FERRARI N.V.
Annual Report
2019
Ferrari N.V.
Official Seat:
Amsterdam, The Netherlands
Dutch Trade Registration Number:
64060977
Administrative Offices:
Via Abetone Inferiore 4
I-41053, Maranello (MO)
Italy
FERRARI N.V.
Annual Report2019 FERRARI N.V.
Table of contents
Board Report
Board of Directors and Auditors
Letter from Chairman and Chief
Executive Officer
Certain Defined Terms and Note
on Presentation
Forward-Looking Statements
Selected Financial and Other Data
Creating Value for Our Shareholders
Risk Factors
Overview
Industry Overview
Overview of Our Business
Operating Results
Subsequent Events and 2020 Outlook
Major Shareholders
Corporate Governance
Non Financial Statement
5
6
8
10
12
14
17
18
46
48
52
88
109
110
114
141
Risk, Risk Management and Control Systems 174
Remuneration of Directors
182
Financial Statements
201
Consolidated Financial Statements
and Notes at December 31, 2019
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, 2019
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
202
203
204
205
206
207
208
282
283
284
285
286
287
317
318
320
3
Annual Report 2019 Board Report
FERRARI N.V.
Board of Directors and Auditors
Board of Directors
Executive Chairman
John Elkann
Chief Executive Officer
Louis C. Camilleri
Vice Chairman
Piero Ferrari
Directors
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Sergio Duca
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
Independent Auditors
Ernst & Young Accountants LLP
6
Annual Report 2019 FERRARI N.V.
Letter from the Chairman
and the Chief Executive Officer
Dear Shareholders,
2019 was a highly significant year from a financial
perspective and our overall strategic positioning.
The strong results delivered reflect the work of a
Company pursuing its long term vision focussed
on supporting the continued vitality of its brand
through innovation, whilst maintaining an enviable
competitive edge.
very modern styling, allowing us to tap into the
needs of a new client segment. We also unveiled
the F8 Tributo, a two-seater V8 mid-rear-engined
berlinetta, in addition to its drop-top version,
the F8 Spider, and 812 GTS, which hails a return
exactly 50 years since the last series spider sported
a front-mounted V12.
The Ferrari Group either met or exceeded all of its
financial targets for the year. As a result, we are
confident that the 2022 industrial plan will be
successfully completed. We delivered 10,131 cars, a
9.5% increase on the previous year. The increase of
our industrial free cash flow from Euro 375 million
in 2018 to Euro 675 million was also a source of
particular satisfaction.
We presented five new models this year, a record
for Maranello, that ensures we are able to satisfy
the varied requirements of our existing and new
clients. Our first production hybrid model, the
SF90 Stradale, opened a new chapter in our
history, whilst the Ferrari Roma is a coupé that
effortlessly translates the elegance of the Ferrari
Grand Touring cars of the 1950s and 60s into
The presentation of the two spiders was the
highlight of Universo Ferrari, the first event
dedicated exclusively to Ferrari in its hometown.
Held in September 2019 this exhibition opened its
doors to over 14,000 customers, prospects and
Ferrari enthusiasts, who had a unique chance to
experience the multifaceted nature of our marque.
We now have the most complete range in our history
and are continuing to garner international plaudits.
Our V8 turbo engine has been named “International
Engine of the Year” for the fourth consecutive
occasion, whilst the styling of the Ferrari Monza SP1
secured us our fifth consecutive “Red Dot: Best of
the Best” award. Ferrari has also been awarded the
title of the world’s strongest brand for the second
consecutive year by Brand Finance.
8
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The same exclusive range approach is also
applied to our brand diversification strategy,
which has led to the termination of numerous
licensing agreements and the exit from merchandise
categories that do not reflect the Company’s
inherent values. We are extremely pleased to have
entered into a long term manufacturing agreement
with the Giorgio Armani Group, in order to elevate
the standards and quality of a selected array of
apparel products.
We ended the Formula 1 World Championship in
a position that fell short of what our remarkable
history deserves. We are conscious that we need
to do more and better and will be intensifying our
efforts and the investments necessary to achieve our
sole objective: to win the Championship.
The GT Racing Season ended on a very positive
note once again with a tally of 25 international
titles crowned by our 36th victory in the 24 Hours
of Le Mans. Ferrari’s track car range is now more
competitive than ever, thanks to the new 488 GT3
EVO 2020 and 488 Challenge EVO, unveiled during
the Finali Mondiali at Mugello.
We are also increasing our commitment to
sustainability in every area of the Company. Aside
from hybrid and first steps in electric technology, our
work has been focusing on energy consumption in
our facilities. In fact, we are pleased to say that this
year there was a decrease in energy consumption
per car manufactured. We are determining our
comprehensive carbon footprint to enable us to
set ambitious targets to become ultimately carbon
neutral over the longer term. In the course of the
year, we also further invested in one of our most
important assets, our people, by making 12% more
training hours available.
The extraordinary results we achieved this year are
a tribute to all those who make up the Ferrari Group.
We would like to thank all of them for their outstanding
personal and professional contribution, and for the very
clear passion and sense of responsibility displayed in
their work each and every day.
We also take this opportunity to thank you, our
shareholders, for remaining our trusted partners
and supporters in this crucial period of growth and
innovation for Ferrari.
April 16, 2020
John Elkann
Chairman
Louis Carey Camilleri
Chief Executive Officer
9
Annual Report 2019
FERRARI N.V.
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.
Note on Presentation
This Annual Report includes the consolidated financial statements of Ferrari N.V. as of December 31,
2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017 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. 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”). We refer to these consolidated financial
statements collectively as the “Consolidated Financial Statements”.
Basis of Preparation of the Consolidated Financial Statements
The Group’s financial information is presented in Euro. In some instances, information is presented in U.S.
Dollars. All references in this Annual Report to “Euro” and “€” refer to the currency introduced at the start
of the third stage of European Economic and Monetary Union pursuant to the Treaty on the Functioning of
the European Union, as amended, and all references to “U.S. Dollars” 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.
10
Annual Report 2019 FERRARI N.V.
Forward-Looking Statements
Statements contained in this Annual Report, particularly those regarding our possible or assumed future
performance, competitive strengths, costs, dividends, reserves and growth, industry growth and other
trends and projections and estimated company earnings are “forward-looking statements” that contain
risks and uncertainties. In some cases, words such as “may”, “will”, “expect”, “could”, “should”, “intend”,
“estimate”, “anticipate”, “believe”, “outlook”, “continue”, “remain”, “on track”, “design”, “target”,
“objective”, “goal”, “plan” and similar expressions are used to identify forward-looking statements. These
forward-looking statements reflect the respective current views of Ferrari with respect to future events and
involve significant risks and uncertainties that could cause actual results to differ materially from those
indicated in the forward-looking statements.
These factors include, without limitation:
• our ability to preserve and enhance the value of the Ferrari brand;
• the success of our Formula 1 racing team and the expenses we incur for our Formula 1 activities, as well as
the popularity of Formula 1 more broadly;
• our ability to keep up with advances in high performance car technology and to make appealing designs
for our new models;
• our ability to preserve our relationship with the automobile collector and enthusiast community;
• changes in client preferences and automotive trends;
• changes in the general economic environment, including changes in some of the markets in which we
operate, and changes in demand for luxury goods, including high performance luxury cars, which is highly
volatile;
• competition in the luxury performance automobile industry;
• our ability to successfully carry out our growth strategy and, particularly, our ability to grow our presence
in growth and emerging market countries;
• our low volume strategy;
• reliance upon a number of key members of executive management and employees, and the ability of our
current management team to operate and manage effectively;
• the performance of our dealer network on which we depend for sales and services;
• increases in costs, disruptions of supply or shortages of components and raw materials;
• disruptions at our manufacturing facilities in Maranello and Modena;
• the performance of our licensees for Ferrari-branded products;
• our ability to protect our intellectual property rights and to avoid infringing on the intellectual property
rights of others;
• the ability of Maserati, our engine customer, to sell its planned volume of cars;
• our continued compliance with customs regulations of various jurisdictions;
• the impact of increasingly stringent fuel economy, emissions and safety standards, including the cost of
compliance, and any required changes to our products;
12
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
• the challenges and costs of integrating hybrid and electric technology more broadly into our car portfolio
over time;
• product warranties, product recalls and liability claims;
• the adequacy of our insurance coverage to protect us against potential losses;
• our ability to ensure that our employees, agents and representatives comply with applicable law and
regulations;
• our ability to maintain the functional and efficient operation of our information technology systems,
including our ability to defend from the risk of cyberattacks, including on our in-vehicle technology;
• our ability to service and refinance our debt;
• our ability to provide or arrange for adequate access to financing for our dealers and clients, and
associated risks;
• labor relations and collective bargaining agreements;
• exchange rate fluctuations, interest rate changes, credit risk and other market risks;
• changes in tax, tariff or fiscal policies and regulatory, political and labor conditions in the jurisdictions
in which we operate, including possible future bans of combustion engine cars in cities and the potential
advent of self-driving technology;
• potential conflicts of interest due to director and officer overlaps with our largest shareholders; and
• other factors discussed elsewhere in this document.
We expressly disclaim and do not assume any liability in connection with any inaccuracies in any of the
forward-looking statements in this Annual Report or in connection with any use by any third party of such
forward-looking statements. Actual results could differ materially from those anticipated in such forward-
looking statements. We do not undertake an obligation to update or revise publicly any forward-looking
statements.
Additional factors which could cause actual results and developments to differ from those expressed
or implied by the forward-looking statements are included in the section “Risk Factors” of this Annual
Report. These factors may not be exhaustive and should be read in conjunction with the other cautionary
statements included in this Annual Report. You should evaluate all forward-looking statements made in this
report in the context of these risks and uncertainties.
13
Annual Report 2019 FERRARI N.V.
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,
2016 and 2015 and the audited consolidated
statement of financial position at December 31,
2017, 2016 and 2015.
This financial information has been prepared in
accordance with IFRS.
For the purposes of the financial information set
forth in this section, the restructuring activities
undertaken as part of the separation from FCA (the
“Separation”) have been retrospectively reflected
as though it had occurred effective January 1,
2015, with the exception of the debt owing to FCA
and subsequent refinancing, which were reflected
from the dates on which they occurred. References
to “FCA” or “FCA Group” refer to Fiat Chrysler
Automobiles N.V., together with its subsidiaries.
See “Overview—History of the Company” for additional
details regarding the Separation.
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.
14
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 (€)(1) (2)
Diluted earnings per common share (€)(1) (2) (3)
Dividend approved per common share (€)(4) (5)
Dividend approved per common share ($)(4) (5) (6)
Distribution approved per common share (€)(7) (8)
Distribution approved per common share ($)(6) (7) (8)
For the years ended December 31,
2018
3,420
826
803
787
785
2
4.16
4.14
0.71
0.88
—
—
2017
3,417
775
746
537
535
2
2.83
2.82
—
—
0.635
0.682
2016
3,105
595
567
400
399
1
2.11
2.11
—
—
0.46
0.52
2019
3,766
917
875
699
696
3
3.73
3.71
1.03
1.16
—
—
2015
2,854
444
434
290
288
2
1.52
1.52
—
—
—
—
(1) For 2015, retrospectively reflects the issuance of 188,923,499 common shares as if the Separation had occurred on January 1, 2015. See also
Note 12 to the Consolidated Financial Statements.
(2) 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 “Non-
GAAP Financial Measures” as well as Note 10 to the Consolidated Financial Statements, both included elsewhere in this Annual Report, for
additional information.
(3) 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 have been issued under the equity incentive plan for
the years ended December 31, 2019, 2018 and 2017 (assuming 100 percent of the related awards vested), 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 year ended December 31, 2015 there were no potentially dilutive instruments. See Note 12 to the Consolidated Financial
Statements for additional information.
(4) Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 12, 2019, a
dividend distribution of €1.03 per outstanding common share was approved, corresponding to a total distribution of €193 million. The
distribution was made from the retained earnings reserve.
(5) 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 €0.71 per outstanding common share was approved, corresponding to a total distribution of €134 million. The
distribution was made from the retained earnings reserve.
(6) Translated into U.S. Dollars at the exchange rates in effect on the dates on which the distribution was declared in U.S. Dollars for
common shares that are traded on the New York Stock Exchange. These translations are examples only, and should not be construed as a
representation that the Euro amount represents, or has been or could be converted into, U.S. Dollars at that or any other rate.
(7) Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 14, 2017, a cash
distribution of €0.635 per outstanding common share was approved, corresponding to a total distribution of €120 million. The distribution
was made from the share premium reserve which is a distributable reserve under Dutch law.
(8) 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 €0.46 per outstanding common share was approved, corresponding to a total distribution of €87 million. The distribution
was made from the share premium reserve which is a distributable reserve under Dutch law.
15
Annual Report 2019 FERRARI N.V.
/ Selected Financial and Other Data
CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATA
(e million, except number of shares issued)
At December 31,
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
Common shares issued and outstanding
(in thousands of shares)(3)
2019
898
—
5,446
2,090
1,487
1,481
6
3
2018
794
—
4,852
1,927
1,354
1,349
5
3
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
185,283
187,921 188,954 188,923 188,923
(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 activities undertaken as part of the Separation.
(3) For 2015, the number of common shares issued retrospectively reflects the issuance of common shares (net of treasury shares), all with a
nominal value of €0.01, as if the Separation had occurred on January 1, 2015.
OTHER STATISTICAL INFORMATION
Shipments (number of cars)
Average number of employees for the period
For the years ended December 31,
2019
10,131
4,164
2018
9,251
3,651
2017
8,398
3,336
2016
8,014
3,115
2015
7,664
2,954
16
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
excellence in innovation, design and exclusivity.
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, 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
of innovation, state-of-the-art performance
and distinction in design and engineering in our
luxury cars is inseparable from our commitment
to integrity, transparency and responsibility in
the conduct of our business. By fully integrating
environmental and social considerations with
economic objectives we are able to identify
potential risks and capitalize on additional
opportunities, resulting in a process of continuous
improvement. Sustainability is a core element of our
governance model and executive management plays
a direct and active role in developing and achieving
our sustainability objectives under the oversight of
our Board of Directors.
The foundation of a responsible company rests
on being fully attentive to the nature and extent
of this interconnection and our understanding of
both the potential effects of our activities and how
those effects can be mitigated through responsible
management.
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 excellent working conditions and respect
for human rights;
• professional development of our employees;
• mutually beneficial relationships with business
partners and the communities in which we
operate;
• mitigation of environmental impacts from our
production processes and the luxury cars we
produce.
The Non Financial Statement section of our 2019
Annual Report addresses those aspects of our
sustainability efforts that we have identified as being
of greatest importance to our internal and external
stakeholders.
17
Annual Report 2019 FERRARI N.V.
Risk Factors
We face a variety of risks and uncertainties in our business. Those described below are
not the only risks and uncertainties that we face. 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
continuously renovate and expand the range
of our models. For example, the gradual
expansion of hybrid engine and electric engine
technology (already integrated in past models
such as the LaFerrari and the LaFerrari Aperta, as
well as in the new SF90 Stradale) will introduce
a notable change in the overall driver experience
compared to the combustion engine cars of
our 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.
In addition, we have recently announced a
brand diversification strategy that will significantly
increase the deployment of our brand in
non-car products and experiences. If this strategy
is not successful, our brand image may be diluted
or tainted.
18
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 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,
racing team 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 that 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
and electric technology in our 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
19
Annual Report 2019 FERRARI N.V.
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 the Ferrari Design Centre, our in-house
design team. If the design of our future models fails
to meet the evolving tastes and preferences of our
clients and prospective clients, or the appreciation
of the wider public, our brand may suffer and our
sales may be adversely affected.
The value of our brand depends in part
on the automobile collector and enthusiast
community.
An important factor in the connection of clients
to the Ferrari brand is our strong relationship with
the global community of automotive collectors and
enthusiasts, particularly collectors and enthusiasts
of Ferrari automobiles. This is influenced by our
close ties to the automotive collectors’ community
and our support of related events (such as car
shows and driving events) at our headquarters in
Maranello and through our dealers, the Ferrari
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 industries.
Our continued success depends in part on our
ability to originate and define products and trends
in the automotive and luxury industries, 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 and electric technology in our cars is
costly and its long term success is uncertain”. 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
20
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
our business, operating results and financial
condition. The market in which we sell our cars is
subject to volatility in demand. 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 the cost of purchasing
and operating automobiles, such as the availability
and cost of financing, prices of raw materials and
parts and components, fuel costs and governmental
regulations, including tariffs, import regulation and
other taxes, including taxes on luxury goods, resulting
in limitations to the use of high performance sports
cars or luxury goods more generally. Volatility in
demand may lead to lower car unit sales, which may
result in downward price pressure and adversely
affect our business, operating results and financial
condition. The impact of a luxury market downturn
may be particularly pronounced for the most
expensive among our car models, which generate
a more than proportionate amount of our profits,
therefore exacerbating the impact on our results. In
addition, 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. In
addition, several other manufacturers have recently
entered or are attempting to enter the upper end
of the luxury performance car market, thereby
increasing competition. 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 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 leading-edge 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.
At our Capital Markets Day in September 2018, we
announced our plan to introduce 15 new models
in the 2019-2022 period (which is unprecedented
for Ferrari over a similar time period), including 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
21
Annual Report 2019 FERRARI N.V.
technology and materials. 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 and
electric 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 operations
and financial condition could be adversely affected.
We continuously improve our international network
footprint and skill set. We also plan to open
additional retail stores in international markets.
We do not yet have significant experience directly
operating in many of these markets, and in many
of them we face established competitors. Many
of these countries have different operational
characteristics, including but not limited to
employment and labor, transportation, logistics,
real estate, environmental regulations and local
reporting or legal requirements.
Consumer demand and behavior, as well as
tastes and purchasing trends may differ in these
markets, and as a result, sales of our products
may not be successful, or the margins on those
sales may not be in line with those we currently
anticipate. Furthermore, such markets will have
upfront short-term investment costs that may not
be accompanied by sufficient revenues to achieve
typical or expected operational and financial
performance and therefore may be dilutive to us in
the short-term. In many of these countries, there
is significant competition to attract and retain
experienced and talented employees.
Consequently, if our international expansion plans
are unsuccessful, our business, results of operations
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.
On the other hand, our current growth strategy
contemplates a measured but significant increase
in car sales above current levels as we target a larger
customer base and modes of use, we increase our
focus on GT cars, and our product portfolio evolves
with a broader product range. We sold 10,131 cars
in 2019, compared to 7,255 cars in 2014, and sales
are expected to continue to increase gradually.
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.
22
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 nine range
models (including five sports cars and four GT
cars) and two special series cars, as well as our
limited edition Icona cars. While we anticipate
significantly expanding our car offerings as part
of our growth strategy, through our previously
announced plan to introduce 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,
a single unsuccessful new model would harm us
more than it would other automakers. 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 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 and macro
events 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 are also susceptible to risks relating to
epidemics and pandemics of diseases. For
example, the recent outbreak of coronavirus
COVID-19 (“Coronavirus”), a virus causing
potentially deadly respiratory tract infections
originating in China, may negatively affect
economic conditions regionally as well as
globally, disrupt supply chains and otherwise
impact operations. Governments in affected
countries are imposing travel bans, quarantines
and other emergency public safety measures.
Those measures, though temporary in nature,
may continue and increase depending on
developments in the virus’ outbreak. The ultimate
severity of the Coronavirus outbreak is uncertain
at this time and therefore we cannot predict the
impact it may have on our end markets, supply
chain or operations; however, the effect on our
results may be material and adverse.
23
Annual Report 2019 FERRARI N.V.
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
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 in
2016 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 may have an
adverse effect on our business, financial condition
and results of operations. Although China only
represents approximately 9 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.
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 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. See “Global economic conditions and
macro events may adversely affect us” for a discussion
of the recent Coronavirus outbreak, which, for
example, may negatively affect sales of our cars in
Hong Kong and China in the coming periods.
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
and macro events may adversely affect us”.
24
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
We may be adversely affected by the UK
determination to leave the European Union
(Brexit).
Our success depends largely on the ability
of our current management team to operate
and manage effectively.
In a June 23, 2016 referendum, the United
Kingdom voted to terminate the UK’s membership
in the European Union (“Brexit”). The UK
ceased to be a member of the European Union
on January 31, 2020, opening the transition
period that is currently set to last until December
31, 2020, during which 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, will be
negotiated. 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 the 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. The UK’s withdrawal from the EU could
also negatively impact economic conditions
in Europe more generally, which in turn could
adversely impact global economic conditions.
For instance, the negotiating process surrounding
the terms of the departure of the UK from the
EU may continue to contribute to significant
volatility in exchange rates, wider risks to supply
chains across the European Union and ultimately
lead to changes in market access or trading
terms, including to customs duties, tariffs and/
or industry-specific requirements and regulations
and generally increased legal and regulatory
complexity and costs. In 2019, approximately 10
percent of our cars and spare parts net revenues
were generated in the UK; therefore, any material
adverse effect of Brexit 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 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 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.
25
Annual Report 2019 FERRARI N.V.
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 components for hybrid and electric engines
as we introduce hybrid and electric technology
in our cars, and we expect producers of these
components will be called upon to increase the
levels of supply as the shift to hybrid or electric
technology gathers pace in the industry. While
we obtain components from multiple sources
whenever possible, similar to other small volume
car manufacturers, most of the key components
we use in our cars are purchased by us from single
source suppliers. We generally do not qualify
alternative sources for most of the single-sourced
components we use in our cars and we do not
maintain long-term agreements with a number of
our suppliers. Furthermore, we have limited ability
to monitor the financial stability of our suppliers.
While we believe that we may be able to establish
alternate supply relationships and can obtain or
engineer replacement components for our single-
sourced components, we may be unable to do so
in the short term, or at all, at prices or costs that
we believe are reasonable. Qualifying alternate
suppliers or developing our own replacements for
certain highly customized components of our cars
may be time consuming, costly and may force us
to make costly modifications to the designs of our
cars. For example, defective airbags manufactured
by Takata Corporation (“Takata”) our former
principal supplier of airbags, 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”).
Following the acquisition of Takata by Key Safety
Systems (“KSS”) in April 2018, Joyson Safety
Systems, which is the combined company of Takata
and KSS following the acquisition, is our principal
supplier of the airbags installed in our cars. Failure
by Joyson Safety Systems 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
26
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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. If any further major disasters occur, such
as earthquakes, fires, floods, hurricanes, wars,
terrorist attacks, pandemics or other events, our
supply chain may be disrupted, which may stop
or delay production and shipment of our cars.
See “Global economic conditions and macro events
may adversely affect us” for a discussion of the
recent Coronavirus outbreak, which may affect
our supply chain directly or indirectly dependent
on certain Chinese supplies. As a consequence,
should the current disruption in Chinese industrial
activity and logistics persist or deteriorate, this
may disrupt and potentially halt our production
temporarily unless alternative supplies are secured.
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, and we may experience similar cost
increases in the future. We are negotiating with
existing suppliers for cost reductions, seeking new
and less expensive suppliers for certain parts, and
attempting to redesign certain parts to make them
less expensive to produce. If we are unsuccessful
in our efforts to control and reduce supplier
costs while maintaining a stable source of high
quality supplies, our operating results will suffer.
Additionally, cost reduction efforts may disrupt our
normal production processes, thereby harming the
quality or volume of our production.
Furthermore, if our suppliers fail to provide
components in a timely manner or at the level of
quality necessary to manufacture our cars, our
clients may face longer waiting periods which could
result in negative publicity, harm our reputation
and relationship with clients and have a material
adverse effect on our business, operating results
and financial condition.
We depend on our manufacturing facilities
in Maranello and Modena.
We assemble all of the cars that we sell and
manufacture, and all of the engines we use in our
cars and sell to Maserati, at our production facility
in Maranello, Italy, where we also have our corporate
headquarters. We manufacture all of our car chassis
in a nearby facility in Modena, Italy. Our Maranello
or Modena plants could become unavailable either
permanently or temporarily for a number of reasons,
including contamination, power shortage or labor
unrest. Alternatively, changes in law and regulation,
including export, tax and employment laws and
regulations, or economic conditions, including
wage inflation, could make it uneconomic for us to
continue manufacturing our cars in Italy. In the event
that we were unable to continue production at either
of these facilities or it became uneconomic for us to
continue to do so, we would need to seek alternative
manufacturing arrangements which would take time
and reduce our ability to produce sufficient cars
to meet demand. Moving manufacturing to other
locations may also affect the perception of our brand
and car quality among our clients. Such a transfer
would materially reduce our revenues and could
require significant investment, which as a result could
have a material adverse effect on our business, results
of operations and financial condition.
Maranello and Modena are located in the Emilia-
Romagna region of Italy which has the potential
for seismic activity. For instance, in 2012 a major
earthquake struck the region, causing production
at our facilities to be temporarily suspended for
a day. If major disasters such as earthquakes,
fires, floods, hurricanes, wars, terrorist attacks,
pandemics or other events occur, our headquarters
and production facilities may be seriously damaged,
or we may stop or delay production and shipment
of our cars. See “Global economic conditions and macro
events may adversely affect us” for a discussion of the
27
Annual Report 2019 FERRARI N.V.
recent Coronavirus outbreak. 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.
In connection with our new brand diversification
strategy, we expect to streamline our existing
arrangements with licensing partners and decrease
the volume of licensing business. This may adversely
affect our results from brand activities, particularly
in the short to medium term while our broader
brand diversification strategy is carried out.
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.
We may fail to adequately protect our
intellectual and industrial property rights
against infringement or misappropriation
by third parties.
Our success and competitive positioning depend
on, among other factors, our registered intellectual
property rights, as well as other industrial or
28
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
intellectual property rights, including confidential
know-how, trade secrets, database rights and
copyrights. To protect our intellectual property,
we rely on intellectual property laws, agreements
for the protection of trade secrets, confidentiality
and non-disclosure agreements, and other
contractual means. Such measures, however,
may be inadequate and our intellectual property
rights may be infringed or challenged by third
parties, and our confidential know-how or trade
secrets could be misappropriated or disclosed
to the public without our consent. Consultants,
vendors and current and former employees,
for example, could violate their confidentiality
obligations and restrictions on the use of Ferrari’s
intellectual property. Ferrari may not be able to
prevent such infringements, misappropriations or
disclosures, with potential adverse effects on our
brand, reputation and business. In particular, our
components may be subject to product piracy,
where our components are counterfeited, which
may result in reputational risk for Ferrari. The risks
described above arise particularly in our Brand
activities (see “Overview of Our Business—Brand
activities”).
If we fail to adequately protect our intellectual
property rights, this may adversely affect our results
of operations and financial condition, as other
manufacturers may be able to manufacture similar
products at lower cost, with adverse effects on our
competitive position. In addition, counterfeited
products, or products illegally branded as “Ferrari”,
may damage our brand. In addition, we may
incur high costs in reacting to infringements or
misappropriations of our intellectual property
rights.
Third parties may claim that we infringe
their intellectual property rights.
We believe that we hold all the rights required for
our business operations (including intellectual
property rights and third-party licenses). However,
we are exposed to potential claims from third
parties alleging that we infringe their intellectual
property rights, since many competitors and
suppliers also submit patent applications for their
inventions and secure patent protection or other
intellectual property rights. If we are unsuccessful
in defending against any such claim, we may be
required to pay damages or comply with injunctions
which may disrupt our operations. We may also as
a result be forced to enter into royalty or licensing
agreements on unfavorable terms or to redesign
products to comply with third parties’ intellectual
property rights.
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.
On October 31, 2019, the World Council
(Formula 1’s legislative body) approved new
technical, sporting and financial rules, following
29
Annual Report 2019 FERRARI N.V.
the extensive talks held in the past two years
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. The new rules,
which will come into effect in 2021, provide for,
among other things, a new car design, a cap of
$175 million per year for all costs and expenses
covering on-track performance (excluding, among
others, the activities to enable the supply of power
units, marketing costs, drivers’ salaries and the
top three personnel at each team), limits on car
upgrades over race weekends, restrictions on the
number of times that certain components can be
replaced during a race and the standardization
of certain parts. While the new rules approved
by the World Council may be subject to further
changes during the course of 2020, the final set
of rules that will become applicable as of 2021
will require significant changes to our racing
cars, processes and operations. These changes
may result in adverse effects on our revenues and
results of operations. In particular, the new cap on
expenses will affect the amount of resources that
we are allowed to allocate to Formula 1 activities,
with potential adverse effects on our team’s
performance if we are not able to optimize such
resources.
Engine production revenues are dependent
on Maserati’s ability to sell its cars.
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;
• 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;
30
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
• European Union and foreign government trade
restrictions, customs regulations, tariffs and price
or exchange controls;
extent of these regulations, and their effect on our
cost structure and product line-up, will increase
significantly in the future.
• 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 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
Current European legislation limits fleet average
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. Despite global
shipments exceeding 10,000 vehicles in 2019, Ferrari
still qualifies as an SVM under EU regulations, since
its total number of registered vehicles in the EU per
year is less than 10,000 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. Since Ferrari
is considered to be an SVM under EPA GHG
regulations (as it produces less than 5,000 vehicles
per model year for the US market), 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. If our petitions are rejected, we will
not be able to benefit from the more favorable CAFE
standards levels which we have petitioned for and
this may require us to purchase additional CAFE
credits in order to comply with applicable CAFE
standards. Starting from 2019, we are no longer
considered to be an SVM by NHTSA, because our
31
Annual Report 2019 FERRARI N.V.
global production exceeded 10,000 vehicles, and
therefore we may be required to purchase further
CAFE credits.
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. The SAFE Vehicles Rule has not been
adopted in final form as of the date of this filing.
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. On
September 19, 2019, NHTSA and EPA established
the “One National Program” for fuel economy
regulation, taking the first step towards finalizing
the agencies’ August 2018 proposal by announcing
the EPA’s decision to withdraw California’s
waiver of preemption under the Clean Air Act,
and by affirming the NHTSA’s authority to set
nationally applicable regulatory standards under
the preemption provisions of the Energy Policy
and Conservation Act (EPCA). The two agencies
indicated that they anticipate issuing a final rule
on standards in the near future. Ferrari currently
avails itself of the “deemed-to-comply” provision
to comply with CARB greenhouse gas emissions
regulations. Therefore, depending on future
developments, it may be 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
32
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
by 2020, and the Stage V regulation, issued on
December 31, 2019, targets a national average fuel
consumption of 4.0 l/100km by 2025.
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.
We have lost our status as an SVM for NHSTA in
2019, because our global production exceeded
10,000 vehicles, but we have not lost our SVM status
for EU regulations or for EPA GHG regulations in the
United States. 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 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. An update of the
Administrative Measures on CAFC and NEV credits
is awaited, following the adoption of the Stage V
fuel consumption regulation. 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.
To comply with current and future environmental
rules related to both fuel economy and pollutant
emissions in all markets in which we sell our cars, 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.
The introduction of hybrid and electric
technology in our cars is costly and its long
term success is uncertain.
We are gradually but rapidly introducing
hybrid and electric technology in our cars. In
accordance with our strategy, we believe hybrid
and electric 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
33
Annual Report 2019 FERRARI N.V.
purchasers whom we are increasingly targeting,
while helping us meet increasingly stricter
emissions requirements.
If our cars do not perform as expected our
ability to develop, market and sell our cars
could be harmed.
In 2019, we launched the SF90 Stradale
(shipments of which are expected to begin in
2020), the first series production Ferrari to
feature Plug-in Hybrid Electric Vehicle (PHEV)
architecture, integrating the internal combustion
engine with three electric motors. Some of our
past models, such as LaFerrari and LaFerrari
Aperta, have also included hybrid technology.
The integration of hybrid and electric 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 and electric technology-
related projects. Although we expect to price
our hybrid and electric 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 and
electric technology. In the long term, although we
believe that combustion engines will continue to
be fundamental to the Ferrari driver experience,
hybrid and pure electric cars may become the
prevalent technology for performance sports cars
thereby displacing combustion engine 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 and electric technology is a core
component of our strategy, and we expect that a
significant portion of our shipments in the medium
term will consist of vehicles that feature hybrid and
electric technology, if the introduction of hybrid and
electric cars proves too costly or is unsuccessful in
the market, our business and results of operations
could be materially adversely affected.
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 €37 million. This provision
amounted to €16 million as of December 31,
2019. For a description of these and other recent
recalls, see “Overview of Our Business—Regulatory
34
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Matters—Vehicle safety”. In addition, regulatory
oversight of recalls, particularly in the vehicle safety,
has increased recently. Any product recalls can
harm our reputation with clients, particularly if
consumers call into question the safety, reliability
or performance of our cars. Any such recalls could
harm our reputation and result in adverse publicity,
lost revenue, delivery delays, product liability claims
and other expenses, and could have a material
adverse impact on our business, operating results
and financial condition.
We may become subject to product liability
claims, which could harm our financial
condition and liquidity if we are not able
to successfully defend or insure against
such claims.
We may become subject to product liability claims,
which could harm our business, operating results
and financial condition. The automobile industry
experiences significant product liability claims
and we have inherent risk of exposure to claims in
the event our cars do not perform as expected or
malfunction resulting in personal injury or death. A
successful product liability claim against us could
require us to pay a substantial monetary award.
Moreover, a product liability claim could generate
substantial negative publicity about our cars and
business, adversely affecting our reputation and
inhibiting or preventing commercialization of
future cars which could have a material adverse
effect on our brand, business, operating results
and financial condition. While we seek to insure
against product liability risks, insurance may be
insufficient to protect against any monetary claims
we may face and will not mitigate any reputational
harm. Any lawsuit seeking significant monetary
damages may have a material adverse effect on
our reputation, business and financial condition.
We may not be able to secure additional product
liability insurance coverage on commercially
acceptable terms or at reasonable costs when
needed, particularly if we face liability for our
products and are forced to make a claim under
such a policy.
We are exposed to risks in connection with
product warranties as well as the provision
of services.
A number of our contractual and legal requirements
oblige us to provide extensive warranties to our clients,
dealers and national distributors. There is a risk that,
relative to the guarantees and warranties granted, the
calculated product prices and the provisions for our
guarantee and warranty risks have been set or will in
the future be set too low. There is also a risk that we
will be required to extend the guarantee or warranty
originally granted in certain markets for legal reasons,
or provide services as a courtesy or for reasons of
reputation where we are not legally obliged to do so,
and for which we will generally not be able to recover
from suppliers or insurers.
Our insurance coverage may not be
adequate to protect us against all potential
losses to which we may be subject, which
could have a material adverse effect on
our business.
We maintain insurance coverage that we believe
is adequate to cover normal risks associated with
the operation of our business. However, there
can be no assurance that any claim under our
insurance policies will be honored fully or timely,
our insurance coverage will be sufficient in any
respect or our insurance premiums will not increase
substantially. Accordingly, to the extent that
we suffer loss or damage that is not covered by
insurance or which exceeds our insurance coverage,
or have to pay higher insurance premiums, our
financial condition may be affected.
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,
35
Annual Report 2019 FERRARI N.V.
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.
A disruption in our information technology
could compromise confidential and sensitive
information.
We depend on our information technology and data
processing systems to operate our business, and a
significant malfunction or disruption in the operation
of our systems, human error, 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,
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
36
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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.
Our indebtedness could adversely affect our
operations and we may face difficulties in
servicing or refinancing our debt.
As of December 31, 2019, our gross consolidated
debt was approximately €2,090 million (which
includes our financial services). 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
or incur additional indebtedness to execute our
growth strategy or otherwise may place us at a
competitive disadvantage relative to competitors
that have less debt. 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 expected to rise as well,
which may make our cars less affordable to clients
or cause consumers to purchase less expensive
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 either on controlled or
associated finance companies or on 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 in the United States 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. At December 31, 2019,
an amount of $886 million was outstanding under
revolving securitizations carried out by Ferrari
Financial Services Inc. See “Operating Results—
37
Annual Report 2019 FERRARI N.V.
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 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. In
particular, changes in exchange rates between the
Euro and the main foreign currencies in which
we operate affect our revenues and results of
operations. 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 remained relatively stable during the
course of 2019, while the pound sterling remained
subject to some volatility against the Euro, with
an initial depreciation against the Euro followed
by a reversal in trend in the second half of the
year. If the U.S. Dollar were to depreciate against
the Euro, we expect that it would adversely impact
our revenues and results of operations. Foreign
exchange volatility remained low in early 2020
38
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
and the Euro has not experienced any significant
appreciation versus the main currencies to which
Ferrari is exposed. The extent of adverse impacts
from exchange rate fluctuations could increase if
the portion of our business in countries outside of
Eurozone increases.
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.
United States administration to date. 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 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 phase 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, or any decisions by policymakers
to implement taxes on luxury automobiles,
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.
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;
such decision was again postponed in May 2019,
and a final decision has not been made by the
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
39
Annual Report 2019 FERRARI N.V.
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 was subject to mandatory
audit review in 2019 and renewal of the AEO
certification was obtained. 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.
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.
40
Annual Report 2019/ Risks Related to Our Business, Strategy and Operations Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The interests of our largest shareholders
may differ from the interests of other
shareholders.
Exor N.V. (“Exor”) is our largest shareholder,
holding approximately 24.0 percent of our
outstanding common shares and approximately
35.8 percent of our voting power (as of February 7,
2020). 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 7, 2020, Piero Ferrari, the Vice Chairman
of Ferrari, holds approximately 10.2 percent of our
outstanding common shares and approximately
15.2 percent of voting interest in us (as of February
7, 2020). The percentages of ownership and voting
power above are calculated based on the number
of outstanding shares net of treasury shares. 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.
common shareholdings and management, as well
as our past and ongoing relationships. There are
certain overlaps among the directors and officers
of us and FCA. For example, Mr. John Elkann,
our Executive Chairman, is the Chairman and
an executive director of FCA and Chairman 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, which may create
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 24.0 percent of our
outstanding common shares and approximately
35.8 percent of the voting power in us (as of
February 7, 2020), 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). The percentages of
ownership and voting power above are calculated
based on the number of outstanding shares net
of treasury shares. Exor also owns a controlling
interest in CNH Industrial N.V., which was part
of the FCA Group before its spin-off several years
ago. These ownership interests could create actual,
perceived or potential conflicts of interest when
these parties or our common directors and officers
are faced with decisions that could have different
implications for us and FCA or Exor, as applicable.
Our loyalty voting program may make it
more difficult for shareholders to acquire
a controlling interest in Ferrari, change
our management or strategy or otherwise
exercise influence over us, which may affect
the market price of our common shares.
Questions relating to conflicts of interest may
arise between us and FCA, our former largest
shareholder, in a number of areas relating to
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
41
Annual Report 2019 FERRARI N.V.
/ Risks Related to our Common Shares
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 7,
2020, Exor had approximately 24.0 percent of our
outstanding common shares and a voting interest
in Ferrari of approximately 35.8 percent. As of
February 7, 2020, Piero Ferrari held approximately
10.2 percent of our outstanding common shares
and, as a result of the loyalty voting mechanism,
had approximately 15.2 percent of the voting
power in our shares. The percentages of ownership
and voting power above are calculated based
on the number of outstanding shares net of
treasury shares. In addition, Exor and Piero
Ferrari informed us that they have entered into a
shareholder agreement, summarized under “Major
Shareholders—Shareholders’ Agreement”. As a result,
Exor and Piero Ferrari may exercise significant
influence on matters involving our shareholders.
Exor and Piero Ferrari and other shareholders
participating in the loyalty voting program may
have the power effectively to prevent or delay
change of control or other transactions that may
otherwise benefit our shareholders. The loyalty
voting program may also prevent or discourage
shareholder initiatives aimed at changing Ferrari’s
management or strategy or otherwise exerting
influence over Ferrari. See “Corporate Governance—
Loyalty Voting Structure”.
We are a Dutch public company with
limited liability, and our shareholders
may have rights different to those of
shareholders of companies organized in the
United States.
The rights of our shareholders may be different
from the rights of shareholders governed by
the laws of U.S. jurisdictions. We are a Dutch
public company with limited liability (naamloze
vennootschap). Our corporate affairs are governed
42
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 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.
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Our ability to pay dividends on our
common shares may be limited and the level
of future dividends is subject to change.
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 New York Stock
Exchange (“NYSE”) and the Mercato Telematico
Azionario (“MTA”). The dual listing of our common
shares may split trading between the NYSE and the
MTA, adversely affect the liquidity of the shares and
the development of an active trading market for our
common shares in one or both markets and may
result in price differentials between the exchanges.
Differences in the trading schedules, as well as
volatility in the exchange rate of the two trading
FCA creditors may seek to hold us liable for
certain FCA obligations.
One step of our Separation from FCA included a
demerger from FCA of our common shares previously
held by it. In connection with a demerger under Dutch
law, the demerged company may continue to be liable
for certain obligations of the demerging company that
exist at the time of the demerger, but only to the extent
that the demerging company fails to satisfy such
liabilities. Based on other actions taken as part of the
Separation, we do not believe we retain any liability
for obligations of FCA existing at the time of the
Separation. Nevertheless, in the event that FCA fails to
satisfy obligations to its creditors existing at the time
of the demerger, it is possible that those creditors may
43
Annual Report 2019 FERRARI N.V.
/ Risks Related to our Common Shares
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”.
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.
Risks Related to Taxation
Changes to taxation or the interpretation
or application of tax laws could have an
adverse impact on our results of operations
and financial condition.
Our business is subject to various taxes in different
jurisdictions (mainly Italy), which include, among
others, the Italian corporate income tax (“IRES”),
regional trade tax (“IRAP”), value added tax
(“VAT”), excise duty, registration tax and other
indirect taxes. We are exposed to the risk that our
overall tax burden may increase in the future.
Changes in tax laws or regulations or in the
position of the relevant Italian and non-
Italian authorities regarding the application,
administration or interpretation of these laws or
regulations, particularly if applied retrospectively,
could have negative effects on our current business
model and have a material adverse effect on our
business, operating results and financial condition.
In order to reduce future potential disputes with
tax authorities, we seek advance agreements with
tax 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 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
As a result of the demergers and the merger
in connection with the Separation, we
might be jointly and severally liable with
FCA for certain tax liabilities arisen in the
hands of FCA.
Although the Italian tax authorities confirmed in
a positive advance tax ruling issued on October 9,
2015 that the demergers and the Merger that was
carried out in connection with the Separation would
be respected as tax-free, neutral transactions from an
Italian income tax perspective, under Italian tax law we
may still be held jointly and severally liable, as a result
of the combined application of the rules governing the
allocation of tax liabilities in case of demergers and
mergers, with FCA for taxes, penalties, interest and any
other tax liability arising in the actions of FCA because
of violations of its tax obligations related to tax years
prior to the two Demergers described in the section
“Overview—History of the Company”.
There may be potential “Passive Foreign
Investment Company” tax considerations
for U.S. holders.
Shares of our stock would be stock of a “passive
foreign investment company,” or a PFIC, for U.S.
federal income tax purposes with respect to a U.S.
holder if for any taxable year in which such U.S. holder
held shares of our stock, after the application of
applicable “look-through rules” (i) 75 percent or more
of our gross income for the taxable year consists of
“passive income” (including dividends, interest, gains
from the sale or exchange of investment property and
rents and royalties other than rents and royalties which
are received from unrelated parties in connection with
the active conduct of a trade or business, as defined
in applicable Treasury Regulations), or (ii) at least 50
percent of our assets for the taxable year (averaged
44
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
over the year and determined based upon value)
produce or are held for the production of “passive
income”. U.S. persons who own shares of a PFIC are
subject to a disadvantageous U.S. federal income tax
regime with respect to the income derived by the PFIC,
the dividends they receive from the PFIC, and the gain,
if any, they derive from the sale or other disposition of
their shares in the PFIC.
While we believe that shares of our stock are
not stock of a PFIC for U.S. federal income tax
purposes, this conclusion is based on a factual
determination made annually and thus is subject to
change. Moreover, our common shares may become
stock of a PFIC in future taxable years if there were
to be changes in our assets, income or operations.
The consequences of the loyalty voting
program are uncertain.
No statutory, judicial or administrative authority
directly discusses how the receipt, ownership, or
disposition of special voting shares should be treated
for Italian or U.S. tax purposes and as a result, the
tax consequences in those jurisdictions are uncertain.
The fair market value of the special voting shares,
which may be relevant to the tax consequences, is
a factual determination and is not governed by any
guidance that directly addresses such a situation.
Because, among other things, our special voting
shares are not transferable (other than, in very
limited circumstances, together with the associated
common shares) and a shareholder will receive
amounts in respect of the special voting shares only
if we are liquidated, we believe and intend to take
the position that the fair market value of each special
voting share is minimal. However, the relevant tax
authorities could assert that the value of the special
voting shares as determined by us is incorrect.
The tax treatment of the loyalty voting program
is unclear and shareholders are urged to consult
their tax advisors in respect of the consequences
of acquiring, owning and disposing of special
voting shares.
We currently benefit or seek to benefit from
certain special tax regimes, which may not
be available in the future.
We currently calculate taxes due in Italy
based, among other things, on certain tax
breaks recognized by Italian tax regulations
for R&D expenses and for the investments on
manufacturing equipment (available until fiscal
year 2019 according to current regulations),
which result in a tax saving. Law no. 160/2019
or “Budget Law 2020”, introduced new rules
relating to tax breaks. In particular the hyper- and
super-depreciation have been modified into a tax
credit for the purchase of new capital assets. The
Budget Law 2020 also introduced new tax credits
for (i) technological innovation and ecological
transition, and (ii) the design and creation of new
products and samples.
These new measures continue to mitigate the
amount of taxes due in Italy. Significant changes in
regulations or interpretation might adversely affect
the availability of such exemptions and result in
higher tax charges.
Italian Law No. 190 of December 2014, as
subsequently amended and supplemented
(Finance Act 2015) introduced an optional
Patent Box regime in the Italian tax system.
The Patent Box regime is a tax exemption related
to, inter alia, the use of intellectual property
assets. Business income derived from the use
of each qualified intangible asset is partially
exempted from taxation for both IRES and IRAP
purposes. 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. The Group is progressing
with the required activities to apply the Patent
Box tax regime for the period from 2020 to 2024,
in line with currently applicable tax regulations
in Italy. The amount of the related tax benefits
(if any) that the Group may receive from the tax
regime remains subject to uncertainty.
