivalent employees (12 at December 31, 2017, all
of which related to the UK branch), 12 of which relate to the UK Branch and 10 of which relate to the Italian
Branch, the personnel transferred through the dividend in kind transaction described in Note 2 - Basis of
preparation and significant accounting policies. All employees work outside of the Netherlands.
283
Annual Report 2018 > 5. SELLING, GENERAL AND ADMINISTRATIVE COSTS
Shared service costs mainly relate to services provided by Ferrari S.p.A. for human resources, payroll, tax,
legal, accounting and treasury and the decrease is mainly due to the transfer of finance, human resources and
other personnel through the dividend in kind transaction described in Note 2 - Basis of preparation and significant
accounting policies.
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:
(e thousand)
Interest expenses
Of which:
Interest on bonds
Interest on intercompany borrowings
Interest on the Term Loan
Fair value changes on currency swap
Foreign exchange rate differences
Other financial expenses
Other financial income
Net financial expenses
For the years ended December 31,
2018
23,577
12,386
11,191
—
1,296
(507)
1,259
(622)
25,003
2017
31,582
9,231
15,124
7,227
(815)
585
995
(137)
32,210
Fair value changes on currency swap relates to the instruments 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”), a subsidiary of Ferrari S.p.A., that was entered into in November 2017 (see Note 11 for
additional details). The currency swap matured in November 2018, concurrently with the repayment of the
financial receivable.
Other financial expenses for both 2018 and 2017 includes bank fees and charges.
Other financial income for both 2018 and 2017 includes interest income on cash and cash equivalents held
with banks and the financial receivable with FFS Inc.
284
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
7. INCOME TAXES
Income tax benefit for the years ended December 31, 2018 and 2017 is as follows:
(e thousand)
Current income tax benefit
Deferred income tax benefit/(expense)
Total income tax benefit
(e thousand)
Profit before tax
Theoretical income tax expense
Tax effect on:
Non-taxable dividends
Non-deductible costs
Other permanent differences
Total income tax benefit
For the years ended December 31,
2018
10,902
1,596
12,498
2017
11,938
(2,347)
9,591
For the years ended December 31,
2018
134,871
(32,369)
42,568
(93)
2,392
12,498
2017
182,810
(43,877)
53,580
(19)
(93)
9,591
The theoretical income tax expense has been calculated at a rate of 24.0 percent for the years ended
December 31, 2018 and 2017, which is the corporate rate of taxation according to the Italian Tax Code for the
respective years.
(e thousand)
Tax receivables
Tax payables
Net
At December 31,
2018
111,590
100,640
10,950
2017
30,037
19,078
10,959
Tax receivables of e111,590 thousand at December 31, 2018 primarily relate to amounts due from the tax
authorities for the 2018 group tax consolidation in Italy. Tax receivables of e30,037 thousand at December 31,
2017 primarily relate to amounts due from related parties for the 2017 group tax consolidation in Italy.
Tax payables of e100,640 thousand at December 31, 2018 primarily relate to amounts due to related
parties for the 2018 group tax consolidation in Italy. Tax payables of e19,078 thousand at December 31, 2017
primarily relate to amounts to the tax authorities for the 2017 group tax consolidation in Italy.
285
Annual Report 2018 > 7. INCOME TAXES
(e thousand)
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
At December 31,
2018
2017
312
78
390
—
—
—
390
—
—
—
(9)
(1,197)
(1,206)
(1,206)
Net deferred tax assets of e390 thousand at December 31, 2018 are primarily related to timing differences
arising from provision of labor costs. Net deferred tax liabilities of e1,206 thousand at December 31, 2017
primarily relate to timing differences arising from the deduction of bond issuance costs.
8. PROPERTY, PLANT AND EQUIPMENT
(e thousand)
Cost
Accumulated depreciation
Carrying amount
At December 31,
2018
166
(60)
106
2017
172
(53)
119
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
e8 thousand for the year ended December 31, 2018 (e24 thousand for the year ended December 31, 2017)
were recorded within cost of sales.
286
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
9. INVESTMENTS IN SUBSIDIARIES
Investments in subsidiaries include Ferrari S.p.A. amounting to e8,778,000 thousand and New Business 33
S.p.A. (formerly Fiat Investments S.p.A.), amounting to e123 thousand.
