Consolidated shareholders’ equity at 31 December 2013 increased by €4,215 million from 31 December 2012, mainly due to an increase of €2,908 million in the remeasurement of defined benefit plans reserve net of related tax impact, the profit for the period of €1,951 million and an increase of €123 million in the cash flow hedge reserve partially offset by the decrease of €796 million in the cumulative exchange differences on translating foreign operations.
At 31 December 2013, fully paid-up share capital amounts to €4,477 million (€4,476 million at 31 December 2012) and consists of 1,250,687,773 ordinary shares (1,250,402,773 ordinary shares at 31 December 2012), with a par value of €3.58 each. The capital increase from the previous year is due to the issue of 285,000 new shares in relation to the exercise of stock options.
The following table provides a reconciliation between the number of Fiat S.p.A. shares outstanding at 31 December 2011 and the number outstanding at 31 December 2013:
|(number of shares in thousands)||
At 31 December 2011
|Conversion of preferences and saving shares||Share based payments||
At 31 December 2012
|Exercise of Stock Options||
At 31 December 2013
|Ordinary shares issued||1,092,681||157,722||-||1,250,403||285||1,250,688|
|Less: Ordinary treasury shares||(38,568)||(10)||4,000||(34,578)||-||(34,578)|
|Ordinary shares outstanding||1,054,113||157,712||4,000||1,215,825||285||1,216,110|
|Preference shares issued||103,292||(103,292)||-||-||-||-|
|Savings shares issued||79,913||(79,913)||-||-||-||-|
|Total Shares issued by Fiat S.p.A.||1,275,886||(25,483)||-||1,250,403||285||1,250,688|
|Less: Treasury shares||(38,568)||(10)||4,000||(34,578)||-||(34,578)|
|Total Fiat S.p.A. outstanding shares||1,237,318||(25,493)||4,000||1,215,825||285||1,216,110|
The mandatory conversion of all 103,292,310 Fiat S.p.A. preference shares and 79,912,800 Fiat S.p.A. savings shares into 157,722,163 Fiat S.p.A. ordinary shares, approved by the extraordinary Shareholders' Meeting of 4 April 2012, took place (at a conversion ratio of 0.850 ordinary shares for every preference share and 0.875 ordinary shares for every savings share). From 21 May 2012 only Fiat S.p.A. ordinary shares are traded on the Borsa Italiana electronic exchange (“MTA”).
As a result of the above-mentioned conversion, the allocation of the annual profit of Fiat S.p.A. as stated in its annual separate financial statements is currently as follows:
- to the legal reserve, 5% of net profit until the amount of the reserve is equal to one-fifth of share capital;
- further allocations to the legal reserve, allocations to the extraordinary reserve, to retained profit reserve and/or to other allocations as may be resolved by Shareholders;
- to each share, any remaining net profit which Shareholders may resolve to distribute.
In the case of winding up, the company’s assets shall be distributed in equal pro rata amounts to shares.
In addition, as a result of the resolutions adopted by the Board of Directors on 3 November 2006, the demerger of Fiat Industrial S.p.A. (now CNH Industrial N.V.), and the resolution adopted by Shareholders at the Extraordinary Meeting on 4 April 2012, Fiat S.p.A. share capital may be increased by a maximum of €33,229,112.50 through the issue of up to 9,281,875 ordinary shares, through paid capital contributions, exclusively to executives employed by the Company and/or its subsidiaries in accordance with the relevant incentive plan.