45
Annual Report 2019 FERRARI N.V.
Overview
Ferrari is among the world’s leading luxury brands,
focused on the design, engineering, production
and sale of the world’s most recognizable luxury
performance sports cars. Our brand symbolizes
exclusivity, innovation, state-of-the-art sporting
performance and Italian design and engineering
heritage. Our name and history and the image
enjoyed by our cars are closely associated with
our Formula 1 racing team, Scuderia Ferrari, the
most successful team in Formula 1 history. From
the inaugural year of Formula 1 in 1950 through
the present, Scuderia Ferrari has won 238 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 166 authorized dealers
operating 187 points of sale as of the end of 2019.
We believe our cars are the epitome of performance,
luxury and styling. Our product offering comprises
four main pillars: the sports range, the GT range,
special series and Icona, a line of modern cars
inspired by our iconic cars of the past. Our current
product range (including cars presented in 2019,
for which shipments will commence in 2020) is
comprised of five sports cars (SF90 Stradale, F8
Tributo, F8 Spider, 812 Superfast and 812 GTS),
four GT cars (Ferrari Roma, Ferrari Portofino,
GTC4Lusso and GTC4Lusso T) and two special
series cars (488 Pista and 488 Pista Spider), as
well as two versions of our first Icona car, the
Ferrari Monza SP1 and the Ferrari Monza SP2. We
also produce limited edition hypercars, fuori serie
and one-off cars. Our most recent hypercar, the
LaFerrari Aperta, was launched in 2016 to celebrate
our 70th Anniversary and finished its limited series
run in 2018. In 2019, we unveiled the SF90 Stradale
(our first series production Plug-in Hybrid Electric
Vehicle (PHEV)), the F8 Tributo, the F8 Spider, the
812 GTS and the Ferrari Roma, with shipments of
the F8 Tributo commencing in the fourth quarter of
2019 and shipments of the other cars expected to
commence in 2020.
In 2019, we shipped 10,131 cars and recorded net
revenues of €3,766 million, EBIT of €917 million,
net profit of €699 million, and earnings before
interest, taxes, depreciation, and amortization
(EBITDA) of €1,269 million. For additional
information regarding EBITDA, including a
reconciliation of EBITDA to net profit, as well
as other non-GAAP measures we present, 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 48.3 percent,
28.6 percent, 8.3 percent and 14.8 percent of units
shipped in 2019.
46
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
are 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., 250 Sylvan Avenue, Englewood
Cliffs, NJ 07632. Its telephone number is +1 (201)
816 2600.
Our company is named after our founder Enzo
Ferrari. An Alfa Romeo driver since 1924, Enzo Ferrari
founded his own racing team, Scuderia Ferrari, in
Modena in 1929 initially to race Alfa Romeo cars.
In 1939 he set up his own company, initially called
Auto Avio Costruzioni. In late 1943, Enzo Ferrari
moved his headquarters from Modena to Maranello,
which remains our headquarters to this day.
In 1947, we produced our first racing car, the 125 S.
The 125 S’s powerful 12 cylinder engine would go
on to become synonymous with the Ferrari brand.
In 1948, the first road car, the Ferrari 166 Inter, was
produced. Styling quickly became an integral part of
the Ferrari brand.
In 1950, we began our participation in the Formula
1 World Championship, racing in the world’s
second Grand Prix in Monaco, which makes
Scuderia Ferrari the longest running Formula 1
team. We won our first Constructor World Title in
1952. Our success on the world’s tracks and roads
extends beyond Formula 1, including victories in
some of the most important car races such as the
24 Hours of Le Mans, the world’s oldest endurance
automobile race, and the 24 Hours of Daytona.
The Fiat group acquired a 50 percent stake in
Ferrari S.p.A. in 1969 and increased its stake to 90
percent in 1988 following the death of Enzo Ferrari,
with the remaining 10 percent held by Enzo Ferrari’s
son, Piero Ferrari.
Ferrari became an independent, publicly traded
company following its separation from FCA (the
“Separation”), which was completed on January 3,
2016 and occurred through a series of transactions
including (i) an intragroup 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 in October 2015 under
the ticker symbol RACE, and (iv) the distribution,
following the initial public offering, of FCA’s
remaining interest in the Company to FCA’s
shareholders. 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.
47
Annual Report 2019 FERRARI N.V.
Industry Overview
Within the luxury goods market, we define our
target market for luxury performance cars as two-
door cars powered by engines producing more than
500 hp and selling at a retail price in excess of Euro
150,000 (including VAT). The luxury performance
car market historically has followed relatively closely
growth patterns in the broader luxury market.
The luxury performance car market is generally
affected by global macroeconomic conditions
and, although we and certain other manufacturers
have proven relatively resilient, general downturns
can have a disproportionate impact on sales of
luxury goods in light of the discretionary nature of
consumer spending in this market. Furthermore,
because of the emotional nature of the purchasing
decision, economic confidence and factors such as
expectations regarding future income streams as
well as the social acceptability of luxury goods may
impact sales.
Following the sharp recession of 2008-2009, the
luxury performance car market has been resilient to
further economic downturns and stagnation in the
broader economy, also a result of the increase of
new product launches. A sustained period of wealth
creation in several Asian countries and, to a lesser
extent, in the Americas, has led to an expanding
population of potential consumers of luxury goods.
Developing consumer preferences in the Asian
markets, where the newly affluent are increasingly
embracing western brands of luxury products, have
also led to higher demand for cars in our segment,
which are all produced by established European
manufacturers. In turn, the changing demographic
of customers and potential customers is driving an
evolution towards luxury performance cars more
suited to an urban, daily use.
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.
Growing environmental concerns are leading to the
implementation of increasingly stringent emissions
regulations and an increase in demand for both
hybrid and electric vehicles. Cost and limited
charging infrastructure are currently limiting factors
in the demand for electric vehicles, but advancements
in battery technology in coming years are expected to
boost sales of hybrid and electric high performance
luxury vehicles, although at a slower pace compared
to mass market vehicles. The ability to combine
driving experience with hybrid and electric technology
will be key for the commercial success of high
performance luxury vehicles.
48
Annual Report 2019 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
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
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
Dec 31,
2019
FERRARI
LUXURY PERFORMANCE CAR INDUSTRY
• Ferrari and Luxury Performance Car Industry data are updated to December 31, 2019.
• 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, BMW, 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 2019).
• Data for the Luxury Performance Car Industry based on units registered (in Brazil, Japan, Taiwan, United Kingdom, Germany, France,
Switzerland, Italy, Poland, Spain, Sweden, Netherlands, Belgium and Austria) or sold (in USA, South Korea, 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; Poland-CEPiK; 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.
Annual Report 2019 49
FERRARI N.V.
/ Industry Overview
As shown in the chart above, our volumes in
recent years have proven less volatile than our
competitors’.
In 2019, our volumes in the largest 22 markets
slightly increased compared to 2018, primarily
driven by contribution from our range models. In
2019, we had a market share of 23 percent in the
luxury performance car market; with 25 percent
of market share in the sports car segment and 19
percent of market share in the GT segment. The
chart below sets forth our market shares in 2019
based on volumes in our largest 22 markets by
geographical area.
TOP 22 Markets
Europe
Americas
Mainland China,
Hong Kong and
Taiwan
Rest of
APAC
23%
23%
19%
29%
30%
Ferrari Market Share
Luxury Perfomance Car Industry
• Ferrari and Luxury Performance Car Industry data are updated to December 31, 2019.
• 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, BMW, 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 2019).
• Data for the Luxury Performance Car Industry based on units registered (Brazil, Japan, Taiwan, United Kingdom, Germany, France,
Switzerland, Italy, Poland, Spain, Sweden, Netherlands, Belgium and Austria) or sold (in USA, South Korea, 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; Poland-CEPiK; 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.
• Ferrari is market leader in several countries, including France, Italy, Mainland China, Japan and South Korea, among others.
50
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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.
Our sports car models are the F8 Tributo,
the F8 Spider, the 812 Superfast, the 812 GTS
and our first series production Plug-in Hybrid
Electric Vehicle (PHEV), the SF90 Stradale, 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. Our GT range models are the Ferrari
Portofino, the GTC4Lusso, the GTC4Lusso T,
and the most-recent, the Ferrari Roma, and our
principal competitors are Rolls-Royce, Bentley,
BMW, Aston Martin and Mercedes.
In recent years, the market has shifted somewhat
with an increased focus on the GT cars segment
and the lower priced range of the sports car
market, with larger automotive groups expanding
their offering of premium cars to enter the luxury
performance car market.
Competition in the luxury performance car market
is driven by the strength of the brand and the
appeal of the products in terms of performance,
styling, novelty and innovation as well as on the
manufacturers’ ability to renew its product offerings
regularly in order to continue to stimulate customer
demand.
Competition among similarly positioned luxury
performance cars is also driven by price and total
cost of ownership. Resilience of the car value after
a period of ownership is an important competitive
dimension among similarly positioned luxury cars,
as a higher resilience decreases the total cost of
ownership and promotes repeat purchases: we
believe this is a strong competitive advantage of
Ferrari cars.
51
Annual Report 2019 FERRARI N.V.
Overview of Our Business
Ferrari is among the world’s leading luxury brands,
focused on the design, engineering, production
and sale of the world’s most recognizable luxury
performance sports cars. Our brand symbolizes
exclusivity, innovation, state-of-the-art sporting
performance and Italian design and engineering
heritage. Our name and history and the image
enjoyed by our cars are closely associated with
our Formula 1 racing team, Scuderia Ferrari, the
most successful team in Formula 1 history. From
the inaugural year of Formula 1 in 1950 through
the present, Scuderia Ferrari has won 238 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 166 authorized dealers
operating 187 points of sale as of the end of 2019.
We believe our cars are the epitome of performance,
luxury and styling. Our product offering comprises
four main pillars: the sports range, the GT range,
special series and Icona, a line of modern cars
inspired by our iconic cars of the past. Our current
product range (including cars presented in 2019,
for which shipments will commence in 2020) is
comprised of five sports cars (SF90 Stradale, F8
Tributo, F8 Spider, 812 Superfast and 812 GTS), four
GT cars (Ferrari Roma, Ferrari Portofino, GTC4Lusso
and GTC4Lusso T) and two special series cars (488
Pista and 488 Pista Spider), as well as two versions
of our first Icona car, the Ferrari Monza SP1 and the
Ferrari Monza SP2. We also produce limited edition
hypercars, fuori serie and one-off cars. Our most
recent hypercar, the LaFerrari Aperta, was launched
in 2016 to celebrate our 70th Anniversary and finished
its limited series run in 2018. In 2019, we unveiled
the SF90 Stradale (our first series production Plug-
in Hybrid Electric Vehicle (PHEV)), the F8 Tributo,
the F8 Spider, the 812 GTS and the Ferrari Roma,
with shipments of the F8 Tributo commencing in the
fourth quarter of 2019 and shipments of the other
cars expected to commence in 2020.
In 2019, we shipped 10,131 cars and recorded net
revenues of €3,766 million, EBIT of €917 million,
net profit of €699 million and earnings before
interest, taxes, depreciation, and amortization
(EBITDA) of €1,269 million. For additional
information regarding EBITDA, including a
reconciliation of EBITDA to net profit, as well
as other non-GAAP measures we present, 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 48.3 percent, 28.6 percent, 8.3 percent
and 14.8 percent of units shipped in 2019.
We focus our marketing and promotion efforts in
the investments we make in our racing activities and
in particular, Scuderia Ferrari’s participation in the
Formula 1 World Championship, which is one of
the most watched annual sports series in the world,
with approximately 405.5 million unique television
viewers in 2019 in the top 20(*) markets
(*) Top 20 markets are, in alphabetical order, Australia, Austria, Belgium, Brazil, China, Finland, France, Germany, Greece, Italy, Mexico,
Netherlands, Pan Africa, Pan Latin America, Pan Middle East, Pan Russia, Poland, Russia, United Kingdom and United States.
52
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
(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 racing results
and restoring our historical position as the premier
racing team in Formula 1. We believe that these
activities support the strength and awareness of our
brand among motor enthusiasts, clients and the
general public.
We 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
20 Ferrari-owned stores and 24 franchised stores
(including 15 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
growth of the premium luxury market. 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
Sports
GT
Special Series
Icona
53
Annual Report 2019 FERRARI N.V.
/ Sports and GT Range, Special Series and Icona: Ferrari Line-Up Strategic Pillars
Our product offering comprises four main strategic
pillars: the sports range, the GT range, special series
and Icona. Our current product range includes
five sports cars, four GT cars and two special
series cars, as well as our Icona cars, introduced
in September 2018 with the Ferrari Monza SP1
and SP2. We target end clients seeking high
performance cars with distinctive design and state
of the art technology. Our broad model range is
designed to fulfill the strategy of “Different Ferrari
for different Ferraristi, different Ferrari for different
moments”, which means being able to offer a highly
differentiated product line-up that can meet the
varying needs of new customer segments (in terms
of sportiness, comfort, on-board space, design)
and that can allow our existing clients to use a
Ferrari in every moment of their lives. Our diversified
product offering includes different architectures
(such as front-engine and mid-rear engine), engine
sizes (V8 and V12), technologies (atmospheric,
turbo-charged, hybrid, electric), body styles (such
as coupes and spiders), and seats (2 seaters, 2+2
seaters and 4 seaters).
We are also actively engaged in after sales activities
driven, among other things, by the objective of
preserving and extending the market value of the
cars we sell. We believe our cars’ performance
in terms of value preservation after a period of
ownership significantly exceeds that of any other
brand in the luxury car segment. High residual value
is important to the primary market because clients,
when purchasing our cars, take into account the
expected resale value of the car in assessing the
overall cost of ownership. Furthermore, a higher
residual value potentially lowers the cost for the
owner to switch to a new model thereby supporting
client loyalty and promoting repeat purchases.
54 Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The most complete Ferrari Product Range ever
ROAD CARS
RANGE MODELS
SPORTS
SF90
Stradale
F8
Tributo
F8
Spider
812
Superfast
812
GTS
GRAN TURISMO
Roma
Portofino
GTC4Lusso T
GTC4Lusso
SPECIAL SERIES MODELS
ONE-OFF
ICONA
488
Pista
488
Pista Spider
P80/C
Ferrari Monza
SP1/SP2
FERRARI CHALLENGE
THE XX PROGRAMME
RACING CARS
TRACK CARS
488
Challenge
FXX K EVO
488
GTE/GT3
55
Annual Report 2019 FERRARI N.V.
/ Sports and GT Range, Special Series and Icona: Ferrari Line-Up Strategic Pillars
The charts below set forth the percentage of our unit shipments (excluding the XX Programme, racing cars,
Fuori Serie, one-off and pre-owned cars) for the years ended December 31, 2019, 2018 and 2017 by pillar:
<1%
36%
32%
30%
2019
2018
2017
64%
68%
70%
Sports and Special Series(*)
GT
Icona(**)
Includes shipments of the LaFerrari and LaFerrari Aperta.
(*)
(**) Shipments of Icona cars commenced in 2019, and contributed to less than 1 percent of our shipments for that year.
The table and charts below set forth our unit shipments(1) for the years ended December 31, 2019, 2018 and
2017, by geographic market:
NUMBER OF CARS AND % OF TOTAL CARS
EMEA
UK
Germany
Italy
Switzerland
France
Middle East(2)
Other EMEA(3)
Total EMEA
Americas(4)
Mainland China, Hong Kong and Taiwan
Rest of APAC(5)
Total
For the years ended December 31,
2019
%
2018
%
2017
%
1,120
11.1%
967
559
454
452
309
1,034
4,895
2,900
836
1,500
9.5%
5.5%
4.5%
4.5%
3.1%
10.1%
48.3%
28.6%
8.3%
14.8%
981
803
479
380
399
326
859
4,227
3,000
695
10.6%
8.7%
5.2%
4.1%
4.3%
3.5%
9.3%
45.7%
32.4%
7.5%
843
710
417
339
346
331
751
10.0%
8.5%
5.0%
4.0%
4.1%
3.9%
9.0%
3,737
44.5%
2,811
33.5%
617
7.3%
1,329
14.4%
1,233
14.7%
10,131
100.0%
9,251
100.0%
8,398 100.0%
(1) Excluding the XX Progamme, racing cars, Fuori Serie, one-off and pre-owned cars
(2) Middle East includes the United Arab Emirates, Saudi Arabia, Bahrain, Lebanon, Qatar, Oman and Kuwait
(3) Rest of EMEA includes Africa and the other European markets not separately identified
(4) Americas includes the United States of America, Canada, Mexico, the Caribbean and Central and South America
(5) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia, South Korea, Thailand and Malaysia
56
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
14,8%
14,4%
14,7%
8,3%
7,5%
7,3%
44,5%
2019
48,3%
2018
45,7%
2017
28,6%
32,4%
33,5%
EMEA
Americas
Mainland China, Hong Kong and Taiwan
Rest of APAC
Sports Range
GT Range
Our GT cars, while maintaining the performance
expected of a Ferrari, are characterized by more
refined interiors with a higher focus on comfort
and on-board life quality. In our GT class, we offer
three models equipped with our V8 engine, the
Ferrari Roma (620 hp), combining sportiness and
elegant design; the Ferrari Portofino (600 hp) and
the GTC4Lusso T (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 (690 hp), our sport-luxury 4 seater and
4 wheel drive.
Our sports cars are characterized by compact
bodies, a design guided by performance
and aerodynamics, and often benefit from
technologies initially developed for our Formula 1
single-seaters. They favor performance over
comfort, seeking to provide a driver with an
immediate response and superior handling,
leveraging state of the art vehicle dynamics
components and controls. In our sports car class,
we offer five models: the SF90 Stradale, our
first series production car which features PHEV
technology that combines a V8 engine (780 hp)
with three electric motors that allow the car to
reach 1000 hp; the F8 Tributo and the F8 Spider
are equipped with a mid-rear V8 engine (720 hp),
a 4 time winner of the engine of the year award;
the 812 Superfast and the 812 GTS are equipped
with a front V12 engine (800 hp).
57
Annual Report 2019 FERRARI N.V.
/ Sports and GT Range, Special Series and Icona: Ferrari Line-Up Strategic Pillars
The following picture depicts the four dimensions of our customer value proposition for our sports and GT
range models:
Customer value proposition
Sportiness
F8
Tributo
F8
Spider
SF90 Stradale
Portofino
812
Superfast
812
GTS
Comfort & Versatility
Performance
GTC4Lusso
Roma
Elegance
Special Series
From time to time, we also design, engineer and produce special series cars which can be limited in time or
volume and are usually based on our range sports models but introduce novel product concepts. These cars are
characterized by significant modifications designed to enhance performance and driving emotions. Our special
series cars are particularly targeted to collectors and, from a commercial and product development standpoint,
they facilitate the transition from existing to new range models. Our current special series cars are the 488 Pista,
powered by a 720 hp V8 engine, and its retractable hard top version, the 488 Pista Spider (720 hp).
Icona
In September 2018, we introduced a new pillar of our product portfolio: the Icona, a unique concept that
takes inspiration from the iconic cars of our history and reinterprets them in a modern fashion, pairing
timeless design 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, which are inspired by the classic collectible barchetta
cars, the 750 Monza and 860 Monza.
58
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Limited Edition Hypercars, Fuori Serie and One-Offs
In line with our tradition of hypercars starting with the 288GTO in 1984 up to the Enzo in 2002 and the
LaFerrari Aperta, our latest hypercar 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 produce a very
limited number of 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 emerged from our One-Off program include the SP12 EC (inspired by the 512 BB
and created in 2011), 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 P80/C, a real
track car taking inspiration from past Ferrari Sport Prototipo models.
Annual Report 2019
59
FERRARI N.V.
Personalization Offer
1
One-off
Tailor Made
3
Special Equipment
4
Personalization Program
“Carrozzeria Scaglietti”
Where (Sales Channel)
How (Initiatives)
Maranello
TM Center
@Maranello
@Shanghai
@New York
Atelier
@Maranello
@New York
Dealership
with Special
Equipment
Dealership
New sales toolbox
New Special
Equipment Process
Continuous 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 performance contents like carbon fibre
parts, carbon fibre wheels, titanium exhaust systems, alternative brake caliper colors, parking cameras,
MagneRide dual mode suspension, panoramic roof option, various door panel configurations, steering
wheel inserts and state of the art custom high fidelity sound systems. Commencing with the the SF90
Stradale, we have also introduced the “Assetto Fiorano” configuration, which provides numerous exclusive
features for those who seek radical performance and design.
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 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).
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.
60
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 involved
in the styling and conceptual definition of Ferrari
branded products produced by our licensees (see “—
Brand Activities”). In 2019, we created the Advanced
Design team, a laboratory that aims at defining the
brand’s design vision, developing new concepts and
formal languages through so far unexplored methods
and tools, and trying to achieve simplification and
formal purity while staying true to the Ferrari DNA
which has characterized its history.
Ferrari Design is organized as an integrated
automotive design studio, employing a total
workforce of approximately 110 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.
In September 2018 we opened a new building for the
Ferrari Design Centre, which is our first facility fully
dedicated to the Ferrari Design. The new building
hosts two Ateliers and the Tailor Made department
to engage clients with Ferrari’s rich personalization
services. The Ferrari Design Centre entirely designed
our most recent cars, including the Ferrari Roma, the
SF90 Stradale, the F8 Tributo and F8 Spider, the 812
GTS and the Ferrari Monza SP1 and SP2.
61
Annual Report 2019 FERRARI N.V.
/ Design
During its 10 year history, the Ferrari Design Centre
has received prestigious design awards for several
cars it has designed, among which in the last 2 years:
• Ferrari Monza SP2: The Most Beautiful Supercar of
the Year - Festival Automobile International, Paris
(2019);
• 488 Pista: iF Design Award (2019);
• SP38: iF Design Award - Ferrari (2019);
• Portofino: iF Design Award (2019); UIGA - Auto
Europa Sportiva (2019);
• Ferrari Monza SP1: iF Gold Design Award (2019);
Red Dot Best of The Best (2019); 2019 Good
Design Award;
• 488 Pista: Red Dot Design Award (2019);
• SP38: Red Dot Design Award (2019);
• SF90 Stradale: 2019 Good Design Award;
• 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).
62
Product Development
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 rearwheeldrive
or allwheeldrive 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.
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
SPORTS
Driving
Emotions
GRAN TURISMO
Perfomance
Innovation principles
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 and the
development or use of bio-fuels. In 2018 we won
the “Engine of the Year” award for the newest
edition of our V8 turbocharged engine mounted
on the 488 Pista.
Versatility
& Comfort
Going forward, Ferrari will have three engine
families: we will maintain and develop the V12
naturallyaspirated 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 naturallyaspirated engine.
For example, the specific power output of the 488
Pista was increased to 184 horsepower without
meaningful turbo lag.
In the future, we intend to use hybrid and electric
technology, as well as Formula 1 technology, to
increase specific power output without turbo lag.
We are deploying considerable resources for the
development of hybrid and electric powertrains,
which will be mounted on an increasingly larger
63
Annual Report 2019 FERRARI N.V.
/ Product Development
proportion of our car models; this is intended to
improve performance and driving experience while
also satisfying customer preferences and regulatory
requirements regarding emissions. With the SF90
Stradale we developed the first series production
car in our range with Plug-in-Hybrid Electric Vehicle
(PHEV) technology.
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 and electrification; 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.
Rear-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 have developed a new and highly
innovative 8-shift doubleclutch 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
first example of this new architecture is the SF90
Stradale.
Front-mid-engine architecture
We expect that our core architectures will be
he rear-mid-engine architecture and the
front-mid-engine architecture, each comprising
several variants.
The front-mid-engine architecture, also a transaxle
powertrain concept, is even more flexible than the
rear-mid-engine architecture. This architecture
is able to accommodate an allwheeldrive
Product Specification
Architecture
Engine
V12 vs. V8 vs. V6
Hybridization Yes vs. No
Traction
2WD vs. 4WD
Seating
2 vs. 2+ vs. 2+2 vs. 4
Body style
Coupè vs. Spider vs. “Purosangue”
Clearance
Low vs. High
64
NEW
FERRARI
PRODUCT
RANGE
Power unit
Gearbox
Rear-mid-engine
Power unit
Front-mid-engine
Gearbox
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
powertrain, will allow for hybridization, and will
have a flexible wheelbase suited to a variety of
engines as well as seat configurations including
twoseaters and fourseaters. 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.
New-generation human-machine interface
Particularly driven by growth in the GT segment,
Ferrari has developed the next generation of
humanmachine interface (HMI) technologies.
Using stateoftheart 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. The new HMI
includes several new technologies, including a
new headup 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.
Autonomous driving
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.
Production and Procurement
Production Process
Our production facilities are located in Maranello
and in Modena, Italy (see “—Properties”). Our
production processes include supply chain
management, production and distribution logistics
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, and its management is outsourced to a
third party logistics company.
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”).
Between 2002 and 2012 the plants housing our
production processes were entirely renovated or
rebuilt and in recent years, we have continued
to make significant investments in our
manufacturing facilities. Equipment may require
substantial investment with the introduction
of new models or to maintain state of the art
technology, 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.
As at December 31, 2019, our production processes
employed over 1,720 engineers, technicians and
other personnel (approximately 1,300 workers,
including approximately 240 temporary production
65
Annual Report 2019 FERRARI N.V.
/ Production and Procurement
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 increase of
weekend shifts to address special peaks in demand.
Production could be increased even further with the
introduction of a second shift on car assembly lines
in addition to the single shift currently operated
on the V8 Assembly line. 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
66
are ready, engines are assembled, on different lines
for our V8 engines, V12 engines and for the V6
engines we manufacture for Maserati. The assembly
process is a combination of automatic and manual
operations. At the start of the assembly process, each
engine is identified with a barcode and operations
are recorded electronically. Every engine goes to
the test benches to ensure it delivers the expected
performance; 10 - 20 percent of engines are also
hot tested and measured for power and torque. In
2019 we produced an average of approximately 117
engines per day, including approximately 11 V12,
45 V8 (including 5 V8 turbo and 3 V8 aspirated for
Maserati) and 61 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.
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 the Ferrari Monza
SP1 and SP2.
Painting
Our paint shop was inaugurated in 2004. 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
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 and in the summer of 2019, we
replaced the robot which performs the application
of the base coat. 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 allows
us to decrease the temperature of the oven from
140°C to 90°C; this is a very innovative and
unique process that allows us to simultaneously
paint aluminum and carbon fiber parts.
Assembly Line and Final Checks
The final assembly of our cars takes place in
Maranello in a building constructed in 2008.
We have three 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. On the first floor there
is also the assembly line of the Ferrari Monza SP1
and SP2.
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, 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.
Manufacturing of Engines for Maserati
We have been producing engines for Maserati since
2003. The V8 engines that we historically produced
and continue to produce for Maserati are variants
of Ferrari families of engines and are mounted on
Maserati’s highest performing models, such as the
Quattroporte 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 2019, we sold approximately 1,000 V8 turbo
engines and approximately 800 V8 aspirated engines
to Maserati. These were the last V8 aspirated engines
to be sold to Maserati, as they have stopped the
production of the GranTurismo and GranCabrio.
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 the production of F161
engines to be installed on the Levante, Maserati’s
SUV. We have a multi-year arrangement with
Maserati to provide V6 engines, up to 2020. Under
the framework agreement, Maserati is required
to compensate us for certain costs we may incur,
such as penalties from our suppliers, if there is a
shortfall in the annual volume of engines actually
purchased by Maserati in that year. In 2019, we sold
approximately 14,000 V6 engines to Maserati in four
different versions, ranging from 330 hp to 450 hp.
67
Annual Report 2019 FERRARI N.V.
/ Production and Procurement
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 engines. Due to the larger volumes and
product specifications, our make-or-buy strategy
for the production of F160 V6 and F161 V6 engines
also differs from the strategy applicable to the
production of Ferrari engines. The vast majority
of the engine components are sourced externally
from our panel of suppliers (see “—Procurement”)
and then assembled in Maranello on our highly
automated V6 assembly line.
Procurement
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 several
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, 2019, the purchases
from our ten largest suppliers by value accounted for
68
approximately 20 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 approximately
400 employees at December 31, 2019, 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).
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, 2019, our network comprised 166
dealers operating 187 points of sale.
We do not presently own dealerships and, while our
strategy does not contemplate owning dealerships,
we retain flexibility to adapt to evolving market
requirements over 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 stability and proven track
records. We are also intent on selecting 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
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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. 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.
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.
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. The chart below sets forth the
geographic distribution of our 187 points of sale
at December 31, 2019:
FERRARI - MARANELLO
Mainland China,
Hong Kong, Taiwan
22 POS
Rest of
APAC
24 POS
Americas
51 POS
U.S.A.
39 POS
Canada
5 POS
EMEA
90 POS
North Europe
13 POS
Central Europe
13 POS
China
18 POS
Taiwan
3 POS
Latin America
7 POS
East West Europe & Africa
35 POS
Hong Kong
1 POS
South Europe
18 POS
Middle East
11 POS
North East Asia
9 POS
South East Asia
7 POS
Australasia
8 POS
69
Annual Report 2019 FERRARI N.V.
/ Production and Procurement
Our sales are diversified across our dealer network,
with the largest dealer representing approximately
2.5 percent of sales, and our 15 largest dealers
representing 22.5 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
70
continued training and support to the dealers’
service personnel. This includes our team of “flying
doctors,” Ferrari engineers who regularly travel to
service centers to address difficult technical issues
for our clients.
We 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 warranty coverage
program up to the 15th year of life of the car.
After the 7th year of life, a car (if in perfect
maintenance condition) can be included in
the Main Power warranty coverage program
(Maintenance and Power) through 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
through the 73 “Officina Ferrari Classiche”
workshops, part of our service network.
Annual Report 2019 In addition, owners of our classic cars can seek
assistance in car and engine restorations at our
Ferrari Classiche department in Maranello.
Client Relations
Our clients are the backbone of our business
together with our brand and our technology.
We do not promote our brand or our cars through
general advertising. Our main brand marketing and
promotional activities have two principal targets.
Firstly, we target the general public. Our most
significant effort in this respect is centered on our
racing activities and the resonance of Scuderia Ferrari
(see “—Formula 1 Activities”). We also engage in other
brand-promotional activities, including participation
in motor shows and other public events.
Secondly, we target existing and prospective clients,
seeking to promote clients’ knowledge of our
products, and their enjoyment of our cars both
on road and on track, and to foster long-term
relationships with our clients, which is key to our
success. In 2019, more than 70 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.
During the fourth quarter of 2019, we launched
the MyFerrari App, an app created to enhance our
clients’ connection to the Ferrari world through
the direct distribution of tailored content. This
new channel enables clients to directly access
features and services, expanding their relationship
with both the brand and their preferred official
Ferrari dealer.
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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”).
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 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.
In May 2019, clients from all over the world were
invited to the world premiere of our first series
production Plug-in Hybrid Electric Vehicle (PHEV)
- the SF90 Stradale - with a presentation and gala
dinner hosted at the Fiorano race circuit.
In September 2019, Ferrari launched “Universo
Ferrari” exhibition, the first ever immersive
exhibition dedicated to the world of Ferrari, set in a
dedicated location overlooking the Fiorano Circuit.
This new event format hosted the premieres of two
new Spider models - the 812 GTS and F8 Spider,
and had over 14,000 attendees including clients,
prospective clients, and fans.
In November 2019, clients were invited to the Stadio
dei Marmi in Rome for the world premiere of the
new Ferrari Roma, an event in the “La Nuova Dolce
Vita” spirit of the new luxury model.
71
Annual Report 2019 FERRARI N.V.
/ Client Relations
Driving events
Driving events serve the dual objective of allowing
clients to enjoy the best emotions of driving a
Ferrari, and to foster client loyalty and repeat
purchases by creating enhanced opportunities to
experience new Ferrari cars. The Ferrari community
is a passionate group supported by a wide array of
experiences tailored to the dreams of modern car
owners, classic car connoisseurs, and racetrack
enthusiasts.
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 on-track racing, we organize various
on-the-road driving events, both under proprietary
formats (Ferrari Cavalcade, including the Cavalcade
Classiche and the International Edition) and with our own
branded presence within established driving events.
For example, in the Ferrari Tribute to Mille Miglia and
the Ferrari Tribute to Targa Florio modern Ferrari cars
take part in their own dedicated competition before
the start of the main racing events.
Another exclusive driving experience was initiated
in October 2019, led by experts of the Ferrari
Classiche Academy, and aimed at classic car
enthusiasts and clients interested in learning more
about Ferrari’s Classiche certification program
and the storied archives at our Officine Classiche
restoration department. The initiative also offers the
opportunity to experience on-track driving of these
celebrated models on our own Fiorano race circuit.
72
GT Racing activities
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, UK, 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
Programme/F1 Clienti events are run together in the
so-called Ferrari Racing Days, which are open to the
public and intended for a wider audience, and in 2019
were held in Laguna Seca, Shanghai and Nurburgring.
These track activities reach their climax at the Finali
Mondiali, an annual gathering of all Ferrari client racing
programs under Corse Clienti, which last year took
place from October 24 to 27 at the Mugello Circuit
to celebrate the winners of the Challenge Series. The
new Ferrari 488 Challenge EVO and 488 GT3 EVO
were unveiled to our sporting customers from all over
the world, while over the weekend 43,000 spectators
in the stands were treated to the traditional Ferrari
Show, with the 488 GTE celebrating 70 years of Ferrari
victories at Le Mans, and the F60 celebrating the 90th
anniversary of Scuderia Ferrari.
During the 2019 season, the Competizioni GT
department supported both the Ferrari 488 GTE
and the Ferrari GT3 cars that competed in the most
important international championships. The 488
GTE, with a team composed of Alessandro Pier Guidi,
James Calado and Daniel Serra, won the Le Mans 24
Hours competition in the WEC, and the same team
also won the Petit Le Mans competition, the last
round of the IMSA series. The 488 GT3, gave clear
proof of its exceptional competitiveness and reliability,
allowing Ferrari to grow its impressive record of
victories, with 285 since its debut and 67 titles across
Annual Report 2019 various international series. In 2019 the new program,
Club Competizioni GT, was successfully launched. The
initiative is aimed at bringing back to the track the
most beautiful Ferrari GT racing cars of the last 30
years and is dedicated to clients who love on-track
racing and wish to unleash their cars’ maximum
potential, without short, time-constrained testing
sessions and outside of competitive race settings.
Ferrari Classiche
The Ferrari Classiche department aims to provide
Ferrari customers with a point of reference for
managing their historic Ferrari vehicles with the
objective of keeping as many of these classic cars on
the road as possible. Services include the certification
of the authenticity of classic Ferrari cars and vehicles
of particular historical relevance, the management
of Ferrari restoration and repair activities, as well as
the management of Ferrari spare parts, including
when these are no longer available on the market. The
department also provides advice on repair operations
carried out on Ferrari Classiche cars within its network.
Ferrari Classiche aims to create a platform of
information and technical expertise to preserve and
enhance over time the awareness and value of Ferrari’s
heritage and brand. We view the surviving Ferrari
vehicles of historical value as the tangible legacy
and incarnation of our brand. The Ferrari Classiche
department also supports and encourages the direct
participation of clients in strategic historical events.
The Ferrari Classiche department in Maranello
consists of an office of specialists and a workshop
in which historic cars are restored and repaired. In
addition, in order to provide an enhanced service
to owners away from the proximity of the main
workshop in Maranello, starting in 2017 Ferrari
Classiche authorized a new service network with
73 “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.
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 service offers our clients the
opportunity to restore any classic Ferrari to its
original pristine conditions.
The Ferrari Classiche department also provides
basic technical and instructional support to
the Ferrari Classiche Academy, a new driving
school project that launched in 2019 for vintage
Ferrari cars, including the Ferrari 308 and
550 Maranello.
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 a
total global TV cumulative audience of 1.922 billion
in 2019, the highest number since 2012, which
represents an increase of 9% compared to 2018.
In terms of unique television viewers, during 2019
the sport remained stable in the top 20 markets(*)
at approximately 405.5 million (+0.3 percent)
(Source: Formula 1 Press Office).
(*) Top 20 markets are, in alphabetical order, Australia, Austria, Belgium, Brazil, China, Finland, France, Germany, Greece, Italy, Mexico,
Netherlands, Pan Africa, Pan Latin America, Pan Middle East, Pan Russia, Poland, Russia, United Kingdom and United States.
73
Annual Report 2019 FERRARI N.V.
/ Formula 1 Activities
In 2019 the number of users across Formula 1’s
social media platforms again grew significantly, with
the total number of followers on Facebook, Twitter,
Instagram and YouTube reaching 24.9m
(+32.9 percent compared to 2018). Again in 2019,
Formula 1’s social media channels were the fastest
growing of all major sports leagues in the world.
Formula 1 cars rely on advanced technology,
powerful hybrid engines and cutting edge
aerodynamics. While Europe is the sport’s traditional
base, longstanding non-European venues such as
Australia, Brazil, Canada, Japan, Mexico and the
United States have recently been joined by racing
venues in China, Bahrain, United Arab Emirates,
Singapore and Azerbaijan. A new venue in Vietnam
has been launched in 2020, while the Dutch Grand
Prix has returned after several decades. 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 238 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 cars
including Alberto Ascari, Juan-Manuel Fangio, Mike
Hawthorn, Phil Hill, John Surtees, Niki Lauda, Jody
Scheckter, Gilles Villeneuve, Michael Schumacher
and Kimi Raikkonen. Our drivers’ line-up in 2019
comprised four-time World Champion Sebastian
Vettel, who joined Ferrari at the beginning of 2015,
and Charles Leclerc, the first graduate of the Ferrari
Driver Academy training scheme to race for our
Formula 1 race team.
For Scuderia Ferrari, 2019 was very much a year of
reorganization, with many team members taking on
new roles, including Mattia Binotto, who stepped
up to the role of Team Principal, and one half of the
driver line-up was renewed. During the past season,
Scuderia Ferrari achieved three wins, nine pole
positions, 19 podiums and 504 points. Its drivers
led for a total of 406 laps, approximately a third of
the total number of race laps over the entire season,
and the team finished second in the Constructors’
Championship.
Participation in the Formula 1 World Championship
is regulated by bilateral Team Agreements entered
into between Formula 1 World Championship
Limited (FOWC), 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
sets both the sporting and technical regulations for
the competitions. 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 designing and producing the race cars
each year and the costs associated with managing a
racing team including the salaries of the drivers, who
are typically among the most highly paid athletes
in the world. New regulations were introduced in
2019, relating to aerodynamics, drivers’ weight, fuel
allowance and the requirement for drivers to wear
biometric gloves for additional safety. The discussions
to establish the sport’s regulations which will apply
from 2021 onwards continued during 2019. The new
rules were approved by the World Council on October
31, 2019, with the understanding that they will be
subject to further discussions between F1, the FIA and
the teams over the coming months, which may lead
to further changes between now and 2021. Please see
“Risk Factors—Our revenues from Formula 1 activities may
decline and our related expenses may grow”.
74
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Improvements in technology and, from time to
time, changes in regulation require the design
and production of a new racing car every year.
Therefore, in addition to our long-term research
and development efforts, we begin designing our
cars 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 Formula 1 cars, 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 road cars and their
engines. 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 features 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 sponsorship. Philip Morris
International has been Scuderia Ferrari’s partner
for over forty years and currently remains our Title
Partner. Starting from October 2018, the “Mission
Winnow” logo has appeared on the cars’ livery
and drivers’ overalls. Mission Winnow is a Philip
Morris International global campaign aimed at
driving change by constantly searching for better
ways of doing things. Shell has also been a long
term Sponsor and Technical Partner of Scuderia
Ferrari (supporting the team continuously since
1996). The other partners of the Team are divided
into three different categories (Sponsor, Official
Supplier and Supplier) and include Ray-Ban,
Kaspersky lab, UPS, Lenovo, Weichai, Mahle,
Hublot, AMD, OMR and Alfa Romeo among
others. 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
associate their brand to Ferrari in their marketing
activities and communications.
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 Ferrari Formula 1 Club Hospitality to watch
and experience the Grand Prix races with Scuderia
Ferrari, and our Formula 1 drivers’ participation in
various promotional activities for our road cars. We
often sell older Formula 1 cars to customers for use
in amateur racing or collection.
More generally, Formula 1 racing allows us to
promote and market our brand and technology to
a global audience without resorting to traditional
advertising activities, therefore preserving the aura
of exclusivity around our brand and limiting the
marketing costs that we, as a company operating in
the luxury industry, would otherwise incur.
The Mugello Circuit
We acquired the international Mugello circuit in
Scarperia, near Florence, in 1988. We have renovated
its buildings, 5.2 km race track and other testing and
racing facilities, making Mugello what we believe to
be one of the world’s finest circuits of its type, with
FIA Grade 1 and FIM Grade A certifications, the
highest level of homologation for a racetrack.
75
Annual Report 2019 FERRARI N.V.
/ Formula 1 Activities
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
2019, the circuit hosted 16 race weekends and 250
days of track activities. Almost 121,000 spectators
attended the 2019 MotoGP World Championship
(71,000 on the Sunday), one of the largest
audiences ever recorded in the 29 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
consumer electronics, sportswear, toys, video games,
watches and other accessories, as well as theme parks.
In 2019, we commenced our participation in
eSports (i.e., electronic sports) with the launch of
an entertainment platform and the selection of
a team which took part in two of the main world
championships: F1 Pro Series 2019 and SRO
E-Sport GT Series, which our team won.
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.
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
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.
Ferrari owns and manages two museums, one in
Maranello and one in Modena, which attracted
more than 600,000 visitors in 2019.
Retail
Licensing, Entertainment and Theme Parks
We enter into license agreements with a number
of licensees for the design, development and
production of Ferrari branded products.
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.
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
As at December 31, 2019, there were a total of 44
retail Ferrari stores, including those in Maranello,
Milan, Rome, Macau, Miami, Los Angeles,
Johannesburg, Dubai and Abu Dhabi, of which 24
are franchised stores (including 15 Ferrari Store
Junior) and 20 stores owned and operated by us.
76
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
We also offer direct dealer financing in the United
States through FFS Inc.
Through FFS, we offer a range of flexible, bespoke
financial and 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.
At December 31, 2019, the consolidated financial
services portfolio was €966 million and originated
in the United States.
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.
Brand Diversification Strategy
In November 2019, management presented the
principles of its brand diversification strategy,
recognizing Ferrari as a unique brand with a dual
identity: exclusive, but also inclusive in relation to our
F1 fan communities. To ensure long term profitable
growth, Ferrari intends to focus its offering on
product categories that enhance the vibrancy and
vitality of the brand through the following pillars:
• “Brand Extension” pillar, a refined collection of
products that will embody Ferrari’s DNA;
• “Entertainment” pillar, to reach out to a wider and
younger customer base while leveraging Ferrari’s
unique racing roots; and
• “Car Adjacencies” pillar, a collection of exclusive
luxury products and services to complement the
Ferrari experience.
Annual Report 2019
77
FERRARI N.V.
Intellectual Property
• “Ferrari” (word)
• “Ferrari” logotype:
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 493
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 approximately 4,000 applications/
registrations in approximately 140 countries, in
most of the main classes for goods and services:
• The “Prancing Horse” (figurative):
• The trademark (figurative):
• The racing shield (figurative):
• Scuderia Ferrari (word and figurative):
78
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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.
The protection of intellectual property is also
increasingly important in connection with our
design and brand activities. Therefore, we adopt
and follow internal processes and procedures to
ensure both that all necessary protection is given
to our intellectual property rights and that no
third party rights are infringed by us. In addition,
we are particularly active in seeking to limit any
counterfeiting activities regarding our Ferrari branded
products around the world. To reach this goal we
closely monitor trademark applications and domain
names worldwide, actively interact with national and
local authorities and customs and avail ourselves of a
network of experienced outside counsels.
Properties
Our principal manufacturing facility is located in
Maranello (Modena), Italy. It has an aggregate
covered area of approximately 690 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 “—Production and Procurement—
Production Process”). Except for some leased technical
equipment, we own all of our facilities and
equipment in Maranello.
In 2018 we completed the new Ferrari Design
Centre, a building that covers more than 7.3
thousand square meters.
In 2019 we completed the office area and workshop
area of the New Technical Center, covering
approximately 9 thousand square meters, for the
development of engines and hybrid systems. The entire
building and the engine and hybrid test benches, for a
total of approximately 20 thousand square meters, are
expected to be completed during the course of 2020.
We also purchased land of approximately 16 thousand
square meters in Maranello in 2019, to be used for
future developments.
Adjacent to the plant is our Fiorano track, of
approximately 3,000 meters, built in 1972 and
remodeled in 1996. The track also houses the
Formula 1 logistics offices. Additional facilities in
Maranello include a product development center, a
hospitality area and the Ferrari museum.
We also own the Mugello racing circuit in Scarperia,
near Florence, which we rent to racing events
organizers (see “—Formula 1 Activities—The Mugello
Circuit”).
We own a second plant in Modena, named
Carrozzeria Scaglietti. At this approximately 26
thousand square meter plant we manufacture
aluminum bodyworks for our regular range, special
series and prototype cars.
Since 2002 we have either rebuilt or renovated
most of the buildings in Maranello, including the
paint shop building and the production building.
The total carrying value of our property, plant and
equipment at December 31, 2019 was €1,070 million.
79
Annual Report 2019 FERRARI N.V.
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, including our appraisal
system to assess our middle-managers 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, 2019, we had a total
of 4,285 employees, including 123 managers
and senior managers. Of these, 4,043 were based
at our Maranello facility, and 242 in offices
around the world (including 22 managers
and senior managers), mostly in North America
and China.