Investment in subsidiaries amounted to e8,778,123 thousand at December 31, 2018 and 2017.
Impairment testing
At December 31, 2018, the market capitalization of Ferrari N.V. amounted to approximately e16.4 billion.
Considering the share price of the Company at December 31, 2018 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, 2018 amounted to e149 thousand (e317 thousand at December 31, 2017)
and relate to demo cars purchased from Ferrari S.p.A. for eventual sale to third parties. Such inventories are
recorded net of an accumulated provision of e517 thousand (e353 thousand at December 31, 2017).
An inventory provision charge of e168 thousand was recorded within cost of sales for the year ended
December 31, 2018 (e172 thousand for the year ended December 31, 2017).
Changes in the provision for slow moving and obsolete inventories were as follows:
(e thousand)
At January 1,
Provision
Use and other changes
At December 31,
2018
353
168
(4)
517
2017
252
172
(71)
353
287
Annual Report 2018 11. TRADE RECEIVABLES, FINANCIAL ASSETS AND OTHER CURRENT ASSETS
(e thousand)
Trade receivables
Financial assets
Other current assets
Total
Trade receivables
At December 31,
2018
7,102
22,871
12,384
42,357
2017
9,999
69,686
3,472
83,517
Trade receivables at December 31, 2018 amounted to e7,102 thousand (e9,999 thousand at December 31,
2017) and included e6,513 thousand due from Ferrari S.p.A. for corporate services rendered and fees charged
and e589 thousand due from third parties for marketing-related events (e9,512 thousand and e487 thousand
respectively at December 31, 2017).
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:
(e thousand)
Trade receivables denominated in:
Euro
Pound Sterling
Total
Financial assets
(e thousand)
Non-current financial receivables
Current financial receivables
Derivative financial instruments
Total
At December 31,
2018
2017
5,938
1,164
7,102
3,900
6,099
9,999
At December 31,
2018
22,871
—
—
22,871
2017
15,417
53,546
723
69,686
At December 31, 2018, non-current financial receivables of e22,871 thousand (e15,417 thousand at
December 31, 2017) 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.
288
FERRARI N.V.Annual Report 2018
Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Current financial receivables at December 31, 2017 related 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 e53,546 thousand at December 31, 2017 accrued interest
quarterly at a rate of LIBOR 3M + 60 basis points, and was fully paid off in November 2018.
Derivative financial instruments at December 31, 2017 related 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 had a notional value of $64 million and matured in November 2018,
consistent with the repayment of the loan above.
Other current assets
Other current assets of e12,384 thousand at December 31, 2018 (e3,472 thousand at December 31, 2017)
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, 2018, the Company had a net
asset of e3,618 thousand and at December 31, 2017 the Company had a net liability of e2,699 thousand.
13. CASH AND CASH EQUIVALENTS
Cash and cash equivalents amounted to e75,615 thousand at December 31, 2018 (e114,922 thousand at
December 31, 2017) 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, 2018 and 2017.
Credit risk associated with cash and cash equivalents is considered limited as the counterparties are leading
national and international banks.
289
Annual Report 2018 14. EQUITY
Share capital
At December 31, 2018 and 2017 the fully paid up share capital of the Company was e2,504 thousand,
consisting of 193,923,499 common shares and 56,497,618 special voting shares, all with a nominal value of
e0.01 per share. At December 31, 2018, the Company had 6,002,843 common shares and 4,744 special voting
shares held in treasury, while at December 31, 2017 the Company held 4,969,625 common shares and 4,099
special voting shares in treasury.
The following table provides a reconciliation of the opening and closing number of outstanding common
shares and outstanding special voting shares:
(e thousand)
Outstanding shares at January 1, 2018
188,953,874
56,493,519
245,447,393
Shares repurchased under share repurchase program (1)
(1,033,218)
Other changes (2)
—
—
(645)
(1,033,218)
(645)
Outstanding shares at December 31, 2018
187,920,656
56,492,874
244,413,530
Common Shares
Special Voting Shares
Total
(1) Includes shares repurchased between January 1, 2018 and December 31, 2018 based on the transaction trade date.
(2) Relates to the deregistration of special voting shares from the loyalty register.