Policies and processes for managing capital
Italian laws and regulations regarding the share capital and reserves of a joint stock corporation establish the following:
- the minimum share capital is €120,000;
- any change in the amount of share capital must be approved in a General meeting by shareholders who may delegate powers to the Board of Directors to increase share capital up to a predetermined amount for a maximum period of five years; the General meeting of shareholders is also required to adopt suitable measures when share capital decreases by more than one third as the result of ascertained losses and to reduce share capital if by the end of the following year such losses have not fallen by at least one third. If as the consequence of a loss of more than one third of capital this then falls below the legal minimum, shareholders in General meeting are required to approve a decrease and simultaneous increase of capital to an amount not less than this minimum or must change a company’s legal form;
- an additional paid-in capital reserve is established if a company issues shares at a price exceeding their nominal value. This reserve may not be distributed until the legal reserve has reached one fifth of share capital;
- a company may not purchase treasury shares for an amount exceeding the distributable profits and available reserves stated in its most recently approved Financial statements. Any purchase must be approved by shareholders in General meeting and in no case may the nominal value of the shares acquired exceed one fifth of share capital.
For 2013, the Board of Directors has proposed to Shareholders at their annual general meeting not to recommend a dividend payment on Fiat shares, given the company’s desire to maintain a balanced level of liquidity following the acquisition of the minority stake in Chrysler on 21 January 2014.
The objectives identified by the Group for 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 an adequate level of capital that at the same time enables it to obtain a satisfactory economic return for its shareholders and guarantee economic access to external sources of funds, including by means of achieving an adequate credit rating.
The Group constantly monitors the ratio between debt and equity and in particular the level of net debt and the generation of cash from its industrial activities.
In order to reach these objectives, the Group aims at a continuous improvement in the profitability of the business in which it operates. Further, in general, it may sell part of its assets to reduce the level of its debt, while the Board of Directors may make proposals to Shareholders in the general meeting to reduce or increase share capital or, where permitted by law, to distribute reserves. In this context, the Group may also make purchases of treasury shares, without exceeding the limits authorized by Shareholders in the general meeting, under the same logic of creating value, compatible with the objectives of achieving financial equilibrium and an improvement in its rating.
In this respect, capital means the value brought into Fiat S.p.A. by its shareholders (share capital plus the additional paid-in capital reserve less treasury shares), equal to €5,292 million at 31 December 2013 (€5,289 million at 31 December 2012) and the value generated by the Group in terms of the results achieved in operations (retained earnings and other reserves), equal in total, before the result for the year, to €3,786 million at 31 December 2013 and €3,252 million at 31 December 2012, excluding Other comprehensive income/(losses) and non-controlling interests.
Treasury shares consist of 34,577,867 Fiat S.p.A. ordinary shares for an amount of €259 million (34,577,766 ordinary shares for an amount of €259 million at 31 December 2012). There has been an increase of 101 in the number of treasury shares over 31 December 2012 as a result of the adjustment arising from the conversion of preference and savings shares into ordinary shares resolved in 2012.
In addition, at their annual general meeting of 9 April 2013, the shareholders renewed their authorization for the purchase and sale of treasury shares, including through subsidiaries. The previous authorization provided on 4 April 2012 was revoked. The authorization provides for the purchase of a maximum number of shares not to exceed the legally established percentage of share capital or an aggregate value of €1.2 billion, inclusive of the €259 million in Fiat shares already held. As announced, the buy-back program is currently on hold and Fiat has no obligation to buy-back shares under the authorization. The buy-back authorization is valid for a period of 18 months and any buy-backs must be carried out in the manner established by law and at a purchase price per share which may not be more than 10% higher or 10% lower than the reference price reported by Borsa Italiana on the day prior to purchase.
On 27 February 2014, the Board of Directors proposed to Shareholders to revoke the previous resolution, for the part not already utilized at the date of the General Meeting, and approve a new resolution for the purchase of own shares for a further period of 18 months and for an amount not to exceed the legally established percentage of share capital and the maximum amount of approximately €1.2 billion, inclusive of the equity reserves allocated for treasury shares already held for €259 million. Should renewal of the program be approved, the Company would, however, have no obligation to buy back shares. The authorization is being requested to ensure the Company the flexibility to pursue any strategic opportunities that may arise for all purposes permitted by law.