White-collar employees and middle-managers
Italy
Rest of the world
Workers
Italy
Rest of the world
Managers and senior managers
Total
80
Approximately 12 percent of the employees were
trade union members in 2019. 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 two agreements:
the first one entered into by FCA, CNH Industrial N.V.
and Ferrari with FIM-CISL, UILM-IUL, FISMIC and
Unione Generale del Lavoro (UGL) signed on March 11,
2019 which will expire on December 31, 2022, and the
second one named “Accordo Premio di Competitività
Ferrari” signed on September 25, 2019 which
will expire on December 31, 2023. This collective
bargaining contract provides, among other things, for
the payment of bonuses linked to performance up to
a maximum of approximately €13,000 gross per year
and payable in four installments: three advances and
a final balance.
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,
2019
1,983
1,772
211
2,179
2,170
9
123
2018
1,691
1,517
174
2,050
2,047
3
110
2017
1,531
1,358
173
1,757
1,754
3
92
4,285
3,851
3,380
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
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 under EU regulations 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. Despite global shipments
exceeding 10,000 vehicles in 2019, Ferrari continues
to qualify as an SVM under EU regulations, because
its total number of registered vehicles in the EU per
year is less than 10,000 vehicles.
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
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.
81
Annual Report 2019 FERRARI N.V.
/ Regulatory Matters
In 2019, the European Union set new 2025 and
2030 emissions targets, calling for respectively a
15% and 37.5% reduction of the target in 2021. An
incentive mechanism for zero and low emission
vehicles was also introduced. This new regulation
(EU 2019/631) continues to state that it is not
appropriate to use the same method to determine
the emissions reduction targets for large volume
manufacturers as for small volume manufacturers
that are considered as independent. Therefore,
SVMs have the possibility to continue to apply for
alternative emissions reduction and are required to
submit the application at the latest by 31 October
of the first year in which the derogation shall apply.
The regulation 2019/631 sets out new EU rules on
monitoring and reporting of average emissions:
the Commission will have to ensure the real-world
representativeness of the CO2 emission values based
on data from the fuel consumption meters installed
in new cars and will be obliged to publish the
performance of each manufacturer. In addition, the
Commission will have to evaluate the possibility of
a common methodology for the assessment and the
consistent data reporting of full life-cycle emissions
from cars. The regulation provides also specific
provisions on in-service conformity testing and on
detecting strategies which may artificially improve
the CO2 performance.
In the United States, both Corporate Average Fuel
Economy (“CAFE”) standards and greenhouse
gas emissions (“GHG”) standards are imposed
on manufacturers of passenger cars. Because the
control of fuel economy is closely correlated with
the control of GHG emissions, the United States
Environmental Protection Agency (“EPA”) and the
National Highway Traffic Safety Administration
(“NHTSA”) have sought to harmonize fuel economy
regulations with the regulation of GHG vehicle
emissions (primarily CO2). These agencies have set
the federal standards for passenger cars and light
trucks to meet an estimated combined average fuel
economy (CAFE) level that is equivalent to 35.5
miles per U.S. gallon for 2016 model year vehicles
(250 grams CO2 per mile). In August 2012, these
agencies extended this program to cars and light
trucks for model years 2017 through 2025, targeting
an estimated combined average emissions level of
163 grams per mile in 2025, which is equivalent to
54.5 miles per gallon.
In 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. The SAFE Vehicles Rule has not been
adopted in final form as of the date of this filing.
On September 27, 2019 EPA and NHTSA issued
the “Safer Affordable Fuel-Efficient Vehicles Rule
Part One: One National Program” 84 Fed. Reg.
51310. These rules would exert federal preemption
authority under the CAFE statute over California’s
ability to regulate greenhouse gases and would
revoke the current EPA waiver under the Clean Air
Act which had authorized California to regulate
GHG from motor vehicles. The state of California
along with other states and certain NGOs filed
challenges to these rules in both US District Court
for the District of Columbia and the United States
Court of Appeals D.C. Circuit. The litigation is
pending and the impact on Ferrari of the rule and
the challenges cannot be determined until the
conclusion of the litigation.
82
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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. On July 31,
2019 EPA published a Notice in the U.S. Federal
Register (Federal Register /Vol. 84, No. 147) that
in part proposed that Ferrari be permitted an
alternative standard substantially in line with the
alternative standard that Ferrari proposed to EPA
for model years 2017-2021. EPA approved Ferrari
proposed standards for model years 2017-2020,
whereas it requires a small reduction of the model
year 2021 standard.
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. If our petitions are rejected, we will not
be able to benefit from the more favorable CAFE
standards levels which we have petitioned for and
this may require us to purchase additional CAFE
credits in order to comply with applicable CAFE
standards. Starting from 2019, we are no longer
considered to be an SVM by NHTSA, because
our global production exceeded 10,000 vehicles,
and therefore we are required to apply for Large
Vehicle Manufacturer (“LVM”) standards, and
consequently, to purchase further CAFE credits.
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”
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. On September 19, 2019, the
NHTSA and the EPA established the “One National
Program” for fuel economy regulation, taking the
first step towards finalizing the agencies’ August
2018 proposal by announcing the EPA’s decision to
withdraw California’s waiver of preemption under
the Clean Air Act, and by affirming the NHTSA’s
authority to set nationally applicable regulatory
standards under the preemption provisions of the
Energy Policy and Conservation Act (EPCA). The
two agencies indicated that they anticipate issuing
a final rule on standards in the near future. Ferrari
currently avails itself of the “deemed-to-comply”
provision to comply with CARB greenhouse gas
emissions regulations. Therefore, depending on
future developments, it may be 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.
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 IV targets a national average
83
Annual Report 2019 FERRARI N.V.
/ Regulatory Matters
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.
The Stage V regulation, issued on December 31,
2019, sets the fuel consumption fleet average targets
for the period 2021-2025, targeting a national
average fuel consumption of 4.0 l/100km by 2025.
Consequently, an update of the Administrative
Measures on CAFC and NEV Credits is awaited,
keeping the additional flexibility for SVMs and
relaxing the minimum CAFC yearly improvement
rate required.
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 in the year prior to the grant of
the type-approval) 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. We believe all
new Ferrari models are fully compliant with RDE
requirements. 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 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.
On 13th of December 2018, the General Court of the
European Union issued a ruling on the action started
in mid-2016 by the cities of Madrid, Brussels and
Paris on the legality of the Commission introducing
in the second RDE Regulation (2016/646) RDE
conformity factors (CF) which had the effect of
increasing the emission limits. This led to the appeal
proceedings during 2019 against the General Court’s
judgment that annulled the conformity factors in the
RDE legislation. The judgment is currently expected
towards the end of 2020.
During 2019, the European Commission announced
that it will propose more stringent air pollutant
emissions standards for combustion-engine
vehicles and indicated 2021 as a target timeline.
The Commission created an Advisory Group on
Vehicle Emission Standards (AGVES), by joining
all the relevant expert groups working on emission
legislation, in order to provide technical advice for
the development of the post-EURO 6/VI emission
standards for motor vehicles.
84
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 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 have implemented 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.
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 to make certain vehicle
safety measures mandatory. On March 25, 2019,
the European Parliament, Council and Commission
reached a provisional political agreement on the
revised General Safety Regulation. As of 2022,
new safety technologies will become mandatory in
European vehicles, such as Advanced Emergency
Braking, Emergency Lane Keeping systems, crash-test
improved safety belts, intelligent speed assistance
and warning of driver drowsiness or distraction.
In 2017 the EU published technical requirements
for the Emergency Call (eCall) system, mandatory
85
Annual Report 2019 FERRARI N.V.
/ Regulatory Matters
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. Starting from 2022, European authorities
and United Nation’s Contracting Parties will enforce
Regulations on cyber security and over the air
updates.
Under U.S. federal law, all vehicles sold in the
United States must comply with Federal Motor
Vehicle Safety Standards (“FMVSS”) promulgated
by the NHTSA. Manufacturers need to provide
certification that all vehicles are in compliance with
those standards. In addition, if a vehicle contains
a defect that is related to motor vehicle safety or
does not comply with an applicable FMVSS, the
manufacturer must notify vehicle owners and provide
a remedy at no cost to the 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 have taken or 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
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. In January 2020, Ferrari, in accordance
with the Amended Consent Order and the ACRO,
filed with the NHTSA a Part 573 Defect Information
Report to include vehicles that had received the so-
called “like-for-like” repair. As a result of the ACRO
and the decision to extend the worldwide Takata
airbag inflator recall, Ferrari recognized provisions
of €37 million in 2016 for the estimated charges for
Takata airbag inflators recalls to cover the cost of the
worldwide global Takata recall due to uncertainty of
recoverability of the costs from Takata. At December
31, 2019 the provision amounted to €16 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,
86
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 were defined in mid-2019, through
the formal adoption of the local standard.
Among the United Nations Contracting Parties,
China has been the first country to propose
an early adoption of updated test procedures
on high-voltage batteries for hybrid and electric
vehicles, which is expected to be enforced
in 2020.
87
Annual Report 2019 FERRARI N.V.
Operating Results
Results of Operations
Consolidated Results of Operations – 2019 compared to 2018 and 2018 compared to 2017
The following is a discussion of the results of operations for the year ended December 31, 2019 as
compared to the year ended December 31, 2018, and for the year ended December 31, 2018 as compared
to the year ended December 31, 2017. 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)
For the years ended December 31,
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
2019
3,766
1,805
343
699
5
3
917
42
875
176
699
Percentage of
net revenues
100.0%
47.9%
9.1%
18.6%
0.1%
0.1%
24.4%
1.2%
23.2%
4.6%
18.6%
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%
2016
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%
88
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Net revenues
The following table sets forth an analysis of our net revenues for the periods indicated:
(e million, except percentages)
For the years ended December 31,
Increase/(Decrease)
Percentage
of net
revenues
2018
Percentage
of net
revenues
2017
Percentage
of net
revenues
2019 vs. 2018
2018 vs. 2017
77.7% 2,535
74.1% 2,456
71.9% 391
15.4%
79
3.2%
5.3%
284
8.3%
373
10.9% (86) (30.3)% (89)(23.8)%
Cars and spare parts(1)
Engines(2)
Sponsorship, commercial
and brand(3)
Other(4)
2019
2,926
198
538
104
Total net revenues
3,766
100.0% 3,420
100.0% 3,417
100.0% 346
10.1%
14.3%
2.7%
506
95
14.8%
2.8%
494
94
14.5%
2.7%
32
9
6.4%
10.0%
12
1
3
2.4%
1.4%
0.1%
(1) Includes net revenues generated from shipments of our cars, including any personalization net revenues generated on these cars, as well as sales
of spare parts.
(2) Includes net revenues generated from the sale of engines to Maserati for use in their cars, and the revenues generated from the rental of engines to
other Formula 1 racing teams.
(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, as well as net revenues generated through the Ferrari brand, including merchandising, licensing and
royalty income.
(4) Primarily relates to financial services activities and management of the Mugello racetrack.
2019 compared to 2018
Net revenues for 2019 were €3,766 million, an increase of €346 million, or 10.1 percent (an increase of
8.2 percent on a constant currency basis), from €3,420 million for 2018.
The increase in net revenues was attributable to the combination of (i) a €391 million increase in cars
and spare parts, (ii) a €32 million increase in sponsorship, commercial and brand, and (iii) a €9 million
increase in other net revenues, partially offset by (iv) an €86 million decrease in engines.
Cars and spare parts
Cars and spare parts net revenues were €2,926 million for 2019, an increase of €391 million, or 15.4
percent, from €2,535 million for 2018.
The €391 million increase in net revenues was composed of increases in all four of our main geographical
regions, including: (i) a €209 million increase in EMEA, (ii) a €77 million increase in Mainland China,
Hong Kong and Taiwan, (iii) a €76 million increase in Americas (including positive foreign currency
translation impact driven by the strengthening of the U.S. Dollar compared to the Euro) and (iv)
a €29 million increase in the Rest of APAC.
The increase in net revenues was primarily attributable to positive volume impact, positive contribution
from our personalization programs and positive foreign currency impact. In particular, total shipments
increased by 880 cars, or 9.5 percent, compared to the prior year, primarily attributable to an 11.2 percent
increase in V8 models and a 4.6 percent increase in V12 models. The increase in shipments was mainly
driven by deliveries of the Ferrari Portofino, the 812 Superfast, the 488 Pista and 488 Pista Spider, and the
initial deliveries of the F8 Tributo, as well as the initial deliveries of our Ferrari Monza SP1 and SP2 in the
89
Annual Report 2019 FERRARI N.V.
last four months of 2019. These effects were partially offset by lower shipments of the 488 GTB and 488
Spider, which concluded their lifecycle in 2019, as well as deliveries in 2018 of the LaFerrari Aperta and the
strictly limited edition Ferrari J50.
Considering our four main geographical areas, the increase in shipments in 2019 compared to 2018 of 9.5
percent was composed of: (i) an increase in Mainland China, Hong Kong and Taiwan of 20.3 percent, (ii)
an increase in EMEA of 15.8 percent, and (iii) an increase in Rest of APAC of 12.9 percent, partially offset
by (iv) a decrease in Americas of 3.3 percent, reflecting a deliberate geographical rebalancing driven by the
pace of product phase-ins and waiting lists.
Engines
Net revenues generated from engines were €198 million for 2019, a decrease of €86 million, or 30.3
percent, from €284 million for 2018. The €86 million decrease was attributable to a decrease in net
revenues generated from the sale of engines to Maserati.
Sponsorship, commercial and brand
Net revenues generated from sponsorship, commercial agreements and brand management activities were
€538 million for 2019, an increase of €32 million, or 6.4 percent, from €506 million for 2018. The increase
was primarily attributable to higher revenues from Formula 1 racing activities and positive foreign currency
exchange impact.
2018 compared to 2017
Net revenues for 2018 were €3,420 million, an increase of €3 million, or 0.1 percent (an increase of 3.2
percent on a constant currency basis), from €3,417 million for 2017.
The increase in net revenues was attributable to the combination of (i) a €79 million increase in cars and
spare parts, (ii) a €12 million increase in sponsorship, commercial and brand and (iii) a €1 million increase
in other net revenues, partially offset by (iv) an €89 million decrease in engines.
Cars and spare parts
Cars and spare parts net revenues were €2,535 million for 2018, an increase of €79 million, or 3.2 percent,
from €2,456 million for 2017.
The €79 million increase in net revenues was composed of (i) a €70 million increase in EMEA, (ii) a €30
million increase in Rest of APAC and (iii) a €2 million increase in Americas, partially offset by (iv) a €23
million decrease in Mainland China, Hong Kong and Taiwan.
The increase in net revenues was primarily attributable to positive volume impact across all major
geographical regions, as well as greater contribution from our personalization programs and pricing
increases, partially offset by negative foreign currency exchange impact. In particular, total shipments
increased by 853 cars, or approximately 10 percent, comprised of an increase in V12 models of
approximately 20 percent and an increase in V8 models of approximately 7 percent. The increase in
90
/ Results of OperationsAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
volumes was driven by shipments of the Ferrari Portofino, the 812 Superfast, the newly launched 488 Pista
and deliveries of the strictly limited edition Ferrari J50 and FXX K EVO, partially offset by the phase out of
the California T in 2018 and the F12berlinetta and limited series F12tdf in 2017, as well as a decrease in
shipments of the LaFerrari Aperta, which finished its limited series run in 2018.
Engines
Net revenues generated from engines were €284 million for 2018, a decrease of €89 million, or 23.8
percent, from €373 million for 2017. The €89 million decrease was mainly attributable to a decrease in net
revenues generated from the sale of engines to Maserati.
Sponsorship, commercial and brand
Net revenues generated from sponsorship, commercial agreements and brand management activities were
€506 million for 2018, an increase of €12 million, or 2.4 percent, from €494 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.
COST OF SALES
(e million, except
percentages)
For the years ended December 31,
Increase/(Decrease)
Cost of sales
1,805
47.9% 1,623
47.4% 1,651
2019
Percentage
of net
revenues
2018
Percentage
of net
revenues
2017
Percentage
of net
revenues
48.3%
2019 vs. 2018
2018 vs. 2017
182
11.2
(28)
(1.7)%
2019 compared to 2018
Cost of sales for 2019 was €1,805 million, an increase of €182 million, or 11.2 percent, from €1,623
million for 2018. As a percentage of net revenues, cost of sales increased from 47.4 percent in 2018 to 47.9
percent in 2019.
The increase in cost of sales was primarily attributable to an increase in volumes, a change in product
mix, higher industrial costs and, to a lesser extent, higher depreciation and negative foreign currency
exchange impact, partially offset by a decrease in costs related to lower Maserati engine volumes and a
release of provisions related to favorable developments in emissions regulations that occurred in the third
quarter of 2019.
2018 compared to 2017
Cost of sales for 2018 was €1,623 million, a decrease of €28 million, or 1.7 percent, from €1,651 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 a lower Maserati engine volumes and lower
industrial costs, including warranty charges, partially offset by an increase in volumes, as well as higher
91
Annual Report 2019 FERRARI N.V.
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.
SELLING, GENERAL AND ADMINISTRATIVE COSTS
(e million, except
percentages)
For the years ended December 31,
2019
Percentage
of net
revenues
2018
Percentage
of net
revenues
2017
Percentage
of net
revenues
Increase/(Decrease)
2019 vs. 2018
2018 vs. 2017
Selling, general and
administrative costs
343
9.1%
327
9.6%
329
9.6%
16
4.8%
(2)
(0.5)%
2019 compared to 2018
Selling, general and administrative costs for 2019 were €343 million, an increase of €16 million, or 4.8
percent, from €327 million for 2018. As a percentage of net revenues, selling, general and administrative
costs decreased from 9.6 percent in 2018 to 9.1 percent in 2019.
The increase in selling, general and administrative costs was primarily attributable to product launches for
new cars in our product offering as well as costs incurred to support the organic growth of the business.
2018 compared to 2017
Selling, general and administrative costs for 2018 were €327 million, a decrease of €2 million, or 0.5 percent,
from €329 million for 2017. As a percentage of net revenues, selling, general and administrative costs were
substantially unchanged.
RESEARCH AND DEVELOPMENT COSTS
(e million, except
percentages)
For the years ended December 31,
2019
Percentage
of net
revenues
2018
Percentage
of net
revenues
2017
Percentage
of net
revenues
Increase/(Decrease)
2019 vs. 2018
2018 vs. 2017
Research and
development costs
expensed during the
year
Amortization
of capitalized
development costs
Research and
development costs
559
14.9%
528
15.4%
556
16.3%
31
6.0% (28)
(5.2)%
140
3.7%
115
3.4%
101
2.9%
699
18.6%
643
18.8%
657
19.2%
25
56
21.2%
14
14.6%
8.7% (14)
(2.1)%
2019 compared to 2018
Research and development costs for 2019 were €699 million, an increase of €56 million, or 8.7 percent,
from €643 million for 2018. As a percentage of net revenues, research and development costs were 18.6
percent in 2019 compared to 18.8 percent in 2018.
92
/ Results of OperationsAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The increase in research and development costs was primarily to support innovation activities on our
product range and components, as well as expenses incurred in relation to Formula 1 racing activities.
Additionally, amortization of capitalized development costs increased by 21.2 percent as a result of an
increase in capitalized development costs in prior years.
2018 compared to 2017
Research and development costs for 2018 were €643 million, a decrease of €14 million, or 2.1 percent,
from €657 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 €28 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 €14 million
in amortization of capitalized development costs.
EBIT
(e million, except
percentages)
EBIT
For the years ended December 31,
Increase/(Decrease)
Percentage
of net
revenues
24.4%
2019
917
Percentage
of net
revenues
24.2%
2018
826
Percentage
of net
revenues
22.7%
2017
775
2019 vs. 2018
2018 vs. 2017
91
11.0%
51
6.6%
2019 compared to 2018
EBIT for 2019 was €917 million, an increase of €91 million, or 11.0 percent, from €826 million for 2018.
As a percentage of net revenues, EBIT increased from 24.2 percent in 2018 to 24.4 percent in 2019.
The increase in EBIT was primarily attributable to the combined effects of (i) positive volume impact of
€99 million, (ii) positive product mix and price impact of €78 million, (iii) an increase in research and
development costs of €56 million, (iv) an increase in selling, general and administrative costs of €16
million, (v) an increase of industrial costs of €31 million mainly due to the operational startup costs
in connection with the introduction of new models, including higher depreciation of fixed assets and
other variable costs, (vi) negative contribution of €33 million due to lower engine sales to Maserati
and other supporting activities, and (vii) positive foreign currency exchange impact of €50 million
(including foreign currency hedging instruments) primarily driven by the strengthening of the U.S.
Dollar compared to the Euro.
The positive volume impact was attributable to an increase in total shipments, driven by the
488 Pista family, the Ferrari Portofino and the 812 Superfast, as well as the initial deliveries of the new
F8 Tributo, partially offset by lower shipments of the 488 GTB and the 488 Spider, which concluded
their lifecycle in 2019. The positive product mix and price impact was primarily attributable to the combined
positive effects of the Ferrari Monza SP1 and SP2 in the fourth quarter of 2019, our personalization program
and deliveries of the FXX K EVO, partially offset by negative product mix from range models as well as prior
year shipments of the LaFerrari Aperta and the strictly limited edition Ferrari J50.
93
Annual Report 2019 FERRARI N.V.
2018 compared to 2017
EBIT for 2018 was €826 million, an increase of €51 million, or 6.6 percent, from €775 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
€118 million, (ii) negative product mix and price impact of €17 million, (iii) a decrease in research and
development costs of €14 million, (iv) a decrease in selling, general and administrative costs of €2 million,
(v) net positive contribution from other supporting activities of €26 million, (vi) negative foreign currency
exchange impact of €92 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 €118 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 and price impact
of €17 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 net positive
contribution from other supporting activities of €26 million was primarily attributable to sponsorship
activities, a higher 2017 championship ranking compared to 2016 and a pronouncement on a prior year’s
legal dispute, partially offset by a lower contribution from other brand related activities and engines
supplied to Maserati.
NET FINANCIAL EXPENSES
(e million, except percentages)
Net financial expenses
2019 compared to 2018
For the years ended December 31,
Increase/(Decrease)
2019
42
2018
23
2017
2019 vs. 2018
2018 vs. 2017
29
19
78.6%
(6)
(19.5)%
Net financial expenses for 2019 were €42 million compared to €23 million for 2018, representing an
increase of €19 million. The increase in net financial expenses was primarily attributable to the net costs
of hedging and foreign exchange losses of €11 million and €8 million of costs incurred in connection with
the partial repurchase of bonds following a cash tender offer in July 2019, as well as the recognition of
unamortized issuance costs.
2018 compared to 2017
Net financial expenses for 2018 were €23 million compared to €29 million for 2017, representing a
decrease of €6 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 a bank 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.
94
/ Results of OperationsAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
For the years ended December 31,
Increase/(Decrease)
2019
176
2018
16
2017
2019 vs. 2018
2018 vs. 2017
209
160
n.m.
(193)
(92.2)%
INCOME TAX EXPENSE
(e million, except percentages)
Income tax expense
2019 compared to 2018
Income tax expense for 2019 was €176 million, an increase of €160 million, compared to €16 million for 2018.
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 10 “Income Taxes” to our Consolidated Financial Statements included elsewhere in this
Annual Report. Income taxes for 2018 included the positive impact of the Patent Box benefit relating to the
years 2015 to 2017 of €141 million.
The effective tax rate (net of IRAP) was 17.0 percent for 2019 compared to (1.1) percent for 2018 (total
effective tax rate of 20.2 percent and 2.0 percent for 2019 and 2018, respectively).
2018 compared to 2017
Income tax expense for 2018 was €16 million, a decrease of €193 million, or 92.2 percent, from €209
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 above), including €141 million of Patent Box
benefits related to the years 2015 to 2017 (of which €139 million was from direct use and €2 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 €61 million.
Recent Developments
See “Subsequent Events and 2020 Outlook”.
95
Annual Report 2019 FERRARI N.V.
Liquidity and Capital Resources
Liquidity Overview
We require liquidity in order to fund our 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 require cash for capital investments to support
continuous product range renewal and expansion and, more recently, for research and development
to transition our product portfolio to hybrid technology. We also make investments for initiatives
to enhance manufacturing efficiency, improve capacity, ensure environmental compliance and carry
out maintenance activities. We fund our capital expenditure primarily with cash generated from our
operating activities.
We centrally manage our operating cash management, liquidity and cash flow requirements with the
objective of ensuring efficient and effective 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 our liquidity.
Cyclical Nature of our Cash Flows
Our working capital is subject to month to month fluctuations due to, among other things, production
and sales volumes, our financial services activities, as wells as the timing of capital expenditure and tax
payments. 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 the first quarter of 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 for certain models, we generally receive payment
for cars shipped before we are required to make payment for the raw materials and components used in
manufacturing the cars.
Our investments for capital expenditure and research and development are, among other factors,
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
96
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
number of new models to renew or expand our product range. Our research and development costs
are also influenced by the timing of research costs for our Formula 1 activities, for which expenditure
is generally higher in the first and last quarters of the year. We significantly increased our capital
expenditure in 2018 and 2019 to further our investments in hybrid technology and to support the
expansion of our product range.
The payment of income taxes also affects our working capital. We have typically paid our income taxes in
two advances, however, 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 and we did not pay the second advance in relation to 2018 taxes or
the first advance in relation to 2019 taxes. In the fourth quarter of 2019, we paid the second advance
in relation to 2019 taxes, which was significantly reduced as a result of the Patent Box tax benefit. The
Group is progressing with the required activities to apply the Patent Box tax regime for the period from
2020 to 2024, in line with currently applicable tax regulations in Italy. See Note 10 “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, 2019, 2018 and 2017. For additional details of our cash flows, see
our Consolidated Financial Statements included elsewhere in this Annual Report.
(e million)
For the years ended December 31,
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
2019
1,306
(701)
(502)
1
104
2018
934
(637)
(152)
1
146
2017
663
(379)
(85)
(9)
190
Operating Activities - Year Ended December 31, 2019
For the year ended December 31, 2019, our cash flows from operating activities were €1,306 million,
primarily the result of:
(i) profit before tax of €875 million, adjusted to add back €352 million of depreciation and amortization
expense, €42 million of net finance costs, €35 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) and €14 million in provisions accrued. Other non-cash expenses
were primarily attributable to share-based compensation expense under the equity incentive plan; and
(ii) €146 million of cash generated by the change in other operating assets and liabilities, primarily
attributable to advances received for the Ferrari Monza SP1 and SP2.
These cash inflows were partially offset by:
(i) €77 million of cash absorbed from receivables from financing activities driven by an increase in the
financial services portfolio;
97
Annual Report 2019 FERRARI N.V.
/ Liquidity and Capital Resources
(ii) €9 million of cash related to the net change in inventories, trade payables and trade receivables. In
particular, the movement was attributable to (a) cash absorbed by inventory of €41 million and (b)
cash absorbed by trade receivables of €22 million, which were both primarily driven by higher volumes,
partially offset by (c) cash generated from trade payables of €54 million driven by higher capital
expenditures and an increase in volumes;
(iii) €39 million of net finance costs paid; and
(iv) income tax paid of €33 million.
Operating Activities - Year Ended December 31, 2018
For the year ended December 31, 2018, our cash flows from operating activities were €934 million,
primarily the result of:
(i) profit before tax of €803 million, adjusted to add back €289 million of depreciation and amortization
expense, €30 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),
€23 million of net finance costs and €16 million in provisions accrued. Other non-cash expenses were
primarily attributable to share-based compensation expense under the equity incentive plan; and
(ii) €62 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 generated from trade payables of
€40 million driven by higher capital expenditures and an increase in volumes, (b) cash generated by
trade receivables of €27 million, partially offset by (c) cash absorbed by inventory of €5 million.
These cash inflows were partially offset by:
(i) €107 million related to cash absorbed from receivables from financing activities driven by an increase
in the financial services portfolio in the U.S.;
(ii) €83 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 and the Ferrari J50;
(iii) €11 million of net finance costs paid; and
(iv) income tax paid of €88 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 €663 million, primarily
the result of:
(i) profit before tax of €746 million, adjusted to add back €261 million of depreciation and amortization
expense, €39 million related to other non-cash expenses and income (including net gains on disposal
of property, plant and equipment and intangible assets as well as non-cash result from investments),
€29 million of net finance costs and €13 million in provisions accrued. Other non-cash expenses were
primarily attributable to share-based compensation expense under the equity incentive plan and equity-
settled Non-Executive Directors’ compensation.
These cash inflows were partially offset by:
(i) €73 million related to cash absorbed by the change in other operating assets and liabilities, primarily
attributable to a decrease in advances for the LaFerrari Aperta in 2017, partially offset by advances
received for the Ferrari J50;
98
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
(ii) €61 million related to cash absorbed by the net change in inventories, trade payables and trade
receivables. In particular, the movement was attributable to (a) cash absorbed by inventory of €88
million driven by projected volume growth in line with our 2018 production outlook, (b) cash absorbed
by trade receivables of €2 million, partially offset by (c) cash generated from trade payables of €29
million, driven by an increase in volumes;
(iii) €44 million related to cash absorbed from receivables from financing activities driven by an increase in
the financial services portfolio in the U.S.;
(iv) €32 million of net finance costs paid; and
(v)
income tax paid of €215 million, primarily related to the payment of the remaining balance of 2016
taxes and advances of 2017 taxes.
Investing Activities - Year Ended December 31, 2019
For the year ended December 31, 2019, our net cash used in investing activities was €701 million, primarily
the result of:
(i) €354 million for additions to intangible assets, mainly related to externally acquired and internally
generated development costs and, (ii) €352 million of capital expenditures additions to property, plant
and equipment, mainly related to plant and machinery for new models. These cash flows were partially
offset by proceeds from the disposal of property, plant and equipment.
Investing Activities - Year Ended December 31, 2018
For the year ended December 31, 2018, our net cash used in investing activities was €637 million, primarily
the result of:
(i) €338 million for additions to intangible assets, mainly related to externally acquired and internally
generated development costs and, (ii) €301 million of capital expenditures additions to property, plant
and equipment, mainly related to plant and machinery for new models. These cash flows were partially
offset by proceeds from the sale of property, plant and equipment.
Investing Activities - Year Ended December 31, 2017
For the year ended December 31, 2017, our net cash used in investing activities was €379 million, primarily
the result of:
(i) €203 million for additions to intangible assets, mainly related to externally acquired and internally
generated development costs and, (ii) €189 million of capital expenditures additions to property, plant
and equipment, mainly related to plant and machinery for new models. These cash flows were partially
offset by €8 million of proceeds from exercising the Delta Topco option and proceeds from the sale of
property, plant and equipment.
Financing Activities - Year Ended December 31, 2019
For the year ended December 31, 2019, our net cash used in financing activities was €502 million, primarily
the result of:
(i) €387 million paid to repurchase common shares under the Company’s share repurchase program;
(ii) €315 million related to the cash tender offer to repurchase an aggregate nominal amount of €200
million of the 2021 Bond and an aggregate nominal amount of €115 million of the 2023 Bond;
99
Annual Report 2019 FERRARI N.V.
/ Liquidity and Capital Resources
(iii) €195 million of dividends paid, of which €2 million was to non-controlling interests; and
(iv) €7 million related to the net change in bank borrowings and lease liabilities.
These cash outflows were partially offset by:
(i) €298 million of net proceeds from the Company’s issuance of 1.12 percent senior notes due August
2029 and 1.27 percent senior notes due August 2031, each having a principal amount of €150 million;
(ii) €92 million of proceeds net of repayments related to our revolving securitization programs in the U.S.;
and
(iii) €12 million related to the net change in other debt.
Financing Activities - Year Ended December 31, 2018
For the year ended December 31, 2018, net cash used in financing activities was €152 million, primarily the
result of:
(i) €133 million of dividends paid to owners of the parent;
(ii) €100 million paid to repurchase common shares under the Company’s share repurchase program;
(iii) €8 million related to the net change in other debt;
(iv) €4 million related to the net change in bank borrowings; and
(v) €2 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) €95 million of proceeds net of repayments related to our revolving securitization programs in the U.S.
Financing Activities - Year Ended December 31, 2017
For the year ended December 31, 2017, net cash used in financing activities was €85 million, primarily the
result of:
(i) €791 million related to the net change in bank borrowings, including €795 million related to the full
repayment of a bank loan under a previous credit facility, primarily with the proceeds of the 2021 Bond;
(ii) €120 million related to a cash distribution of reserves to holders of our common shares;
(iii) €8 million related to the net change in other debt; and
(iv) €1 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) €694 million of net proceeds related to the issuance of the 2021 Bond, which were used, together with
additional cash held, for the full repayment of a bank loan under a previous credit facility; and
(ii) €141 million of proceeds net of repayments related to our revolving securitization programs in the U.S.
Net Debt and Net Industrial Debt
Due to different sources of cash flows used for the repayment of debt between industrial activities and
financial services activities, and the different business structure and leverage implications, Net Industrial
100
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Debt, together with Net Debt, are the primary measures used by us to analyze our capital structure and
financial leverage. We believe the presentation of Net Industrial Debt aids management and investors
in their analysis of the Group’s financial position and financial performance and to compare with other
companies. Net Industrial Debt is defined as total debt less cash and cash equivalents (Net Debt), further
adjusted to exclude the debt and cash and cash equivalents related to our financial services activities (Net
Debt of Financial Services Activities). Starting in 2019 we changed the definition of Net Industrial Debt. See
“Non-GAAP Financial Measures” below for further information.
The following table sets forth a reconciliation of Net Debt and Net Industrial Debt at December 31, 2019
and 2018:
(e million)
At December 31,
Cash and cash equivalents
Total liquidity
Bonds and notes
Asset-backed financing (Securitizations)
Lease liabilities(1)
Borrowings from banks
Other debt
Total debt
Net Debt (A)
Net Debt of Financial Services Activities (B)
Net Industrial Debt (A-B)
2019
898
898
(1,186)
(788)
(60)
(33)
(23)
(2,090)
(1,192)
(855)
(337)
2018
794
794
(1,198)
(683)
-
(36)
(10)
(1,927)
(1,133)
(763)
(370)
(1) As a result of adopting IFRS 16 - Leases on January 1, 2019, the Group recognized right-of-use assets and related lease liabilities of 63 million
in relation to leases which had previously been classified as operating leases under IAS 17. For further details, see Note 2 “Significant Accounting
Policies” to the Consolidated Financial Statements included elsewhere in this Annual Report.
Following a cash tender offer, on July 16, 2019 the Company executed a partial repurchase of the 2023
Bond and 2021 Bond for aggregate nominal amounts of €115 million and €200 million respectively.
On July 31, 2019, the Company issued 1.12 percent senior notes due August 2029 (“2029 Notes”) and
1.27 percent senior notes due August 2031 (“2031 Notes”) through a private placement to certain US
institutional investors, each having a principal of €150 million. The net proceeds from the issuances
amounted to €298 million.
For further details on total debt, see Note 24 “Debt” to the Consolidated Financial Statements included
elsewhere in this Annual Report.
Cash and cash equivalents
Cash and cash equivalents were €898 million at December 31, 2019 compared to €794 million at
December 31, 2018. See “Cash Flows” above for further details.
Approximately 77 percent of our cash and cash equivalents were denominated in Euro at December 31, 2019
(approximately 78 percent at December 31, 2018). 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
101
Annual Report 2019 FERRARI N.V.
/ Liquidity and Capital Resources
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 (including in foreign currencies), which
amounted to €115 million at December 31, 2019 (€78 million at December 31, 2018), is subject to certain
repatriation restrictions and may only be repatriated as dividends or capital distributions. We do not currently
believe that such transfer restrictions have an adverse impact on our ability to meet our liquidity requirements.
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,
2019
690
110
63
12
23
898
2018
616
73
50
24
31
794
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 €28 million and €26 million at December 31, 2019 and 2018, respectively.
Total Available Liquidity
Our total available liquidity (defined as cash and cash equivalents plus undrawn committed credit lines) at
December 31, 2019 was €1,248 million (€1,294 million at December 31, 2018).
The following table summarizes our total available liquidity:
(e million)
Cash and cash equivalents
Undrawn committed credit lines
Total available liquidity
At December 31,
2019
898
350
1,248
2018
794
500
1,294
The undrawn committed credit lines consist of a revolving credit facility. The revolving credit facility in place
at December 31, 2018, which was due to mature in November 2020, was canceled in December 2019 and
replaced with a new €350 million unsecured committed revolving credit facility (the “RCF”), which has a
five-year tenor with two further one-year extension options on the Company’s request and the approval of
each participating bank. For further details see Note 24 “Debt” to the Consolidated Financial Statements
included elsewhere in this Annual Report.
102
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 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 investments in
property, plant and equipment and intangible assets. Free Cash Flow from Industrial Activities is defined as
Free Cash Flow adjusted to exclude the operating cash flow from our financial services activities (Free Cash
Flow from Financial Services Activities). Starting in 2019 we changed the definition of Free Cash Flow and Free
Cash Flow from Industrial Activities. See “Non-GAAP Financial Measures” below for further information.
The following table sets forth our Free Cash Flow and Free Cash Flow from Industrial Activities for the years
ended December 31, 2019, 2018 and 2017:
(e million)
For the years ended December 31,
Cash flows from operating activities
Investments in property, plant and equipment and intangible assets
Free Cash Flow
Free Cash Flow from Financial Services Activities
Free Cash Flow from Industrial Activities
2019
1,306
(706)
600
(75)
675
2018
934
(639)
295
(80)
375
2017
663
(392)
271
(37)
308
Free Cash Flow for the year ended December 31, 2019 was €600 million compared to €295 million for the
year ended December 31, 2018 and €271 million for the year ended December 31, 2017. 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, 2019 was €675 million,
compared to €375 million for the year ended December 31, 2018. The increase was primarily attributable
to an increase in Adjusted EBITDA, a positive change in cash generated from other operating assets and
liabilities, driven by advances received for the Ferrari Monza SP1 and SP2, as well as a decrease in income
taxes paid, partially offset by an increase in capital expenditures.
Free Cash Flow from Industrial Activities for the year ended December 31, 2018 was €375 million compared
to €308 million for the year ended December 31, 2017. The increase was primarily attributable to an
increase in Adjusted 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.
103
Annual Report 2019 FERRARI N.V.
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 certain income and costs, which are
significant in nature, expected to occur infrequently, and that management considers not reflective of
ongoing operational activities. EBITDA is presented by management to aid investors in their analysis of
the performance of the Group and to assist investors in the comparison of the Group’s performance with
that of other companies. Adjusted EBITDA is presented to demonstrate how the underlying business has
performed prior to the impact of the adjustments, which may obscure the underlying performance and
impair comparability of results between periods.
The following table sets forth the calculation of EBITDA and Adjusted EBITDA for the years ended December
31, 2019, 2018 and 2017, and provides a reconciliation of these non-GAAP measures to net profit:
(e million)
For the years ended December 31,
Net profit
Income tax expense
Net financial expenses
Amortization and depreciation
EBITDA
Release of charges for Takata airbag inflator recalls
Adjusted EBITDA
Adjusted EBIT
2019
699
176
42
352
1,269
-
1,269
2018
787
16
23
289
1,115
(1)
1,114
2017
537
209
29
261
1,036
-
1,036
Adjusted EBIT represents EBIT as adjusted for certain income and costs which are significant in nature,
expected to occur infrequently, and that management considers not reflective of ongoing operational
activities. We provide such information in order to present how the underlying business has performed prior
to the impact of such items, which may obscure the underlying performance and impair comparability of
results between the periods.
104
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The following table sets forth the calculation of Adjusted EBIT for the years ended December 31, 2019, 2018
and 2017:
(e million)
EBIT
Release of charges for Takata airbag inflator recalls
Adjusted EBIT
Adjusted Net Profit
For the years ended December 31,
2019
917
-
917
2018
826
(1)
825
2017
775
-
775
Adjusted Net Profit represents net profit as adjusted for certain income and costs (net of tax effect) which
are significant in nature, expected to occur infrequently, and that management considers not reflective
of ongoing operational activities. The tax effect is calculated by applying the corporate tax rate in Italy,
which was 24.0 percent for all years presented, 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 the 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, 2019,
2018 and 2017:
(e million)
Net profit
Patent box benefit for the period 2015-2017
Release of charges for Takata airbag inflator recalls (net of tax effect)
Adjusted Net Profit
For the years ended December 31,
2019
699
-
-
699
2018
787
(141)
(1)
645
2017
537
-
-
537
Adjusted Basic and Diluted Earnings per Common Share
Adjusted Basic and Diluted Earnings per Common Share represents earnings per share, as adjusted
for certain income and costs (net of tax effect) which are significant in nature, expected to occur
infrequently, and that management considers not reflective of ongoing operational activities. The tax
effect is calculated by applying the corporate tax rate in Italy, which was 24.0 percent for all years
presented, 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 the underlying performance and impair comparability of results
between the periods.
105
Annual Report 2019 FERRARI N.V.
/ Non-GAAP Financial Measures
The following table sets forth the calculation of Adjusted Basic and Diluted Earnings per Common Share for
the years ended December 31, 2019, 2018 and 2017:
Net profit attributable to owners of the Company
Patent box benefit for the period 2015-2017
Release of 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,
2019
696
-
-
696
2018
785
(141)
(1)
643
2017
535
-
-
535
Weighted average number of common shares for basic
earnings per share
Adjusted basic earnings per common share
Weighted average number of common shares(1) for diluted
earnings per common share
Adjusted diluted earnings per common share
thousand
186,767
188,606
188,951
e
3.73
3.41
2.83
thousand
187,535
189,394
189,759
e
3.71
3.40
2.82
(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, 2019, 2018 and
2017 (assuming 100 percent of the related awards vested), and (ii) the potential common shares that would have been issued for the Non-
Executive Directors’ compensation agreement for the year ended December 31, 2017.
See Note 12 “Earnings per Share” to the Consolidated Financial Statements, included elsewhere in this Annual
Report, for the calculation of the basic and diluted earnings per common share.
Net Debt and Net Industrial Debt
Due to different sources of cash flows used for the repayment of debt between industrial activities
and financial services activities, and the different business structure and leverage implications, Net
Industrial Debt, together with Net Debt, are the primary measures used by us to analyze our capital
structure and financial leverage. We believe the presentation of Net Industrial Debt aids management
and 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 total cash and cash equivalents (Net Debt), further
adjusted to exclude the debt and cash and cash equivalents related to our financial services activities
(Net Debt of Financial Services Activities). Prior to the first quarter of 2019, we defined Net Industrial
Debt as Net Debt adjusted to exclude (a) 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 but not (b) the cash and cash equivalents of the financial activities,
since such cash was considered also available for use in our industrial activities. We believe the
current definition provides a more comprehensive disclosure of our underlying financial leverage from
industrial activities. Net Industrial Debt for the comparative period has been restated to conform to
the current presentation.
106
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The following table sets forth a reconciliation of Net Debt and Net Industrial Debt at December 31, 2019,
and 2018:
(e million)
Cash and cash equivalents
Debt
Net Debt (A)
Net Debt of Financial Services Activities (B)
Net Industrial Debt (A-B)
At December 31,
2019
898
(2,090)
(1,192)
(855)
(337)
2018
794
(1,927)
(1,133)
(763)
(370)
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 investments in property, plant and equipment and intangible assets. Free Cash Flow from
Industrial Activities is defined as Free Cash Flow adjusted to exclude the operating cash flow from our
financial services activities (Free Cash Flow from Financial Services Activities). Prior to the first quarter of
2019, we defined Free Cash Flow as cash flows from operating activities less cash flows used in investing
activities, and we defined Free Cash Flow from Industrial Activities 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). In order to align our definition of Free Cash Flow to other more common definitions
and to allow the definition of Free Cash Flow from Industrial Activities to exclude all cash flows from
operating activities not attributable to the industrial activities, even if such cash flows were available for
industrial activities, we determined it was appropriate to redefine Free Cash Flow and Free Cash Flow
from Industrial Activities starting in 2019. Free Cash Flow and Free Cash Flow from Industrial Activities
for the comparative periods have been restated to conform to the current presentation.
The following table sets forth our Free Cash Flow and Free Cash Flow from Industrial Activities for the years
ended December 31, 2019, 2018 and 2017:
(e million)
For the years ended December 31,
Cash flows from operating activities
Investments in property, plant and equipment and intangible assets
Free Cash Flow
Free Cash Flow from Financial Services Activities
Free Cash Flow from Industrial Activities
2019
1,306
(706)
600
(75)
675
2018
934
(639)
295
(80)
375
2017
663
(392)
271
(37)
308
For further information on Free Cash Flow and Free Cash Flow from Industrial Activities, see “Liquidity and
Capital Resources-Free Cash Flow and Free Cash Flow from Industrial Activities” above.
107
Annual Report 2019 FERRARI N.V.
/ Non-GAAP Financial Measures
Constant Currency Information
The “Results of Operations” discussion below 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 and the impact of hedging provide additional useful
information to investors regarding the operating performance on a local currency basis.
108
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Subsequent Events and 2020 Outlook
Subsequent Events
Under the common share repurchase program, from January 1, 2020 to February 14, 2020, the Company
has repurchased an additional 209,326 common shares for a total consideration of €153.2 million.
At February 14, 2020 the Company held in treasury an aggregate of 8,849,502 common shares.
On February 18, 2020, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders
that the Company declare a dividend of €1.13 per common share, totaling approximately €210 million.
The proposal is subject to the approval of the Company’s shareholders at the Annual General Meeting to be
held on April 16, 2020.
2020 Outlook
The Group targets the following performance in 2020, increased across all metrics compared to the Plan
announced at the Capital Markets Day on September 18, 2018:
• Net revenues: > Euro 4.1 billion (from > Euro 3.8 billion)
• Adj. EBITDA: Euro 1.38-1.43 billion (from > Euro 1.3 billion)
• Adj. EBIT: Euro 0.95-1.0 billion (from > Euro 0.9 billion)
• Adj. diluted EPS: Euro 3.90-3.95(1) per share (from > Euro 3.40(2) per share)
• Industrial free cash flow: ≥ Euro 0.4 billion (from > Euro 0.4 billion)
February 18, 2020
Board of Directors
John Elkann
Louis C. Camilleri
Pietro Ferrari
Sergio Duca
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
(1) Calculated using the diluted number of common shares as of December 31, 2019 (186,052 thousand).