The authorized share capital of the Company is e7,500,000, divided into 375,000,000 common shares
with nominal value of e0.01 per share and an equal number of special voting shares with nominal value of
e0.01 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. 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 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
The share premium reserve amounted to e5,768,544 thousand at both December 31, 2018 and December
31, 2017, and primarily originated from the issuance of common shares pursuant to the restructuring activities
undertaken as part of an intra-group restructuring (the Separation).
290
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 e0.635 per common share was approved, corresponding
to a total distribution of e119,985 thousand in 2017.
Retained earnings
Following approval of the annual accounts by the shareholders at the Annual General Meeting of
the Shareholders on April 13, 2018, a dividend distribution of e0.71 per common share was approved,
corresponding to a total distribution of e133,939 thousand (of which e133,095 thousand was paid in 2018).
The distribution was made from the retained earnings reserve.
Retained earnings amounted to e174,870 thousand at December 31, 2018 (e160,178 thousand at
December 31, 2017).
Other reserves
Other reserves includes, among others:
• a treasury reserve of e100,143 thousand at December 31, 2018 and e50 thousand at December 31, 2017;
• a share-based compensation reserve of e52,198 thousand at December 31, 2018 and e29,707 thousand at
December 31, 2017;
• a legal reserve of e29 thousand at December 31, 2018 and e8 thousand at December 31, 2017, determined
in accordance with Dutch law.
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, 2018, the legal and non-distributable reserves of the Company amounted to
e29 thousand (e8 thousand at December 31, 2017) 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, 208, the cumulative translation reserve amounted to
e23 thousand (e2 thousand at December 31, 2017).
• The Company records a statutory non-distributable reserve equal to 1 percent of the nominal value of the
special voting shares. At December 31, 2018 and 2017, this reserve amounted to e6 thousand.
On February 9, 2018, the Company announced its intention to launch a share repurchase program. The
program is intended to optimize the capital structure of the Company. Shares repurchased may also be used
to meet the Company’s obligations arising from the equity incentive plan approved in 2017. As of December
31, 2018 the Company had repurchased 1,033,218 common shares for a total consideration of e100,093
thousand under the program.
291
Annual Report 2018 > 14. EQUITY
Reconciliation of Equity and Net Profit
The reconciliation of equity as per the Consolidated Financial Statements to equity as per the Company
Financial Statements is provided below:
(e thousand)
Equity attributable to owners of the parent
in the Consolidated Financial Statements of Ferrari N.V.
Intra-group restructuring
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
Cumulative dividends in prior years
Other changes
Dividends
At December 31,
2018
2017
1,348,722
5,969,427
(26,740)
(1,008,927)
(824,009)
235,000
(2,090)
186,700
778,678
5,969,427
(29,833)
(430,935)
(577,992)
—
—
235,000
Equity in the Company Financial Statements of Ferrari N.V.
5,878,083
5,944,345
The reconciliation of net profit as per the Consolidated Financial Statements to net profit as per the
Company Financial Statements is provided below:
(e thousand)
Net profit in the Consolidated Financial Statements of Ferrari N.V.
Results of subsidiaries in the Consolidated Financial Statements
Dividends
Net profit in the Company Financial Statements of Ferrari N.V.
For the years ended December 31,
2018
784,678
(824,009)
186,700
147,369
2017
535,393
(577,992)
235,000
192,401
15. SHARE-BASED COMPENSATION
Following the approval on March 1, 2017 of the equity incentive plan by the Board of Directors 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 members of the Senior Management Team (“SMT”) and key leaders of
the Group. 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 Group’s strategic
horizon. During 2018 additional PSU and RSU awards were granted to the new Chief Executive Officer and
certain key employees of the Group under the equity incentive plan.
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.
292
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
At December 31, 2018 none of the PSUs or RSUs were vested, and 33 thousand PSUs and 16 thousand
RSUs were forfeited. Under the equity incentive plan, the total number of PSUs and RSUs outstanding at
December 31, 2018 were 675 thousand and 113 thousand respectively.
For the years ended December 31, 2018 and 2017, the Company recognized e22,491 thousand and
e28,179 thousand, respectively, as an increase to other reserves in equity for the PSU awards and RSU awards.