The main earnings reserves include:
- the legal reserve of Fiat S.p.A. of €529 million at 31 December 2013 (€529 million at 31 December 2012);
- retained earnings of €3,225 million at 31 December 2013 (retained earnings of €3,256 million at 31 December 2012);
- the profit attributable to owners of the parent of €904 million at 31 December 2013 (a profit of €44 million for the year ended 31 December 2012);
- the reserve for share-based payments of €63 million at 31 December 2013 (€54 million at 31 December 2012).
Other comprehensive income/(losses)
Other comprehensive income/(losses) are as follows:
|Items that will never be reclassified to the Income statement:|
|Gains/(losses) on remeasurement of defined benefit plans||2,678||(1,843)|
|Shares of gains/(losses) on remeasurement of defined benefit plans for equity accounted entities||(9)||1|
|Total items that will never be reclassified to the Income statement (B1)||2,669||(1,842)|
|Items that may be reclassified to the Income statement:|
|Gains/(losses) on cash flow hedging instruments arising during the period||343||91|
|Gains/(losses) on cash flow hedging instruments reclassified to the Income statement||(181)||93|
|Gains/(losses) on cash flow hedging instruments||162||184|
|Gains/(losses) on available-for-sale financial assets arising during the period||4||27|
|Gains/(losses) on available-for-sale financial assets reclassified to the Income statement||-||-|
|Gains/(losses) on available-for-sale financial assets||4||27|
|Exchange differences on translating foreign operations arising during the period||(708)||(270)|
|Exchange differences on translating foreign operations reclassified to the Income statement||-||-|
|Exchange differences on translating foreign operations||(708)||(270)|
|Share of Other comprehensive income/(losses) for equity accounted entities arising during the period||(87)||4|
|Share of Other comprehensive income/(losses) for equity accounted entities reclassified to the Income statement||(13)||17|
|:Share of Other comprehensive income/(losses) for equity accounted entities||(100)||21|
|Total items that may be reclassified to the Income statement (B2)||(642)||(38)|
|TOTAL OTHER COMPREHENSIVE INCOME/(LOSSES) (B1)+(B2)=(B)||2,027||(1,880)|
|Total Other comprehensive income/(losses), net of tax||2,239||(1,901)|
With reference to the Group defined benefit plans, the gains and losses arising from the remeasurement mainly include actuarial gains and losses arising during the period, the return on plan assets (net of interest income recognized in the Income statement) and any changes in the effect of the asset ceiling. These gains and losses are offset against the related net liabilities or assets for defined benefit plans (see Note 25).
The tax effect relating to Other comprehensive income/(losses) are as follows:
|Gains/(Losses) on remeasurement of defined benefit plans||2,678||239||2,917||(1,843)||3||(1,840)|
|Gains/(losses) on cash flow hedging instruments||162||(27)||135||184||(24)||160|
|Gains/(losses) on available-for-sale financial assets||4||-||4||27||-||27|
|Exchange gains/(losses) on translating foreign operations||(708)||-||(708)||(270)||-||(270)|
|Share of Other comprehensive income/(losses) for equity accounted entities||(109)||-||(109)||22||-||22|
|Total Other comprehensive income/(losses)||2,027||212||2,239||(1,880)||(21)||(1,901)|
The non-controlling interest of €4,258 million at 31 December 2013 (€2,182 million at 31 December 2012) refers mainly to the following subsidiaries:
|(% held by non-controlling interest)||At 31 December 2013||At 31 December 2012|
|Chrysler Group LLC (*)||41.5||41.5|
(*) It should be noted that on 21 January 2014 Fiat acquired the remaining ownership interest of Chrysler (41.5%), further information are described in Note 39.
The following table shows the effects of changes in Group’s interest in its subsidiaries on the Group’s equity:
|Profit/(loss) for the period attributable to owners of the parent||904||348|
|Acquisition of 50% in VM Motori||2||-|
|Acquisition of 5% (fully-diluted) in Chrysler||-||35|
|Net transfers from/(to) non-controlling interests||2||35|
|Total Profit/(loss) for the year and transfers from (to) non-controlling interest||906||383|