(2) Calculated using the weighted average diluted number of common shares as of June 30, 2018.
109
Annual Report 2019 FERRARI N.V.
Major Shareholders
Exor is the largest shareholder of Ferrari through its
approximately 24.0 percent shareholding interest
in our outstanding common shares (as of February
7, 2020). See “Overview-History of the Company”. As a
result of the loyalty voting mechanism, Exor’s voting
power is approximately 35.8 percent (as of February
7, 2020). In addition, as of February 7, 2020, Mr.
Piero Ferrari holds approximately 10.2 percent of
our outstanding common shares and, as a result
of the loyalty voting mechanism, his voting power
is approximately 15.2 percent. The percentages of
ownership and voting power above are calculated
based on the number of outstanding shares net of
treasury shares.
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 7, 2020, were John Elkann,
Jeroen Preller, Florence Hinnen, Tiberto Brandolini
d’Adda, Alessandro Nasi, Andrea Agnelli, Luca
Ferrero de’ Gubernatis Ventimiglia and Eduardo
Teodorani-Fabbri.
110
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 7, 2020:
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
11,229,807
8,648,944
101,877,301
Percentage
owned(1)
24.0%
10.2%
6.1%
4.7%
55.0%
(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. As of February 7, 2020 Exor owned 44,435,280 special
voting shares, including 6,854,893 special voting shares issued to Exor in April 2019 under the terms of the loyalty voting program, and
Mr. Ferrari owned 18,892,160 special voting shares. 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 (Amendment No. 1 to Schedule 13G filed by BlackRock, Inc. on February 5, 2020, File No. 005-89223),
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 10,276,324 common shares.
(4) Based on filings with the SEC (Amendment No. 1 to Schedule 13G filed on February 14, 2018, File No. 005-89223), T. Rowe Price Associates,
Inc. is an investment adviser registered under Section 203 of the U.S. Investment Advisers Act of 1940 and, out of the common shares
beneficially owned as set forth in the table, it has sole voting power over 3,143,852 common shares.
Based on the information in Ferrari’s shareholder
register and other sources available to us, as of
February 7, 2020, approximately 58.2 million Ferrari
common shares, or 31.4 percent of the outstanding
Ferrari common shares, were held in the United
States. As of the same date, approximately 1,850
record holders had registered addresses in the
United States.
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
111
Annual Report 2019 FERRARI N.V.
/ Shareholders’ Agreement
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.
112
Annual Report 2019 FERRARI N.V.
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.
114
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 annual general
meeting of shareholders held on April 12, 2019,
the number of the Directors was set at ten and
the current slate of Directors was appointed. The
term of office of the current Directors will expire
following the Company’s 2020 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 16, 2020.
The Board of Directors as a whole is responsible for
the strategy of the Company. The Board of Directors
is composed of two executive Directors (i.e., Mr. John
Elkan, Executive Chairman, and Mr. Camilleri, Chief
Executive Officer) and eight non-executive Directors,
who do not have day-to-day responsibility within the
Company or the Group. Pursuant to Article 17 of
the Articles of Association, the general authority to
represent the Company shall be vested in the Board
of Directors and the Chief Executive Officer.
The Board of Directors appointed the following
internal committees: (i) an Audit Committee, (ii)
a Governance and Sustainability Committee, and
(iii) a Compensation Committee. On certain key
industrial matters, the CEO is supported by the
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
Name
John Elkann
Louis C. Camilleri
Piero Ferrari
Sergio Duca
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
Year of Birth
Position
1976
1955
1945
1947
1975
1969
1964
1952
1973
1964
Chairman and 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
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 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:
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.
• Delphine Arnault;
• Giuseppina Capaldo;
• Eddy Cue;
• Sergio Duca;
• Maria Patrizia Grieco;
• Adam Keswick; and
• Elena Zambon.
The Board of Directors has resolved to grant the
following titles:
• John Elkann: Chairman of the Company;
• Louis C. Camilleri: Chief Executive Officer;
• Piero Ferrari: Vice-Chairman; and
• Sergio Duca: Senior Non-Executive Director.
In addition, Piero Ferrari is considered independent
within the meaning of the NYSE rules.
Directors are expected to prepare themselves for
and to attend all Board of Directors meetings, the
annual general meeting of shareholders and the
115
Annual Report 2019 FERRARI N.V.
/ Board of Directors
meetings of the committees on which they serve, with the understanding that, on occasion, a Director may
be unable to attend a meeting.
From January 1, 2019 to the year-end there were four meetings of the Board of Directors. The attendance
rate at these meetings was 95.42 percent.
The current composition of the Board of Directors is the following:
John Elkann (Chairman of the Company and 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., board member of The Economist Group and board member of
PartnerRe Ltd. Mr. Elkann is a trustee of MoMA. He also serves as Chairman of the Giovanni Agnelli Foundation.
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. (formerly
Philip Morris Companies, 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 served on
the Board of Directors of América Móvil, S.A.B. de C.V. from April 2011 to March 2019, 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 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.
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 2011 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
116
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 member of the Statutory Auditors of BasicNet S.p.A. since 2017 and director of Tofaþ Türk
Otomobil Fabrikasý Anonim Þirketi, as well as the Chairperson of the corporate governance committee,
member of the risk management committee and member of the audit committee of Tofaþ Türk Otomobil
Fabrikasý Anonim Þirketi. He also serves as member of the board of Nedcommunity association since May
2019 and 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
Statutory Auditors of Enel S.p.A. from April 2010 until May 2019, 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.
Delphine Arnault (non-executive Director)
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 SE 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 and Christian Dior SE in April 2012.
Delphine Arnault previously served as a director of both Havas and 21st Century Fox from 2013 to 2019.
Born in 1975, French citizenship.
117
Annual Report 2019 FERRARI N.V.
/ Board of Directors
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.
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.
118
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Adam Keswick (non-executive Director)
Mr Adam Keswick joined the Board in 2007 and was Deputy Managing Director of Jardine Matheson from
2012 to 2016. He was appointed chairman of Matheson & Co. in August 2016. He has held a number
of executive positions since joining the Jardine Matheson Group from N M Rothschild & Sons in 2001,
including group strategy director and, thereafter, group managing director of Jardine Cycle & Carriage
between 2003 and 2007. Mr Keswick is a director of Dairy Farm, Hongkong Land, Jardine Strategic and
Mandarin Oriental. He is also a Director of Ferrari N.V., and Vice-Chairman of the Supervisory Board
of Rothschild & Co, and is a Director of Yabuli China Entrepreneurs Forum. Mr Keswick attended Eaton
College and Edinburgh University where he received his Master of Arts degree in 1995.
Born in 1973, British citizenship.
Elena Zambon (non-executive Director)
Ms. Zambon is President of Zambon S.p.A. - Pharmaceutical Multinational established in 1906 in Vicenza
(Italy) and present in 20 countries with subsidiaries in Europe, America and Asia - on top of being President
of Fondazione Zoé - Zambon Open Education. Elena is a member of the Board of Directors of UniCredit,
Ferrari N.V. and IIT- Istituto Italiano di Tecnologia; former member of the Board of Directors of Italcementi
SpA, Fondo Strategico Italiano, Italian sovereign fund, Akros Finanziaria S.p.A. and Salvagnini SpA. She
is Board Member and Vice Chair of FBN - Family Business Network, and Honorary President of AIdAF -
Italian Family Business. She is also Vice President of Aspen Institute Italia; member of the Advisory Board
of Politecnico di Milano School of Management and member of the Bocconi University Campaign Board;
Board Member of the Centro Internazionale di Studi di Architettura Andrea Palladio. After obtaining the
degree in Business Economics at Bocconi University, Elena joined Citibank N.A. In 1994 she founded the
Family Office of the Zambon family, which in 2000 was transformed into a Multi Family Office, creating
Secofind, of which she is still Honorary President. Elena Zambon has been knighted by the President of
Italy, she is an Accademico Olimpico and she received the “Olivettiano Entrepreneur” Award, the “Marisa
Belisario” Award, the “Masi Prize” and the “Leonardo Prize”.
Born in 1964, Italian citizenship.
119
Annual Report 2019 FERRARI N.V.
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 ten Directors are female and six 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.
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, and acting under authority delegated
by the Board of Directors, with respect to:
(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.
A Director may only be represented by another
Director authorized in writing. A Director may not
act as a proxy for more than one other Director.
The Audit Committee currently consists of Mr.
Duca (Chairperson), Ms. Capaldo and Mrs.
Grieco, each of whom is independent within the
120
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
meaning of the Dutch Corporate Governance
Code. The Audit Committee is elected by the
Board of Directors and is comprised of at least
three non-executive Directors. Audit Committee
members are also required (i) not to have any
material relationship with the Company or to
serve as auditors or accountants for the Company,
(ii) to be “independent”, for purposes of NYSE
rules, Rule 10A-3 of the Exchange Act and the
Dutch Corporate Governance Code, and (iii) to
be “financially literate” and have “accounting
or selected financial management expertise” (as
determined by the Board of Directors). At least
one member of the Audit Committee shall be a
“financial expert” as defined by the Sarbanes-
Oxley Act and the rules of the U.S. Securities
and Exchange Commission and section 2(3) of
the Dutch Decree on the Establishment of an
audit committee. No Audit Committee member
may serve on more than four audit committees
for other public companies, absent a waiver
from the Board of Directors, 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 2019 the Audit Committee met eight times
and the average attendance rate was 95.83
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, and acting under
authority delegated by the Board of Directors
,with respect to: (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. Capaldo (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 2019 the Compensation Committee met once
with 100 percent attendance of its members at
such meeting. The Compensation Committee
reviewed the remuneration report and the
implementation of the Remuneration Policy.
The amended Shareholders’ Rights Directive
(2017/828/EU) has been incorporated in
Dutch law effective per December 1, 2019. The
Compensation Committee considered the impact
thereof on the Company’s Remuneration Policy
and the Company’s Remuneration Report. On
the basis of this assessment, the Compensation
Committee proposed to the Board of Directors to
amend the Remuneration Policy in 2020. Further
information on the activities of the Compensation
Committee are included in the remuneration
report.
121
Annual Report 2019 FERRARI N.V.
The Governance and
Sustainability Committee
The Governance and Sustainability Committee is
responsible for, among other things, assisting and
advising the Board of Directors, and acting under
authority delegated by the Board of Directors,
with respect to: (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. Cue. 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 2019 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
122
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.
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Conflict of Interest
relevant information regarding business and other
relationships.
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
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
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.
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
(€0.01) per share to FCA, Piero Ferrari and FCA
shareholders holding FCA special voting shares
prior to the separation including Exor, in addition
to Ferrari common shares.
As of February 7, 2020, Exor held approximately
24.0 percent of our outstanding common shares
and approximately 35.8 percent of the voting
power in us, Piero Ferrari held approximately 10.2
percent of our outstanding common shares and
approximately 15.2 percent of the voting power
in us and public shareholders hold approximately
49.0 percent of the voting power in us. The
123
Annual Report 2019 FERRARI N.V.
/ Loyalty Voting Structure
percentages of voting power above are calculated
based on the number of outstanding shares net of
treasury shares.
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 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.
124
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Pursuant to Section 12 of the Terms and Conditions,
any amendment to the Terms and Conditions (other
than merely technical, non-material amendments
and unless such amendment is required to ensure
compliance with applicable law or regulations or
the listing rules of any securities exchange on which
the Ferrari common shares are listed) may only be
made with the approval of the general meeting of
shareholders of Ferrari.
At any time, a holder of Qualifying Common Shares
or Electing Common Shares may request the de-
registration of such shares from the Loyalty Register
to enable free trading thereof in the Regular Trading
System. Upon the de-registration from the Loyalty
Register, such shares will cease to be Electing
Common Shares or Qualifying Common Shares
as the case may be and will be freely tradable and
voting rights attached to the corresponding special
voting shares will be suspended with immediate
effect and such special voting shares shall be
transferred to Ferrari for no consideration (om niet).
A shareholder who is a holder of Qualifying
Common Shares or Electing Common Shares must
promptly notify the Agent and Ferrari upon the
occurrence of a “change of control” as defined in
the Ferrari Articles of Association, as described
below. The change of control will trigger the de-
registration of the relevant Electing Common Shares
or Qualifying Common Shares or the relevant
Ferrari common shares in the Loyalty Register. The
voting rights attached to the special voting shares
issued and allocated in respect of the relevant
Qualified Common Shares will be suspended upon
a direct or indirect change of control in respect of
the relevant holder of such Qualifying Common
Shares that are registered in the Loyalty Register.
For the purposes of this section a “change of control”
shall mean, in respect of any Ferrari shareholder
that is not an individual (natuurlijk persoon), any
direct or indirect transfer in one or a series of related
transactions as a result of which (i) a majority of the
voting rights of such shareholder, (ii) the de facto
ability to direct the casting of a majority of the votes
exercisable at general meetings of shareholders of
such shareholder and/or (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
125
Annual Report 2019 FERRARI N.V.
/ Loyalty Voting Structure
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 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 2019, the
issued share capital of the Company consisted
of 193,923,499 common shares, representing
126
approximately 75.38 percent of the aggregate
issued share capital, and 63,349,111 special
voting shares, representing approximately 24.62
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
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
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.
127
Annual Report 2019 FERRARI N.V.
/ General Meeting of Shareholders
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.
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.
128
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 report;
b. the remuneration report;
c. at least every four years after adoption of the
remuneration policy, the remuneration policy;
d. the policy of the Company on additions to
reserves and on dividends, if any;
e. granting of discharge to the Directors in respect
of the performance of their duties in the relevant
financial year;
f. the appointment of Directors;
g. if applicable, the proposal to pay a dividend;
h. if applicable, discussion of any substantial
change in the corporate governance structure of
the Company; and
i. 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
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
by a proxy duly authorized in writing, provided
they shall notify the Company in writing of their
wish to be represented at such time and place
as shall be stated in the notice of the meetings.
For the avoidance of doubt, such attorney is also
authorized in writing if the proxy is documented
electronically. The Board of Directors may
determine further rules concerning the deposit of
the powers of attorney; these shall be mentioned in
the notice of the meeting.
The Company is exempt from the proxy rules under
the Exchange Act.
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
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.
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
129
Annual Report 2019 FERRARI N.V.
/ General Meeting of Shareholders
shareholder and other person attending a meeting
by the use of electronic means of communication
and identified in accordance with the above shall
be registered on the attendance list by the Board of
Directors. In the event that it concerns an attorney of
a shareholder or another person entitled to attend
the meeting, the name(s) of the person(s) on whose
behalf the attorney is acting, shall also be stated.
The chairman of the meeting may decide that the
attendance list must also be signed by other persons
present at the meeting.
The 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.
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
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.
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
The general meeting of shareholders or the Board
of Directors if so designated in accordance with
the Articles of Association, shall decide on the
130
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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, as the case may be, shall decide when
passing the resolution to issue shares or rights to
subscribe for shares in which manner the shares
shall be issued and, to the extent that rights of pre-
emption apply, within what period those rights may
be exercised.
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
131
Annual Report 2019 FERRARI N.V.
/ Internal Control System
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,
132
control activities, information and communication,
and monitoring) in achieving those objectives.
The Company has a system of administrative and
accounting procedures in place that ensure a high
degree of reliability in the system of internal control
over financial reporting.
The approach adopted by the Company for the
evaluation, monitoring and continuous updating
of the system of internal control over financial
reporting, is based on a ‘top-down, risk-based’
process consistent with the COSO Framework.
This enables focus on areas of higher risk and/
or materiality, where there is risk of significant
errors, including those attributable to fraud,
in the elements of the financial statements and
related documents. The key components of the
process are:
• identification and evaluation of the source and
probability of material errors in elements of
financial reporting;
• assessment of the adequacy of key controls in
enabling ex-ante or ex-post identification of
potential misstatements in elements of financial
reporting; and
• verification of the operating effectiveness of
controls based on the assessment of the risk of
misstatement in financial reporting, with testing
focused on areas of higher risk.
Identification and evaluation of the risk of
misstatements which could have material effects
on financial reporting is carried out through a
risk assessment process that uses a top-down
approach to identify the organizational entities,
processes and the related accounts, in addition to
specific activities, which could potentially generate
significant errors. Under the methodology
adopted by the Company, risks and related
controls are associated with the accounting
and business processes upon which accounting
information is based.
Significant risks identified through the assessment
process require definition and evaluation of key
Annual Report 2019 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
fraud that could result in misstatements in financial
reporting) or detective (i.e., designed to reveal
errors or fraud that have already occurred). They
may also be classified as manual or automatic,
such as application-based controls relating to the
technical characteristics and configuration of IT
systems supporting business activities.
An assessment of the design and operating
effectiveness of key controls is carried out through tests
performed by the Internal Audit department, both at
group and subsidiary level, using sampling techniques
recognized as best practices internationally.
The assessment of the controls may require the
definition of compensating controls and plans
for remediation and improvement. The results of
monitoring are subject to periodic review by the
manager responsible for 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
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
officers. Our Code of Conduct is posted on our
website at http://corporate.ferrari.com/sites/ferrari15ipo/
files/codice_condotta_ferrari_eng_def.pdf. If the provisions
of our Code of Conduct that apply to our principal
executive officer, principal financial officer or principal
accounting officer are amended, or if a waiver is
granted, we will disclose such amendment or waiver.
The Code of Conduct represents a set of values
recognized, adhered to and promoted by the
Company which understands that conduct based on
the principles of diligence, integrity and fairness is an
important driver of social and economic development.
The Code of Conduct is a pillar of the governance
system which regulates the decision-making
processes and operating approach of the Company
and its employees in the interests of stakeholders.
The Code of Conduct amplifies aspects of conduct
related to the economic, social and environmental
dimensions, underscoring the importance of dialog
with stakeholders. Explicit reference is made to
the UN’s Universal Declaration on Human Rights,
the principal Conventions of the International
Labor Organization (ILO), the OECD Guidelines
for Multinational Enterprises and the U.S. Foreign
Corrupt Practices Act (FCPA). The Code of Conduct
was amended to include specific guidelines relating
to: the Environment, Health and Safety, Business
Ethics and Anti-corruption, Suppliers, Human
Resource Management, Respect of Human Rights,
Conflicts of Interest, Community Investment, Data
Privacy, Use of IT and Communications Equipment,
Antitrust and Export Controls.
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
133
Annual Report 2019 FERRARI N.V.
/ Code of Conduct
principles underlying the Code of Conduct and
related guidelines, as well as compliance with
local regulations, particularly those related to
corruption, money-laundering, terrorism and other
crimes constituting liability for legal persons.
The Company closely monitors the effectiveness
of and compliance with the Code of Conduct.
Violations of the Code of Conduct are usually
determined through, among other things: periodic
activities carried out by the Internal Audit department
of the Group; reports received in accordance with the
whistleblowing management procedures; and checks
forming part of the standard operating procedures.
The Internal Audit department investigates violations
of the Code of Conduct during standard periodic
or specific audits. Periodic reporting is provided
to the Chairman and CEO as well as to the Audit
Committee. For all Code of Conduct violations, the
disciplinary measures taken are commensurate with
the seriousness of the case and comply with local
legislation. The relevant corporate departments are
notified of violations, irrespective of whether criminal
action is taken by the authorities.
Insider Trading Policy
As of January 3, 2016 the Company’s Board of
Directors adopted an insider trading policy setting
forth guidelines and recommendations to all
Directors, officers and employees of the Group
with respect to transactions in the Company’s
securities. This policy, which also applies to
immediate family members and members of the
households of persons covered by the policy, is
designed to prevent insider trading or allegations
of insider trading, and to protect the Company for
integrity and ethical conduct.
Diversity Policy
The Board of Directors adopted a diversity policy
for the Board of Directors (the “Diversity Policy”)
134
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 Diversity Policy gives weight to the following
diversity factors in Board of Directors composition:
age, gender, expertise, work and personal background
and nationality. The Company considers each of these
aspects key drivers to support the above mentioned
goals and to achieve sufficient diversity of views and
the expertise needed for a proper understanding of
current affairs and longer-term risks and opportunities
related to the Company’s business. The Board of
Directors and its Governance and Sustainability
Committee consider such factors when evaluating
nominees for election to the Board of Directors and
during the annual performance assessment process.
The Company has achieved all 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; (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; and
(c) 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. In 2019 also the target
relating to nationality has been achieved.
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 2.2.4 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 and Chair of
the Board of Directors, 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.
Mr. John Elkann, our Executive Chairman and
Executive Director, 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 in this committee follows inter alia 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.
135
Annual Report 2019 FERRARI N.V.
Report of the non-executive
directors
Introduction
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”.
This is the report of the non-executive Directors
of the Company over the financial year 2019, 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).
Supervision by the non-executive Directors
The non-executive Directors supervise the policies
carried out by the executive Directors and the general
affairs of the Company and its affiliated enterprise.
In so doing, the non-executive Directors have also
focused on the effectiveness of the Company’s internal
risk management and control systems, the integrity
and quality of the financial reporting and Ferrari’s
long-term business plans, the implementation of such
plans and the risks associated.
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.
136
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
During 2019, there were four meetings of the Board of Directors. Portions of these meetings took place
without the executive Directors being present. The average attendance at those meetings was 95.42 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
Piero Ferrari(2)
Sergio Duca(1)
Delphine Arnault
Giuseppina Capaldo(1) (2)
Eddy Cue(1) (2)
Lapo Elkann(3)
Amedeo Felisa(3)
Maria Patrizia Grieco
Adam Keswick
Elena Zambon(2)
4/4
4/4
4/4
4/4
2/4
4/4
4/4
1/1
1/1
4/4
4/4
4/4
0
0
0
8/8
0
8/8
0
0
0
7/8
0
0
Governance and
Sustainability
Committee
1/1
0
0
1/1
0
1/1
0
0
0
0
0
0
Compensation
Committee
0
0
1/1
0
0
0
1/1
0
0
0
0
1/1
(1) In 2019, the Governance and Sustainability Committee held one meeting, on February 26. Effective as of July 24, 2019 Mr. Eddy Cue was
appointed member of the Governance & Sustainability Committee instead of Mr.Sergio Duca.
(2) In 2019, the Compensation Committee held one meeting on February 26. Effective as of July 24, 2019 Ms. Giuseppina Capaldo was
appointed member and Chairperson of the Compensation Committee instead of Ms. Elena Zambon.
(3) Mr. Lapo Elkann and Mr. Amedeo Felisa were not re-appointed by the AGM held on April 12, 2019.
During these meetings, key topics discussed were,
amongst others: the Group’s strategy, the Group’s
financial results and reporting, sustainability,
acquisitions and divestments, executive
compensation, technological developments, risk
management, updates on legal and compliance,
risk management, human resources with the Head
of Human Resources, implementation of the
Remuneration Policy and the Remuneration Report.
considered to be independent under the Dutch
Corporate Governance Code. Mr. Piero Ferrari
is considered not to be independent under the
Dutch Corporate Governance Code, since he
holds approximately 10 percent of our outstanding
common shares. 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.
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 eight non-executive Directors
are considered to be independent under the NYSE
definition while seven non-executive Directors are
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 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.
137
Annual Report 2019 FERRARI N.V.
/ Report of the non-executive directors
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 2019, the Governance and Sustainability
Committee’s periodic assessments took place
during the meeting held on February 26. During
that meeting, the Governance and Sustainability
Committee focused on the results of the periodic
assessments and the performance of the Board
of Directors, its committees and the individual
Directors, keeping also into account the self-
assessment prepared by each Director. During
such meeting the Governance and Sustainability
Committee dealt also with the directors’
nomination process, the assessment of Directors’
qualifications, the size and composition of the
Board of Directors and the committees, and the
recommendations for Directors’ election.
The non-executive Directors have been regularly
informed by each committee as referred to in best
practice provision 2.3.5 of the Dutch Corporate
Governance Code and the conclusions of those
committee were taken into account when drafting
this report of the non-executive Directors.
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 were able to review
and evaluate the performance of the Audit
Committee, the Governance and Sustainability
Committee and the Compensation Committee
The non-executive Directors have supervised
the performance of the Audit Committee, the
Compensation Committee and the Governance and
Sustainability Committee.
138
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2019,
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 18, 2020
John Elkann
Executive Chairman
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 18, 2020
Board of Directors
John Elkann
Louis C. Camilleri
Piero Ferrari
Sergio Duca
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
139
Annual Report 2019 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 238 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 166 authorized dealers operating 187 points of sale as of the end of 2019.
Our Strategy
Our strategy focuses on maintaining our leading position in the luxury performance sports car market, while
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
141
Annual Report 2019 FERRARI N.V.
Materiality Matrix and Stakeholder Engagement
Materiality Matrix of Ferrari Group
In 2019, we updated the analysis of the most relevant sustainability topics(1) (materiality analysis), for the
Group and our stakeholders to better reflect sustainability context developments, changes in our drivers
and goals, as well as our 2019-2022 plan, which led to the creation of our 5 sustainability strategic pillars:
exceeding expectations; reducing environmental footprint; being the employer of choice; creating and
sharing value with the community and; proactively fostering best practice governance. This process has been
complemented through a qualitative analysis by our Senior Management Team (“SMT”), which resulted in
the materiality matrix below.
Materiality Matrix of Ferrari Group
t
n
a
t
r
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
Environmental
commitment
Education
Responsible
communication
and marketing
Diversity,
inclusion and
non-discrimination
Work-life balance and
employees wellness
Local
communities
Legend:
Proactively fostering best practice governance
Industrial
relations
Relationship
with sponsors
Relationship with
Institutions and Authorities
Exceeding expectations
Being the employer of choice
Reducing environmental footprint
Creating and sharing value with the community
Very important
Important
RELEVANCE FOR FERRARI GROUP
The materiality matrix highlights the assessed topics that are most relevant for the Group and our
stakeholders and therefore represent our strategic sustainability priorities.
(1) The potentially relevant topics are identified by taking into consideration sector benchmarking analyses, UN Sustainable Development Goals
(SDGs), and relevant international studies and publications.
142
Annual Report 2019
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, environmental
responsibility is also a key aspect. Compared to last year’s materiality matrix, we incorporated the material
topics “Attention to enthusiasts” and “Sport fair play” into “Image and brand reputation” and “Ethical
business conduct”, respectively.
This materiality matrix translated into our sustainability approach characterized by:
EXCEEDING EXPECTATIONS:
Drive technological innovation while pursuing
excellence in design and craftsmanship to fuel the
passion of our customers and fans.
PROACTIVELY FOSTERING
BEST PRACTICE GOVERNANCE:
Maintain Ferrari’s corporate governance and risk
management systems aligned with best practices to ensure
an ethical business conduct while providing superior and
sustainable returns to our shareholders.
Material topic
• Image and brand reputation
• Innovation: technology and design
Material topic
• Ethical business conduct
• Risk management and Compliance
• Quality and safety of products and customers
• Supply chain responsible management
• Customer satisfaction
• Relationship with Institutions and Authorities
• Responsible communication and marketing
• Relationship with sponsors
SDGs
SDGs
BEING THE EMPLOYER OF CHOICE:
Provide an inclusive, educational and inspiring work environment
to unleash everyone’s passion, creativity and talent.
REDUCING ENVIRONMENTAL FOOTPRINT:
Increase our environmental awareness to continuously
set and implement related programs and actions.
Material topic
• Human capital
• Health and safety
• Work-life balance and employees wellness
• Diversity inclusion and non-discrimination
Material topic
• Emissions
• Environmental commitment
SDGs
SDGs
CREATING AND SHARING VALUE WITH THE
COMMUNITY:
Encourage strategic partnerships and the creation of
positive externalities for all stakeholders.
Material topic
• Economic and financial performance
• Education
• Local communities
• Industrial relations
SDGs
143
Annual Report 2019 FERRARI N.V.
/ Materiality Matrix and Stakeholder Engagement
The above mentioned material topics have been linked to the 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.
MOST SIGNIFICANT
MATERIAL
TOPICS
PURSUED
POLICIES
IMAGE AND BRAND
REPUTATION
Enhancing and protecting the
value and exclusivity of the Ferrari
brand.
KEY RISKS
AND
RISK TRENDS
RELEVANT
CHAPTERS OF THE
SUSTAINABILITY
REPORT
• Brand image
Ferrari Group
ETHICAL BUSINESS
CONDUCT
Maintaining a culture dedicated to
integrity, responsibility and ethical
behavior.
• Non-compliance with
laws, regulations, local
standards (including
tax) and codes
Proactively fostering
best practice
governance
INNOVATION:
TECHNOLOGY
AND DESIGN
HUMAN
CAPITAL
EMISSIONS
Being focused on developing
new technologies and distinctive
designs.
• Brand image
• Competition
Exceeding expectations
Creating an inspiring working
environment, enabling the
development of everyone’s talent
• Attraction,
development and
retention of talents
Being the employer of
choice
Focusing on researching
technologies that further reduce
emissions and preparing for a
low-emission future
• Non-compliance with
laws, regulations, local
standards (including
tax) and codes
Reducing
environmental
footprint
QUALITY AND SAFETY
OF PRODUCTS AND
CUSTOMERS
Designing and manufacturing
while keeping the safety of our
customers and other road users
always in mind
• Non-compliance with
Exceeding expectations
laws, regulations, local
standards (including
tax) and codes
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
Proactively fostering
best practice
governance
Being devoted to the highest level
of customer satisfaction.
• Brand image
• Competition
Enforcing a safety-first culture.
• Attraction,
development and
retention of talents
Exceeding expectations
Being the employer of
choice
Implementing a responsible
and efficient supply chain
management;
Encouraging the adoption of
sustainable practices and sharing
among our business partners and
suppliers
• Non-compliance with
laws, regulations, local
standards (including
tax) and codes
Proactively fostering
best practice
governance
CUSTOMER
SATISFACTION
HEALTH AND
SAFETY
SUPPLY CHAIN
RESPONSIBLE
MANAGEMENT
144
Annual Report 2019 Board Report | Financial Statements | Other Information |
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 2019, we carried out various stakeholder engagement activities in order to enhance the voice of our
stakeholders. We engaged with our employees by explaining what sustainability stands for within Ferrari
while taking into consideration their priorities. We also engaged with our top investors to better understand
what they consider to be the main ESG drivers for Ferrari, as well as participating in a variety of ESG
questionnaires such as the SAM Corporate Sustainability Assessment (CSA) and the CDP Climate Change
questionnaire. 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 that helps us identifying our sustainability risks and opportunities, as well as
supporting management in achieving the Company’s objectives.
145
Annual Report 2019 FERRARI N.V.
Proactively fostering best
practice governance
Our Governance and Sustainability
Committee
The Governance and Sustainability Committee is
responsible for, among other things, assisting and
advising the Board of Directors, and acting under
authority delegated by the Board of Directors,
with respect to: (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. Giuseppina Capaldo and Mr. Eddy Cue.
Effective as of July 24, 2019 Mr. Eddy Cue
was appointed member of the Governance &
Sustainability Committee instead of Mr. Sergio
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 2019 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.
Integrity of Business Conduct
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 the Ferrari Group 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 comprises the following
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
applications 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.
146
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The Code of Conduct is completed with the
following Ferrari Practices: (i) Conducting Business,
(ii) Interacting with External Parties, (iii) Managing
our Assets and Information and (iv), Protecting our
Workforce. These Practices, which further explain
the Code of Conduct, can be consulted by all
employees on the Company intranet.
Internal Audit investigates possible violations of the
Code of Conduct during standard periodic audits
and through specific Business Ethics Compliance
(BEC) audits. In 2019, BEC surveys were carried
out to measure employees’ awareness on: Code
of Conduct, Whistleblowing Procedure, Gift and
Entertainment Expenses Management. In light of
the results, dedicated training activities have been
implemented accordingly.
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 and Compliance Departments,
through the analysis of the reports received in
accordance with the Ethics Helpline Management
Procedures and through checks which form 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
languages 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 and Compliance Departments.
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 then reported based on the
necessary escalation process (the relevant internal
functions are notified of the violations).
On November 15, 2017, Italian law for
whistleblowing, which contains provisions for the
147
Annual Report 2019 FERRARI N.V.
/ Proactively fostering best practice governance
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 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, 2019
Category
Conducting business
Interacting with external parties
Managing our assets and information
Protecting our workforce
Total
(*) Including 2 WB received in 2017
Reports received
in 2019
Total 2019
reports closed(*)
1
4
-
16
21
1
4
2
9
16
Reports in which
a violation was
confirmed
1
1
-
2
7
Periodic reporting is provided to the CEO as well as to the Audit Committee.
148
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 last publication (“Enterprise Risk Management - Integrating Strategy and
Performance”) of the COSO Framework (Committee of Sponsoring Organizations of the Treadway
Commission) as the foundation of its enterprise risk management (ERM). 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. Our risk management framework
is discussed with the Group’s Audit Committee at least on an annual basis.
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”.
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 revenue and
demand for our cars. 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, as
well as the appeal of our dealerships and stores, the success of our client activities, and 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 we offer our customers.
Topics
Ethical business conduct
Emissions
Risk management and Compliance
Quality and safety of products and customers
Supply chain responsible management
Health and safety
Key risks and risk trends
NON-COMPLIANCE WITH LAWS, REGULATIONS,
LOCAL STANDARDS (INCLUDING TAX)
AND CODES
149
Annual Report 2019 FERRARI N.V.
/ Proactively fostering best practice governance
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
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 the 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 the potential enthusiasm
of Ferrari clients for the brand and their perception
of our cars, which could have an adverse effect on
our business, results of operations and financial
condition.
A detailed description of how we respond to
these risks can be found in the section “Risk, Risk
Management and Control Systems” of the 2019 Annual
Report.
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. The 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 relationships and 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.
Conflict minerals
Responsible Supply Chain
Our focus on excellence, in terms of luxury,
quality, aesthetics and performance, requires us
to implement a responsible and efficient supply
chain management in order to select suppliers
and partners that are able to meet our high
standards. 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 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”).
150
Annual Report 2019 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
the objective, inter alia, of (1) minimizing the trade in
Conflict Minerals that directly or indirectly finance
or benefit armed groups anywhere in the world;
and (2) enabling legitimate 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 strengthened our engagement
with suppliers, communicating our position on
responsible sourcing and our expectations in terms
of responsible supply chains. 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
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
• require all of 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 2018, 93% of Ferrari’s direct suppliers by
purchased value submitted responses to our survey.
We are strongly committed to increase the coverage
of our analysis and the response rate through
targeted actions.
Exceeding expectations
Innovation is in our DNA and we will continue
pushing boundaries to respond to customers’
desires, always setting new standards in the
“Ferrari way”.
Research, Innovation and Technology
Innovation drives products and processes, which
represents 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
or adapted into our road cars, such as the hybrid
configuration of the SF90 Stradale. 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
151
Annual Report 2019 FERRARI N.V.
/ Exceeding expectations
Position Evo, for instance, rewards ideas put forward
by individual staff members. In 2019, we received
around 20,000 suggestions from employees, more
than doubling from the previous year.
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.
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 elegant and powerful lines
typical of Ferrari cars.
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 control
The R&D investments and expenses to fuel the
growth of the Group, as described above, are
represented in the charts below.
EXPENSED R&D AND CAPEX
CAPEX
R&D AND CAPEX (€M)
1,265
1,167
706
639
948
392
556
528
559
330
16
145
169
271
16
93
162
852
803
745
630
330
415
356
447
342
510
271
359
706
639
24
330
20
318
352
301
392
18
185
189
356 342
25
17
154
185
141
176
2013
2014
2015
2016
2017
2018
2019
2013
2014
2015
2016
2017
2018
2019
R&D expensed to the P&L
CAPEX
PP&E
Captalised R&D
Other Intangible Assets
152
Annual Report 2019 FERRARI N.V.
Customer Satisfaction
adopted for evaluating the quality of service and
satisfaction of our events.
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
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 chart below shows the flow between clients,
dealers and Ferrari.
FERRARI CLIENTS
Clients Inquiries
Replies to Inquiries
Market Research Activities
(questionnaires & reports)
Q uestionnaires feedbacks
and inquiries
Q uestionnaires
MARKETING
INTELLIGENCE
CUSTOMER CARE
Questionnaires
Questionnaires feedbacks
Scorecard & Report
DEALERS
AREA
MANAGER
Report & Analysis
DEVELOPMENT
(for future models)
PRODUCTION
(for future models)
We have developed an integrated system between our customer care, dealers, marketing
department and area managers to track all contacts with clients, manage inquiries and share
the results of customer and dealer satisfaction analysis.
154
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Privacy and data protection
Customer personal data and information is one 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 towards 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 our
personal data at global scale, including but not
limited to the General Data Protection Regulation
“GDPR” (EU Regulation no. 2016/679).
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 and privacy law requirements, such as
the implementation of ICT and security systems
(e.g. system collecting consents and privacy
notices, back-end systems managing direct
personal data etc.), the enhancement of internal
policies and procedures (e.g. data breach policy,
data retention policy etc.), the guarantee of an
effective and prompt response to requests from
data subjects, the update of privacy notices,
drafting of operating instructions for authorized
persons within the Company as well as the
designation of internal privacy referents within
Company departments.
Regular 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
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 further
enhance 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
155
Annual Report 2019 FERRARI N.V.
/ Vehicle Safety
most recent trends and developments in terms of
simplifying and easing the interaction between the
car and the driver to avoid any distraction. In 2019,
we extended ADAS to our entire fleet, after the
initial introduction on the GTC4Lusso in 2018.
In 2019, we launched the SF90 Stradale, the
first hybrid series-production car in Ferrari’s
history. This new model encapsulates the most
advanced technologies developed in Maranello,
including the HMI, which with its track derived
“eyes on the street, hands on the steering wheel”
philosophy takes on a truly central role. The
result is an HMI (Human-Machine Interface) that
is a complete departure from previous models.
The “hands-on-the-steering-wheel” philosophy
has consistently driven the development of the
human-machine interface in every Ferrari F1 car
and its subsequent gradual transfer to its road-
going sports cars. The SF90 Stradale’s steering
wheel completes that transfer process from the
racing competition and also ushers in a new era
by introducing a series of touch commands that
allow the driver to control virtually every aspect
of the car without ever taking their hands off
the wheel. The Head Up Display is another part
of the innovative HMI and allows various data
to be projected onto the windshield within the
driver’s field of vision so that their attention is not
distracted from driving.
156
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Being the employer of choice
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 53 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.
This is why the working environment and wellbeing
of the Company’s employees are among our most
important priorities, representing the key focus of
our “Formula Uomo” initiatives.
Our complex in Maranello, a state-of-the-art
work environment, was designed to reinforce
the synergistic relationship between work and
results. With the needs of our employees firmly in
mind, our manufacturing facilities are specifically
created to combine carefully designed lighting
systems, projected to maximize the amount of
natural light, and several external and internal
green areas. Thermal comfort throughout the
factory is also a crucial requirement; since 2013,
the in-plant foundry is equipped with a cooling
system that makes it air-conditioned and climate
controlled. Special measures aimed at reducing the
environmental impact and noise through the use
of advanced technologies are also in place. As an
example, the design of our Machining Department
is aimed at providing the workplace with maximum
acoustic comfort thanks to noise reduction
solutions (source and reverberation).
To promote an active lifestyle among our employees,
we rely on our “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 also provided to
managers and children of all employees aged
5 to 15. In 2019, “Formula Benessere Donna”,
a preventative healthcare program specifically
designed for women’s health, was launched. All
female employees are offered the opportunity of
undergoing a free gynecological examination as well
as mammary and thyroid gland ultrasound scans.
Our attention to the promotion of health and safety
among our employees goes beyond what is required
by law, and to this effect, special workshops are
organized for employees to raise awareness on the
importance of these topics.
To foster a sense of belonging among employees
and their families and to offer concrete support
to working parents with the demanding duties of
childcare during school holidays, we have launched
the program “Formula Estate Junior”. This initiative
consist of a free day camp for employees’children
aged 3 to 13, with various programs including sports,
outdoor activities, excursions and workshops. The
program, at its 10th edition, has a duration of 11
weeks (with a shorter 4-day version taking place
157
Annual Report 2019 FERRARI N.V.
/ Being the employer of choice
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 119 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 2019, our scholarship program, named after
our founder “Enzo Ferrari”, was awarded to
56 talented students. The awards were handed
by our Chairman during an event that saw the
participation of all Ferrari Senior Managers.
Moreover, in 2019 we reimbursed almost 600
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).
We offer additional benefits to our employees in
five different areas - food, free time, wellness, travel
and personal services - including personalized loans
at competitive rates at the internal branch of a
local bank, special rates for the employees’ housing
needs and discounts at the Ferrari Museums, Ferrari
Stores and at the Ferrari company outlet.
To foster the sense of belonging, the Company
organizes multiple events. In September 2019,
the Ferrari Family Day, the open day dedicated
to Ferrari employees and their families, was
attended by 24,000 people. During the same
month, the first edition of the Universo Ferrari
event in Maranello welcomed employees during
two dedicated evenings. More than 2,600 people
among employees and their guests attended
the Ferrari Challenge championship event Finali
Mondiali at the Mugello Circuit. Approximately
4,400 people among employees and their family
members attended the 2019 edition of Natale
Bimbi.
All these benefits are provided to all of our
employees.
158
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 offer 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 57,600 hours (up 11.8% vs. 2018)
of training have been provided right across the
Company’s employees in 2019. What makes
Ferrari’s craftsmanship unique is the direct transfer
of knowledge and expertise from senior to junior
workers, which in our manufacturing process
takes place directly on the job since we believe in
constantly maintaining excellence through “learning
by doing”.
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.
A Training Plan with three specific objectives is in
place:
• 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
Annual Report 2019 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,
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 125 employees) are also responsible
for the Pit Stop and Pole Position programs
among their shift colleagues.
In 2019, we consolidated the activities started
in the previous year, with the three main areas
of focus being: 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. Additionally, in 2019 we started a
specific training focusing on managerial and
organizational skills necessary to meet our
strategic plan.
• To shape and prepare the managerial class of the
future for the business, innovation, management
and human capital development challenges.
- In 2019, 40 Ferrari talents, from all across the
organization, started the second edition of the
Ferrari Corporate Executive MBA, organized in
partnership with the Bologna Business School.
The objective of the masters program 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
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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. During the course of the 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.
The innovation of 2019 was gaining access to the
Harvard Manage Mentor e-learning platform. The
training offer, provided through this platform, has
been customized according to our needs and the
following three lines of development: to integrate
this platform with the Performance and Leadership
Management system, to give employees, especially
newcomers, the basic managerial skills that we
consider essential requirements and to adapt
professional development paths based on
employees’ career levels.
In addition, an online training campaign is
launched every 3 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 2019, a similar mandatory online
campaign was launched on GDPR (General Data
Protection Regulation) training.
159
Annual Report 2019 FERRARI N.V.
/ Being the employer of choice
In 2019 we consolidated the activities started the
previous year: we introduced the new employees to
the “Ferrari way” to ensure know-how continuity
and continued to build employee skills in order
to meet the challenges of the future: 15 new cars
between 2019-2022, 5 of which were presented
during 2019, including the SF90 Stradale, our first
hybrid series-production car.
AVERAGE HOURS OF TRAINING PER EMPLOYEE
Average Hours
2019
13.45
2018
2017
13.40
10.51
or indirectly through communications and social
media, nourishing our recruitment pipeline. In
2019, alongside our graduate project “Ferrari
F1 Engineering Academy”, active since 2015, we
launched three more Academy programs: “Ferrari GT
Manufacturing Academy”, “Ferrari GT Engineering
Academy” and “Ferrari GT Marketing and Sales
Academy” with dedicated communication at
universities, integrating on-line testing as well as
dedicated assessment centers managed in Maranello
to ensure that the most suitable applicants have the
opportunity to join the Ferrari team.
Talent Recruitment and Employee
Retention
The excellence, that our products and our brand
embody, is what attracts and retains the best talents
worldwide.
At Ferrari, recruitment and selection is about sourcing
the right qualities and skills that will represent the
backbone of our 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 bring onboard the individuals which
are aligned with our requirements and values. We
received in excess of 45,000 applications during
2019, including specific as well as spontaneous
applications from around the world for engineering,
technical, marketing and financial positions.
We also undertake exchange programs with top
universities around the world to engage with
students, professors, career offices and a network
of professionals in order to identify talents for the
future. We offer company insight presentations,
testimonials by Ferrari staff, selected case studies at
university campus and, for partner universities we
offer the opportunity to visit the Ferrari facilities.
These activities allow us to transmit the key values
of the company, and therefore to engage directly,
To ease employees into their new jobs, Ferrari
provides a two-day induction program. The first day
is dedicated to introducing the Company culture and
mission, as well as guiding new employees 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 the improvement of quality,
efficiency and environmental sustainability. The
teams are then ranked based on the 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 for individual
absenteeism rates. In 2019, each employee received
around Euro 5,500.
A huge part 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. Workers undergo a different review, which is
based on regular assessments aimed at developing
their internal career path.
160
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
In 2019, we further increased the number of
employees who received a performance evaluation
through our specific online tool: around 1,400
employees were evaluated on our system. This
online tool allows us to track and share with
employees and management the results of the
assessment, including strengths and improvement
areas as well as the professional aspirations and the
final evaluation.
EMPLOYEES WHO RECEIVED A REGULAR PERFORMANCE
AND CAREER DEVELOPMENT REVIEW BY EMPLOYEE
CATEGORY
Employee category
Managers and
Senior Managers
Middle Managers
White Collars
Workers
2019
86%
73%
66%
-%
2018
2017(2)
88%
72%
44%
-%
86%
69%
35%
-%
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 carried out in 2018 of the key positions
covered by our employees 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.
Occupational Health and Safety
We are particularly focused on the safety of our
people and we are dedicated to the prevention of
accidents at work(3). Our hazard identification, risk
assessment and incident investigation processes
are developed in accordance with the highest
international and national voluntary standards
and normative requirements on health and safety.