Of this amount for the year ended December 31, 2018, e15,037 thousand was recognized as an expense in
cost of sales and selling, general and administrative costs, and e7,454 thousand was recorded as financial
receivables in relation to share-based compensation recharged to subsidiaries (e12,762 thousand and e15,417
thousand respectively for the year ended December 31, 2017).
At December 31, 2018 the unrecognized share-based compensation amounted to approximately e5,572
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.
See Note 22 “Share-based Compensation” to the Consolidated Financial Statements for additional details
relating to the equity incentive plan.
16. DEBT
The breakdown of debt at December 31, 2018 and 2017 by nature and by maturity is as follows:
(e thousand)
At December 31,
2018
2017
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
7,616 1,190,493
— 1,198,109
6,159
694,402
492,956
1,193,517
1,810,721
—
— 1,810,721 1,400,574
432,458
— 1,833,032
Bonds
Financial liabilities
with related parties
Total debt
1,818,337 1,190,493
— 3,008,830 1,406,733 1,126,860
492,956
3,026,549
Bonds
2023 Bond
On March 16, 2016, the Company issued 1.5 percent coupon notes due March 2023, having a principal of
e500 million. The bond was issued at a discount for an issue price of 98.977 percent, resulting in net proceeds
of e490,729 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 e500,000 thousand Bridge Loan under the Facility (see
“Borrowings from banks” below). The bond is unrated and was admitted to trading on the regulated market
of the Irish Stock Exchange. The amounts outstanding at December 31, 2018 of e500,197 thousand includes
accrued interest of e5,938 thousand (e498,894 thousand including accrued interest of e5,938 thousand at
December 31, 2017).
293
Annual Report 2018 > 16. DEBT
2021 Bond
On November 16, 2017, the Company issued 0.25 percent coupon notes due January 2021, having a
principal of e700 million. The bond was issued at a discount for an issue price of 99.557 percent, resulting
in net proceeds of e694,172 thousand after the debt discount and issuance costs. The net proceeds were
primarily used to repay the Term Loan (see “Borrowings from banks” below). The bond is unrated and
was admitted to trading on the regulated market of the Irish Stock Exchange. The amount outstanding at
December 31, 2018 of e697,912 thousand includes accrued interest of e1,678 thousand (e694,623 thousand
including accrued interest of e221 thousand at December 31, 2017).
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, 2018 and 2017, the
Company was in compliance with the covenants of the notes.
Financial liabilities with related parties
Financial liabilities with related parties at December 31, 2018 are broken down as follows:
(e thousand)
Currency
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari S.p.A.
Total
Euro
Euro
Euro
Euro
Total amount
outstanding at
December 31, 2018
1,000,153
432,468
148,074
230,026
1,810,721
Due date
Interest Rate
September 2019
EURIBOR 3M + 60bps
October 2019
EURIBOR 3M + 110bps
April 2019
EURIBOR 3M + 60bps
December 2019
EURIBOR 3M + 60bps
Financial liabilities with related parties at December 31, 2017 are broken down as follows:
(e thousand)
Currency
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari Financial Services S.p.A.
Euro
Euro
Euro
Euro
Euro
Total
294
Total amount
outstanding at
December 31, 2017
1,000,331
100,141
200,021
100,081
432,458
1,833,032
Due date
Interest Rate
September 2018
EURIBOR 3M + 110bps
April 2018
EURIBOR 3M + 110bps
December 2018
EURIBOR 3M + 60bps
May 2018
EURIBOR 3M + 110bps
October 2019
EURIBOR 3M + 110bps
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
During 2018, total repayments of financial liabilities with related parties amounted to e187,000 thousand,
and additional proceeds received amounted to e165,000 thousand.
At December 31, 2018 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 e1,734 thousand on
an annualized basis (decrease of e1,832 thousand at December 31, 2017).
The carrying amount of the financial liabilities with related parties approximates its fair value.
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.
Borrowings from banks
At December 31, 2018 and 2017 there were no borrowings from banks.
Revolving Credit Facility
At December 31, 2018 and 2017 the Company has a revolving credit facility of e500 million (the “RCF”)
which 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 in November 2020.
295
Annual Report 2018 17. TRADE PAYABLES
(e thousand)
Due to related parties
Due to third parties
Total trade payables
At December 31,
2018
14,701
1,184
15,885
2017
9,305
1,515
10,820
Due to related parties primarily relates to amounts payable 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.