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 our health
and safety management system, current laws
and best practices. In 2019, Ferrari S.p.A. further
improved its health and safety management system
obtaining the ISO 45001:2018 certification(4)
two years in advance of the mandatory migration
from the OHSAS 18001 standard (March 2021).
The Mugello Circuit S.p.A. is certified OHSAS
18001:2007 since 2013(5).
HOURS OF HEALTH AND SAFETY TRAINING PER YEAR
AND NUMBER OF PARTECIPANTS(6)
Employee category
2019
2018
2017
Training hours
Number of
participants
22,313
21,358
15,386
2,927
2,439
1,656
(2) The 2017 data by employee category has been restated to align the subsidiaries’ categories to the headquarters’ definition.
(3) In this section, we refer to Ferrari S.p.A., which operates primarily in the Maranello and Modena plants and to Mugello Circuit S.p.A., which
operates the Mugello racing circuit.
(4) The ISO 45001:2018 certification of Ferrari S.p.A. includes the Maranello and Modena plants where we produce all of our vehicles and spare parts.
(5) Ferrari S.p.A and Mugello Circuit S.p.A include 94.1% of all Ferrari Group employees.
(6) The figures provided refer to all employees and external staff of Ferrari S.p.A and Mugello Circuit S.p.A.. 2018 and 2017 data do not include
Mugello Circuit S.p.A..
161
Annual Report 2019 FERRARI N.V.
/ Occupational Health and Safety
We continue to make significant investments
in safety at work: improvements in the existing
structures and specific training have allowed us to
achieve significant results. Mandatory health and
safety training is provided to all new hires during
the second day of the induction program, while
periodic sessions are developed for all employees.
We provide employees who test our cars with specific
on-track driving training to make sure they have all
the skills required to perform emergency maneuvers,
if necessary. As shown in the table above, in 2019
the hours of training are in line with 2018, mainly
due to the mandatory periodic training update for
employees started last year. In addition, a constantly
updated dynamic health protocol is in place and
a specific health and safety section is part of the
training program of the Department Team Leaders.
The table below shows the trend in accidents over the
last three years(7). In 2019, the injury rate was 1.5, with
10 occurrences (12 in 2018) and no high-consequence
work-related injuries or fatalities occurred. Each work-
related injury is analyzed to determine the cause and
appropriate measures to avoid recurrence have been
implemented. The main types of work-related injury
include fractures and burns.
NUMBER OF INJURIES AND INJURY RATE(8)
Total number of injuries
of which more than 3 days of absence(excl. high-consequence injury and fatalities)(9)
of which high-consequence injury
which fatalities
Total injury rate(10)
of which more than 3 days of absence(excl. high-consequence injury and fatalities)(11)
of which high-consequence injury
of which fatalities
Hours worked
2019
10
7
0
0
1.5
1.1
0
0
2018
12
8
1
0
2.2
1.4
0.2
0
2017
7
5
0
0
1.3
0.9
0
0
6,471,529
5,524,896 5,417,338
During the course of 2019, no injuries have been recorded for agency workers in the Maranello and Modena
plants, and Mugello racing circuit.
(7) For 2019, we reported our injury data using the new GRI Standard 403, published by the Global Reporting Initiative (GRI) in 2018, that
replaces the previous version published in 2016. For comparison, the 2017 and 2018 data have been restated following the new standard. For
previously published data, please refer to the 2018 Sustainability Report.
(8) The figures provided are referred to all the employees of Ferrari S.p.A. and Mugello Circuit S.p.A., with the exception of Managers and Senior
Managers; this category of employees did not incur any injuries in 2019. 2018 and 2017 data do not include Mugello Circuit S.p.A.. All data
does not include first aid medical treatments.
(9) Injuries that must be reported to INAIL (Italian National Institute for Insurance against Accidents at Work), according to Italian legislation.
(10) The injury rate is the ratio of the number of injuries reported to the number of hours worked (including overtime), multiplied by 1,000,000,
excluding commuting accidents.
(11) Injuries that must be reported to INAIL (Italian National Institute for Insurance against Accidents at Work), according to Italian legislation.
162
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Our employees in numbers
As of December 31, 2019, Group(12) employees were 4,285, an increase of 11% compared to December 31,
2018 (3,851). We expect to continue growing over the next few years in order to meet our strategic plan.
NUMBER OF EMPLOYEES
Number of employees
Total
of which women
December 31, 2019
December 31, 2018 December 31, 2017
4,285
14.0%
3,851
13.0%
3,380
12.3%
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, 2019
December 31, 2018
Managers and Senior Managers
Middle Managers
White Collars
Workers
Total
Male
Female
86.2%
85.5%
76.6%
92.2%
86.0%
13.8%
14.5%
23.4%
7.8%
14.0%
Total
123
566
1,417
2,179
4,285
Male
Female
90.0%
85.9%
78.3%
92.0%
87.0%
10.0%
14.1%
21.7%
8.0%
13.0%
Total
110
545
1,146
2,050
3,851
As indicated in the table above, in 2019, compared to the previous year, the percentage of female employees
grew from 13% to 14%. This was mainly due to an increase in the “Managers and Senior Managers” and
“White Collars” categories.
PERCENTAGE OF EMPLOYEES BY AGE GROUP
Total
<30
16.0%
30-50
66.1%
>50
Total
17.9%
4,285
<30
13.7%
30-50
70.4%
>50
Total
15.9%
3,851
December 31, 2019
December 31, 2018
The majority of the workforce is between the age of 30 and 50 (66.1%). The percentage of workers under 30
has increased from 13.7% to 16.0%, highlighting our capability to attract young talents.
(12) In this chapter, “The Group” refers to all the legal entities indicated as consolidated line by line by Ferrari N.V. in 2019 Annual Report.
163
Annual Report 2019
FERRARI N.V.
/ Occupational Health and Safety
NEW EMPLOYEE HIRES AND EMPLOYEE TURNOVER
GROUP
EMPLOYEE HIRED
Number of employees
Turnover %
EMPLOYEE TURNOVER
Number of employees
Turnover %
ABSENTEE RATE IN ITALY(13)
Employees
2019
627
14.6%
2019
193
4.5%
2019
1.37%
2018
639
16.6%
2018
168
4.4%
2018
1.60%
The absenteeism rate for 2019 was 1.37%, a relevant decrease from the past few years.
(13) 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 N.V., Ferrari S.p.A. and Mugello circuit S.p.A. employees.
164
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Reducing environmental
footprint
Our most significant environmental efforts are
deployed through efficiencies in the manufacturing
processes and a program for the reduction of
polluting emissions.
Our environmental responsibility
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(14) (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 716,000 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 20 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.
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.
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.
Plants and circuits
Environmental management systems
We have invested heavily to minimize our
environmental impact since 2001, when the
Company was given the ISO 14001 certification for
our plants in Maranello and Modena.
In 2016, we obtained the renewal of the
certification of our environmental management
system according to the new standard ISO
14001:2015. In addition, in 2007 we obtained
and renewed the Integrated Environmental
Authorization. As mentioned in our Environmental
Policy, our effort is to minimize the negative impact
of our activities on natural resources and the
global environment.
The Mugello Circuit S.p.A. obtained and renewed
the certification for the environmental management
system with ISO 14001 and the EMAS
(Eco-Management and Audit Scheme).
Efficient energy use
Our culture embraces a rational use of energy,
which is mainly used for the manufacturing of
cars and engines. Over the years, the Group has
strived to lower its energy consumption and to
minimize its environmental impact, adopting
innovative solutions and using renewable energy
sources for its manufacturing facilities. In 2008,
we installed our first solar panels and subsequently
increased capacity in 2011 and 2015. Since 2014,
Ferrari S.p.A. has been purchasing electricity with
Guarantee of Origin certificates.
(14) 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).
165
Annual Report 2019 FERRARI N.V.
/ Reducing environmental footprint
In addition, from 2009, we started using electricity along with hot and cold water generated by the
trigeneration plant(15). In 2019, the trigeneration plant produced 83% of the electricity needed for the
Maranello plant, while the remaining 17% originated from renewable sources(16).
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)(17)
Diesel (for motor room and other uses)(18)
Total electricity bought for consumption
From renewable sources
From non-renewable sources
Electricity self-produced for consumption(19)
Electricity sold
Total
2019
1,623,478
1,126,190
433,987
53,701
9,600
116,354
110,199
6,155
3,344
(9,250)
1,733,926
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
The total energy consumption within the Group for 2019 was 1,733,926 GJ, with an increase of 4.8% from
2018 (1,654,895 GJ). In light of the efficiencies we always strive to implement, this increase was lower than
our production growth.
We are 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 2019 we completed
the office area and workshop area of the New Technical Center, while the engine and hybrid test benches
will be completed in 2020.
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 94,615 tCO2eq in 2019, in line with 91,773 tCO2eq in 2018,
92,609 tCO2eq in 2017 and 93,086 tCO2eq in 2016(20).
(15) 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.
(16) Thanks to our photovoltaic system and the purchase of Guarantee of Origin certificates.
(17) 2019 data include Ferrari’s leased car fleet.
(18) 2019 data include Ferrari’s leased car fleet.
(19) From photovoltaic.
(20) 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 in the ISPRA Report “Atmospheric emission factors of CO2 and other greenhouse
gases in the electricity sector”.
166
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
DIRECT AND ENERGY INDIRECT GHG EMISSIONS
Unit of measurement: tCO2eq
Scope 1(21)
Scope 2 (market-based method)(22)
Scope 2 (location-based method)(23)
GHG Protocol (WRI, WBCSD) definitions
2019
93,789
826
11,603
2018
91,001
772
9,219
2017
91,789
820
9,822
2016
92,319
767
9,105
In 2019, our Scope 2 market-based GHG emissions are 826 tons CO2eq. If Ferrari had not purchased
Guarantee of Origin certificates these emissions would have been higher by 14,785 tons(24).
Other significant air emissions are related mainly to volatile organic compounds (VOCs) released during
vehicle manufacturing. In addition, NOX, SOX and dust emissions are constantly monitored.
OTHER SIGNIFICANT AIR EMISSIONS(25)
Unit of measurement: Kg
NOX
SOX
Volatile Organic Compounds (VOCs)
Dusts
2019
43,991
1,073
43,393
2,155
2018
59,613
1,378
50,913
4,260
Furthermore, a water-based painting process was introduced in 2004 with the aim of reducing VOC emissions.
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 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).
(21) 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.
(22) Market-based indirect greenhouse gas emissions, measured in tons of CO2, were calculated using the Residual Mix emission factors
indicated in “2018 European Residual Mixes, V.1.2”, 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.
(23) Location-based indirect greenhouse gas emissions, measured in tons of CO2, were calculated using the emission factor indicated in
“Confronti internazionali; 2017”, published by Terna. The 2016 and 2017 data have been re-calculated using the same emission factors used
for 2018 data.
(24) Calculated using the market-based method and considering an alternative scenario in which Ferrari does not purchase Guarantee of Origin
certificates for electricity.
(25) Only air emissions of the plants of Maranello and Modena have been considered. The 2018 data referring to Dusts has been restated to
include Modena plant.
167
Annual Report 2019 FERRARI N.V.
/ Reducing environmental footprint
WASTE BY TYPE(26)
NON HAZARDOUS WASTE
Unit of measurement: tons
Total
HAZARDOUS WASTE
Unit of measurement: tons
Total
2019
8,498.8
2018(27)
8,414.9
2019
2,676.6
2018(28)
2,809.4
Total waste for 2019 was equal to 11,175.4 tons, in line with 2018, notwithstanding a production increase.
This result was mainly achieved through two initiatives that were introduced in 2018: the first is that we
started recovering sand from the foundry to sell 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 longer-lasting
cooling lubricant. Since the inception of these two activities, there has been a waste reduction of 10.2%.
Logistics
We produce all of our vehicles and spare parts in our Maranello and Modena plants, however, our network
of third party dealers comprises 187 point of sales around the world. A meticulous work is constantly
carried out to optimize logistical operations with the aim of reducing the impact on the environment and
associated air emissions.
Water management
We are well aware of the importance of a responsible management of water and, even if our plants are not
located in areas exposed to high or extremely high overall water risks(29), 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 comes from municipal water supplies and wells: as of today, no water bodies are
directly affected by the withdrawal of water.
WATER WITHDRAWAL BY SOURCE
Unit of measurement: m3
Surface water
Wells
Municipal water or other water utilities
Total
2019
-
460,230
166,011
626,241
2018
-
501,665
166,900
668,565
(26) Data includes only waste generated by Ferrari S.p.A. in the plants of Maranello and Modena and third-party warehouses: waste of Mugello
racing circuit has an impact of less than 2% of the total waste produced by the Group.
(27) For a better reporting of the total waste generated by the Group, waste generated by Ferrari S.p.A. and managed through third-party
warehouses, not included in the previous Report, have been added to 2018 data.
(28) For a better reporting of the total waste generated by the Group, waste generated by Ferrari S.p.A. and managed through third-party
warehouses, not included in the previous Report, have been added to 2018 data.
(29) Source: WRI Aqueduct 2014 (World Resources Institute, 2014).
168
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
We treat our wastewater in accordance with all applicable laws and regulations. All the wastewater of our
plants is always monitored and channeled in the public sewage system and not directly into water bodies.
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 treatments.
WATER DISCHARGE BY DESTINATION
Unit of measurement: m3
Effluents / Water bodies
Public sewer system
Total
Vehicles environmental impact
2019
-
369,426
369,426
2018
-
383,861
383,861
Part of the environmental impact of our activities is related to our product lifecycle. Ferrari cars are
perceived as collectibles and therefore the number of cars demolished each year is very scarce. In addition,
the cars are generally not considered means of transportation.
Vehicles emissions
We are subject to a variety of laws and regulations that, among others, are related to car emissions and fuel
consumption. Ferrari vehicles must comply with extensive regional, national and local laws and regulations,
as well as industry self-regulations (including those that regulate vehicle safety). However, we currently
benefit from certain regulatory exemptions because we qualify as a Small Volume Manufacturer or similar
designation in most of the jurisdictions where we sell our cars (for more details refer to the “Regulatory
Matters” paragraph of 2019 Annual Report).
We continue focusing on researching technologies that further reduced emissions, such as hybrid engines.
We started working with hybrid technology back in 2011, when we introduced the HY-KERS (Kinetic Energy
Recovery System) technology in our F1 cars, which was transferred in 2013 to LaFerrari, our first road car
to use hybrid technology. Further enhancing the hybrid technologies in 2014, we introduced hybrid power
units in our F1 cars and, in 2019 we launched the SF90 Stradale, our first hybrid series-production car.
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 emissions by 15%(30) (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 enhanced our efforts to combine improved performance with reductions in CO2 emissions.
(30) 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.
169
Annual Report 2019 FERRARI N.V.
/ Reducing environmental footprint
We have undertaken an important program to develop hybrid and electric technology. One of the more
relevant topics of this generation, the concept of the car in an era of climate change, will likely be an
opportunity for us. Innovation runs within Ferrari, so the challenge of building a Ferrari for a low-emissions
future is one that we are already embracing.
In 2019, we achieved a 35% 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.
Vehicle’s 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.
(31) 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. 2019: provisional fleet average emissions of CO2. 2018: preliminary data
released by the European Commission.
170
Annual Report 2019CO2 Emissions [g/km]Registration year2019E201820172016201520142013201220112010200820092007Average Specific CO2 Emissions - Ferrari EU Fleet(31)450430410390370350330310290270250(E) Estimate-35% Creating and sharing value with
the community
Our goal is to create and share long-term
value with our stakeholders. On the one side,
the economic value generated and distributed
provides an indication on how we created wealth,
on the other there are plenty of intangible
resources and initiatives that contribute to
the value creation processes. In this context,
community engagement and involvement with the
local territory are of fundamental importance for
us, with particular reference to Maranello and
Modena, where all our cars are manufactured. To
keep alive the spirit of Ferrari and the story of its
founder Enzo Ferrari, two different museums have
been established, attracting every year thousands
of visitors from all over the world to the heart of
the Italian “Motor Valley”.
Ferrari & Education
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. 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 aims to promote education in the local
community also at secondary school level. Ferrari has
established long-term relationships with technical
schools in Maranello and other towns nearby.
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
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 between Ferrari and our community of
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 have formed clubs around the world.
Today the company has over 221 officially-
recognized Clubs in 24 nations. An incredible mix
of different nationalities, cultures and lifestyles all
united by one enduring passion: Ferrari.
171
Annual Report 2019 FERRARI N.V.
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 2019 (from January
1, 2019 to December 31, 2019) to ensure transparent and structured communication with our stakeholders.
This Statement was prepared in accordance with the Dutch Civil Code, and with the Dutch Decree on Non-
Financial Information (Besluit bekendmaking niet-financiële informatie), which is a transposition of Directive
2014/95/EU ‘Disclosure of non-financial and diversity information’ into Dutch law. 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.
DUTCH DECREE ASPECTS
INTERNAL REFERENCE - CHAPTER / PARAGRAPH
Business model
• Our Business
• Corporate Governance
• Proactively fostering best practice governance / Integrity of Business Conduct
• Proactively fostering best practice governance / Anti-Bribery and Corruption
• Proactively fostering best practice governance / Whistleblowing
• Being the employer of choice / Working environment
• Being the employer of choice / Training and talent development
• Being the employer of choice / Occupational health and safety
• Reducing environmental footprint / Environmental management systems
• Risk Factors
• Proactively fostering best practice governance / Sustainability Risks
• Risk, Risk Management and Control Systems
• Reducing environmental footprint / Plants and circuits
• Reducing environmental footprint / Vehicles environmental impact
• Our Business
• Proactively fostering best practice governance / Integrity of Business Conduct
• Proactively fostering best practice governance / Responsible supply chain
• Exceeding expectations / Research innovation technology
• Exceeding expectations / Customer Satisfaction
• Exceeding expectations / Vehicle safety
• Creating and sharing value with the community / Ferrari & education
• Being the employer of choice / Working environment
• Being the employer of choice / Training and talent development
• Being the employer of choice / Talent recruitment and Employee Retention
• Being the employer of choice / Occupational Health and Safety
• Being the employer of choice / Our employees in numbers
• Proactively fostering best practice governance / Integrity of Business Conduct
• Proactively fostering best practice governance / Responsible supply chain
• Proactively fostering best practice governance / Conflict Minerals
• Proactively fostering best practice governance / Integrity of Business Conduct
• Proactively fostering best practice governance / Anti-Bribery and Corruption
• Proactively fostering best practice governance / Whistleblowing
• Proactively fostering best practice governance / Integrity of Business Conduct
• Proactively fostering best practice governance /Responsible Supply Chain
• Proactively fostering best practice governance / Integrity of Business Conduct;
• Proactively fostering best practice governance / Conflict Minerals
Policies and due diligence
Principal risks and their
management
Thematic aspects
Environmental matters
Social matters
Employee matters
Respect for human rights
Fight against corruption and bribery
Supply Chain
Conflict minerals
172
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
the Note 3 “Scope of consolidation”). Environmental data and information is reported for our principal
manufacturing facility in Maranello, for our second plant in Modena and for our Mugello racing circuit. 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 Annual
Report 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.
Annual Report 2019
173
173
Annual Report 2019 FERRARI N.V.
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 last publication (“Enterprise
Risk Management - Integrating Strategy and
Performance”) of the COSO Framework
(Committee of Sponsoring Organizations of the
Treadway Commission) as the foundation of its
enterprise risk management (ERM). 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. Our risk management framework
is discussed with the Group’s Audit Committee at
least on an annual basis.
174 Annual Report 2019
174
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Risk Appetite
The risk appetite of Ferrari, (i.e. the level of risk that Ferrari is willing to accept to achieve its objectives),
has been defined based on the parameters identified below and will be applied to our strategy, Code of
Conduct, company values and policies. Ferrari does not rank by importance the individual risks identified
in this section because it believes such ranking would be an arbitrary exercise as all risks mentioned have
relevance for the Group and the business. The type of risks identified are as follows:
Risk category
Risk description:
Risk appetite
Strategic
risks (S)
Moderate
Risks which affect or
are created by Ferrari’s
business strategy and
could affect Ferrari’s
long-term positioning and
performance.
Operational
risks (O)
Risks impacting the
internal processes,
people, systems and/or
external resources of the
organization and affect
Ferrari’s ability to execute
its business plan.
Moderate
Ferrari is willing to accept moderate risks in order to
achieve its strategic objectives. Ferrari recognizes the
need of continuing to invest in research and development
to design and build technically innovative, aesthetically
iconic and highly performing cars able to deliver the
most “fun to drive” experience and feature design
excellence. Strategic risks are taken in a responsible
way considering both stakeholders’ interests in order to
preserve its brand exclusivity, an extraordinary level of
demand and the unique customer experience and the
current technological and regulatory trends.
Ferrari seeks to minimize execution risks on the plan
by implementing a manufacturing system capable of
flexibly meeting expected targets, maintaining a quality
of products and services in line with Ferrari’s customers
expectations, developing and retaining talents within
the organization, securing business continuity as well as
production line performances and ensuring the adequacy
of our business partners.
Financial
risks (F)
Risks include areas such
as valuation, currency,
liquidity and impairment
risks.
Low
Ferrari has a cautious approach with respect to
financial risks. Ferrari continuously seeks to improve
and strengthen its financial position to generate the
required cash to finance its operations and reward its
stakeholders.
Compliance
risks (C)
Risks of non-compliance
with laws, regulations,
local standards, code of
conduct, internal policies
and procedures.
Zero
tolerance
Ferrari does not tolerate infringements and abides
to all applicable laws and regulations through the
implementation of preventive measures, the rigorous
enforcement of its internal Code of Conduct to ensure
that ethics and integrity are respected and the promotion
of its values.
Reputational
risks (R)
Risks which affect Ferrari’s
Brand image, credibility
and/or integrity
Zero
tolerance
Ferrari strives to protect and enhance its reputation by
mitigating all the potential threats that could impact the
organization's reputation, credibility and the operational
integrity, while constantly increasing its brand awareness.
175
Annual Report 2019 FERRARI N.V.
Key Risks and Risk Trends
Ferrari assesses risks according to their potential impact, likelihood and the 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 (S/R)
The preservation and enhancement of the value of the Ferrari brand is crucial in driving revenue and
demand for our cars. 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, as
well as the appeal of our dealerships and stores, the success of our client activities, and our general profile,
including our brand’s image of exclusivity.
The prestige, identity and appeal of the Ferrari brand also depend on the continued success of the Scuderia
Ferrari racing team in the Formula 1 World Championship.
Key aspects
Response plans:
Preserving brand value
Success of the Formula 1 team
Selective licensees of the Ferrari brand.
Monitor and maximize residual values of Ferrari cars.
Selective franchising partners.
Dealer score cards.
Ferrari Academy (in-house training center for dealers).
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.
176
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 of customers’ orders and waiting lists.
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 we
offer 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
Response plans:
Margin pressure
Shipments
Focus on client relationships, including Maranello Experience, selected
participation for new model launches and Ferrari clubs.
Close contact with dealers and clients programs.
Support residual values with the financing of pre-owned cars.
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.
177
Annual Report 2019 FERRARI N.V.
/ Dependence on manufacturing facilities in Maranello and Modena and relationship with single
source suppliers (O)
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.
Key aspects
Response plans:
Dependence on two manufacturing
facilities located in close proximity
to each other
Investments in the last 15 years to reduce the effect of possible damage from
earthquakes.
High quality reputable suppliers assessed by the Supplier Risk Management.
Single source suppliers for
components
Dependence on limited number of
suppliers for raw materials
Identifying alternative suppliers for critical components.
IT Disaster recovery.
Insurance coverage.
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.
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 the potential enthusiasm
of Ferrari clients for the brand and their perception of our cars, which could have an adverse effect on our
business, results of operations and financial condition.
Key aspects
Response plans:
Requirement for skilled engineers
Preparing current successful employees for future key positions.
Requirement to attract and retain
the best drivers
Improving talent development program for key resources.
Talent reviews and succession plans.
Management potential
Retention plans.
Labor unions
Training and development.
178
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
basis
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.
HSE (Health, Safety and
Environment)
Monitoring, reviewing, reporting and adapting to relevant changes in rules and
regulations.
Tax
Human Resources
Legal
Anti-Bribery & Corruption
Code of Conduct
Implement and update global HSE system.
Risk-based reviews of operations by HSE professionals.
Strengthening IT infrastructure for standard operational procedures.
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.
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 Euro while we receive the majority of our
revenues in currencies other than Euro.
179
Annual Report 2019 FERRARI N.V.
/ Exchange rate fluctuations, interest rate changes, credit risk and other market risks (F)
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 2019, the
value of commercial activity exposed to changes in the Euro/U.S. Dollar exchange rate accounted for about
53 percent of the total currency risk from commercial activity. Ferrari uses derivative financial instruments
(primarily forward currency contracts, currency swaps and currency options) to hedge between 50 and 90
percent of certain exposures subject to foreign currency exchange risk for up to twelve months or longer to
the extent justified by specific business considerations. Derivatives financial instruments are executed for
hedging purposes only.
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 because the relative exposure is not material.
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.
Ferrari has a positive cash flow that almost offsets the exposure to liquidity risk. The Group uses
various forms of financing to cover the funding requirements of its industrial activity and for financing
offered to customers and dealers. Those form of financing, that include bank facilities (committed and
uncommitted), access to capital markets and private placements, are aimed at limit the Group exposure to
interest rate fluctuation. Approximately 39 percent of the Group’s total debt bears floating interest rates
and Ferrari enters into interest rate caps as requested by certain of its asset-backed financing agreements
for its financial services activities. Considering the current capital structure of the Group, Ferrari has not
entered into any interest rate derivatives other than the interest rate caps mentioned, however, the exposure
is regularly monitored.
Ferrari’s most important financial asset is cash. It is allocated on bank and deposit accounts with primary
financial institutions and money market funds. It is a group policy to continuously monitor counterparty
risk and limit concentration of financial asset to a maximum of 25% 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 3,800 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 or overdue credit positions.
The amount of the write-down is based on an estimate of the recoverable cash flows, their timing, recovery
costs and the fair value of any guarantees received.
Further information is included in Note 31 to the Consolidated Financial Statements.
Key aspects
Response plans:
Exposure to foreign exchange
movements from non-Euro
related sales
Exposure to interest rate
movements on financial assets and
liabilities
Foreign exchange hedging instruments authorized within the Company’s
foreign exchange risk management policy.
Monitoring interest rate movements for hedging purposes and execution of
the foreseen interest rate caps.
Credit approval policies applied to dealers and retail clients.
Credit risk of default or insolvency
Personal guarantees and security of the vehicle.
180
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Internal Control over Financial Reporting
Starting from October 2015 Ferrari N.V. is listed on 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.
181
Annual Report 2019 FERRARI N.V.
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, this section provides the remuneration paid to
these individuals for the year ended December 31, 2019. The form and amount of compensation received
by the directors of Ferrari for the year ended December 31, 2019 was determined in accordance with the
remuneration policy. The Compensation Committee oversees the remuneration policy, remuneration plans
and practices of Ferrari and recommends changes when appropriate. The Committee is solely comprised of
non-executive directors from the Board of Directors who are independent pursuant to the Dutch Corporate
Governance Code. Through this document, 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.
This Compensation Report consists of two sections:
1. Remuneration strategy: our current remuneration policy (which is available on our corporate website)
governs compensation for both executive and non-executive directors. In 2019, Ferrari revised some
remuneration features in order to provide an enhanced alignment with shareholders’ interests and
long-term sustainability of our business. Our current remuneration strategy further strengthens such
alignment and adopts some new features to reflect developing best practices in the Dutch Corporate
Governance Code.
2. Implementation of remuneration strategy: details how remuneration features have been implemented
during the 2019 financial year and actual remuneration received by each executive and non-executive
director. In 2019, there was no deviation from the Remuneration Policy.
1. Remuneration Strategy for the 2019 Financial Year
Remuneration principles
The main goal of Ferrari’s remuneration strategy 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 and taking into account the social context around the Company, as outlined below.
182
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 publically disclosed objectives
PAY FOR
PERFORMANCE
Compensation must reinforce our performance driven culture
and meritocracy
COMPETITIVENESS
Compensation set in manner to attract, retain and motivate
highly qualified executives and very effective leaders
LONG-TERM SHAREHOLDER
VALUE CREATION
Targets triggering any variable compensation payment aligned to
interests of shareholders and business sustainability
COMPLIANCE
Ferrari compensation policies and plans are designed to comply
with applicable laws and corporate governance requirements
183
Annual Report 2019 FERRARI N.V.
/ 1. Remuneration Strategy for the 2019 Financial Year
Overview of remuneration elements
The structure of the remuneration applicable to our executive directors, non-executive directors and other
key management under Ferrari’s 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 for 2019 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 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
- Executive Chairman: €250,000
annually
- CEO: €700,000 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
- Executive Chairman: Fixed
remuneration is set in relation
to the delegated powers
assigned over the term and
positions held in line with the
reference market
- 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
Short-Term
Incentive Plan
• Achieve the annual financial,
operational and other targets
and additional business
priorities
• Motivate and guide executives’
activities over the short-term
period
2019 Short-term incentives
targets:
- Based on achievement of
annually predetermined
performance objectives
- Executive Chairman: The Chairman
compensation package for
2019 did not include short-term
incentives
- CEO: The CEO compensation
- Annual financial, operational
and other identified objectives
package for 2019 did not include
short-term incentives
- Equity awards to promote
creation of value for the
shareholders
- PSUs and RSUs: vesting in
installments
- PSUs: 50% linked to TSR
compared to Peer Group, 30%
linked to EBITDA; 20% linked
to a qualitative factor related
to the sustainability and
innovation of business
- SMT Members: variable incentive
percentage of fixed remuneration
based on the position held
- Executive Chairman: Target pay-
opportunity is 300% and maximum
pay-opportunity is 400% of base
salary, in accordance with the long-
term shareholder value creation
and pay for performance principles
of Ferrari’s remuneration policy
- CEO: Target pay-opportunity
is 643% and maximum pay-
opportunity is 857% of base salary
- SMT Members: variable incentive
percentage of fixed remuneration
based on the position held
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
184
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Component
Purpose
Terms and Conditions
Amounts
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
Customary fringe benefits such
as company cars and drivers,
personal/home security, medical
insurance, accident insurance,
tax preparation and financial
counseling
Share
Ownership
Guidelines
• Ensures alignment with
shareholders’ interests
- Executive Directors, other
- Executive Chairman and CEO: 6
SMT members, other senior
leaders and key employees
are expected to build up
share ownership over a
period of 5 years
times net base salary
- SMT Members: 3 times net base
salary
Executive directors’ pay-mix
In light of the foregoing considerations, our Executive Chairman’s and CEO’s compensation packages are
structured as follows:
Chairman Target Amounts
Chairman Maximum Amounts
25%
20%
75%
80%
CEO Target Amounts
CEO Maximum Amounts
13%
10%
87%
90%
Fixed Remuneration
Short-Term Incentives
Long-Term Incentives
185
Annual Report 2019 FERRARI N.V.
/ 1. Remuneration Strategy for the 2019 Financial Year
As shown in the charts above, the Chairman and
CEO compensation packages for 2019 do not
include short-term incentives.
companies in similar industries with whom we are
most likely to compete for the executive talent.
Our remuneration policy is aligned with Dutch
law and the Dutch Corporate Governance Code.
In particular, the Dutch Corporate Governance
Code requires listed companies to disclose certain
information about the compensation of their Board
and Executive Directors. Through this remuneration
strategy, Ferrari fulfills the requirements of the Code
ensuring full transparency with our shareholders.
2019 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, while
considering the executive directors’ view concerning
the level and structure of their own remuneration.
Performance targets are set by the Compensation
Committee to be both achievable and stretching,
considering Ferrari’s strategic priorities and the
automotive landscape. The performance measures
that are used for variable components have been
chosen to better support Ferrari’s strategy, long-
term interests and sustainability. We establish target
compensation levels using a market-based approach
and we monitor compensation levels and trends in
the market. In addition, we periodically benchmark
our executive compensation program against other
186
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 2019.
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 short-term incentive plan is designed
to motivate its beneficiaries to achieve challenging
targets, by recognizing individual contributions to the
Group’s results on an annual basis. The Compensation
Committee believes that it is appropriate to use
a balance of corporate financial targets, strategic
objectives and individual performance objectives.
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
The methodology for Short Term Incentive Calculation is the following:
Base Salary
x
STI%
Adjusts
opportunity
based on
business results
Links directly
to individual
current
contribution
(x)
$
To determine the executive directors’ annual
performance bonus, the non-executive directors,
upon proposal of the Compensation Committee:
• approve the executive directors’ targets and
maximum allowable bonuses;
• select the appropriate metrics and their weighting;
• set the stretch objectives;
• consider any unusual items in a performance year
to determine the appropriate measurement of
achievement; and
• approve the final bonus determination.
In 2019, the Compensation Committee defined
the Company Performance Factor including four
metrics:
• Net Revenues (20%);
• Consolidated Adjusted EBIT (20%);
• Consolidated EBITDA (20%);
• Industrial Free Cash Flow (40%).
The Compensation Committee established
challenging goals for each metric, each of which
pays out independently. There is no minimum
bonus payout. As a result, if none of the threshold
objectives are satisfied, there is no bonus payment.
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.
As described above, our executive directors
(Executive Chairman and CEO) were not
included in the Short-Term Incentive Plan in
2019, as the focus of their role is primarily on
the long-term view.
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
CEO, the Executive Chairman and SMT members of
the Group to increasing shareholder value.
187
Annual Report 2019TargetBonusSTIPayoutIndividualPerformanceFactorCompanyPerformanceFactorXX= FERRARI N.V.
/ 1. Remuneration Strategy for the 2019 Financial Year
Equity Incentive Plan 2019-2021
On February 26, 2019, the Board of Directors approved a new equity incentive plan covering a performance
period from 2019 to 2021. The Equity Incentive Plan 2019-2021 is consistent with the Company’s business
plan presented at the Capital Markets Day in September 2018. Under the Equity Incentive Plan 2019-2021,
a combination of performance share units (“PSUs”) and retention restricted share units (“RSUs”), each
representing the right to receive one Ferrari common share, have been awarded to the Executive Chairman
and the CEO of the Company (as approved by Annual General Meeting on April 12, 2019), as well as to
members of the SMT and other key employees of the Group.
The Equity Incentive Plan 2019-2021 has the features described below.
The PSU awards are based on the achievement of defined key performance indicators relating to: i) a
relative total shareholder return (“TSR”) target (which is relative to the TSR of a peer group), ii) an EBITDA
target, and iii) an innovation target. Each target is measured independently of the other targets and relates
to separate portions of the aggregate awards. The RSU awards are service-based and will vest conditional
on the Chairman’s and CEO’s continued employment with the Company at the time of vesting.
Type of Equity Long-Term
Incentive Vehicle
Proportion of Equity
Long-Term Grant
Vesting Cycle
Performance Metrics
(Weighting)
Executive
Chairman
Performance
Share Units
(PSUs)
67%
3-years cliff vesting
1) TSR (50%)
2) EBITDA (30%)
3) Innovation Performance
Goal (20%)
CEO
Retention Restricted
Share Units
(RSUs)
Performance
Share Units
(PSUs)
Retention Restricted
Share Units
(RSUs)
33%
67%
33%
3-years cliff vesting
N/A
3-years installment vesting:
- 12% after 1 year
- 12% after 2 years
- 76% after 3 years
1) TSR (50%)
2) EBITDA (30%)
3) Innovation Performance
Goal (20%)
3-years installment vesting:
- 33% after 1 year
- 33% after 2 years
- 34% after 3 years
N/A
The number of PSU awards earned is determined based on the level at which the three performance
criteria described below are achieved. At the end of vesting period, the total number of PSUs earned is
equal to the sum of:
• the number of PSUs earned under the TSR payout factor, plus;
• the number of PSUs earned under the EBITDA payout factor, plus;
• the number of PSUs earned under the Innovation Performance Goal.
188
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Metrics
(weight)
TSR (50%)
Metrics
(type)
Financial
criteria
Benchmark
Rationale
Link between pay and performance
TSR is tracked for both Ferrari
and the companies in the
defined New Peer Group
calculating starting and ending
prices as an average of the 30
calendar days prior to grant
and award date.
New Peer
Group*
(8 companies:
Ferrari, Aston
Martin,
Burberry,
Hermes,
Kering, LVMH,
Moncler,
Richemont)
Ranking
% of Target Awards
1°
2°
3°
4°
5°
6° - 7° - 8°
150%
120%
100%
75%
50%
0%
EBITDA
(30%)
Financial
criteria
5-year
Business Plan
Innovation
Performance
Factor (20%)
Non-financial
criteria
Critical project
milestones
Earnings before interest, taxes,
depreciation and amortization
takes a company’s earnings,
and subtracts its cost of
debt, cost of goods sold and
operating expenses and taxes,
resulting in an indicator of
Ferrari’s profitability.
Performance
Payout
+10%
+5%
5 Years Plan
-5%
<-5%
140%
120%
100%
80%
0%
The Innovation Performance Factor focuses on the new product launches
in line with Ferrari’s plan and on technological innovation. It is measured
in terms of product launches (milestones, volumes and contribution
margin), for a weight of 70%, and key technological projects, for the
remaining 30%, to be achieved during the performance period.
*Tiffany was removed from the New Peer Group as a consequence of its recently announced acquisition by LVMH in November 2019.
Our non-financial criterion, the Innovation Performance Factor. was added in the Equity Incentive Plan
2019-2021 in order to have a performance indicator directly linked to the long-term sustainability and
technological innovation of our business.
The TSR peer group was updated during the course of 2019 in order to consider more strategically relevant
comparable companies for Ferrari.
In relation to the vesting of the PSUs awarded to the CEO, for the interim performance periods ending
on December 31, 2019 and December 31, 2020, a maximum of 100% of the units subject to the TSR and
EBITDA payout factors may be earned and vest even in case of over-performance. Only at the end of the last
interim performance period, ending on December 31, 2021, the plan recognizes a possible over-achievement
through the recognition of a payout higher than the target award.
In relation to the vesting of the awards to the Chairman, the vesting of all units will occur after the end of
the performance period (December 31, 2021), assuming the conditions for vesting are satisfied.
The performance period for the PSUs commenced on January 1, 2019. The fair value of the awards used for
accounting purposes was measured at the grant date using a Monte Carlo Simulation model. The fair value
of the PSUs that were granted to Mr. Elkann in 2019 is €111.64 per share and the fair value of the PSUs that
were granted to Mr. Camilleri in 2019 is €111.25 per share.
189
Annual Report 2019 FERRARI N.V.
/ 1. Remuneration Strategy for the 2019 Financial Year
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 the
Chairman and the CEO
in 2019
€122.90
26.5%
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.
While the RSUs granted to Mr. Camilleri will vest
in 2020, 2021 and 2022 subject to continued
employment with the Company, the RSUs granted
to Mr Elkann have a three-years cliff vesting
period and will vest in 2022 subject to continued
employment with the Company. The fair value of
the RSUs that were granted to Mr. Elkann in 2019
is €119.54 and the fair value of the RSUs that were
granted to Mr. Camilleri in 2019 is €120.56.
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.
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
190
(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.
If within twenty-four months following a change of
control (as defined), the Chairman’s services are
terminated by the Company (other than for cause),
or are terminated by the Chairman for good reason,
the Chairman is entitled to receive the accelerated
vesting of awards under his long-term incentive plan.
Internal pay ratios
In line with the Dutch Corporate Governance
Code, the internal pay ratio is an important input
for determining the Remuneration Policy for the
Board of Directors. In the absence of prescribed
methodologies within the Dutch Corporate
Governance Code, for the financial year 2019 we
chose to show two different internal pay ratios:
1. Fixed Pay Ratio: considers the annual fixed salary
of our executive directors versus the median
employee’s base salary.
Using the CEO’s fixed remuneration of €700,000
in 2019, the resulting CEO pay ratio versus the
median employee base salary was 22 (in 2018:
16). The change in the CEO pay ratio is primarily
caused by the increase of the CEO’s fixed salary
from €500,000 in 2018 to €700,000 in 2019.
Similarly, the resulting Chairman pay ratio using
the Chairman’s fixed remuneration versus the
median employee base salary was 7.9 for 2019 (not
applicable in 2018 as the Chairman did not hold an
executive role).
2. Total Pay Ratio: considers the annual target
compensation of our executives directors versus
the median employee’s compensation, consisting
of actual fixed and variable compensation,
excluding fringe benefits and social contributions.
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Using the CEO’s target annual compensation of
€5.2 million, the resulting CEO pay ratio versus
the median employee was 138 (in 2018: 148).
The change in the CEO pay ratio is primarily
caused by the increase of the median employee’s
compensation from €35,100 in 2018 to €37,694 in
2019, in line with our compensation strategy linked
to the Group’s performance. Similarly, the resulting
Chairman pay ratio using the Chairman’s targeted
annual compensation of €1.0 million versus the
median employee was 26.5 (not applicable in 2018
as the Chairman did not hold an executive role).
The methodology used to calculate the “Fixed Pay
Ratio”, which takes only the fixed remuneration
component and excludes the variable components
of compensation, was originally chosen for
the following two reasons. First, the overall
compensation package (including fixed and variable
components) depends on the results achieved by
Group. Therefore, poor performance would imply
low or null variable remuneration, thereby reducing
the 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 to avoid the ratio being skewed in
different periods by the vesting features of the plan.
We added the “Total Pay Ratio” disclosure in 2019 in
order to provide a more complete internal pay ratio
disclosure and offer additional insight into the pay
ratio when the target annual compensation of our
executive directors is considered.
The development of these ratios and any prescribed
methodologies within the Dutch Corporate
Governance Code will be monitored and disclosed
going forward.
Recoupment of incentive compensation
(claw back policy)
The long-term incentive plans (the Equity Incentive
Plan 2016-2020 and the Equity Incentive Plan 2019-
2021) 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 2019 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 Executive Chairman, CEO,
SMT members and senior leaders and key employees
with those of the shareholders. As of the end of the
2019 financial year, covered employees should own
Ferrari common shares in the following minimum
amounts (as multiple of net base salary):
Incumbent
Share Ownership Guideline
Executive Chairman and
Chief Executive Officer
Other SMT members
6 times net base salary
3 times net base salary
Other senior leaders
1.5 times net base salary
Other key employees
1 times net base salary
The Chairman and the Chief Executive Officer are
each required to retain one hundred percent (100%)
of net, after-tax shares of common stock issued
upon vesting and settlement of any equity awards
granted to such individual until the fifth anniversary
of the grant date of such award other than death,
termination of service due to total disability,
approved leave of absence or retirement.
The above listed covered employees are required to
achieve the applicable ownership threshold within
191
Annual Report 2019 FERRARI N.V.
/ 1. Remuneration Strategy for the 2019 Financial Year
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.
Scenario analysis
On an annual basis, the non-executive directors, upon proposal of the Compensation Committee, examine
the relationship between the performance criteria chosen and the possible outcomes for the variable
remuneration of Executive Chairman and 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 Executive
Chairman’s and our CEO’s long-term incentive plan (i.e. the TSR, EBITDA and Innovation Performance
Factor), which represents a significant part of the Executive Chairman’s and the CEO’s compensation
package, supports both Ferrari’s business strategy and value creation for our shareholders.
In the event that specific long-term threshold performance targets are not achieved, there will be no variable
pay vesting or payout for executive directors for the relevant period.
The following table and chart describe compensation levels that current Executive Directors could receive
under different scenarios in a calendar year, assuming a constant share price (i.e. no appreciation):
Element of remuneration
Details of assumption
Fixed remuneration
This comprises base salary with effect from January 1, 2020. The Executive Chairman salary
will be €250,000 and the CEO salary will be €700,000.
Short-term Incentive Plan The Chairman and the CEO compensation packages do not include short-term
incentives.
Long-term Incentive Plan
Executive Chairman:
– in case of failure to achieve any of the performance criteria the scenario assumes no award
of PSUs and solely the payment of RSUs;
– in case of achievement of the targets for each of the performance criteria, the scenario
assumes an award equal to target pay opportunity (300% of base salary);
– in case of achievement of the maximum level of each performance criteria the scenario
assumes the award equal to maximum pay opportunity (400% of base salary).
CEO:
– in case of failure to achieve any of the performance criteria the scenario assumes no award
of PSUs and solely the payment of RSUs;
– in case of achievement of the targets for each of the performance criteria the scenario
assumes the award equal to target pay opportunity (643% of base salary);
– in case of achievement of the maximum for each of the performance criteria the scenario
assumes the award equal to maximum pay opportunity (857% of base salary).
192
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Chairman Remuneration (€)
CEO Remuneration (€)
6.700.000
5.200.000
2.200.000
8.000.000
7.000.000
6.000.000
5.000.000
4.000.000
3.000.000
2.000.000
1.000.000
500.000
0
1.000.000
1.250.000
Chairman
Minimum
Chairman
Target
Chairman
Maximum
CEO
Minimum
CEO
Target
CEO
Maximum
Fixed Remuneration
Short-Term Incentives
Long-Term Incentives
N.B. Details about the actual CEO remuneration in the section 2. Implementation of Remuneration Policy in 2019.
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.
193
Annual Report 2019 FERRARI N.V.
2. Implementation of Remuneration Strategy in 2019
Introduction
This section sets out the implementation of Ferrari’s remuneration strategy for the year ended December 31,
2019. The remuneration granted in the year ended December 31, 2019 is in accordance with the substance
and the procedures of the remuneration strategy (as set out above) and therefore we believe it allows us to
seek 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 and taking into account the social context around the Company.
Directors’ compensation
The following table summarizes the remuneration received by the members of the Board of Directors for the
year ended December 31, 2019 from Ferrari and its subsidiaries:
Name
Office held
Fixed remuneration
John Elkann(1)
Louis C. Camilleri
Chairman and
Executive Director
Chief Executive Officer
and Executive Director
Annual
fee
(€)
Fringe
benefits
(€)
211,666
11,920(2)
700,000
3,668(2)
Total
Executive Directors
911,666
15,588
Piero Ferrari
Sergio Duca
Vice Chairman and
Non-Executive Director
71,552
11,920(2)
Senior Non-Executive
Director
109,810
Delphine Arnault
Non-Executive Director
67,080
Giuseppina Capaldo
Non-Executive Director
86,465
Eddy Cue
Non-Executive Director
73,542
Lapo Elkann(6)
Non-Executive Director
18,627
Amedeo Felisa(6)
Non-Executive Director
18,627
Maria Patrizia Grieco Non-Executive Director
76,024
Adam Keswick
Non-Executive Director
67,080
Elena Zambon
Non-Executive Director
74,535
Variable
remuneration(3)
(€)
Extraordinary
items
(€)
Pension
expense
(€)
Total
remuneration
in 2019(4)
(€)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
183,587(5)
183,587
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
223,586
887,255
1,110,841
83,472
109,810
67,080
86,465
73,542
18,627
18,627
76,024
67,080
74,535
675,262
-
-
-
-
-
-
-
-
-
Total
Non-Executive Directors
663,342
11,920
(1) From 01/01/2019 to 04/12/2019: Chairman and Non-Executive Director. From 04/12/2019 to 12/31/2019: Chairman and Executive Director.
(2) Relate to car benefits provided to Mr, Camilleri, Mr. Elkann and Mr. Ferrari in accordance with the remuneration policy.
(3) For information regarding Equity Based Variable Compensation see Share-Based Compensation of Executive Directors below.
(4) Certain amounts have been translated from U.S. Dollars to Euro.
(5) The amount includes an extraordinary lump sum to compensate the Italian taxation impact on the CEO’s relocation to Italy.
(6) Mr. Lapo Elkann and Mr. Amedeo Felisa were Non-Executive Directors from 01/01/2019 to 04/12/2019.
194
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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
Fixed remuneration
John Elkann(1)
Louis C. Camilleri(3)
Chairman and Executive
Director
Chief Executive Officer
and Executive Director
Annual
fee
(€)
Fringe
benefits(2)
(€)
79,554
13,025
270,412
-
Total
Executive Directors
349,966
13,025
Piero Ferrari
Sergio Duca(4)
Vice Chairman and Non-
Executive Director
68,149
12,397
Senior Non-Executive
Director
94,890
Delphine Arnault
Non-Executive Director
63,889
Giuseppina Capaldo
Non-Executive Director
73,781
Eddy Cue
Non-Executive Director
68,149
Lapo Elkann(6)
Non-Executive Director
63,889
Amedeo Felisa(6)
Non-Executive Director
63,889
Maria Patrizia Grieco Non-Executive Director
72,408
Adam Keswick
Non-Executive Director
63,889
Elena Zambon
Non-Executive Director
72,030
Variable
remuneration
(€)
Extraordinary
items
(€)
Pension
expense
(€)
Total
remuneration in
2018(5)
(€)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92,579
270,412
362,991
80,546
94,890
63,889
73,781
68,149
63,889
63,889
72,408
63,889
72,030
717,360
-
-
-
-
-
-
-
-
-
Total
Non-Executive Directors
704,963
12,397
(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) Fringe benefits 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.
195
Annual Report 2019 FERRARI N.V.
/ 2. Implementation of Remuneration Strategy in 2019
The following table shows a comparison of the total remuneration of directors over the last four years,
based on Ferrari directors who served as directors in 2019. Compensation data for 2015 is not included as
the Company was not a Dutch-listed company at December 31, 2015.
DIRECTORS’ TOTAL REMUNERATION (€)
John Elkann
Louis C. Camilleri
Piero Ferrari
Sergio Duca
Chairman and Executive Director
Chief Executive Officer and
Executive Director
Vice Chairman and Non-Executive
Director
Senior Non-Executive Director
Delphine Arnault
Non-Executive Director
Giuseppina Capaldo
Non-Executive Director
Eddy Cue
Lapo Elkann
Non-Executive Director
Non-Executive Director
Amedeo Felisa
Non-Executive Director
Maria Patrizia Grieco
Non-Executive Director
Adam Keswick
Elena Zambon
Non-Executive Director
Non-Executive Director
COMPANY PERFORMANCE (€ MILLION)
Adjusted EBITDA
2019
223,586(1)
2018
92,579(2)
2017
115,317
2016
142,864
887,255
270,412(3)
133,021
214,987
83,472
80,546
111,919
193,610
109,810
94,890(4)
119,743
212,506
67,080
86,465
73,542
18,627(7)
18,627(7)
76,024
67,080
74,535
63,889
73,781
68,149
63,889
63,889
72,408
63,889
72,030
97,614
130,637
106,465
102,039
195,162
186,170
97,614
133,665
87,655(5) 6,750,315(6)
106,465
136,750
97,614
130,637
102,039
189,138
2019
1,269
2018
1,114
2017
1,036
2016
880
MEDIAN OF FIXED REMUNERATION ON A FULL-TIME EQUIVALENT BASIS OF EMPLOYEES(*) (€)
Median fixed remuneration of employees
2019
31,782
2018
30,600
2017
30,385
2016
29,938
(*) This information does not include the “Premio di Competitività”, which is on top of the fixed remuneration.
(1) From 01/01/2019 to 04/12/2019: Chairman and Non-Executive Director. From 04/12/2019 to 12/31/2019: Chairman and Executive Director.
(2) 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.
(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) Mr. Felisa served on the Board of Directors as Executive Director with a specific consultancy contract until the Annual General Meeting of
Shareholders held on 04/14/17, following which Mr. Felisa served as Non-Executive Director.
(6) On May 2, 2016 Mr. Amedeo Felisa retired as Chief Executive Officer. His role was taken by Mr. Sergio Marchionne who assumed the Chief
Executive Officer’s responsibilities while also retaining his role as Chairman of the Company. Mr. Felisa continued to serve on the Board of
Directors of Ferrari as Executive Director with a specific consultancy contract until the Annual General Meeting of Shareholders held in April
2017 following which Mr. Felisa served as non-executive director. Base premium salary includes €814 thousand for his role as Chief Executive
Officer from 01/01/2016 to 05/01 2016 and €167 thousand pursuant to the abovementioned consultancy contract from 05/02/2016 to
12/31/2016. Other includes €5,500 thousand for retirement package.
(7) Mr. Lapo Elkan and Mr. Amedeo Felisa were Non-Executive Directors from 01/01/2019 to 04/12/2019
196
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Share-Based Compensation of Executive Directors
The following table gives an overview of the outstanding equity incentive plans provided to Ferrari Executive
Directors in 2019:
Name, position
Main conditions of share award plans
Movements in share awards during 2019
Plan
Performance
period
Grant date Vesting date Number of
unvested
shares at
January 1,
2019
Shares
awarded
Shares
vested
Number of
unvested
shares at
December
31, 2019
of which are
subject to
performance
conditions
John Elkann,
Executive Chairman
Louis C. Camilleri,
CEO
Equity
Incentive
Plan
2019-2021
Equity
Incentive
Plan
2016-2020
Equity
Incentive
Plan
2019-2021
2019 - 2021
April 2019 March 2022
- 20,703
-
20,703
13,802
2016 - 2020 September 2018 March 2019
17,108
- 17,108
-
11,405
2019 - 2021
April 2019
March 2020
March 2021
March 2022
- 124,218
- 124,218
82,812
In 2017, the Board of Directors and the Shareholders approved an incentive plan covering the
performance period from 2016-2020 (the “Equity Incentive Plan 2016-2020”). The Equity Incentive
Plan 2016-2020 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 RSUs covering
the remaining one third of share units granted, each of which units represents the right to receive one
common share of the Company. Under the terms of the Equity Incentive Plan 2016-2020, the PSUs
vest subject to the achievement of a market performance condition related to the Company’s TSR
compared to a peer group which was comprised of Ferrari and other seven companies (i.e., Brunello
Cucinelli, Burberry, Ferragamo, Hermes, LVMH, Moncler and Richemont); the RSUs vest subject to the
beneficiary’s continued employment with the Company.
The following table summarizes, from a pay-for-performance perspective, the performance of our CEO in
2019 with specific reference to Ferrari’s TSR performance against its industry-specific defined peer group,
since it was the only performance indicator relating to PSU awards granted to our CEO in 2019. It should
be noted that our CEO compensation package for 2019 did not include any short-term incentives:
Name
Position
held
a) Description of
the performance
criteria
b) Applicable
performance
Relative
weighting
of the
performance
criteria
Information on performance targets
a) Threshold
a) Target
a) Maximum
performance
b) Corresponding
performance
b) Corresponding
performance
b) Corresponding
award
award
award
a) Actual
performance
b) Actual payout
Louis C. Camilleri
Chief
Executive
Officer
a) 3-year TSR
(from January 4,
2016 to
December 31,
2018)
b) Equity Incentive
Plan 2016-2020
100.00%
a) 5th out of 8
Companies
a) 3rd out of 8
Companies
a) 1st out of 8
Companies
a) 3rd out of 8
Companies
b) 50% of
b) 100% of
b) 150% of
b) 100% of
Target Award
Target Award
Target Award
Target Award
197
Annual Report 2019 FERRARI N.V.
/ 2. Implementation of Remuneration Strategy in 2019
The former Chairman and Chief Executive Officer of the Company, Mr. Sergio Marchionne, was the
beneficiary of PSU awards under the Equity Incentive Plan 2016-2020. Under the terms and conditions of
the applicable award agreement, the PSUs awarded to Mr. Marchionne under the plan 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. For the first tranche of the PSU awards under the Equity Incentive Plan 2016-
2020, which cover the performance period from 2016 to 2018, Ferrari ranked third in TSR within the
defined industry-specific peer group applicable to the plan, corresponding to the vesting of 100 percent
of the target PSUs awarded for the related period. As a result, in 2019 150,000 PSU awards previously
granted to Mr. Marchionne under the Equity Incentive Plan 2016-2020 vested. A further 300,000 PSU
awards previously awarded under the plan remain outstanding at December 31, 2019 and are subject to
vesting based on the actual performance of the Company compared to the peer group over the related
performance periods from 2016 to 2019 and 2016 to 2020.
Compensation of the members of the SMT
The compensation paid to or accrued during the year ended December 31, 2019 by Ferrari and its
subsidiaries to the members of the SMT (excluding the CEO) amounted to €19.9 million in aggregate,
including €14.5 million for short-term incentives, €0.2 million for the Group’s contributions to pension
funds and €5.2 million for share-based compensation in relation to PSUs and RSUs granted under the
Group’s equity incentive plans. 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 TSR, as described above. Given Ferrari’s third place positioning in the TSR ranking
against the Peer Group for the first tranche of the Equity Incentive Plan 2016-2020, which covers the
performance period from 2016 to 2018, at December 31, 2019 29,444 PSUs and 14,722 RSUs had vested
for SMT members (excluding the CEO).
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 7, 2020, Exor held approximately 24.0
percent of our outstanding common shares and approximately 35.8 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. The percentages of ownership and voting power above are
calculated based on the number of outstanding shares net of treasury shares. See “Risk Factors-Risks related to
our Common Shares-We may have potential conflicts of interest with FCA and Exor and its related companies”.
198
Annual Report 2019 Financial
Statements
FERRARI N.V.
Consolidated Financial Statements
and Notes at December 31, 2019
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
203
204
205
206
207
208
202
Annual Report 2019 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, 2019, 2018 and 2017
(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 €)
Diluted earnings per common share (in €)
For the years ended December 31,
Note
2019
2018
2017
4
5
6
7
8
9
10
3
12
12
3,766,615
3,420,321
3,416,890
1,805,310
1,622,905
1,650,860
343,179
699,211
4,991
3,522
917,446
42,082
875,364
176,656
698,708
327,341
643,038
3,195
2,665
329,065
657,119
6,867
2,437
826,507
775,416
23,563
802,944
16,317
786,627
29,260
746,156
208,760
537,396
695,818
784,678
535,393
2,890
3.73
3.71
1,949
4.16
4.14
2,003
2.83
2.82
The accompanying notes are an integral part of the Consolidated Financial Statements.
203
Annual Report 2019 FERRARI N.V.
Consolidated Statement of Comprehensive Income
for the years ended December 31, 2019, 2018 and 2017
(e thousand)
Net profit
Items that will not be reclassified to the consolidated
income statement in subsequent periods:
(Losses)/Gains on remeasurement of defined benefit
plans
Related tax impact
Total items that will not be reclassified to the
consolidated income statement in subsequent periods
Items that may be reclassified to the consolidated income
statement in subsequent periods:
(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
2019
2018
2017
698,708
786,627
537,396
20
20
20
20
20
(2,078)
456
(1,622)
385
(88)
297
(730)
203
(527)
(2,272)
(13,034)
34,971
2,652
610
990
(632)
5,986
3,608
(15,346)
(9,757)
(3,440)
(3,143)
9,868
9,341
698,076
783,484
546,737
695,075
3,001
781,585
545,071
1,899
1,666
The accompanying notes are an integral part of the Consolidated Financial Statements.
204
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Consolidated Statement of Financial Position
at December 31, 2019 and 2018
(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
2019
2018
13
14
15
16
10
17
18
18
18
18
19
3
20
22
23
10
24
25
19
26
785,182
837,938
1,069,652
38,716
73,683
785,182
645,797
850,550
32,134
60,744
2,805,171
2,374,407
420,051
231,439
966,448
21,078
92,830
11,409
391,064
211,399
878,496
128,234
64,295
10,174
897,946
793,664
2,641,201
2,477,326
5,446,372
4,851,733
1,481,290
1,348,722
5,998
5,117
1,487,288
1,353,839
88,116
165,572
82,208
86,575
182,539
39,142
2,089,737
1,927,167
800,015
14,791
711,539
7,106
589,743
11,342
653,751
7,635
5,446,372
4,851,733
The accompanying notes are an integral part of the Consolidated Financial Statements.
205
Annual Report 2019 FERRARI N.V.
Consolidated Statement of Cash Flows
for the years ended December 31, 2019, 2018 and 2017
(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, net
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,
2019
793,664
875,364
351,946
14,253
(3,522)
42,082
38,563
2018
647,706
2017
457,784
802,944
288,748
15,573
(2,665)
23,563
33,012
746,156
260,606
13,473
(2,437)
29,260
43,453
424
(283)
(2,585)
(40,627)
(22,377)
53,940
(76,694)
145,547
3,274
(42,600)
(33,480)
1,306,093
(4,638)
26,890
40,317
(107,353)
(83,013)
2,657
(13,966)
(87,745)
934,041
(88,483)
(1,745)
29,333
(44,123)
(72,803)
4,402
(36,222)
(215,486)
662,799
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
Total
(352,154)
(353,458)
(300,794)
(337,542)
(188,904)
(202,506)
4,539
1,392
3,663
—
(701,073)
—
(636,944)
8,307
(379,440)
Cash flows used in financing activities:
Proceeds from the issuance of bonds and notes
Repayment of bonds and notes
Net change in bank borrowings
Proceeds from securitizations, net of repayments
Net change in lease liabilities
Net change in other debt
Dividends paid to owners of the parent
Cash distribution of reserves
Share repurchases
Dividends paid to non-controlling interest
Total
Translation exchange differences
Total change in cash and cash equivalents
Cash and cash equivalents at end of the year
298,316
(315,395)
(3,516)
92,173
(3,896)
12,322
(192,664)
—
(386,749)
(2,120
(501,529)
791
104,282
897,946
The accompanying notes are an integral part of the Consolidated Financial Statements.
206
—
—
(3,584)
94,709
—
(7,988)
(133,095)
(100,093)
(2,040)
(152,091)
694,172
—
(790,869)
141,115
—
(8,280)
—
— (119,985)
—
(1,218)
(85,065)
952
145,958
793,664
(8,372)
189,922
647,706
Annual Report 2019
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, 2019, 2018 and 2017
(e thousand)
Share
capital
Retained
earnings
and other
reserves
Cash flow
hedge
reserve
Currency
translation
differences
Remeasurement
of defined
benefit plans
At January 1, 2017
2,504
302,336 (18,780)
46,823
(7,888)
Equity
attributable
to owners
of the parent
324,995
Non-
controlling
interests
Total
4,810
329,805
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
Net profit
Other
comprehensive
(loss)/income
Dividends to
owners of the
parent
Dividends to non-
controlling interests
Share repurchases
Share-based
compensation
Special voting
shares issuance (1)
At December 31,
2019
— 535,393
—
—
—
535,393
2,003
537,396
—
—
25,214
(15,009)
(527)
9,678
(337)
9,341
— (119,985)
—
—
—
28,597
—
—
—
—
—
—
—
—
—
(119,985)
— (119,985)
—
(1,218)
(1,218)
28,597
—
28,597
2,504
746,341
6,434
31,814
(8,415)
778,678
5,258
783,936
— 784,678
—
—
—
784,678
1,949
786,627
—
— (9,426)
6,036
297
(3,093)
(50)
(3,143)
— (133,939)
—
—
— (100,093)
—
22,491
—
—
—
—
—
—
—
—
— (133,939)
— (133,939)
—
—
(2,040)
(2,040)
— (100,093)
— (100,093)
—
22,491
—
22,491
2,504 1,319,478
(2,992)
37,850
(8,118)
1,348,722
5,117 1,353,839
— 695,818
—
—
—
695,818
2,890
698,708
—
— (1,662)
2,541
(1,622)
(743)
111
(632)
— (193,238)
—
—
— (386,749)
—
17,480
69
(69)
—
—
—
—
—
—
—
—
—
—
— (193,238)
— (193,238)
—
—
(2,120)
(2,120)
— (386,749)
— (386,749)
—
—
17,480
—
—
—
17,480
—
2,573 1,452,720
(4,654)
40,391
(9,740)
1,481,290
5,998 1,487,288
(1) See Note 20 “Equity” for additional details.
The accompanying notes are an integral part of the Consolidated Financial Statements.
207
Annual Report 2019 FERRARI N.V.
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 166 authorized dealers operating 187 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 20 Ferrari-owned stores and 24 franchised stores (including 15 Ferrari
Store Junior), as well as on the Group’s website. To facilitate the sale of new and pre-owned cars, the
Group provides various forms of financing to clients and dealers, including through cooperation and other
agreements. 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 to support the technological advancement of Ferrari range models.
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 18, 2020.
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 a going concern basis and applying the historical
cost method, modified as required for the measurement of certain financial instruments.
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.
208
Annual Report 2019 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 the accompanying notes (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 one of the primary measures 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 primarily 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 various components of debt is provided in Note 24.
The consolidated statement of cash flows is presented using the indirect method.
New standards and amendments effective from January 1, 2019
The following new standards and amendments that are applicable from January 1, 2019 were adopted by
the Group for the preparation of these Consolidated Financial Statements.
IFRS 16 - Leases
Transition impact
The Group applied the simplified transition approach and has therefore recognized the impacts of adoption at
January 1, 2019 without restating comparative figures for the period prior to adoption. The Group elected to use
the exemptions permitted on transition for short term leases (contracts in 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.
209
Annual Report 2019 FERRARI N.V.
Upon adoption, the Group recognized right-of-use assets and corresponding lease liabilities in relation to
leases which had previously been classified as operating lease under IAS 17, measured at the present value
of the remaining lease payments over the lease term that have not been paid at the date of adoption,
discounted using the Group’s incremental borrowing rate as of January 1, 2019, being the rate that the
Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar
economic environment with similar terms and conditions. At January 1, 2019 this rate ranged from 1
percent to 5 percent based primarily on the country of the lessee and the remaining lease term of the
underlying leased assets. 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 if the Group is reasonably certain
to exercise the related renewal option.
As of January 1, 2019, after considering the exemptions mentioned above, the Group had non-cancellable
operating lease commitments of approximately €74,930 thousand. Of these commitments, the Group
recognized right-of-use assets and related lease liabilities of €63,535 thousand.
The main contracts within the scope of IFRS 16 for which the Group is lessee primarily relate to Ferrari
stores (included within other assets) and industrial buildings.
(e thousand)
Industrial buildings
Plant, machinery and equipment
Other assets
Right-of-use assets
(e thousand)
Non-cancellable operating lease commitments
Lease contracts for which the underlying asset is of low value
Lease contracts for which the lease terms ends within 12 months
Discount of remaining lease payments
Lease liabilities
At December 31,
At January 1,
2019
15,834
7,612
34,319
57,765
2019
17,226
10,011
36,298
63,535
At January 1,
2019
74,930
(1,008)
(2,420)
(7,967)
63,535
Upon adoption the Group did not 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 initial recognition
does not affect accounting profit or taxable profit.
For the year ended December 31, 2019 the impact of adopting the new standard resulted in the recognition
of €17,067 thousand of depreciation of right-of-use assets and €1,172 thousand of financial expenses.
Lease expenses that would have been recognized in the income statement under the previous lease
standard, IAS 17, would have been €17,380 thousand.
There were no impacts arising on the application of IFRS 16 from the Group’s activities as lessor.
See “Leases” below for a description of the Group’s accounting policy with respect to leases.
210
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments
The Group adopted IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments. The interpretation
provides provides specific guidance to recognise and measure the accounting impact of tax uncertainties
which IAS 12 did not address. Particularly, IFRIC 23 specifies how to determine the unit of account and
the recognition and measurement guidance to be applied to that unit, as well as when to reconsider the
accounting for a tax uncertainty. The interpretation is effective on or after January 1, 2019. The Group has
reviewed its previously designed model to account for tax uncertainties and assessed that it is consistent
with the more specific IFRIC 23 requirements.
Amendments to IFRS 9 - Financial Instruments
The Group adopted Amendments to IFRS 9 - Financial Instruments. These amendments 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. There was no effect from the adoption of these amendments.
Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures
The Group adopted Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures. These amendments
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 amendments are
effective on or after January 1, 2019. There was no effect from the adoption of these amendments.
Amendments to IAS 19 - Employee Benefits
The Group adopted Amendments to IAS 19 - Employee Benefits. These amendments require that when there is a
change to a defined benefit plan (an amendment, curtailment or settlement) the company use the adopted
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. The amendments
are effective on or after January 1, 2019. There was no effect from the adoption of these amendments.
Annual Improvements to IFRSs 2015-2017 Cycle
The Group adopted Annual Improvements to IFRSs 2015-2017 Cycle. The improvements have amended four
standards with effective date of January 1, 2019: i) IFRS 3 - Business Combinations, in relation to obtaining
control of a business which was previously accounted for as an interest in a joint operation; ii) IFRS 11 - Joint
Arrangements, in relation to obtaining joint control of a business which was previously accounted for as a joint
operation; iii) IAS 12 - Income Taxes, clarifying the treatment of taxes in relation to dividend payments; and iv)
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. There was no effect from the adoption of these amendments.
211
Annual Report 2019 FERRARI N.V.
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 2020 or subsequent years are listed below:
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 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.
In September 2019 the IASB issued amendments to IFRS 9 - Financial Instruments, IAS 39 - Financial Instruments:
Recognition and Measurement and IFRS 7 - Financial Instruments: Disclosures, collectively the “Interest Rate
Benchmark Reform”. These amendments modify certain hedge accounting requirements in order to provide
relief from potential effects of the uncertainty caused by the interbank offered rates (IBOR) reform and
require companies to provide additional information to investors about their hedging relationships that are
directly affected by these uncertainties. 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 January 2020 the IASB issued amendments to IAS 1 - Presentation of Financial Statements: Classification of
Liabilities as Current or Non-Current to clarify how to classify debt and other liabilities as current or non-
current, and in particular how to classify liabilities with an uncertain settlement date and liabilities that may
be settled by converting to equity. These amendments are effective on or after January 1, 2022. 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
212
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 Conceptual Framework.
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
213
Annual Report 2019 FERRARI N.V.
control over those policies. Associates are accounted for using the equity method of accounting from the
date significant influence is obtained.
Under the equity method, the investments are initially recognized at cost and adjusted thereafter to
recognize the Group’s share of the profit/(loss) and other comprehensive income/(loss) of the investee.
The Group’s share of the investee’s profit/(loss) is recognized in the consolidated income statement.
Distributions received from an investee reduce the carrying amount of the investment. Post-acquisition
movements in other comprehensive income/(loss) are recognized in other comprehensive income/(loss)
with a corresponding adjustment to the carrying amount of the investment.
Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the
Group’s interest in the associate. Unrealized losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
When the Group’s share of the losses of an associate exceeds the Group’s interest in that associate, the
Group discontinues recognizing its share of further losses. Additional losses are provided for, and a liability
is recognized, only to the extent that the Group has incurred legal or constructive obligations or made
payments on behalf of the associate.
The Group discontinues the use of the equity method from the date the investment ceases to be an
associate or when it is classified as available-for-sale.
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.
214
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
The principal foreign currency exchange rates used to translate other currencies into Euro were as follows:
2019
2018
2017
Average
At December 31,
Average
At December 31,
Average At December 31,
1.1195
0.8778
1.1124
1.1234
0.8508
1.0854
1.1810
0.8847
1.1550
1.1450
0.8945
1.1269
1.1297
0.8767
1.1117
1.1993
0.8872
1.1702
122.0058
121.9400
130.3959
125.8500
126.7112
135.0100
7.7355
1.6109
1.4855
1.5273
8.7715
7.8205
1.5995
1.4598
1.5111
8.7473
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
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.
215
Annual Report 2019 FERRARI N.V.
Capitalized development costs are amortized on a straight-line basis from the start of production over
the estimated lifecycle of the model or the useful life of the components (generally between four and eight
years). All other research and development costs are expensed as incurred.
In particular the Group incurs significant research and development costs through the Formula 1 racing
activities. These costs are considered fundamental to the development of the sports and street car models
and prototypes. The model for the Formula 1 racing activities continually evolves and as such these costs
are expensed as incurred.
Patents, concessions and licenses
Separately acquired patents, concessions and licenses are initially recognized at cost. Patents,
concessions and licenses acquired in a business combination are initially recognized at fair value. Patents,
concessions and licenses are amortized on a straight-line basis over their useful economic lives, which is
generally between three and five years.
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.
216
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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’.
Leases
With the adoption of IFRS 16, the Group recognizes a right-of-use asset and a corresponding lease
liability at the date at which the leased asset is available for use. Each lease payment is allocated between
the principal liability and finance costs. Finance costs are charged to the income statement over the lease
period using the effective interest rate method. The right-of-use asset is depreciated on a straight-line
basis over the lease term.
Right-of-use assets are measured at cost comprising the following: (i) the amount of the initial
measurement of lease liability; (ii) any lease payments made at or before the commencement date less any
lease incentives received; (iii) any initial direct costs and, if applicable, (iv) restoration costs. Payments
associated with short-term leases and leases of low-value assets are recognized as an expense in the income
statement on a straight-line basis.
Lease liabilities are measured at the net present value of the following: (i) fixed lease payments, (ii) variable
lease payments that are based on an index or a rate and, if applicable, (iii) amounts expected to be payable
by the lessee under residual value guarantees, and (iv) the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option. Lease liabilities do not include any non-lease components that
may be included in the related contracts.
Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be
determined, the Group’s incremental borrowing rate is used, being the rate that the Group would have to
pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Some lease contracts contain variable payment terms that are linked to sales generated from Ferrari stores.
Variable lease payments that depend on sales are recognized in the income statement in the period in which
the condition that triggers those payments occurs.
Extension and termination options are included in a number of leases related to Ferrari stores, warehouses
and machinery and equipment of the Group. In determining the lease term, management considers all
217
Annual Report 2019 FERRARI N.V.
facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a
termination option. Extension options (or periods after termination options) are only included in the lease
term if the lease is reasonably certain to be extended (or not terminated).
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.
218
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, notes, asset-backed financing
(securitizations) and borrowings from banks), trade payables and other financial liabilities, which mainly
include derivative financial instruments.
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.
219
Annual Report 2019 FERRARI N.V.
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
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.
220
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
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.
221
Annual Report 2019 FERRARI N.V.
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 equity incentive plans that provide for the granting of share-based
compensation to the Chairman, the Chief Executive Officer, all other members of the Senior
Management Team (“SMT”) and other key employees of the Group. The equity incentive plans are
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 plans 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.
222
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, Icona, 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.
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
223
Annual Report 2019 FERRARI N.V.
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.
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.
224
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
Other expenses and other income
Other expenses consist of miscellaneous costs which cannot be allocated to specific functional areas,
such as indirect taxes, accruals for provisions not attributable to cost of sales or selling, general and
administrative costs, and other miscellaneous expenses.
Other income consists of miscellaneous income that is not directly attributable to the sale of goods or
services, such as gains on the disposal of property plant and equipment, the release of certain provisions
originally recognized as other expenses, rental income and other miscellaneous income.
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.
225
Annual Report 2019 FERRARI N.V.
The recoverability of deferred tax assets is dependent on the Group’s ability to generate sufficient future
taxable income in the period in which it is assumed that the deductible temporary differences reverse and tax
losses carried forward can be utilized. In making this assessment, the Group considers future taxable income
arising on the most recent budgets and plans, prepared by using the same criteria described for testing the
impairment of assets and goodwill, moreover, it estimates the impact of the reversal of taxable temporary
differences on earnings and it also considers the period over which these assets could be recovered. The
carrying amount of deferred tax assets is reduced to the extent that it is not probable that sufficient taxable
profit will be available to allow the benefit of part or all of the deferred tax assets to be utilized.
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, 2019, 2018 and 2017.
Other taxes not based on income, such as property taxes and capital taxes, are included in other expenses,
net.
With the adoption of IFRIC 23 on January 1, 2019, the Group reviewed its previously designed model
to account for tax uncertainties and assessed that it is consistent with the more specific IFRIC 23
requirements.
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.
226
/ 2. Significant accounting policiesAnnual Report 2019 Board Report | Financial Statements | Other Information |
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, 2019 and 2018 was as
follows:
Name
Country
Nature
of business
At December 31, 2019
At December 31, 2018
Shares
held by
the Group
Shares
held
by NCI
Shares
held by
the Group
Shares
held
by NCI
Italy Manufacturing
100%
—%
100%
—%
Directly held interests
Ferrari S.p.A.
Indirectly held through Ferrari S.p.A.
Ferrari North America Inc.
Ferrari Japan KK
Ferrari Australasia Pty Limited
Ferrari (HK) Limited
Ferrari International Cars Trading
(Shanghai) Co. L.t.d.
Ferrari Far East Pte Limited
Ferrari Management Consulting
(Shanghai) Co. L.t.d.
Ferrari South West Europe S.a.r.l.
USA
Japan
Australia
Importer and
distributor
Importer and
distributor
Importer and
distributor
Importer and
distributor
Importer and
distributor
Singapore Service company
China
Hong Kong
China Service company
France Service company
Ferrari Central Europe GmbH (1)
Germany Service company
G.S.A. S.A.
Mugello Circuit S.p.A.
Ferrari Financial Services Inc.
Switzerland Service company
Racetrack
management
USA Financial services
Italy
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
Indirectly held through other Group entities
Ferrari Auto Securitization
Transaction, LLC (2)
Ferrari Auto Securitization
Transaction - Lease, LLC (2)
Ferrari Auto Securitization
Transaction - Select, LLC (2)
Ferrari Financial Services Titling Trust (2)
410, Park Display Inc. (3)
USA Financial services
100%
USA Financial services
100%
USA Financial services
USA Financial services
USA
Retail
100%
100%
100%
(1) Changed its name from Ferrari Central East Europe GmbH to Ferrari Central Europe GmbH, effective December 2, 2019.
(2) Shareholding held by Ferrari Financial Services Inc.
(3) Shareholding held by Ferrari North America Inc.
—%
—%
—%
—%
100%
100%
100%
100%
—%
—%
—%
—%
20%
80%
20%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
—%
—%
—%
—%
%
—%
—%
—%
—%
—%
—%
—%
227
Annual Report 2019 FERRARI N.V.
Non-controlling interests
The non-controlling interests at December 31, 2019 and 2018 and the net profit attributable to non-
controlling interests for the years ended December 31, 2019, 2018 and 2017 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,
2019
5,998
(e thousand)
Net profit attributable to non-controlling interests
For the years ended December 31,
2019
2,890
2018
1,949
2018
5,117
2017
2,003
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, 2019 amounted to €115,182 thousand
(€77,790 thousand at December 31, 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 €27,524 thousand at December 31, 2019 (€26,497 thousand
at December 31, 2018).
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.
228
/ 3. Scope of consolidationAnnual Report 2019 Board Report | Financial Statements | Other Information |
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
229
Annual Report 2019 FERRARI N.V.
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 warranty 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.
230
/ 3. Scope of consolidationAnnual Report 2019 Board Report | Financial Statements | Other Information |
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
affected 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
231
Annual Report 2019 FERRARI N.V.
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,
2019
2018
2017
2,925,721
2,535,245
2,455,955
198,308
538,238
104,348
3,766,615
284,546
505,701
94,829
3,420,321
373,313
494,082
93,540
3,416,890
Other net revenues primarily relate to financial services activities and management of the Mugello racetrack.
5. Cost of sales
Cost of sales in 2019, 2018 and 2017 amounted to €1,805,310 thousand, €1,622,905 thousand and
€1,650,860 thousand, respectively, consisting mainly of the cost of materials, components and labor
expenses related to the manufacturing and distribution of cars and spare parts, engines sold to Maserati
and engines rented to other Formula 1 racing teams. The remaining costs principally includes depreciation,
insurance and transportation costs. Cost of sales also includes warranty and product-related costs, which
are estimated and recorded at the time of shipment.
Interest and other financial expenses from financial services companies included within cost of sales in 2019,
2018 and 2017 amounted to €45,083 thousand, €33,828 thousand and €30,945 thousand, respectively.
Cost of sales in 2018 included €1,451 thousand related to a partial release of the provision for charges to
Takata airbag inflator recalls. See Note 23 “Provisions” for additional details.
232
/ 3. Scope of consolidationAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
6. Selling, general and administrative costs
Selling costs in 2019, 2018 and 2017 amounted to €173,512 thousand, €167,819 thousand and €173,484
thousand, respectively, consisting mainly of costs for sales personnel, marketing and events, 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 2019, 2018 and 2017 amounted to €169,667 thousand, €159,522
thousand and €155,581 thousand, respectively, consisting mainly of administration and other general
expenses that are not directly attributable to manufacturing, sales 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 research and development costs
For the years ended December 31,
2019
559,582
139,629
699,211
2018
527,847
115,191
643,038
2017
556,617
100,502
657,119
Research and development costs expensed during the period primarily relate to Formula 1 activities and
research and development activities to support the innovation of our product range and components, and
in particular, in relation to hybrid and electric technology. Research and development costs also include
amortization of capitalized development costs.
8. Result from investments
Result from investments of €3,522 thousand, €2,665 thousand and €2,437 thousand in 2019, 2018 and
2017, respectively, related to the Group’s proportionate share of the net profit of Ferrari Financial Services
GmbH (“FFS GmbH”) for the relevant year.
233
Annual Report 2019 FERRARI N.V.
9. 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 activities
Total financial income
Total financial income relating to:
Industrial activities (A)
Financial services activities (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 and other finance costs on bonds and notes
Write-downs of financial receivables
Other financial expenses
Total financial expenses
For the years ended December 31,
2019
2018
2017
1,690
4,116
5,806
66,386
72,192
1,445
677
2,122
52,702
54,824
1,153
5,284
6,437
50,254
56,691
5,806
66,386
2,122
52,702
6,437
50,254
2,671
(2,427)
244
(27,432)
(20,703)
(4,739)
(13,949)
2,884
(1,046)
1,838
(21,486)
(12,386)
(3,326)
(8,494)
1,578
(3,775)
(2,197)
(23,057)
(9,231)
(3,530)
(12,008)
(66,579)
(43,854)
(50,023)
Net expenses from derivative financial instruments and foreign currency
exchange rate differences
(26,392)
(15,659)
(16,619)
Total financial expenses and net expenses from derivative financial
instruments and foreign currency exchange rate differences
(92,971)
(59,513)
(66,642)
Total financial expenses and net expenses from derivative financial
instruments and foreign currency exchange rate differences relating to:
Industrial activities (B)
Financial services activities (reported in cost of sales)
(47,888)
(45,083)
(25,685)
(33,828)
(35,697)
(30,945)
Net financial expenses relating to industrial activities (A+B)
(42,082)
(23,563)
(29,260)
Interest and other finance costs on bonds and notes for the year ended December 31, 2019 includes costs of
€8,142 thousand for the partial repurchase of bonds following a cash tender offer in July (in particular the
repurchase price and premium incurred, as well as previously unamortized issuance costs).
234
Annual Report 2019
10. Income taxes
Income tax expense is as follows:
(e thousand)
Current tax expense
Deferred tax expense
Taxes relating to prior periods
Total income tax expense
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
For the years ended December 31,
2019
137,303
32,145
7,208
176,656
2018
95,076
66,325
(145,084)
16,317
2017
201,274
8,718
(1,232)
208,760
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 €141 million.
The table below provides a reconciliation between actual income tax expense and the theoretical income
tax expense, calculated on the basis of the applicable corporate tax rate in effect in Italy, which was 24.0
percent for each of the years ended December 31, 2019, 2018 and 2017:
(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 expense/(benefit), net of IRAP
Effective tax rate, net of IRAP
IRAP (current and deferred)
Total income tax expense
2019
210,088
(76,187)
733
3,457
7,208
3,360
148,659
17.0%
27,997
176,656
2018
2017
192,706
179,077
(58,877)
—
1,216
(145,084)
1,514
(8,525)
(1.1)%
24,842
16,317
(7,061)
4,862
2,344
(1,232)
2,420
180,410
24.2%
28,350
208,760
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, the cost of fixed-term employees, credit losses and any
interest included in lease payments. The applicable IRAP rate was 3.9 percent for each of the years
ended December 31, 2019, 2018 and 2017.
235
Annual Report 2019
FERRARI N.V.
The increase in the effective tax rate net of IRAP from (1.1) percent in 2018 to 17.0 percent in 2019 was
primarily attributable to the Group’s application of the Patent Box tax regime starting in the third quarter of
2018, which resulted in the recognition in 2018 of the positive impact of the Patent Box relating to the years
2015 to 2017. The Patent Box benefit relating to the years 2015 to 2017 is included within “taxes relating to
prior years” in 2018 and the Patent Box benefit relating to 2019 and 2018 is included within “permanent
and other differences” for the respective years in the tax rate reconciliation above.
Taxes relating to prior years recognized in 2019 are primarily attributable to agreements reached with the
Italian Revenue Agency for the settlement of previous years’ claims.
The analysis of deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018, 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 (liabilities)/assets
At December 31,
2019
2018
16,445
57,238
73,683
(77,334)
(4,874)
(82,208)
(8,525)
27,297
33,447
60,744
(14,497)
(24,645)
(39,142)
21,602
236
/ 10. Income taxesAnnual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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:
(e thousand)
At December 31,
2018
Recognized in
consolidated
income
statement
Charged
to equity
Translation
differences
and other
changes
At December 31,
2019
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
108,147
51,578
2,474
1,176
859
38,275
4,301
17,241
11,147
(8,181)
2,265
—
—
578
13,626
1,104
321
5,858
—
—
456
610
—
—
—
—
Total deferred tax assets
235,198
15,571
1,066
Deferred tax liabilities arising on:
Depreciation
(9,303)
572
Capitalization of development costs
(171,707)
(53,144)
Employee benefits
Exchange rate differences
Cash flow hedge reserve
Tax on undistributed earnings
Other
Total deferred tax liabilities
Total net deferred tax assets/
(liabilities)
—
—
—
—
—
—
—
—
(670)
(149)
(1)
(16,371)
(15,395)
(80)
(251)
1
2,388
2,798
(213,596)
(47,716)
21,602
(32,145)
1,066
332
—
—
—
—
71
2
2
690
1,097
(150)
—
—
1
—
—
4
(145)
952
100,298
53,843
2,930
1,786
1,437
51,972
5,407
17,564
17,695
252,932
(8,881)
(224,851)
(750)
(399)
—
(13,983)
(12,593)
(261,457)
(8,525)
237
Annual Report 2019
FERRARI N.V.
(e thousand)
At December 31,
2017
Recognized in
consolidated
income
statement
Charged
to equity
Translation
differences
and other
changes
At December 31,
2018
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
102,243
46,198
2,562
(2,432)
740
37,615
3,999
16,570
12,383
5,249
3,131
—
—
119
521
303
399
1,876
—
—
(88)
3,608
—
—
—
—
—
Total deferred tax assets
219,878
11,598
3,520
Deferred tax liabilities arising on:
Depreciation
(8,930)
(24)
Capitalization of development costs
(114,775)
(56,932)
Employee benefits
Exchange rate differences
Cash flow hedge reserve
Tax on undistributed earnings
Other
Total deferred tax liabilities
Deferred tax assets arising on tax loss
carry-forward
Total net deferred tax assets
—
—
—
—
—
—
—
—
(1,868)
(647)
(1)
—
(10,652)
(136,873)
(161)
501
—
(16,371)
(4,936)
(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)
(16,371)
(15,395)
(213,596)
—
21,602
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, 2019, 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 €151,990 thousand.
238
/ 10. Income taxesAnnual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
11. Other information by nature
Personnel costs in 2019, 2018 and 2017 amounted to €385,182 thousand, €323,936 thousand and
€313,471 thousand, respectively. These amounts include costs that were capitalized mainly in connection
with product development activities.
In 2019, 2018 and 2017 the Group had an average number of employees of 4,164, 3,651 and 3,336,
respectively.
Depreciation amounted to €191,482 thousand, €156,384 thousand and €143,484 thousand for the years
ended December 31, 2019, 2018 and 2017, respectively.
Amortization amounted to €160,464 thousand, €132,364 thousand and €117,122 thousand for the years
ended December 31, 2019, 2018 and 2017, respectively.
12. 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, 2019, 2018 and 2017:
Profit attributable to owners of the Company
Weighted average number of common shares for
basic earnings per common share
Basic earnings per common share
€ thousand
thousand
€
For the years ended December 31,
2019
695,818
186,767
3.73
2018
2017
784,678
535,393
188,606
188,951
4.16
2.83
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 have been issued under
the equity incentive plans for the years ended December 31, 2019, 2018 and 2017 (assuming 100 percent
of the related awards vested), and (ii) the potential common shares that would have been issued under the
Non-Executive Directors’ compensation agreement for the year ended December 31, 2017. See Note 21 for
additional details relating to the equity incentive plan.
239
Annual Report 2019 FERRARI N.V.
/ 12. Earnings per share
The following table provides the amounts used in the calculation of diluted earnings per share for the years
ended December 31, 2019, 2018 and 2017:
(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
€ thousand
thousand
€
For the years ended December 31,
2019
695,818
187,535
3.71
2018
2017
784,678
535,393
189,394
4.14
189,759
2.82
13. Goodwill
At December 31, 2019 and 2018 goodwill amounted to €785,182 thousand.
In accordance with IAS 36, goodwill is not amortized and is tested for impairment annually, or more
frequently if facts or circumstances indicate that the asset may be impaired. Impairment testing is
performed by comparing the carrying amount and the recoverable amount of the CGU. The recoverable
amount of the CGU is the higher of its fair value less costs of disposal and its value in use.
The assumptions used in this process represent management’s best estimate for the period under
consideration. The estimate of the value in use of the CGU for purposes of performing the annual
impairment test was based on the following assumptions:
• The expected future cash flows covering the period from 2020 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 2019 (2.0 percent in 2018 and 2017).
• 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 6.8 percent in 2019 (7.0 percent
in 2018 and 2017). 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.
240
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
14. 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, 2018
Additions
Reclassification
Translation differences and
other movements
Balance at December 31, 2018
Additions
Reclassification
Translation differences and
other movements
Balance at December 31, 2019
Accumulated amortization at
January 1, 2018
Amortization
Translation differences and
other movements
Balance at December 31, 2018
Amortization
Translation differences and
other movements
Balance at December 31, 2019
Carrying amount at:
January 1, 2018
December 31, 2018
December 31, 2019
1,081,287
242,753
—
—
1,324,040
243,040
—
—
1,567,080
847,129
83,427
—
930,556
103,812
—
1,034,368
234,158
393,484
532,712
516,961
75,109
—
—
592,070
86,919
—
—
678,989
343,348
31,764
—
375,112
35,817
—
410,929
173,613
216,958
268,060
167,886
14,052
508
1,168
183,614
17,606
6,950
(679)
207,491
141,806
14,914
1,196
157,916
18,677
(292)
176,301
26,080
25,698
31,190
45,085
5,628
(508)
143
50,348
5,893
(6,950)
(688)
48,603
38,480
2,259
(48)
40,691
2,158
(222)
42,627
1,811,219
337,542
—
1,311
2,150,072
353,458
—
(1,367)
2,502,163
1,370,763
132,364
1,148
1,504,275
160,464
(514)
1,664,225
6,605
9,657
5,976
440,456
645,797
837,938
Additions of €353,458 thousand in 2019 (€337,542 thousand in 2018) primarily relate to externally
acquired and internally generated costs for the development of new and existing models.
241
Annual Report 2019 FERRARI N.V.
15. Property, plant and equipment
(e thousand)
Gross carrying amount at
January 1, 2018
Additions
Divestitures
Reclassification
Translation differences and
other movements
Balance at December 31, 2018
Impact of IFRS adoption at
January 1, 2019
Additions
Divestitures
Reclassification
Translation differences and
other movements
Balance at December 31, 2019
Accumulated amortization at
January 1, 2018
Depreciation
Divestitures
Translation differences and
other movements
Balance at December 31, 2018
Depreciation
Divestitures
Translation differences and
other movements
Balance at December 31, 2019
Carrying amount at:
January 1, 2018
December 31, 2018
December 31, 2018
of which right-of use assets
under IFRS 16
Land
Industrial
buildings
Plant,
machinery and
equipment
Other
assets
Advances and
assets under
construction
Total
23,537
341,749
1,959,462
136,991
56,760
2,518,499
25
—
—
14,710
(641)
17,225
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
—
30
—
—
17,226
15,560
(884)
5,937
10,011
36,298
—
63,535
176,235
(11,281)
148,102
18,102
(7,673)
1,524
142,227
352,154
(459)
(20,297)
(155,563)
—
5
23,609
(2,554)
408,658
16
2,361,520
(197)
192,528
—
201,396
(2,730)
3,187,711
—
—
—
—
—
—
—
—
—
142,260
10,407
(627)
2,864
154,904
15,443
(417)
(2,798)
167,132
1,555,769
136,793
110,210
9,184
(15,976)
(2,621)
(1,050)
1,675,536
159,302
(11,001)
(2,714)
114,059
16,737
(3,917)
2
1,823,839
209
127,088
— 1,808,239
156,384
—
—
(19,224)
—
(900)
— 1,944,499
—
—
191,482
(15,335)
(2,587)
—
— 2,118,059
23,537
23,574
23,609
199,489
218,469
241,526
403,693
362,901
537,681
26,781
30,415
65,440
56,760
710,260
215,191
850,550
201,396
1,069,652
—
15,834
7,612
34,319
—
57,765
Additions for the periods presented 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.