The following sets for a breakdown of trade payables by currency:
(e thousand)
Trade payables denominated in:
Euro
Pound Sterling
Total
At December 31,
2018
2017
13,535
2,350
15,885
8,407
2,413
10,820
Trade payables are due within one year and their carrying amount at the reporting date is deemed to
approximate their fair value.
18. OTHER CURRENT LIABILITIES
Other current liabilities amounted to e6,318 thousand at December 31, 2018 (e1,978 thousand at December
31, 2017) and primarily relate to employee benefits, provisions, deferred income and VAT payable.
Deferred income principally relates to advances received from dealers for marketing-related events, such as
new car launches.
296
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
19. EARNINGS PER SHARE
Earnings per share information is provided in Note 13 to the Consolidated Financial Statements.
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:
(e thousand)
Audit fees
Tax fees
Audit-related fees
Total
For the years ended December 31,
2018
1,340
12
5
1,357
2017
1,610
4
2
1,616
Audit fees of Ernst & Young Accountants LLP amounted to e80 thousand in 2018 (e100 thousand in 2017)
and are included in the table above.
21. REMUNERATION
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, 2018 and 2017, the Company provided guarantees over certain debt of its subsidiary
Ferrari Financial Services Inc. The book value of the related debt at December 31 2018 and 2017 was e30,694
thousand and e29,189 thousand, respectively.
297
Annual Report 2018 23. RELATED PARTY TRANSACTIONS
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.
Related party transactions include:
• Purchase of demo vehicles and spare parts from Ferrari S.p.A. (Note 10)
• 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, accounting
and treasury. (Note 5)
• 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.
298
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
24. ORGANIZATIONAL STRUCTURE
The following table sets forth the Company’s subsidiaries and associates at December 31, 2018:
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 Auto Securitization Transaction, LLC (1)
Ferrari Auto Securitization Transaction - Lease, LLC (1)
Ferrari Auto Securitization Transaction - Select, LLC
Ferrari Financial Services Titling Trust (1)
410, Park Display Inc. (2)
Associated companies valued at cost
Fondazione Casa di Enzo Ferrari
Branches
UK Branch
(1) Shareholding held by Ferrari Financial Services Inc.
(2) Shareholding held by Ferrari North America Inc.
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
Italy
UK
Racetrack management
Financial services
Financial services
Financial services
Financial services
Financial services
Retail
Service company
Sales and after sales support
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
25%
Ferrari Financial Services S.p.A., which at December 31, 2017 was a wholly-owned indirect subsidiary, was
merged into Ferrari S.p.A. effective May 31, 2018. As a consequence, Ferrari Financial Services Inc., previously
a wholly-owned subsidiary of Ferrari Financial Services S.p.A., became a direct wholly-owned subsidiary of
Ferrari S.p.A. effective May 31, 2018.
299
Annual Report 2018
25. SUBSEQUENT EVENTS
The Company has evaluated subsequent events
through February 26, 2019, which is the date the
Financial Statements were authorized for issuance.
Under a new common share repurchase program
announced by Ferrari on December 28, 2018, the
Company has purchased 335,346 common shares for
a total consideration of e33.4 million. As a result, as
of February 22, 2019 the Company held an aggregate
of 6,338,189 common shares in treasury.
On February 26, 2019, the Board of Directors
of Ferrari N.V. recommended to the Company’s
shareholders that the Company declare a dividend
of e1.03 per common share, totaling approximately
e194 million. The proposal is subject to the approval
of the Company’s shareholders at the Annual General
Meeting to be held on April 12, 2019.
February 26, 2019
Board of Directors
John Elkann
Louis C. Camilleri
Piero Ferrari
Sergio Duca
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Lapo Elkann
Amedeo Felisa
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
300
FERRARI N.V.Annual Report 2018 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 article 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.
3. From the profits, shown in the annual accounts, as adopted, such amounts shall be reserved as the
Board of Directors may determine.
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.
302
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 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.
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.
303
Annual Report 2018 Independent Auditor’s Report
To: the Shareholders and audit committee of Ferrari N.V.
Report on the audit of the 2018 Financial Statements included
in the Annual Report
Our opinion
We have audited the 2018 financial statements of Ferrari N.V. (the company), incorporated in Amsterdam,
the Netherlands.