242
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
As a result of adopting IFRS 16 - Leases on January 1, 2019, the Group recognized right-of-use assets of
€63,535 thousand (and related lease liabilities) in relation to leases which had previously been classified as
operating leases under IAS 17. For further details of the impact of adoption, see Note 2 “Significant Accounting
Policies - New standards and amendments effective from January 1, 2019 - IFRS 16-Leases”.
The following table summarizes the changes in the carrying amount of right-of-use assets for the year ended
December 31, 2019:
(e thousand)
Industrial buildings
Balance at December 31, 2018(*)
Impact of IFRS 16 adoption
Balance at January 1, 2019
Additions
Depreciation
Translation differences and other movements
Balance at December 31, 2019
9
17,226
17,235
3,532
(4,664)
(269)
15,834
Plant, machinery
and equipment
—
10,011
10,011
2,800
(5,023)
(176)
7,612
Other assets
Total
765
36,298
37,063
6,428
(7,380)
(1,792)
34,319
774
63,535
64,309
12,760
(17,067)
(2,237)
57,765
(*) Relates to lease assets that were previously recognized as ‘finance leases’ under IAS 17 - Leases.
Amounts recognized in the income statement in relation to leases for the year ended December 31, 2019
were as follows:
(e thousand)
Depreciation of right-of-use assets
Interest expense on lease liabilities
Variable lease payments not included in the measurement of lease liabilities
Expenses relating to short-term leases and leases of low-value assets
Total expenses recognized
For the year ended
December 31,
2019
17,067
1,172
1,143
4,635
24,017
At December 31, 2019, the Group had contractual commitments for the purchase of property, plant and
equipment amounting to €105,335 thousand (€146,281 thousand at December 31, 2018).
243
Annual Report 2019 FERRARI N.V.
16. 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,
2019
30,012
8,704
38,716
2018
25,972
6,162
32,134
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, 2018
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
Proportionate share of net profit for the year ended December 31, 2019
Proportionate share of remeasurement of defined benefit plans
Balance at December 31, 2019
23,340
2,665
(33)
25,972
4,043
(3)
30,012
Summarized financial information relating to FFS GmbH at and for the years ended December 31, 2019 and
2018 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
244
At December 31,
2019
2018
2,436
660,883
8,565
6,471
678,355
58,049
604,643
15,663
678,355
1,402
591,482
12,630
5,957
611,471
49,969
546,595
14,907
611,471
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
For the year ended December 31,
2019
34,680
15,655
8,892
(963)
11,096
3,010
8,086
2018
29,446
12,183
8,720
239
8,304
2,974
5,330
(e thousand)
Net revenues
Cost of sales
Selling, general and administrative costs
Other (income)/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 €7,674 thousand at December
31, 2019 (€5,142 thousand at December 31, 2018).
17. Inventories
(e thousand)
Raw materials
Semi-finished goods
Finished goods
Total inventories
At December 31,
2019
85,155
91,119
243,777
420,051
2018
74,053
84,576
232,435
391,064
Finished goods primarily includes cars and spare parts.
The accrual to the provision for slow moving and obsolete inventories recognized within cost of sales during
2019 was €14,512 thousand (€11,062 thousand in 2018 and €10,140 thousand in 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,
2019
73,426
14,512
(4,265)
83,673
2018
66,989
11,062
(4,625)
73,426
245
Annual Report 2019 FERRARI N.V.
18. 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,
2019
231,439
966,448
21,078
92,830
2018
211,399
878,496
128,234
64,295
1,311,795
1,282,424
At December 31,
2019
2018
74,589
49,782
46,375
24,937
35,756
64,739
47,882
43,500
26,247
29,031
231,439
211,399
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 28, “Related Party Transactions”.
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 significant concentration of third party credit risk.
246
Annual Report 2019
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,
2019
2018
127,226
75,138
7,238
2,101
11,018
8,718
128,396
68,410
3,440
1,777
1,571
7,805
231,439
211,399
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,
2019
24,346
2,976
(151)
27,171
2018
21,993
2,737
(384)
24,346
Receivables from financing activities
Receivables from financing activities relate entirely to the financial services portfolio in the United States
and are detailed as follows:
(e thousand)
Client financing
Dealer financing
Total receivables from financing activities
At December 31,
2019
950,842
15,606
966,448
2018
851,209
27,287
878,496
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
247
Annual Report 2019
FERRARI N.V.
/ 18. Current receivables and other current assets
as follows:
(e thousand)
At January 1,
Provision
Use and other changes
At December 31,
Client financing
2019
6,457
4,739
(3,716)
7,480
2018
6,948
2,687
(3,178)
6,457
Client financing relates to financing provided by the Group to Ferrari clients to finance their car
acquisitions. During 2019 the average contractual duration at inception of such contracts was
approximately 67 months (in line with 2018) and the weighted average interest rate was approximately 6.0
percent (approximately 5.7 percent in 2018). Receivables for client financing are generally secured on the
titles of the related 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 2019 these receivables were interest bearing at a rate between
4.5 percent and 7.0 percent (between 4.1 percent and 7.0 percent in 2018), 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 titles of the related cars or other collateral. In November 2019 the
Group exited one of the remaining dealer financing arrangements.
Current tax receivables
The decrease in current tax receivables primarily related to the Patent Box benefit recognized in 2018.
248
Annual Report 2019 Other current assets
Other current assets are detailed as follows:
(e thousand)
Italian and foreign VAT credits
Prepayments
Other
Total other current assets
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
At December 31,
2019
48,719
39,856
4,255
92,830
2018
20,466
35,758
8,071
64,295
Other includes security deposits, amounts due from personnel and other receivables.
At December 31, 2019, the Group had provided guarantees through third parties amounting to €95,304
thousand (€133,175 thousand at December 31, 2018), principally to banks and relevant tax authorities for
(i) a U.S. Dollar denominated credit facility of FFS Inc, and (ii) the VAT related to the temporary import of
classic cars for restoration activities which would become due if the car is not exported.
The analysis of 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 assets
Total
(e thousand)
Trade receivables
Receivables from financing activities
Client financing
Dealer financing
Current tax receivables
Other current receivables
Total
At December 31, 2019
Due within
one year
184,613
Due between one
and five years
48
Due beyond
five years
—
683,096
670,901
12,195
681
346
58,740
58,740
—
—
179
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
165,164
161,753
3,411
20,397
52,449
422,623
172,049
144,762
27,287
127,573
28,036
502,285
Overdue
Total
46,778
59,448
59,448
—
—
—
231,439
966,448
950,842
15,606
21,078
52,974
Overdue
Total
36,772
53,800
53,800
—
—
—
211,399
878,496
851,209
27,287
128,234
28,537
684,171
58,919
106,226
1,271,939
601,770
52,039
90,572 1,246,666
249
Annual Report 2019
FERRARI N.V.
19. Current financial assets and other financial liabilities
(e thousand)
Financial derivatives
Other financial assets
Current financial assets
At December 31,
2019
9,423
1,986
11,409
2018
6,788
3,386
10,174
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, 2019 and 2018.
Cash flow hedge:
Foreign currency derivatives
Interest rate caps
Total cash flow hedges
Other foreign currency derivatives
Interest rate caps
Total
At December 31,
2019
2018
Positive
fair value
Negative
fair value
Positive
fair value
Negative
fair value
8,039
87
8,126
1,294
3
9,423
(14,547)
—
(14,547)
(244)
—
(14,791)
3,240
555
3,795
1,023
1,970
6,788
(10,853)
—
(10,853)
(489)
—
(11,342)
Foreign currency derivatives which do not meet the requirements to be recognized as cash flow hedges are
presented as other foreign currency derivatives. 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, 2019
At December 31, 2018
Fair Value Notional Amount
Fair Value Notional Amount
2,826
(4,639)
923
(1,716)
55
(2,817)
(5,368)
1,338,800
175,247
272,183
87,632
57,094
106,491
2,037,447
(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
(*) Other mainly includes the Australian Dollar, the Hong Kong Dollar and the Canadian Dollar.
At December 31, 2019 and 2018, all derivative financial instruments had a maturity of twelve months or less.
250
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 (costs)/revenues
Income tax benefit/(expense)
Total recognized in the consolidated income statement
For the years ended December 31,
2019
(22,055)
6,153
(15,902)
2018
3,777
(1,054)
2,723
2017
19,724
(5,503)
14,221
The ineffectiveness of cash flow hedges was not material for the years 2019, 2018 and 2017.
251
Annual Report 2019 FERRARI N.V.
20. Equity
Share capital
At December 31, 2019 the fully paid up share capital of the Company was €2,573 thousand, consisting
of 193,923,499 common shares and 63,349,111 special voting shares, all with a nominal value of €0.01
(€2,504 thousand at December 31, 2018 consisting of 193,923,499 common shares and 56,497,618
special voting shares, all with a nominal value of €0.01). At December 31, 2019, the Company had
8,640,176 common shares and 2,190 special voting shares held in treasury, while at December 31, 2018,
the Company had 6,002,843 common shares and 4,744 special voting shares held in treasury. The increase
in common shares held in treasury primarily reflects the repurchase of shares by the Company through
its share repurchase program, partially offset by shares assigned under equity incentive plans. As per the
resolution of the Annual General Meeting of Shareholders on April 12, 2019 which approved to cancel all
special voting shares in the share capital of the Company held in treasury as of that date, on August 29,
2019 the Company completed the cancellation process of 3,902 special voting shares.
The following table summarizes the changes in the number of outstanding common shares and outstanding
special voting shares of the Company for the year ended December 31, 2019:
Outstanding shares at December 31, 2018
Common
Shares
187,920,656
Special Voting
Shares
56,492,874
Common shares repurchased under share repurchase program(1)
(2,907,702)
Common shares assigned under equity incentive plans(2)
270,369
—
—
Total
244,413,530
(2,907,702)
270,369
Special voting shares allocation(3)
—
6,854,047
6,854,047
Outstanding shares at December 31, 2019
185,283,323
63,346,921
248,630,244
(1) Includes shares repurchased between January 1, 2019 and December 31, 2019 based on the transaction trade date, for a total consideration
of 386,094 thousand, including transaction costs.
(2) During 2019, approximately 230 thousand performance share units and 40 thousand retention restricted share units vested under the
Equity Incentive Plan 2016- 2020 as a result of certain performance or retention requirements being achieved. As a result, a corresponding
number of common shares, which were previously held in treasury, were assigned to participants of the plan. See Note 21 “Share-Based
Compensation” for additional details.
(3) Relates to the issuance, allocation and deregistration of certain special voting shares under the Company’s special voting shares terms and
conditions.
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 purchase common shares 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
affected 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.
252
Annual Report 2019 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 €5,768,544 thousand at December 31, 2019 (€5,768,544 thousand at
December 31, 2018), which primarily originated from the issuance of common shares pursuant to the
restructuring activities undertaken as part of the Separation;
• a legal reserve of €65 thousand at December 31, 2019 and €29 thousand at December 31, 2018,
determined in accordance with Dutch law;
• a treasury reserve of €486,892 thousand at December 31, 2019 and €100,143 thousand at December 31,
2018;
• a share-based compensation reserve of €46,539 thousand at December 31, 2019 and €52,198 thousand
at December 31, 2018.
Following approval of the annual accounts by the shareholders at the Annual General Meeting of the
Shareholders on April 12, 2019, a dividend distribution of €1.03 per common share was approved,
corresponding to a total distribution of €193,328 thousand (of which €192,664 thousand was paid in
2019). 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 13, 2018, a dividend distribution of €0.71 per common share was approved,
corresponding to a total distribution of €133,939 thousand (of which €133,095 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 €0.635 per common share was approved,
corresponding to a total distribution of €119,985 thousand. The distribution was made from the share
premium reserve which is a distributable reserve under Dutch law.
During the year ended December 31, 2019 the Company repurchased 2,907,702 common shares for a total
consideration of €386,749 thousand under the multi-year Euro 1.5 billion total share repurchase program
announced in December 2018 (1,033,218 common shares for a total consideration of €100,093 thousand
were repurchased during the year ended December 31, 2018 under a previous share repurchase program).
Shares repurchased may be used to meet the Company’s obligations arising from the equity incentive plans.
253
Annual Report 2019 FERRARI N.V.
/ 20. 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:
(Losses)/Gains on remeasurement of defined benefit plans(1)
Total items that will not be reclassified to the consolidated
income statement in subsequent periods
Items that may be reclassified to the consolidated income
statement in subsequent periods:
(Losses)/Gains on cash flow hedging instruments arising
during the period
Losses/(Gains) 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,
2019
2018
2017
(2,078)
(2,078)
385
385
(730)
(730)
(24,327)
(9,257)
54,695
22,055
(2,272)
(3,777)
(19,724)
(13,034)
34,971
2,652
5,986
(15,346)
380
(1,698)
1,066
(632)
(7,048)
(6,663)
3,520
(3,143)
19,625
18,895
(9,554)
9,341
(1) For the year ended December 31, 2019 includes €3 thousand (€33 thousand for the year ended December 31, 2018) 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,
2019
2018
2017
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
(Losses)/
Gains on cash
flow hedging
instruments
Exchange gains/
(losses) on
translating
foreign
operations
Total other
comprehensive
(loss)/income
254
(2,078)
456
(1,622)
385
(88)
297
(730)
203
(527)
(2,272)
610
(1,662)
(13,034)
3,608
(9,426)
34,971
(9,757)
25,214
2,652
—
2,652
5,986
—
5,986 (15,346)
— (15,346)
(1,698)
1,066
(632)
(6,663)
3,520
(3,143)
18,895
(9,554)
9,341
Annual Report 2019
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, 2019, 2018 or 2017.
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.
21. Share-based compensation
Equity Incentive Plan 2016 - 2020
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 (“Equity Incentive Plan 2016-2020”). The grants of the performance share units
(“PSUs”) and the retention restricted share unites (“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 to the current
Chief Executive Officer and certain key employees of the Group under this plan.
Performance Share Units 2016-2020
The Company awarded members of the SMT and key leaders a total target of approximately 237
thousand PSUs and 450 thousand PSUs to its former Chief Executive Officer in 2017, and an additional
total of approximately 21 thousand PSUs were awarded to the current Chief Executive Officer 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 total number of shares that will eventually be issued upon
vesting of the PSUs may vary from the original award.
255
Annual Report 2019 FERRARI N.V.
The target amount of PSUs vests as follows based on the Company’s TSR performance compared to an
industry specific peer group of eight, including the Company, (“Peer Group”):
Ferrari TSR Ranking
% of Target Awards that Vest
1
2
3
4
5
>5
CEO
150%
120%
100%
75%
50%
0%
SMT and Key Leaders
150%
120%
100%
—
—
—
The defined Peer Group, which is applicable for the Performance Share Units 2016-2020, 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 awarded in 2017 is €59.36 to €72.06 per share and the range of the
fair value of the PSUs that were awarded in 2018 is €61.30 and €111.92.
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
€66.85
17.4%
PSU Awards Granted in 2018
€113.70
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.
For the first tranche of the PSU awards under the Equity Incentive Plan 2016-2020, which cover the
performance period from 2016 to 2018, Ferrari ranked third in TSR within the defined industry-specific peer
group applicable to the plan, resulting in the vesting of 100 percent of the target PSUs awarded. As a result,
230,282 PSU awards vested in 2019.
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 new Chief Executive
Officer. The RSU awards granted are conditional on a recipient’s continued service to the Company,
256
/ 21. Share-based compensationAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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. For the first tranche of the RSU awards under the Equity Incentive Plan
2016-2020, 40,087 RSU awards vested in 2019.
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
€63.00 to €64.64 per share and the range of the fair value of the RSUs awarded in 2018 is €110.76 to €112.99.
Equity Incentive Plan 2019-2021
Under a new equity incentive plan approved in 2019, approximately 174 thousand PSUs and 111 thousand
RSUs, which each represent the right to receive one Ferrari common share, were awarded to the Executive
Chairman, the Chief Executive Officer, all members of the SMT and other key employees of the Group
(“Equity Incentive Plan 2019-2021”). These PSUs and RSUs cover a three-year performance period from
2019 to 2021.
Performance Share Units 2019-2021
The vesting of the PSUs is based on the achievement of defined key performance indicators relating to: i)
TSR ranking, ii) an EBITDA target, and iii) innovation targets, which will each be settled independently of
the others targets. The total number of shares that will be assigned upon vesting of the PSUs will depend
on the level of achievement of the targets. The PSUs vest in 2022, except for the PSUs awarded to the Chief
Executive Officer which will vest in three tranches of 12 percent, 12 percent and 76 percent in 2020, 2021
and 2022, respectively.
Of the total number of PSU awards, 50 percent vest based on the achievement of the TSR ranking of Ferrari
compared to an industry specific peer group of eight, including the Company, (“New Peer Group”):
Ferrari TSR Rating
% of Target Awards that Vest
1
2
3
4
5
>5
150%
120%
100%
75%
50%
0%
The defined New Peer Group(*), which is applicable to the Performance Share Units 2019-2021, is as
follows:
Ferrari
Kering
Aston Martin
LVMH
Burberry
Moncler
Hermes
Richemont
(*) Tiffany was removed from the New Peer Group as a consequence of its recently announced acquisition by LVMH in November 2019.
257
Annual Report 2019 FERRARI N.V.
Of the total number of PSU awards, 30 percent vest based on the achievement of an EBITDA target
determined by comparing Adjusted EBITDA to the Adjusted EBITDA targets derived from the business plan:
Actual Adjusted EBITDA Compared to Business Plan
% of Awards that Vest
+10%
+5%
Business Plan Target
-5%
<-5%
140%
120%
100%
80%
0%
Of the total number of PSU awards, 20 percent vest based on the achievement of defined objectives for
technological innovation and the development of the new model pipeline over the performance period.
The performance period for the PSUs commenced on January 1, 2019. The fair value of the awards used for
accounting purposes was measured at the grant date using a Monte Carlo Simulation model. The range of
the fair value of the PSUs that were awarded is €110.57-€111.64 per share. The key assumptions utilized to
calculate the grant-date fair values for these awards are summarized below:
Key Assumptions
Grant date share price
Expected volatility
Dividend yield
Risk-free rate
122.60
26.50%
0.83%
0%
The expected volatility was based on the observed volatility of the New Peer Group. The risk-free rate was
based on the iBoxx sovereign Eurozone yield.
Retention Restricted Share Units (RSUs)
The vesting of the RSUs is conditional on the recipients continued employment with the Company at the
time of vesting. The RSUs vest in 2022, except for the RSUs awarded to the Chief Executive Officer which
vest in three equal tranches in 2020, 2021 and 2022. The range of the fair value of the RSUs awarded is
€119.54-€120.56 per share.
258
/ 21. Share-based compensationAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Outstanding share awards
Changes during 2019, 2018 and 2017 to the outstanding number of PSU and RSU share awards under both
the Equity Incentive Plan 2016-2020 and Equity Incentive Plan 2019-2021 are as follows:
Outstanding PSU Awards
—
Outstanding RSU Awards
—
686,933
—
—
686,933
20,793
(21,200)
—
686,526
175,307
(32,832)
(230,282)
598,719
118,467
—
—
118,467
10,397
(10,600)
—
118,264
110,968
(18,000)
(40,087)
171,145
Balance at January 1, 2017
Granted(1)
Forfeited
Vested
Balance at December 31, 2017
Granted(1)
Forfeited
Vested
Balance at December 31, 2018
Granted(2)
Forfeited
Vested
Balance at December 31, 2019
(1) Granted under the Equity Incentive Plan 2016-2020
(2) Granted under the Equity Incentive Plan 2019-2021
Share-based compensation expense
For the years ended December 31, 2019, 2018 and 2017, the Company recognized €17,480 thousand,
€22,491 thousand and €28,179 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, 2019, unrecognized
compensation expense amounted to €19,298 thousand and will be recognized over the remaining vesting
periods through 2021.
259
Annual Report 2019 FERRARI N.V.
22. 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,
2019
2018
21,795
134
21,929
66,187
88,116
21,195
485
21,680
64,895
86,575
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, 2019, 2018 and 2017 was €13,650 thousand, €11,930 thousand and
€11,987 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.
260
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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)
2020
2021
2022
2023
2024
Beyond 2024
Total
Expected benefit payments
TFR
Pension plans
1,396
1,677
1,808
1,531
1,599
6,086
14,097
The following table summarizes the changes in the defined benefit obligations:
(e thousand)
TFR liability
Pension plans
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
Included in the consolidated income statement
Included in other comprehensive income/(loss)(*)
Other
Benefits paid
Other changes
Amounts at December 31, 2019
(*) Relates to actuarial losses/(gains) from financial assumptions.
22,641
—
(390)
(1,056)
(1,620)
564
21,195
—
1,899
(1,299)
(1,490)
191
21,795
604
55
(28)
(146)
(169)
23
485
(492)
176
(35)
(24)
(11)
134
2
2
2
2
2
611
621
Total
23,245
55
(418)
(1,202)
(1,789)
587
21,680
(492)
2,075
(1,334)
(1,514)
180
21,929
261
Annual Report 2019
FERRARI N.V.
/ 22. Employee benefits
Amounts recognized in the consolidated income statement are as follows:
(e thousand)
For the years ended December 31,
Current service cost
Interest expense
Past service
adjustments
Total recognized in
the consolidated
income statement
Total
TFR
26
—
2019
Pension
plans
26
—
TFR
—
—
—
(518)
(518)
—
(492)
(492)
2018
Pension
plans
55
—
—
55
Total
TFR
55
—
—
55
—
—
—
—
2017
Pension
plans
Total
141
141
1
—
1
—
142
142
—
—
—
—
Past service credit relates to gains recognized in the consolidated income statement due to plan
amendments and curtailments.
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 2019 is equal
to 0.7 percent (1.7 percent in 2018 and 1.5 percent in 2017). 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 2019 was equal to approximately zero percent (0.8
percent 2018 and 0.7 percent in 2017). The average duration of the obligations is approximately 14 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,
2019
2018
Changes in
assumption of +1%
discount rate
(1,695)
Changes in
assumption of -1%
discount rate
1,951
Changes in
assumption of +1%
discount rate
(1,647)
Changes in
assumption of -1%
discount rate
1,891
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.
262
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2019, other provisions for employees comprised long term bonus benefits amounting
to €62,890 thousand (€61,940 thousand at December 31, 2018) and jubilee benefits granted to certain
employees by the Group in the event of achieving 30 years of service amounting to €3,297 thousand
(€2,955 thousand at December 31, 2018).
23. 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,
2018
Additional
provisions
Utilization
Translation
differences and other
At December 31,
2019
111,129
28,131
(32,584)
37,154
34,256
182,539
3,037
12,393
43,561
(14,280)
(18,553)
(65,417)
1,135
1,186
2,568
4,889
107,811
27,097
30,664
165,572
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.
Due to an industry wide recall relating to Takata airbags manufactured using non-desiccated Phase
Stabilized Ammonium Nitrate (“PSAN”), in 2016 the Group initiated a global recall campaign on cars
mounted with such airbags. Due to the uncertainty of recoverability of the costs from Takata, the Group
recognized an aggregate provision of €36,994 thousand in 2016 (within cost of sales). At December 31,
2019, the provision amounted to €15,519 thousand (€24,513 thousand at December 31, 2018), reflecting
the current best estimate for future costs of the Group related to the recall campaign. The decrease in the
provision relates to ongoing recall activities as well as a partial release in 2018.
263
Annual Report 2019 FERRARI N.V.
/ 23. Provisions
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 2020 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 includes a release for a change in the
estimate of the risk and related provision associated with a legal dispute based on developments in the first
quarter of 2019. 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, as well as environmental risks.
The utilization of the provision for other risks includes a release of provisions related to favorable
developments in emissions regulations that occurred in the third quarter of 2019.
The following table sets forth additional provisions to other risks recognized for the years ended December
31, 2019, 2018 and 2017.
(e thousand)
Recorded in the consolidated income statement within:
Cost of sales
Selling, general and administrative costs
Total
For the years ended December 31,
2019
2018
2017
9,563
2,830
12,393
11,420
—
11,420
8,065
274
8,339
264
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
24. Debt
(e thousand)
Bonds and notes
Asset-backed financing
(Securitizations)
Lease liabilities
Borrowings from banks
Other debt
Total debt
Balance at
December 31,
2018
1,198,109
Impact
of IFRS 16
adoption
Balance at
January 1,
2019
— 1,198,109
Proceeds
from
borrowings
298,316
Repayments of
borrowings
(315,395)
Interest
accrued and
other
4,440
Translation
differences
—
Balance at
December 31,
2019
1,185,470
682,581
—
682,581
282,113
(189,940)
(82)
13,597
788,269
673
63,535
35,984
9,820
—
—
64,208
35,984
14,788
—
9,820
33,801
(18,684)
(3,516)
(21,479)
—
(71)
—
184
549
414
60,496
32,946
22,556
1,927,167
63,535 1,990,702
629,018
(549,014)
4,287
14,744
2,089,737
The breakdown of debt by nature and by maturity is as follows:
(e thousand)
At December 31,
2019
2018
Due
within
one year
7,260
Due between
Due
one and
beyond
five years
five years
879,834 298,376
Total
1,185,470
Due
within
one year
7,616
Due between
one and
five years
1,190,493
Due
beyond
five years
Total
— 1,198,109
338,366
449,903
—
788,269
300,051
382,530
— 682,581
20,195
25,894
14,407
60,496
673
32,946
22,556
—
—
—
—
32,946
22,556
34,249
9,820
—
1,735
—
—
—
—
673
35,984
9,820
Bonds and notes
Asset-backed
financing
(Securitizations)
Lease liabilities
Borrowings from
banks
Other debt
Total debt
421,323
1,355,631 312,783 2,089,737
352,409
1,574,758
— 1,927,167
Bonds and notes
2023 Bond
On March 16, 2016, the Company issued 1.5 percent coupon notes due March 2023, having a principal of
€500 million. The bond was issued at a discount for an issue price of 98.977 percent, resulting in net proceeds
of €490,729 thousand after the debt discount and issuance costs. The net proceeds were used, together with
additional cash held by the Company, to fully repay a €500 million bank loan. The bond is unrated and was
admitted to trading on the regulated market of the Irish Stock Exchange. Following a cash tender offer, on July
16, 2019 the Company executed the repurchase of these notes for an aggregate nominal amount of €115,395
thousand. The amount outstanding at December 31, 2019 of €385,776 thousand includes accrued interest of
€4,567 thousand (€500,197 thousand including accrued interest of €5,938 thousand at December 31, 2018).
2021 Bond
On November 16, 2017, the Company issued 0.25 percent coupon notes due January 2021, having a
principal of €700 million. The bond was issued at a discount for an issue price of 99.557 percent, resulting
in net proceeds of €694,172 thousand after the debt discount and issuance costs. The net proceeds were
265
Annual Report 2019 FERRARI N.V.
/ 24. Debt
primarily used to repay a bank loan. The bond is unrated and was admitted to trading on the regulated
market of the Irish Stock Exchange. Following a cash tender offer, on July 16, 2019 the Company executed
the repurchase of these notes for an aggregate nominal amount of €200,000 thousand. The amount
outstanding at December 31, 2019 of €499,824 thousand includes accrued interest of €1,199 thousand
(€697,912 thousand including accrued interest of €1,678 thousand at December 31, 2018).
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, 2019 and 2018, Ferrari was in compliance with the covenants of the notes.
2029 and 2031 Notes
On July 31, 2019, the Company issued 1.12 percent senior notes due August 2029 (“2029 Notes”) and
1.27 percent senior notes due August 2031 (“2031 Notes”) through a private placement to certain US
institutional investors, each having a principal of €150 million. The net proceeds from the issuances
amounted to €298,316 thousand and are to be primarily used towards general corporate purposes,
including the funding of capital expenditures. The amounts outstanding of the 2029 Notes and 2031 Notes
at December 31, 2019 were €149,891 thousand and €149,979 thousand, including accrued interest of
€700 thousand and €794 thousand, respectively.
Asset-backed financing (Securitizations)
As a means of diversifying its sources of funds, the Group sells certain of its receivables originated by
its financial services activities in the US through asset-backed financing or securitization programs (the
terms asset-backed financing and securitization programs are used synonymously throughout this Annual
Report), without transferring the risks typically associated with such receivables. As a result, the receivables
sold through securitization programs are still consolidated until collection from the customer. As of
December 31, 2019, the following revolving securitization programs were in place:
• revolving securitization program for funding of up to $600 million 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, 2019 total proceeds net of repayments from the sales of
financial receivables under the program were $547 million ($424 million at December 31, 2018).
The securitization agreement requires the maintenance of an interest rate cap.
• revolving securitization program for funding of up to $250 million 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, 2019 total proceeds net of repayments from the sales of
financial receivables under the program were $238 million ($223 million at December 31, 2018).
The securitization agreement requires the maintenance of an interest rate cap.
266
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
• 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
115 basis points. As of December 31, 2019 total proceeds net of repayments from the sales of financial
receivables under the program were $101 million ($134 million at December 31, 2018).
The funding limits of the revolving securitization programs have been progressively increased since inception
as the related receivables portfolios have finished.
Cash collected from the settlement of receivables or credit lines pledged as collateral under securitization
programs is subject to certain restrictions regarding its use and is primarily applied to repay principal and
interest of the related funding. Such cash amounted to €27,524 thousand at December 31, 2019 (€26,497
thousand at December 31, 2018).
Lease liabilities
As a result of adopting IFRS 16 - Leases on January 1, 2019, the Group recognized right-of-use assets and
related lease liabilities of €63,535 thousand in relation to leases which had previously been classified as
operating leases under IAS 17. For further details please refer to Note 2 “Significant Accounting Policies - New
standards and amendments effective from January 1, 2019 - IFRS 16 - Leases”.
As of December 31, 2019 lease liabilities amount to €60,496 thousand.
Borrowings from banks
Borrowings from banks at December 31, 2019 mainly relate to financial liabilities of FFS Inc to support
the financial services operations, and in particular (i) €31,211 thousand (€30,694 thousand at December
31, 2018) relating to a U.S. Dollar denominated credit facility for up to $50 million (drawn down for $35
million at December 31, 2019) and bearing interest at LIBOR plus a range of between 65 and 75 basis
points; (ii) other borrowings from banks of €1,735 thousand (€5,290 thousand at December 31, 2018)
relating to various short and medium term credit facilities.
Revolving Credit Facility
At December 31, 2018 the Company had a revolving credit facility of €500 million which was undrawn and
due to mature in November 2020. This revolving credit facility was cancelled in December 2019 and replaced
with a new €350 million unsecured committed revolving credit facility (the “RCF”), which is intended for
general corporate and working capital purposes. The RCF has a 5 year-tenor with two further one-year
extension options, exercisable on the first and second anniversary of the signing date on the Company’s
request and the approval of each participating bank. At December 31, 2019 the RCF was undrawn.
Other debt
Other debt primarily relates to other funding for financing activities of the Group.
267
Annual Report 2019 FERRARI N.V.
25. Other liabilities
An analysis of other liabilities is as follows:
(e thousand)
At December 31,
Deferred income
Advances and security deposits
Accrued expenses
Payables to personnel
Social security payables
Other
Total other liabilities
2019
275,439
348,899
85,965
28,272
20,334
41,106
2018
271,817
145,394
81,408
25,434
18,209
47,481
800,015
589,743
Deferred income primarily includes amounts received under maintenance and power warranty programs
of €219,209 thousand at December 31, 2019 and €204,987 thousand at December 31, 2018, 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, 2019, the Group expects to
recognize in net revenues approximately €61 million in 2020, €44 million in 2021, €35 million in 2022 and
€79 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, 2019 and at December 31, 2018 primarily include advances
received from clients for the purchase of our hypercars and limited edition cars, and at December 31, 2019
also our Icona cars. Upon shipment of such cars, the advances are recognized as revenue. The increase
primarily relates to advances received for the Ferrari Monza SP1 and SP2. Of the total contract liability
related to advances as of December 31, 2019, the Group expects to recognize the entire amount within net
revenues in 2020 and 2021.
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,
2019
Additional
amounts arising
during the period
Amounts
recognized
within revenue
Other
changes
At December 31,
2019
204,987
139,852
90,998
377,950
(76,776)
(176,623)
—
44
219,209
341,223
268
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
An analysis of other liabilities (excluding accrued expenses and deferred income) by due date is as follows:
(e thousand)
At December 31,
2019
2018
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)
422,462
10,083
6,066
438,611
223,138
6,960
6,420 236,518
26. Trade payables
Trade payables of €711,539 thousand at December 31, 2019 (€653,751 thousand at December 31, 2018)
are entirely due within one year. The carrying amount of trade payables is considered to be equivalent to
their fair value.
27. 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.
269
Annual Report 2019 FERRARI N.V.
/ 27. Fair value measurement
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, 2019 and 2018:
(e thousand)
Cash and cash equivalents
Investments and other financial assets -
Liberty Media Shares
Current financial assets
Total assets
Other financial liabilities
Total liabilities
Note
16
19
19
Level 1
897,946
7,674
—
905,620
—
—
At December 31, 2019
Level 2
Level 3
—
—
9,423
9,423
14,791
14,791
—
—
—
—
—
—
Total
897,946
7,674
9,423
915,043
14,791
14,791
(e thousand)
At December 31, 2018
Cash and cash equivalents
Investments and other financial assets -
Liberty Media Shares
Current financial assets
Total assets
Other financial liabilities
Total liabilities
Note
Level 1
Level 2
Level 3
Total
793,664
—
16
19
19
5,142
—
798,806
—
—
—
6,788
6,788
11,342
11,342
—
—
—
—
—
—
793,664
5,142
6,788
805,594
11,342
11,342
There were no transfers between fair value hierarchy levels between 2018 and 2019.
The fair value of current financial assets and other financial liabilities relates 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 foreign currency derivatives (forward contracts, currency swaps and options) 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 par 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.
270
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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,
2019
2018
Note
18
Carrying
amount
966,448
950,842
15,606
Fair
value
966,448
950,842
15,606
Carrying
amount
878,496
851,209
27,287
Fair
value
878,496
851,209
27,287
966,448
966,448
878,496
878,496
24
2,089,737
2,103,871
1,927,167
1,921,937
28. 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 other companies controlled by the Exor Group (including CNH Industrial N.V. and
its subsidiaries), unconsolidated subsidiaries of the Group, associates and joint ventures. In addition,
members of the Ferrari Board of Directors, Board of Statutory Auditors and executives with strategic
responsibilities and their families are also considered related parties.
The Group carries out transactions with related parties on commercial terms that are normal in the respective
markets, considering the characteristics of the goods or services involved. Transactions carried out by the Group
with these related parties are primarily of a commercial nature and, in particular, these transactions relate to:
Transactions with FCA Group companies
• the sale of engines and car bodies to Maserati S.p.A. (“Maserati”) which is controlled by the FCA Group;
• the purchase of engine components for the use in the production of Maserati engines from FCA US LLC,
which is controlled by FCA Group;
• a technical cooperation, starting from November 2019, between the Group and FCA Group with the aim to
enhance the quality and competitiveness of their respective products, while reducing costs and investments;
• 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 were controlled by the FCA Group until May 2, 2019
when FCA completed the sale of Magneti Marelli. Following the sale, Magneti Marelli (which subsequently
operates under the name “Marelli”) is no longer a related party;
• transactions with 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.
271
Annual Report 2019
FERRARI N.V.
/ 28. Related party transactions
Transactions with Exor Group companies (excluding FCA 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 and
managers with strategic responsibilities.
The amounts of transactions with related parties recognized in the consolidated income statement are as
follows:
(e thousand)
For the years ended December 31,
2019
Costs
(1)
Net
revenues
Net
financial
expenses
Net
revenues
2018
Costs
(1)
Net
financial
expenses
Net
revenues
2017
Costs
(1)
Net
financial
expenses
FCA Group
companies
Maserati
FCA US LLC
Magneti Marelli(2)
Other FCA Group
companies
Total FCA Group
companies
Exor Group
companies (excluding
the FCA Group)
Other related parties
Total transactions
with related parties
143,091
—
352
6,275
17,954
10,444
—
—
—
217,922
—
1,589
3,982
28,486
40,343
—
—
—
315,407
6
1,866
4,698
44,882
36,670
—
—
—
8,637
8,028
1,965
12,106
7,193
1,370
6,754
7,007
1,191
152,080
42,701
1,965
231,617
80,004
1,370
324,033
93,257
1,191
281
368
610
13,906
4
31
311
179
1,707
12,651
—
—
283
492
2,159
13,666
—
—
152,971
56,975
2,000
233,635
92,834
1,370
326,475
107,415
1,191
Total for the Group
3,766,615 2,153,480
42,082 3,420,321 1,953,441
23,563 3,416,890 1,986,792
29,260
(1) Costs include cost of sales, selling, general and administrative costs and other expenses, net.
(2) FCA completed the sale of Magneti Marelli on May 2, 2019, following which Magneti Marelli (which subsequently operates under the name
“Marelli”) is no longer a related party.
272
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Assets and liabilities originating from related party transactions are summarized in the table below:
(e thousand)
At December 31,
2019
2018
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)
48,617
—
—
5,449
4,636
—
Other FCA Group companies
1,165
3,598
Total FCA Group companies
49,782
13,683
—
—
203
203
— 21,821
39,077
— 30,594
—
—
581
135
2,774
5,896
6,099
6,332
9,427
—
—
4,689
1,481
—
—
44
22,402
47,882
26,547
1,481
30,638
Exor Group companies
(excluding the FCA Group)
Other related parties
Total transactions with related
parties
350
9
237
207
377
13
147
2,565
1,295
1,835
208
1,999
—
5
4
—
50,279
16,257
1,735
24,444
48,467
28,559
1,486
30,642
Total for the Group
231,439 711,539 92,830 800,015
211,399 653,751 64,295 589,743
(1) FCA completed the sale of Magneti Marelli on May 2, 2019, following which Magneti Marelli (which subsequently operates under the name
“Marelli”) is no longer a related party.
There were no financial assets or financial liabilities originating from related party transactions at December
31, 2019 or December 31, 2018.
Emoluments to Directors and Key Management
The fees of the Directors of Ferrari N.V. are as follows:
(e thousand)
Directors of Ferrari N.V.
For the years ended December 31,
2019
10,260
2018
17,043
2017
17,767
The aggregate compensation to Directors of Ferrari N.V. for year ended December 31, 2019 was €10,260
thousand (€17,043 thousand in 2018 and €17,767 thousand in 2017), inclusive of the following:
• €1,786 thousand for salary and other short-term benefits (€1,080 thousand in 2018 and €1,277
thousand in 2017); and
• €8,474 thousand for share-based compensation awarded under the Company’s equity incentive plans,
(€15,963 thousand in 2018, including an acceleration of the costs relating to the equity incentive plan
of the former Chairman and Chief Executive Officer (Mr. Sergio Marchionne) and €16,490 thousand in
2017). See Note 21 “Share-based compensation” for additional information related to the equity incentive
plans. For the year ended December 31, 2017 only, Non-Executive Directors’ compensation also included
€418 thousand that was settled in common shares of the Company. There was no equity-settled
compensation for Non-Executive Directors for the years ended December 31, 2019 and 2018.
273
Annual Report 2019 FERRARI N.V.
/ 28. Related party transactions
The aggregate compensation for members of the Senior Management Team (excluding the CEO) in 2019
was €19,839 thousand (€16,674 thousand in 2018 and €16,015 thousand in 2017), inclusive of the
following:
• €14,671 thousand for salary and short-term incentives (€13,915 thousand in 2018 and €10,964
thousand in 2017);
• €5,168 thousand for share-based compensation awarded under the Company’s equity incentive plans
(€2,759 thousand in 2018 and €4,737 thousand in 2017); and
• for the year ended December 31, 2017 only, €314 thousand of other long-term benefits.
29. 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 supplier and sponsorship arrangements at December 31,
2019 were as follows:
(e thousand)
Due within
one year
Minimum purchase obligations
72,352
At December 31, 2019
Due between
one and
three years
16,208
Due between
three and
five years
4,403
Due beyond
five years
Total
—
92,963
Non-cancellable lease agreements
The future aggregate minimum lease payments under non-cancellable leases, mainly relating to the lease of
property and cars, are as follows:
(e thousand)
At December 31, 2019
Future minimum lease payments under
lease agreements
20,899
17,242
10,577
14,885
63,603
Due within
one year
Due between
one and
three years
Due between
three and
five years
Due beyond
five years
Total
274
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
30. 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. Derivative financial instruments can only be executed for hedging
purposes.
275
Annual Report 2019 FERRARI N.V.
In particular, the Group used derivative financial instruments as cash flow hedges for the purpose of limiting
the negative impact of foreign currency exchange rate fluctuation on forecasted transactions denominated
in foreign currencies. 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 19.
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 2019, the total trade
flows exposed to foreign currency exchange rate risk amounted to the equivalent of 53 percent of the
Group’s net revenues (49 percent in 2018).
• 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 2019,
the value of commercial activity exposed to fluctuations in the Euro/U.S. Dollar exchange rate accounted
for approximately 53 percent (57 percent in 2018) of the total currency risk from commercial activity. In
2019, the commercial activities exposed to the Euro/Pound Sterling exchange rate and to the Euro/Japanese
Yen exchange rate exceeded 10 percent (in 2018 only Euro/Pound Sterling exceeded 10 percent) of the total
currency risk from commercial activity. Other significant exposures included the exchange rate between the
Euro and the following currencies: Swiss Franc, Chinese Renminbi, 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 2019. It is the Group’s policy to use derivative financial
instruments (primarily forward currency contracts, currency swaps and currency options) 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 (branch), 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 translated
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 translation exchange risk, although there was no specific
hedging in this respect at the reporting date.
276
/ 30. Qualitative and quantitative information on financial risksAnnual Report 2019 Board Report | Financial Statements | Other Information |
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 Group uses
specific financial derivatives to hedge certain of these exposures.
The impact of foreign currency exchange rate differences recorded within financial income/(expenses) for
the year ended December 31, 2019, except for those arising on financial instruments measured at fair value,
amounted to net losses of €24,237 thousand (net losses of €13,293 thousand and €18,059 thousand for
the years ended December 31, 2018 and 2017, respectively).
All of the Group’s financial services activities are conducted in the functional currency of the related
financial services companies, therefore the impact of foreign currency exchange rate differences arising from
financial services activities is nil in all periods presented.
Except as noted above, there have been no substantial changes in 2019 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,
2019 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 €74,700 thousand (€106,400 thousand at December 31, 2018).
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. The
sensitivity analysis is based on currency hedging in place at the end of the period, which can vary during the
period and assumes unchanged market conditions other than exchange rates, such as volatility and interest
rates. For this reason, it is purely indicative.
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, 2019 were cash and cash
equivalents and certain receivables from financing activities (related to client and dealer financing), while
39 percent of the Group’s gross debt bears floating rates of interest. At December 31, 2019, 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 €205 thousand on an annual basis (a
decrease of €251 thousand at December 31, 2018). 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.
277
Annual Report 2019 FERRARI N.V.
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 19 and 25. Details of the repayment of derivative
financial instruments are provided in Note 19.
The Group has a revolving credit facility of €350 million at December 31, 2019 which was entirely undrawn
(€500 million and entirely undrawn at December 31, 2018).
The Group believes that its total available liquidity (defined as cash and cash equivalents plus undrawn
committed credit lines), in addition to funds that will be generated from operating activities, will enable
Ferrari to satisfy the requirements of its investing activities and working capital needs, fulfill its obligations
to repay its debt and ensure an appropriate level of operating and strategic flexibility. The Group, therefore
believes there is no significant risk of a lack of liquidity.
Credit risk
Credit risk is the risk of economic loss arising from the failure to collect a receivable. Credit risk
encompasses the direct risk of default and the risk of a deterioration of the creditworthiness of the
counterparty.
The maximum credit risk to which the Group is theoretically exposed at December 31, 2019 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.
278
/ 30. Qualitative and quantitative information on financial risksAnnual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 €966,448 thousand at December 31, 2019 (€878,496
thousand at December 31, 2018) are shown net of the allowance for doubtful accounts amounting to
€7,480 thousand (€6,457 thousand at December 31, 2018). After considering the allowance for doubtful
accounts, €59,448 thousand of receivables were overdue (€53,800 thousand at December 31, 2018).
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 €231,439 thousand at December 31, 2019 (€211,399 thousand at
December 31, 2018) are shown net of the allowance for doubtful accounts amounting to €27,171 thousand
(€24,346 thousand at December 31, 2018). After considering the allowance for doubtful accounts,
€46,778 thousand of receivables were overdue (€36,772 thousand at December 31, 2018).
279
Annual Report 2019 FERRARI N.V.
31. Entity-wide disclosures
The following table presents an analysis of net revenues by geographic location of the Group’s clients:
(e thousand)
Italy
Rest of EMEA
Americas(1)
Mainland China, Hong Kong and Taiwan
Rest of APAC(2)
Total net revenues
For the years ended December 31,
2019
363,779
1,636,831
1,010,204
350,330
405,471
2018
2017
449,312
563,921
1,400,443
1,308,261
922,639
274,268
373,659
920,858
282,550
341,300
3,766,615
3,420,321
3,416,890
(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, South Korea, Thailand and Malaysia.
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
Rest of EMEA
Americas(1)
Mainland China, Hong Kong and
Taiwan
Rest of APAC(2)
Total
2019
Goodwill
Property,
plant and
equipment
Intangible
assets
Property,
plant and
equipment
2018
Goodwill
Intangible
assets
1,043,821
785,182
837,682
844,218
785,182
644,689
6,309
14,803
1,574
3,145
—
—
—
—
—
—
—
256
2,251
3,327
351
403
—
—
—
—
—
850
—
258
1,069,652
785,182
837,938
850,550
785,182
645,797
(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, South Korea, Thailand and Malaysia.
280
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
32. Subsequent events
The Group has evaluated subsequent events through February 18, 2020, which is the date the Consolidated
Financial Statements were authorized for issuance.
Under the common share repurchase program, from January 1, 2020 to February 14, 2020, the Company
has repurchased an additional 209,326 common shares for a total consideration of €153.2 million. At
February 14, 2020 the Company held in treasury an aggregate of 8,849,502 common shares.
On February 18, 2020, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders
that the Company declare a dividend of €1.13 per common share, totaling approximately €210 million.
The proposal is subject to the approval of the Company’s shareholders at the Annual General Meeting to be
held on April 16, 2020.
281
Annual Report 2019 FERRARI N.V.
Company Financial Statements
and Notes at December 31, 2019
Index to the 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
283
284
285
286
287
282
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Income Statement / Statement of Comprehensive Income
for the years ended December 31, 2019, and 2018
(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,
2019
603
6,447
595,000
1,451
28,207
30,287
542,105
5,337
547,442
2018
196
3,401
186,700
930
29,493
25,003
134,871
12,498
147,369
The accompanying notes are an integral part of the Company Financial Statements.
283
Annual Report 2019 FERRARI N.V.
Statement of Financial Position
at December 31, 2019 and 2018
(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
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
Employee benefits
Total non-current liabilities
Debt - Current
Trade payables
Tax payables
Other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Note
8
9
11
7
10
11
7
11
12
13
14
16
16
17
7
18
At December 31,
2019
2,617
2018
106
8,778,123
8,778,123
22,587
1,373
22,871
390
8,804,700
8,801,490
—
5,923
17,413
44,186
4,571
56,542
149
7,102
111,590
12,384
3,618
75,615
128,635
8,933,335
210,458
9,011,948
2,573
5,768,544
(438,277)
529,074
5,861,914
1,180,438
2,070
1,182,508
1,866,100
9,419
2,549
10,845
1,888,913
3,071,421
8,933,335
2,504
5,768,544
(67,835)
174,870
5,878,083
1,190,493
2,192
1,192,685
1,818,337
15,885
100,640
6,318
1,941,180
3,133,865
9,011,948
The accompanying notes are an integral part of the Company Financial Statements.
284
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Statement of Cash Flows
for the years ended December 31, 2019 and 2018
(e thousand)
For the years ended December 31,
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 (used in)/from investing activities
Proceeds from loans to related parties
Investments in property, plant and equipment
Total
Cash flows used in financing activities
Repayment of bonds
Proceeds from issuance of bonds
Net proceeds/(repayments) from financial liabilities with related parties
Change in Ferrari Group cash management pools
Change in lease liabilities
Dividends paid to owners
Share repurchases
Total
Total change in cash and cash equivalents
Cash and cash equivalents at the end of the period
2019
75,615
542,105
30,287
422
14,441
(6,652)
1,317
676
(28,011)
—
(24,066)
530,519
—
(75)
(75)
(315,395)
298,316
48,114
(953)
(186)
(192,664)
(386,749)
(549,517)
(19,073)
56,542
2018
114,922
134,871
25,003
8
12,729
5,084
2,891
—
6,349
940
(19,634)
168,241
53,957
—
53,957
—
—
(22,000)
(6,317)
—
(133,095)
(100,093)
(261,505)
(39,307)
75,615
(*) Dividends received for the years ended December 31, 2019 and 2018 of €595,000 thousand and €186,700 thousand, respectively, are
included within profit before taxes.
The accompanying notes are an integral part of the Company Financial Statements.
285
Annual Report 2019
FERRARI N.V.
Statement of Changes in Equity
for the years ended December 31, 2019 and 2018
(e thousand)
At December 31, 2017
Comprehensive income
Dividends to owners
Share repurchases
Share-based compensation
Other changes
At December 31, 2018
Comprehensive income
Dividends to owners
Share repurchases
Share-based compensation
Other changes
At December 31, 2019
Share
capital
2,504
Share
premium
5,768,544
—
—
—
—
—
—
—
—
—
—
2,504
5,768,544
—
—
—
—
69(1)
2,573
—
—
—
—
—
Other
reserves
13,119
—
—
(100,093)
22,491
(3,352)
(67,835)
—
—
(386,749)
17,480
(1,173)
Retained
earnings
160,178
147,369
(133,939)
—
—
1,262
174,870
547,442
(193,238)
—
—
—
Total
equity
5,944,345
147,369
(133,939)
(100,093)
22,491
(2,090)
5,878,083
547,442
(193,238)
(386,749)
17,480
(1,104)
5,768,544
(438,277)
529,074
5,861,914
(1) Relates to the issuance, allocation and deregistration of certain special voting shares under the Company’s special voting shares terms and
conditions.
The accompanying notes are an integral part of the Company Financial Statements.
286
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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. 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, 2019 were authorized for issuance on February 18, 2020.
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.
287
Annual Report 2019 FERRARI N.V.
/ 2. Basis of preparation and significant accounting policies
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, 2019 (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 reflect the cost of the
subsidiaries 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, 2019 as noted below.
The amounts in the Company Financial Statements are presented in thousands of Euro (€), except where
otherwise indicated.
Format of the Company Financial Statements
The Company presents the income statement by function and 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 or used in 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 Ferrari Group Italian tax consolidation. Dividends
received are included as part of operating activities.
New standards and amendments effective from January 1, 2019
The following new standards, interpretations and amendments were effective from January 1, 2019 and
were adopted by the Company for the purpose of the preparation of the Company Financial Statements:
• IFRS 16 - Leases (see below)
• IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments (see below)
• Amendments to IFRS 9 - Financial Instruments
• Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures
• Amendments to IAS 19 - Employee Benefits
• Annual Improvements to IFRS 2015-2017 Cycle
288
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Except for IFRS 16, as detailed below, there was no effect from the adoption of these standards,
interpretations and amendments. Further information on these standards is provided in Note 2 of the
Consolidated Financial Statements.
IFRS 16 - Leases
Transition impact
The Company applied the simplified transition approach and has therefore recognized the impacts of
adoption at January 1, 2019 without restating comparative figures for the period prior to adoption. The
Company elected to use the exemptions permitted on transition for short term leases (contracts in 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.
Upon adoption, the Company recognized right-of-use assets and corresponding lease liabilities in
relation to leases which had previously been classified as operating lease under IAS 17, measured at the
present value of the remaining lease payments over the lease term that have not been paid at the date
of adoption, discounted using the Company’s incremental borrowing rate as of January 1, 2019, being
the rate that the Company would have to pay to borrow the funds necessary to obtain an asset of
similar value in a similar economic environment with similar terms and conditions. At January 1, 2019
this rate was 4.5 percent based primarily on the country of the lessee and the remaining lease term of
the underlying leased assets. 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.
As of January 1, 2019, after considering the exemptions mentioned above, the Company had non-
cancellable operating lease commitments of approximately €3,273 thousand. Of these commitments,
the Company recognized right-of-use assets and related lease liabilities of €2,776 thousand. The main
contracts within the scope of IFRS 16 for which the Company is lessee primarily relate to buildings.
(e thousand)
Industrial buildings
Other assets
Right-of-use assets
(e thousand)
Non-cancellable operating lease commitments
Lease contracts for which the underlying asset is of low value
Lease contracts for which the lease term ends within 12 months
Discount of remaining lease payments
Lease liabilities
At December 31,
At January 1,
2019
2,387
113
2,500
2019
2,601
175
2,776
At January 1,
2019
3,273
—
—
(497)
2,776
289
Annual Report 2019 FERRARI N.V.
/ 2. Basis of preparation and significant accounting policies
Upon adoption the Company did not 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 initial recognition
does not affect accounting profit or taxable profit.
For the year ended December 31, 2019 the impact of adopting the new standard resulted in the recognition
of €363 thousand of depreciation of right-of-use assets and €117 thousand of financial expenses. Lease
expenses that would have been recognized in the income statement under the previous lease standard, IAS
17, would have been €431 thousand.
See “Leases” below for a description of the Group’s accounting policy with respect to leases.
IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments
The Company adopted IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments. The
interpretation provides specific guidance to recognise and measure the accounting impact of tax
uncertainties which IAS 12 did not address. Particularly, IFRIC 23 specifies how to determine the unit of
account and the recognition and measurement guidance to be applied to that unit, as well as when to
reconsider the accounting for a tax uncertainty. The interpretation is effective on or after January 1, 2019.
The Company has reviewed its previously designed model to account for tax uncertainties and assessed that
it is consistent with the more specific IFRIC 23 requirements.
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, 2020:
Amendments to IAS 1 - Presentation of Financial Statements and IAS 8 - Accounting Policies, Changes in Accounting
Estimates and Errors which 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
Company does not expect any material impact from the adoption of these amendments.
Amendments to IFRS 9 - Financial Instruments, IAS 39 - Financial Instruments: Recognition and Measurement and IFRS
7 - Financial Instruments: Disclosures, collectively the “Interest Rate Benchmark Reform”, which modify certain
hedge accounting requirements in order to provide relief from potential effects of the uncertainty caused
by the interbank offered rates (IBOR) reform, and require companies to provide additional information
to investors about their hedging relationships that are directly affected by these uncertainties. These
amendments are effective on or after January 1, 2020. The Company does not expect any material impact
from the adoption of these amendments.
Review of the Conceptual Framework for Financial Reporting which revised the Conceptual Framework for Financial
Reporting 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
290
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
transaction, with early application permitted. The Company does not expect a material impact from the
adoption of the revised Conceptual Framework.
Further information on these standards is provided in Note 2 of the Consolidated Financial Statements.
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 IFRS 3 - Business Combinations;
• Amendments to IAS 1 - Presentation of Financial Statements: Classification of Liabilities as Current or Non-current.
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 is 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 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. Any resulting 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, up to a
maximum of 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.
291
Annual Report 2019 FERRARI N.V.
/ 2. Basis of preparation and significant accounting policies
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated
at the foreign currency exchange rate prevailing at that date. Exchange differences arising on the settlement
of monetary items or on reporting monetary items at rates different from those at which they were initially
recorded during the period or in previous financial statements are recognized in the income statement.
Foreign currency translation
The Company has a branch in the United Kingdom (UK) that operates in Pound Sterling. At each reporting
period, the assets and liabilities within the UK branch are translated to Euro using the exchange rate at the
balance sheet date and the income statement is translated using the average exchange rate for the period.
Translation differences resulting from the application of this method are classified as translation differences
within other comprehensive income/(loss) until the disposal of the branch. The cumulative translation
differences at December 31, 2019 amounted to €39 thousand (€23 thousand at December 31, 2018).
The principal foreign currency exchange rates used to translate other currencies into Euro were as follows:
2019
2018
Average
At December 31,
Average
At December 31,
1.1195
0.8778
1.1234
0.8508
1.1810
0.8847
1.1450
0.8945
U.S. Dollar
Pound Sterling
Property, plant and equipment
Property, plant and equipment is recognized at cost net of accumulated depreciation and, if applicable,
impairment. Depreciation is calculated on a straight line basis over the useful lives of the assets as follows:
Buildings
Office equipment
Other assets
Leases
Depreciation rates
10%
20% - 22%
20% - 25%
With the adoption of IFRS 16, the Company recognizes a right-of-use asset and a corresponding lease
liability at the date at which the leased asset is available for use. Each lease payment is allocated
between the principal liability and finance costs. Finance costs are charged to the income statement
over the lease period using the effective interest rate method. The right-of use asset is depreciated on a
straight-line basis over the lease term.
Right-of-use assets are measured at cost comprising the following: (i) the amount of the initial measurement of
lease liability; (ii) any lease payments made at or before the commencement date less any lease incentives received;
(iii) any initial direct costs and, if applicable, (iv) restoration costs. Payments associated with short-term leases
and leases of low-value assets are recognized as an expense in the income statement on a straight-line basis.
292
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Lease liabilities are measured at the net present value of the following: (i) fixed lease payments, (ii) variable
lease payments that are based on an index or a rate and, if applicable, (iii) amounts expected to be payable
by the lessee under residual value guarantees, and (iv) the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option. Lease liabilities do not include any non-lease components that
may be included in the related contracts.
Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be
determined, the Company’s incremental borrowing rate is used, being the rate that the Company would
have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
In determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options (or
periods after termination options) are only included in the lease term if the lease is reasonably certain to be
extended (or not terminated).
Trade receivables
Trade receivables are amounts due for goods sold or services provided in the ordinary course of business.
Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using
the effective interest rate method, less any provision for allowances.
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.
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.
293
Annual Report 2019 FERRARI N.V.
/ 2. Basis of preparation and significant accounting policies
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 as well as 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 includes 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 where appropriate.
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.
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.
294
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
With the adoption of IFRIC 23 on January 1, 2019, the Company reviewed its previously designed
model to account for tax uncertainties and assessed that it is consistent with the more specific IFRIC 23
requirements.
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 provides 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.
According to the Predecessor Accounting Method, the dividend in kind amounted to €940 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 equity incentive plans that provide for the granting of share-based
compensation to the Chairman, the Chief Executive Officer, all other members of the Senior Management
Team (“SMT”) and other key employees of the Group. The equity incentive plan is accounted for in
accordance with IFRS 2 - Share-based Payments, which requires the Company to recognize share-based
295
Annual Report 2019 FERRARI N.V.
/ 2. Basis of preparation and significant accounting policies
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 plans. The Company’s portion of the share-based compensation for the equity incentive plans
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 the 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 for further details.
296
Annual Report 2019 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, 2019 amounted to €603 thousand (€196 thousand for the
year ended December 31, 2018) and primarily related 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, 2019 amounted to €6,447 thousand (€3,401 thousand for
the year ended December 31, 2018) and primarily related to costs recharged to Ferrari S.p.A.
4. Dividend income
Dividend income for the year ended December 31, 2019 amounted to €595,000 thousand and related
entirely to a dividend from Ferrari S.p.A, approved on April 3, 2019 and received in three tranches between
April and July 2019.
Dividend income for the year ended December 31, 2018 amounted to €186,700 thousand and related
entirely to a dividend from Ferrari S.p.A, approved on April 5, 2018 and received on May 11, 2018.
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
2019
16,804
2,834
4,532
2,616
1,421
28,207
2018
17,112
5,272
3,566
2,321
1,222
29,493
Personnel expenses include costs related to the equity incentive plans (see Note 15), compensation for
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, 2019 the Company had 23 full time equivalent employees, 13 of which relate to the UK
Branch and 10 of which relate to the Italian Branch (at December 31, 2018 the Company had 22 full time
equivalent employees, 12 of which relate to the UK Branch and 10 of which relate to the Italian Branch). All
employees work outside of the Netherlands.
297
Annual Report 2019 FERRARI N.V.
/ 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. 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 and other finance costs on bonds and notes
Interest on intercompany borrowings
Interest on leases
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,
2019
28,330
20,703
7,510
117
—
376
1,614
(33)
30,287
2018
23,577
12,386
11,191
—
1,296
(507)
1,259
(622)
25,003
The increase in interest and other finance costs on bonds and notes for the year ended December 31, 2019
primarily relates to costs of €8,142 thousand for the partial repurchase of bonds following a cash tender
offer in July (in particular the repurchase price and premium incurred, as well as previously unamortized
issuance costs).
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. The
currency swap matured in November 2018, concurrently with the repayment of the financial receivable.
Other financial expenses for both 2019 and 2018 includes bank fees and charges.
Other financial income includes interest income on cash and cash equivalents held with banks and, for
2018 only, interest income on the financial receivable with FFS Inc that was repaid in November 2018.
298
Annual Report 2019
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, 2019 and 2018 is as follows:
(e thousand)
Current income tax benefit
Deferred income tax benefit/(expense)
Total income tax benefit
For the years ended December 31,
2019
4,356
981
5,337
2018
10,902
1,596
12,498
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 table below provides a reconciliation between actual income tax benefit and the theoretical income
tax expense, calculated on the basis of the applicable corporate tax rate in effect in Italy, which was 24.0
percent for each of the years ended December 31, 2019 and 2018:
(e thousand)
For the years ended December 31,
Profit before tax
Theoretical income tax expense
Tax effect on:
Non-taxable dividends
Non-deductible costs
Other permanent differences
Total income tax benefit
2019
542,105
(130,105)
135,660
(125)
(93)
5,337
2018
134,871
(32,369)
42,568
(93)
2,392
12,498
The following table provides a split of tax receivables and tax payables for the years ended December 31,
2019 and 2018:
(e thousand)
Tax receivables
Tax payables
Net
At December 31,
2019
17,413
2,549
14,864
2018
111,590
100,640
10,950
Tax receivables of €17,413 thousand at December 31, 2019 (€111,590 thousand at December 31, 2018)
primarily relate to amounts due from the tax authorities for the 2019 Group tax consolidation in Italy.
299
Annual Report 2019 FERRARI N.V.
/ 7. Income taxes
Tax payables of €2,549 thousand at December 31, 2019 (€100,640 thousand at December 31, 2018)
primarily relate to amounts due to related parties for the 2019 Group tax consolidation in Italy.
(e thousand)
Deferred tax assets
To be recovered after 12 months
To be recovered within 12 months
Net deferred tax assets
At December 31,
2019
2018
820
553
1,373
312
78
390
The increase in net deferred tax assets from €390 thousand at December 31, 2018 to €1,373 thousand
at December 31, 2019 is primarily related the reversal of deferred tax liabilities on debt issuance costs as a
result of the Company’s partial repurchase of bonds during 2019.
8. Property, plant and equipment
(e thousand)
Cost
Accumulated depreciation
Carrying amount
At December 31,
2019
3,115
(498)
2,617
2018
166
(60)
106
Property, plant and equipment relates to office furniture and equipment in the UK Branch, as well as
buildings recognised as right-of-use assets in 2019 of €2,776 thousand in accordance with the adoption
of IFRS 16 - Leases. There are no liens, pledges, collateral or restrictions on use over property, plant and
equipment. Depreciation charges of €422 thousand for the year ended December 31, 2019 (€8 thousand
for the year ended December 31, 2018) were recorded within selling, general and administrative costs, of
which €363 thousand related to right-of-use assets. See Note 16 “Debt” for information related to the
related lease liabilities.
300
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
9. Investments in subsidiaries
Investment in subsidiaries amounted to €8,778,123 thousand at December 31, 2019 and 2018, and
included investments in Ferrari S.p.A. amounting to €8,778,000 thousand and New Business 33 S.p.A.
(formerly Fiat Investments S.p.A.) amounting to €123 thousand.
Impairment testing
At December 31, 2019, the market capitalization of Ferrari N.V. amounted to approximately €27.4 billion.
Considering the share price of the Company at December 31, 2019 and at the date of authorization of the
Company Financial Statements, no impairment indicators were identified. As disclosed in Note 13 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 of €149 thousand related to demo cars purchased from Ferrari S.p.A.
for eventual sale to third parties, and were recorded net of a provision of €517 thousand. During 2019, the
Company sold the remaining inventory and therefore had no inventory at December 31, 2019.
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,
2019
517
—
(517)
—
2018
353
168
(4)
517
301
Annual Report 2019 FERRARI N.V.
11. Trade receivables, financial assets and other current assets
Trade receivables
(e thousand)
Trade receivables
Financial assets
Other current assets
Total
At December 31,
2019
5,923
22,587
44,186
72,696
2018
7,102
22,871
12,384
42,357
Trade receivables at December 31, 2019 included €4,945 thousand due from Ferrari S.p.A. for corporate
services rendered and fees charged and €978 thousand due from third parties for marketing-related events
(€6,513 thousand and €589 thousand respectively at December 31, 2018).
The carrying amount of trade receivables is deemed to approximate their fair value. There are no overdue
balances and no allowance for expected credit losses 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
Non-current financial receivables
At December 31,
2019
2018
2,782
3,141
5,923
5,938
1,164
7,102
At December 31, 2019, non-current financial receivables of €22,587 thousand (€22,871 thousand at
December 31, 2018) related 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 plans, pursuant to an intercompany agreement.
Other current assets
Other current assets of €44,186 thousand at December 31, 2019 (€12,384 thousand at December 31,
2018) primarily include VAT credits and prepaid expenses. The increase in 2019 primarily related to an
increase in VAT receivables.
302
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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, 2019, the Company had
a net asset of €4,571 thousand (€3,618 thousand at December 31, 2018). Amounts in cash management
pools at December 31, 2019 and 2018 were entirely denominated in Pound Sterling.
13. Cash and cash equivalents
Cash and cash equivalents amounted to €56,542 thousand at December 31, 2019 (€75,615 thousand at
December 31, 2018) 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, 2019 and 2018.
Credit risk associated with cash and cash equivalents is considered limited as the counterparties are leading
national and international banks.
14. Equity
Share capital
At December 31, 2019 the fully paid up share capital of the Company was €2,573 thousand, consisting of
193,923,499 common shares and 63,349,111 special voting shares, all with a nominal value of €0.01 per
share (€2,504 thousand at December 31, 2018 consisting of 193,923,499 common shares and 56,497,618
special voting shares, all with a nominal value of €0.01). As per the resolution of the Annual General
Meeting of Shareholders on April 12, 2019 which approved to cancel all special voting shares in the share
capital of the Company held in treasury as of that date, on August 29, 2019 the Company completed the
cancellation process of 3,902 special voting shares.
303
Annual Report 2019 FERRARI N.V.
/ 14. Equity
The following table summarizes the changes in the number of outstanding common shares and outstanding
special voting shares of the Company for the year ended December 31, 2019:
(e thousand)
Common Shares
Special Voting Shares
Total
Outstanding shares at December 31, 2018
Common shares repurchased under share repurchase
program(1)
Common shares assigned under equity incentive plans(2)
Special voting shares allocation(3)
187,920,656
(2,907,702)
270,369
—
56,492,874
244,413,530
—
—
(2,907,702)
270,369
6,854,047
6,854,047
Outstanding shares at December 31, 2019
185,283,323
63,346,921
248,630,244
(1) Includes shares repurchased between January 1, 2019 and December 31, 2019 based on the transaction trade date, for a total consideration
of €386,094 thousand, including transaction costs.
(2) During 2019, approximately 230 thousand performance share units and 40 thousand retention restricted share units vested un the Equity
Incentive Plan 2016-2020 as a result of certain performance or retention requirements being achieved. As a result, a corresponding number of
common shares which were previously held in treasury, were assigned to participants of the plan. See Note 15 “Share-Based Compensation”
for additional details.
(3) Relates to the issuance, allocation and deregistration of certain special voting shares under the Company’s special voting shares terms and
conditions.
The authorized share capital of the Company is €7,500,000, divided into 375,000,000 common shares
with nominal value of €0.01 per share and an equal number of special voting shares with nominal value of
€0.01 per share.
The loyalty voting structure
The purpose of the loyalty voting structure is to reward ownership of the Company’s common shares and to
promote stability of the Company’s shareholder base by granting long-term shareholders of the Company
with special voting shares. 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 purchase common shares 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 €5,768,544 thousand at both December 31, 2019 and December
31, 2018, and primarily originated from the issuance of common shares pursuant to the restructuring
activities undertaken as part of an intra-group restructuring (the Separation).
304
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Retained earnings
Following approval of the annual accounts by the shareholders at the Annual General Meeting of the
Shareholders on April 12, 2019, a dividend distribution of €1.03 per common share was approved,
corresponding to a total distribution of €193,238 thousand (of which €192,664 thousand was paid in
2019). 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 13, 2018, a dividend distribution of €0.71 per common share was approved,
corresponding to a total distribution of €133,939 thousand (of which €133,095 thousand was paid in
2018). The distribution was made from the retained earnings reserve.
Other reserves
Other reserves includes, among others:
• a treasury reserve of €486,839 thousand at December 31, 2019 and €100,143 thousand at December 31,
2018;
• a share-based compensation reserve of €46,539 thousand at December 31, 2019 and €52,198 thousand
at December 31, 2018;
• a legal reserve of €65 thousand at December 31, 2019 and €29 thousand at December 31, 2018,
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, 2019, the legal and non-distributable reserves of the Company amounted to
€65 thousand (€29 thousand at December 31, 2018) 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, 2019, the cumulative translation reserve
amounted to €59 thousand (€23 thousand at December 31, 2018).
• The Company records a statutory non-distributable reserve equal to 1 percent of the nominal value of the
special voting shares. At December 31, 2019 and 2018, this reserve amounted to €6 thousand.
During the year ended December 31, 2019 the Company repurchased 2,907,702 common shares for a total
consideration of €386,749 thousand under the multi-year €1.5 billion total share repurchase program
announced in December 2018 (1,033,218 common shares for a total consideration of €100,093 thousand
were repurchased during the year ended December 31, 2018 under a previous share repurchase program).
Shares repurchased may be used to meet the Company’s obligations arising from the equity incentive plans.
305
Annual Report 2019 FERRARI N.V.
/ 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,
2019
2018
1,481,290
5,969,427
(25,997)
1,348,722
5,969,427
(26,740)
(1,832,936)
(1,008,927)
(743,376)
(824,009)
421,700
(3,194)
595,000
235,000
(2,090)
186,700
Equity in the Company Financial Statements of Ferrari N.V.
5,861,914
5,878,083
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 attributable to owners of the parent 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,
2019
2018
695,818
784,678
(743,376)
(824,009)
595,000
547,442
186,700
147,369
306
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
15. Share-Based Compensation
Equity Incentive Plan 2016 - 2020
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 Performance Share Units (“PSUs”) and the Retention Restricted Share
Units (“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 current Chief Executive Officer and certain key
employees of the Group under the equity incentive plan.
Equity Incentive Plan 2019-2021
Under a new equity incentive plan approved in 2019, additional PSUs and RSUs, which each represent the
right to receive one Ferrari common share, were awarded to the Executive Chairman, the Chief Executive
Officer, all members of the SMT and other key employees of the Group (“Equity Incentive Plan 2019-
2021”). These PSUs and RSUs cover a three-year performance period from 2019 to 2021.
Outstanding share awards
Changes during 2019, 2018 and 2017 to the outstanding number of PSU and RSU share awards under both
the Equity Incentive Plan 2016-2020 and Equity Incentive Plan 2019-2021 are as follows:
Outstanding PSU Awards
Balance at January 1, 2017
Granted(1)
Forfeited
Vested
Balance at December 31, 2017
Granted(1)
Forfeited
Vested
Balance at December 31, 2017
Granted(2)
Forfeited
Vested
Balance at December 31, 2019
(1) Granted under the Equity Incentive Plan 2016-2020
(2) Granted under the Equity Incentive Plan 2019-2021
—
686,933
—
—
686,933
20,793
(21,200)
—
686,526
175,307
(32,832)
(230,282)
598,719
Outstanding RSU Awards
—
118,467
—
—
118,467
10,397
(10,600)
—
118,264
110,968
(18,000)
(40,087)
171,145
307
Annual Report 2019 FERRARI N.V.
/ 15. Share-based compensation
Share-based compensation
For the years ended December 31, 2019 and 2018, the Company recognized €17,480 thousand and €22,491
thousand, respectively, as an increase to other reserves in equity for the PSU awards and RSU awards.
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 plans. Of the share-based compensation recognized in 2019,
€7,807 thousand was recognized as an expense in cost of sales and selling, general and administrative
costs, and €9,673 thousand was recorded as financial receivables in relation to share-based compensation
recharged to subsidiaries (€15,037 thousand and €7,454 thousand respectively for the year ended
December 31, 2018).
At December 31, 2019 the unrecognized share-based compensation amounted to approximately
€19,298 thousand and will be recognized over the remaining vesting periods until 2021. A portion of the
unrecognized share-based compensation will be recharged to subsidiaries of the Company.
See Note 21 “Share-based Compensation” to the Consolidated Financial Statements for additional details
relating to the equity incentive plan.
16. Debt
(e thousand)
Bonds
Financial liabilities
with related parties
Lease liabilities
Balance at
December 31,
2018
1,198,109
1,810,721
Impact
of IFRS
16 adoption
Balance at
January 1,
2019
— 1,198,109
Proceeds
from
borrowings
298,316
Repayments
of borrowings
(315,395)
Net interest
accrued/(paid)
and other
4,440
Balance at
December 31,
2019
1,185,470
— 1,810,721
1,576,114 (1,528,000)
(357)
1,858,478
—
2,776
2,776
—
(186)
—
2,590
Total debt
3,008,830
2,776
3,011,606
1,874,430 (1,843,581)
4,083
3,046,538
The breakdown of debt at December 31, 2019 and 2018 by nature and by maturity is as follows:
(e thousand)
At December 31,
2019
2018
Due
within
one year
7,260
Due between
one and
five years
879,834
Total
Due
beyond
five years
298,376 1,185,470
Due
within
one year
7,616
Due between
one and
five years
1,190,493
1,858,478
—
— 1,858,478 1,810,721
362
1,260
968
2,590
—
—
—
Due
beyond
five years
Total
— 1,198,109
— 1,810,721
—
—
Bonds
Financial
liabilities with
related parties
Lease liabilities
Total debt
1,866,100
881,094
299,344 3,046,538 1,818,337
1,190,493
— 3,008,830
308
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Bonds and notes
2023 Bond
On March 16, 2016, the Company issued 1.5 percent coupon notes due March 2023, having a principal of
€500 million. The bond was issued at a discount for an issue price of 98.977 percent, resulting in net proceeds
of €490,729 thousand after the debt discount and issuance costs. The net proceeds were used, together with
additional cash held by the Company, to fully repay a €500 million bank loan. The bond is unrated and was
admitted to trading on the regulated market of the Irish Stock Exchange. Following a cash tender offer, on July
16, 2019 the Company executed the repurchase of these notes for an aggregate nominal amount of €115,395
thousand. The amounts outstanding at December 31, 2019 of €385,776 thousand includes accrued interest of
€4,567 thousand (€500,197 thousand including accrued interest of €5,938 thousand at December 31, 2018).
2021 Bond
On November 16, 2017, the Company issued 0.25 percent coupon notes due January 2021, having a
principal of €700 million. The bond was issued at a discount for an issue price of 99.557 percent, resulting
in net proceeds of €694,172 thousand after the debt discount and issuance costs. The net proceeds were
primarily used to repay a bank loan. The bond is unrated and was admitted to trading on the regulated
market of the Irish Stock Exchange. Following a cash tender offer, on July 16, 2019 the Company executed
the repurchase of these notes for an aggregate nominal amount of €200,000 thousand. The amount
outstanding at December 31, 2019 of €499,824 thousand includes accrued interest of €1,199 thousand
(€697,912 thousand including accrued interest of €1,678 thousand at December 31, 2018).
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, 2019 and
2018, the Company was in compliance with the covenants of the notes.
2029 and 2031 Notes
On July 31, 2019, the Company issued 1.12 percent senior notes due August 2029 (“2029 Notes”) and
1.27 percent senior notes due August 2031 (“2031 Notes”) through a private placement to certain US
institutional investors, each having a principal of €150 million. The net proceeds from the issuances
amounted to €298,316 thousand and are to be primarily used towards general corporate purposes,
including the funding of capital expenditures. The amounts outstanding of the 2029 Notes and 2031 Notes
at December 31, 2019 were €149,891 thousand and €149,979 thousand, including accrued interest of
€700 thousand and €794 thousand, respectively.
309
Annual Report 2019 FERRARI N.V.
/ 16. Debt
Financial liabilities with related parties
Financial liabilities with related parties at December 31, 2019 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, 2019
500,095
500,095
148,052
710,236
1,858,478
Due date
Interest Rate
May 2020
EURIBOR 3M + 60bps
November 2020
EURIBOR 3M + 60bps
April 2020
EURIBOR 3M + 60bps
October 2020
EURIBOR 6M + 60bps
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
During 2019, certain debt agreements with Ferrari S.p.A. were renewed. Net proceeds from financial liabilities with
related parties amounted to €48,114 thousand in 2019 (net repayments of €22,000 thousand in 2018).
At December 31, 2019 a 10 basis point increase in interest rates on the floating rate financial liabilities, with
all other variables held constant, would have resulted in a decrease in profit before tax of €1,858 thousand
on an annualized basis (decrease of €1,734 thousand at December 31, 2018).
The carrying amount of the financial liabilities with related parties approximates fair value.
Information on fair value measurement and qualitative and quantitative information on financial risks are
provided in Note 27 and Note 30, 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.
310
Annual Report 2019
Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Lease liabilities
As a result of adopting IFRS 16 - Leases on January 1, 2019, the Company recognized right-of-use assets
and related lease liabilities of €2,776 thousand in relation to leases which had previously been classified as
operating leases under the previous lease standard, IAS 17. For further details please refer to Note 2 “Basis
of preparation and Significant Accounting Policies - New standards and amendments effective from January
1, 2019 - IFRS 16 - Leases”.
As of December 31, 2019 lease liabilities amount to €2,590 thousand.
Revolving Credit Facility
At December 31, 2018 the Company had a revolving credit facility of €500 million which was undrawn. This
revolving credit facility was cancelled in December 2019 and replaced with a new €350 million unsecured
committed revolving credit facility (the “RCF”), which is intended for general corporate and working
capital purposes. The RCF has a 5 year-tenor with two further one-year extension options, exercisable on
the first and second anniversary of the signing date on the Company’s request and the approval of each
participating bank. At December 31, 2019 the RCF was undrawn.
17. Trade payables
(e thousand)
Due to related parties
Due to third parties
Total trade payables
At December 31,
2019
3,157
6,262
9,419
2018
14,701
1,184
15,885
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,
2019
2018
4,809
4,610
9,419
13,535
2,350
15,885
Trade payables are due within one year and their carrying amount at the reporting date is deemed to
approximate their fair value.
311
Annual Report 2019 FERRARI N.V.
18. Other current liabilities
Other current liabilities amounted to €10,845 thousand at December 31, 2019 (€6,318 thousand at
December 31, 2018) and primarily relate to indirect tax payables, payables to personnel, deferred income
and provisions.
Deferred income principally relates to advances received from dealers for marketing-related events, such as
new car launches.
19. Earnings per share
Earnings per share information is provided in Note 12 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,
2019
1,150
—
139
1,289
2018
1,340
12
5
1,357
Audit fees of Ernst & Young Accountants LLP amounted to €80 thousand in 2019 and 2018 and are
included in the table above.
21. Remuneration
Detailed information on the remuneration of the Board of Directors and senior management is included in
the “Corporate Governance” and “Remuneration of Directors” sections to the Annual Report.
312
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
22. Commitments and contingencies
At December 31, 2019 and 2018, the Company provided guarantees over certain debt of its subsidiary
Ferrari Financial Services Inc. The book value of the related debt at December 31, 2019 and 2018 was
€31,211 thousand and €30,694 thousand, respectively.
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 and receivables with Ferrari S.p.A. or other subsidiaries of the Group (Note 16)
• Key management compensation (Note 21).
The impact of transactions with related parties on the Company Financial Statements is disclosed
separately in the relevant notes.
313
Annual Report 2019 FERRARI N.V.
24. Organizational structure
The following table sets forth the Company’s subsidiaries and associates at December 31, 2019:
Name
Country
Nature of business
Shares held
by the Group
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
25%
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
Hong Kong
Importer and distributor
Singapore
Service company
Ferrari Management Consulting (Shanghai) Co. L.t.d.
China
Ferrari South West Europe S.a.r.l.
Ferrari Central Europe GmbH(1)
G.S.A. S.A.
Mugello Circuit S.p.A.
Ferrari Financial Services USA
Indirectly held through other Group entities
Ferrari Auto Securitization Transaction, LLC(2)
Ferrari Auto Securitization Transaction - Lease, LLC(2)
Ferrari Auto Securitization Transaction - Select, LLC(2)
Ferrari Financial Services Titling Trust(2)
410, Park Display Inc.(3)
Associated companies valued at cost
Fondazione Casa di Enzo Ferrari
Branches
UK Branch
France
Germany
Service company
Service company
Service company
Switzerland
Service company
Italy
USA
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
(1) Changes its name from Ferrari Central East Europe GmbH to Ferrari Central Europe GmbH, effective December 2, 2019.
(2) Shareholding held by Ferrari Financial Services Inc.
(3) Shareholding held by Ferrari North America Inc.
314
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
25. Subsequent events
The Company has evaluated subsequent events through February 18, 2020, which is the date the Company
Financial Statements were authorized for issuance.
Under the common share repurchase program, from January 1, 2020 to February 14, 2020, the Company
has repurchased an additional 209,326 common shares for a total consideration of €153.2 million. At
February 14, 2020 the Company held in treasury an aggregate of 8,849,502 common shares.
On February 18, 2020, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders
that the Company declare a dividend of €1.13 per common share, totaling approximately €210 million.
The proposal is subject to the approval of the Company’s shareholders at the Annual General Meeting to be
held on April 16, 2020.
February 18, 2020
Board of Directors
John Elkann
Louis C. Camilleri
Piero Ferrari
Delphine Arnault
Giuseppina Capaldo
Eddy Cue
Sergio Duca
Maria Patrizia Grieco
Adam Keswick
Elena Zambon
315
Annual Report 2019 Other Information
317
Annual Report 2019 FERRARI N.V.
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.
318
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
5. Any profits remaining thereafter shall be at the disposal of the general meeting of Shareholders for
distribution of profits on the common shares only, subject to the provision of paragraph 8 of this article.
6. Subject to a prior proposal of the Board of Directors, the general meeting of Shareholders may declare
and pay distribution of profits and other distributions in United States Dollars. Furthermore, subject to
the approval of the general meeting of Shareholders and the Board of Directors having been designated
as the body competent to pass a resolution for the issuance of shares in accordance with Article 6,
the Board of Directors may decide that a distribution shall be made in the form of shares or that
Shareholders shall be given the option to receive a distribution either in cash or in the form of shares.
7. The Company shall only have power to make distributions to Shareholders and other persons entitled to
distributable profits to the extent the Company’s equity exceeds the sum of the paid in and called up part
of 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.
319
Annual Report 2019 FERRARI N.V.
Independent auditor’s report
To: the shareholders and audit committee of Ferrari N.V.
Report on the audit of the financial statements 2019 included in the
annual report
Our opinion
We have audited the financial statements for the year ended 2019 of Ferrari N.V. (herein referred to as the
“company” and together with its subsidiaries the “group”), based 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, 2019, and of its result and its cash flows for 2019, in accordance with
International Financial Reporting Standards as adopted by the European Union (EUIFRS) 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, 2019;
• The following statements for 2019: the consolidated and company income statement, the consolidated
and company statements of comprehensive income, changes in equity and cash flows;
• 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.
320
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
Our audit approach
Our understanding of the business
Ferrari N.V. is among the world’s leading luxury brands. The activities of Ferrari N.V. are focused on the
design, engineering, production and sale of luxury performance sports cars. The group is structured in
group entities and we tailored our group audit approach accordingly. We paid specific attention in our
audit to a number of areas driven by the operations of the group and our risk assessment.
We start by determining materiality and identifying and assessing the risks of material misstatement of the
financial statements, whether due to fraud, non-compliance with laws and regulations or error in order
to design audit procedures responsive to those risks, and to obtain 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.
Materiality
Materiality
Benchmark applied
Explanation
€40 million (2018: €40 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 €2 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.
Our focus on fraud and non-compliance with laws and regulations
Our responsibility
Although we are not responsible for preventing fraud or non-compliance and cannot be expected to detect
non-compliance with all laws and regulations, it is our responsibility to obtain reasonable assurance that
the financial statements, taken as a whole, are free from material misstatement, whether caused by fraud or
error. 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.
Non-compliance with laws and regulations may result in fines, litigation or other consequences for the
company that may have a material effect on the financial statements.
321
Annual Report 2019 FERRARI N.V.
/ Report on the audit of the financial statements 2019 included in the annual report
Our audit response related to fraud risks
In order to identify and assess the risks of material misstatements of the financial statements due to fraud,
we obtained an understanding of the entity and its environment, including the entity’s internal control
relevant to the audit and in order to design audit procedures that are appropriate in the circumstances. As
in all of our audits, we addressed the risk of management override of internal control.
We considered available information and made enquiries of relevant executives, directors (including internal
audit, legal, compliance, human resources and directors of group entities) and the audit committee. As part
of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting
fraud, misappropriation of assets and bribery and corruption.
In our risk assessment we considered the potential impact of performance based bonus schemes which the
company has in place at certain components. Furthermore, as Ferrari N.V. is a global company, operating in
multiple jurisdictions, we considered the risk of bribery and corruption.
We evaluated the design and the implementation and, where considered appropriate, tested the operating
effectiveness of internal controls that mitigate fraud risks. In addition, we performed procedures to
evaluate key accounting estimates for management bias in particular relating to important judgment areas
and significant accounting estimates as disclosed in Note 2 and Note 23 to the consolidated financial
statements. We have also used data analysis to identify and address high-risk journal entries.
We incorporated elements of unpredictability in our audit. We considered the outcome of our other audit
procedures and evaluated whether any findings were indicative of fraud or non-compliance. If so, we
reevaluate our assessment of fraud risk and its resulting impact on our audit procedures.
Our audit response related to risks of non-compliance with laws and regulations
We assessed factors related to the risks of non-compliance with laws and regulations that could reasonably
be expected to have a material effect on the financial statements from our general industry experience,
through discussions with the management board, reading minutes, inspection of internal audit and
compliance reports, and performing substantive tests of details of classes of transactions, account balances
or disclosures.
We also inspected lawyers’ letters and correspondence with regulatory authorities and remained alert
to any indication of (suspected) non-compliance throughout the audit. Finally we obtained written
representations that all known instances of non-compliance with laws and regulations have been disclosed
to us.
Going concern
In order to identify and assess the risks of going concern and to conclude on the appropriateness of
management’s use of the going concern basis of accounting, we considered 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
322
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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.
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.
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.
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 Ferrari S.p.A. and Ferrari North America Inc. as
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 matter related to Ferrari S.p.A.: warranty and recall
campaigns provision. 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.
323
Annual Report 2019 FERRARI N.V.
/ Report on the audit of the financial statements 2019 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:
Assets
Revenue
Profit before tax
Full scope
Specific scope
Other procedures
No scope
By performing the procedures mentioned above 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 about the consolidated financial statements.
Teaming, use of specialists and internal audit
We ensured that the audit teams both at group and at component levels included the appropriate skills
and competences which are needed for the audit of a listed client in the automotive industry. We included
specialists in the areas of IT audit, treasury, share based payments and income tax and have made use of
our own experts in the areas of valuations and actuaries.
General audit procedures
Our audit further included among others:
• Performing audit procedures responsive to the risks identified, and obtaining audit evidence that is
sufficient and appropriate to provide a basis for our opinion;
• Evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management;
• 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.
324
Annual Report 2019 Board Report | Financial Statements | Other Information |
Consolidated Financial Statements and Notes
Company Financial Statements and Notes
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 matter to the audit committee. The
key audit matters is not a comprehensive reflection of all matters discussed.
The key audit matter revenue recognition which was included in our last year’s auditor’s report, is not
considered a key audit matter for this year as we considered it did not include a significant risk of a material
misstatement due to error or fraud, there is no significant judgement or subjectivity involved, and there is a
high degree of objectivity of audit evidence involved. We considered that the extent of efforts required was,
by itself, not a key driving factor in the determination of a key audit matter.
The key audit matter mentioned below is 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 this matter.
Risk
Our audit
approach
As more fully described in the Notes to the consolidated financial statements, 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. In addition, the group periodically
initiates voluntary service actions to address various client satisfaction, safety and emissions issues related
to cars sold. The provision includes management’s estimate of the expected cost to fulfill the obligations
over the contractual warranty period. Such estimate is developed on assumptions over expected costs to be
incurred based on the group’s historical claims or costs experience, including the cost of parts and services.
As at December 31, 2019 the warranty and recall campaigns provision amounted to e108 million.
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.
Auditing the warranty and recall campaign provision was complex in consideration of the judgment
required to develop assumptions around future costs to be incurred for warranty and recall campaigns,
especially for newly launched models or vehicles, and the complexity of the calculation involved.
The procedures performed designed to address the matter in our audit included, among others, obtaining
an understanding of the warranty and recall campaign provisioning process, evaluating the group’s
accounting policy, and assessing the design and operating effectiveness of internal controls relevant to
this area, specifically related to management’s assumptions developed to estimate future costs to be
incurred. We assessed 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 tested the completeness and accuracy of the underlying data. We further completed analytical
procedures over the accrued provision and retrospective analyses comparing the provisions recorded by
the group against actual spending for warranty and recall service costs to evaluate the cost assumptions
used by management. Lastly, we assessed the adequacy of the warranty and recall campaign disclosures
included in the notes to the consolidated financial statements.
Key observations
We concur with management’s assessment and recording of the warranty and recall campaigns provision
and the related disclosures as included in the notes to the consolidated financial statements.
325
Annual Report 2019 FERRARI N.V.
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, including the Remuneration of Directors
• 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 and Section 2:135b 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 and Section 2:135b sub-Section 7 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, other information required by Part 9 of Book 2
of the Dutch Civil Code and the Remuneration of Directors in accordance with Section 2:135b of the Dutch
Civil Code.
Report on other legal and regulatory requirements
Engagement
We were engaged by 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.
326
Annual Report 2019 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. The “Our audit approach” section above includes an informative summary of our
responsibilities and the work performed as the basis for our opinion.
Communication
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.
327
Annual Report 2019 FERRARI N.V.
/ Description of responsibilities for the financial statements
We provide the audit committee with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the audit committee, we determine 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 18, 2020
Ernst & Young Accountants LLP
/s/ P.W.J. Laan
328
Annual Report 2019