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, 2018, and of its result and its cash flows for 2018, 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, 2018
• The following statements for 2018: 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.
304
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Materiality
Materiality
Benchmark applied
Explanation
e40 million (2017: e36 million)
5% of 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 into account misstatements and/or possible misstatements that in our opinion are
material for the users of the financial statements for qualitative reasons.
We agreed with the audit committee that misstatements in excess of e2 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.
Scope of the group audit
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 and reviewed 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..
305
Annual Report 2018 > Report on the audit of the 2018 Financial Statements included in the Annual Report
The entities included in the group audit scope represent 99% of the group’s total assets, 99% of net revenues
and 99% of profit before taxes. The scope of the procedures performed is detailed in the graphs reported
below:
Total assets
Net revenues
Profit before taxes
Full scope
Specific scope
Other procedures
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.
Our key audit matters
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.
306
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
REVENUE RECOGNITION
Risk
The group recognizes revenue for sales of vehicles, net of discounts, cash sales incentives and rebates recognized to
dealers or customers, when control over a product or service is transferred to a customer.
Revenue is measured at the transaction price which is based on the amount of consideration that the group expects
to receive in exchange for transferring the promised goods or services to the customer. The group enters into contracts
that may include both products and services, which are generally capable of being distinct and accounted for as
separate performance obligations, and allocates the transaction price to the performance obligations based on the
stand alone selling prices for each obligation. The group accounts for a contract with a customer when there is a
legally enforceable contract between the group and the customer, the rights of the parties are identified, the contract
has commercial substance, and collectability of the contract consideration is probable. The majority of revenue is
recognized at a point-in-time or over a period of one year or less.
The group also 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 maintenance programs include free annual maintenance services, performed once a year, for a period of 7 years.
Other revenue streams relate to the sale of spare parts and engines, as well as sponsorships, commercial and brand
activities.
Revenue recognition is inherently an area which we substantially focus on.
The group has disclosed its accounting policy related to revenue recognition in the financial statements under note 2:
significant accounting policies.
Our audit approach
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 new group’s accounting policy and its implementation under IFRS15, and assessed the design and operating
effectiveness of relevant internal controls.
• We performed sales cut-off testing procedures, with an additional focus on shipping terms and manual adjustments.
• We performed in depth analysis on revenues and margin, disaggregated by month, on the group’s key revenues
streams, compared to operational data (i.e. cars/engines shipping data), to identify and assess any unusual
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 consideration 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 included in the financial statements.
Key observations
As a result of the audit procedures performed we did not identify any material misstatement in the revenues reported
in the financial statements.
SUBJECT 2 WARRANTY AND RECALL CAMPAIGNS PROVISION
Risk
As at December 31, 2018 warranty and recall campaigns provision amounts to e111 million. The group establishes
a provision 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 group’s historical
claims or costs experience and the cost of parts and services to be incurred.
In addition, the group 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.
Future costs of these actions are subject to numerous 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 provision.
The costs related to this provision are recognized within cost of sales.
The group has disclosed its accounting policy related to warranty and recall campaigns provision in the financial
statements under note 2: significant accounting policies.
Our audit approach
Our procedures, designed to be responsive to the risk identified, included the following:
• We confirmed our understanding of the warranty and recall campaign provisioning process, evaluated the group’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 provision.
• We completed a retrospective analysis comparing the provisions recorded by the group 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 included in the financial statements.
Key observations
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.
307
Annual Report 2018 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, as required by Part 9 of Book 2 of the Dutch Civil Code
Based on the following procedures performed, we conclude that the other information:
• Is consistent with the financial statements and does not contain material misstatements
• 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 substantially
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 required by 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, as of the audit
for the year 2015, and have operated as statutory auditor ever since that date.
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.
308
FERRARI N.V.Annual Report 2018 Board Report | Financial Statements | Other Information
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
The audit committee is responsible for overseeing the company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient
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
detect all material errors and fraud during our audit.
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 among others:
• 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.
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• 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 manner that
achieves fair presentation.
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 to the audit committee, we determine the key audit matters: those
matters that were of most significance in the audit of the financial statements. 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 26, 2019
Ernst & Young Accountants LLP
/s/ Pieter Laan
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