Consolidated Income Statement

for the years ended December 31, 2014, 2013 and 2012

NoteFor the years ended December 31,
201420132012
(€ million)
Net revenues (1) 96,090 86,624 83,765
Cost of sales (2) 83,146 74,326 71,473
Selling, general and administrative costs (3) 7,084 6,702 6,775
Research and development costs (4) 2,537 2,236 1,858
Other income/(expenses) 197 77 (68)
Result from investments: (5) 131 84 87
Share of the profit of equity method investees 117 74 74
Other income from investments 14 10 13
Gains and (losses) on the disposal of investments (6) 12 8 (91)
Restructuring costs (7) 50 28 15
Other unusual income/(expenses) (8) (390) (499) (138)
EBIT 3,223 3,002 3,434
Net financial expenses (9) 2,047 1,987 1,910
Profit before taxes 1,176 1,015 1,524
Tax expense/(income) (10) 544 (936) 628
Profit from continuing operations 632 1,951 896
Net profit 632 1,951 896
Net profit attributable to:
Owners of the parent 568 904 44
Non-controlling interests 64 1,047 852
Basic earnings per ordinary share (in €) (12) 0.465 0.744 0.036
Diluted earnings per ordinary share (in €) (12) 0.460 0.736 0.036

The accompanying notes are an integral part of the Consolidated financial statements.

1. Net revenues

Net revenues were as follows:

For the years ended December 31,
201420132012
(€ million)
Revenues from:
Sales of goods 91,869 82,815 80,101
Services provided 2,202 2,033 2,043
Contract revenues 1,150 1,038 1,078
Interest income of financial services activities 275 239 277
Lease installments from assets under operating leases 308 238 244
Other 286 261 22
Total Net revenues 96,090 86,624 83,765

Net revenues were attributed as follows:

For the years ended December 31,
201420132012
(€ million)
Revenues in:
North America 54,602 47,552 45,171
Brazil 7,512 8,431 9,839
Italy 7,054 6,699 7,048
China 6,336 4,445 2,700
Germany 3,460 3,054 3,167
UK 1,927 1,453 1,429
France 1,837 1,956 2,042
Turkey 1,381 1,268 1,236
Australia 1,220 979 673
Argentina 1,181 1,439 1,179
Spain 1,162 1,015 873
Other countries 8,418 8,333 8,408
Total Net revenues 96,090 86,624 83,765

2. Cost of sales

Cost of sales in 2014, 2013 and 2012 amounted to €83,146 million, €74,326 million and €71,473 million, respectively, comprised mainly of expenses incurred in the manufacturing and distribution of vehicles and parts, of which, cost of materials and components are the most significant. The remaining costs principally include labor costs, consisting of direct and indirect wages, as well as depreciation of Property, plant and equipment and amortization of Other intangible assets relating to production and transportation costs.

Cost of sales also includes warranty and product-related costs, estimated at the time of sale to dealer networks or to the end customer. Depending on the specific nature of the recall, including the significance and magnitude, certain warranty expenses incurred are reported as Other unusual expenses. The Group believes that this separate identification allows the users of the Consolidated financial statements to better analyze the comparative year-on-year financial performance of the Group.

Cost of sales in 2014, 2013 and 2012 also includes €170 million, €190 million and €158 million, respectively, of interest and other financial expenses from financial services companies.

3. Selling, general and administrative costs

Selling costs in 2014, 2013 and 2012 amounted to €4,565 million, €4,269 million and €4,367 million, respectively, and mainly consisted of marketing, advertising, and sales personnel costs. Marketing and advertising expenses consisted primarily of media campaigns, as well as marketing support in the form of trade and auto shows, events, and sponsorship.

General and administrative costs in 2014, 2013 and 2012 amounted to €2,519 million, €2,433 million and €2,408 million, respectively, and mainly consisted of administration expenses which are not attributable to sales, manufacturing or research and development functions.

4. Research and development costs

Research and development costs were as follows:

For the years ended December 31,
201420132012
(€ million)
Research and development costs expensed during the year 1,398 1,325 1,180
Amortization of capitalized development costs 1,057 887 621
Write-off of costs previously capitalized 82 24 57
Total Research and development costs 2,537 2,236 1,858

Refer to Note 14 in the Consolidated financial statements for information on capitalized development costs.

5. Result from investments

The net gain in 2014, 2013 and 2012, amounting to €131 million, €84 million and €87 million, respectively, mainly consisted of the Group’s share in the Net profit/(loss) of equity method investments for €117 million, €74 million and €74 million, respectively and other income and expenses arising from investments measured at cost.

6. Gains/(losses) on the disposal of investments

In 2014, the Group recognized net gains on the disposal of investments of €12 million.

In 2013, the Group recognized net gains on the disposal of investments of €8 million.

In 2012, the Group recognized a write-down of €91 million of the interest in Sevelnord Société Anonyme following its reclassification to Assets held for sale and subsequent transfer during the first quarter of 2013.

7. Restructuring costs

Net restructuring costs amounting to €50 million in 2014 primarily related to restructuring provisions recognized in the LATAM, EMEA and Components segments.

Net restructuring costs in 2013 amounted to €28 million and primarily related to restructuring provisions in other minor business aggregated within Other activities for the purpose of segment reporting for €38 million, partially offset by the release of a restructuring provision previously made by the NAFTA segment for €10 million.

Restructuring costs in 2012 amounted to €15 million and related to the EMEA segment for €43 million, the Components segment and Other activities for €20 million, partially offset by the release of restructuring provisions previously made by the NAFTA segment for €48 million.

For a more detailed analysis of Restructuring provisions, reference should be made to Note 26.

8. Other unusual income/(expenses)

For the year ended December 31, 2014, Other unusual expenses amounted to expenses of €639 million and primarily related to the €495 million expense recognized in connection with the execution of the UAW MOU entered into by FCA US on January 21, 2014, as described in the section —Acquisition of the Remaining Ownership Interest in FCA US, above. In addition, Other unusual expenses also included €15 million related to compensation costs as a result of the resignation of the former chairman of Ferrari S.p.A. and included a €98 million remeasurement charge recognized as a result of the Group’s change in the exchange rate used to remeasure its Venezuelan subsidiary’s net monetary assets in U.S. Dollar.

Based on first quarter 2014 developments related to the foreign exchange process in Venezuela, we changed the exchange rate used to remeasure our Venezuelan subsidiary’s net monetary assets in U.S. Dollar as of March 31, 2014. As the official exchange rate is increasingly reserved only for purchases of those goods and services deemed “essential” by the Venezuelan government, the Group began to use the exchange rate determined by an auction process conducted by Venezuela’s Supplementary Foreign Currency Administration System (“SICAD”), referred to as the “SICAD I rate”, as of March 31, 2014. Previously, the Group utilized the official exchange rate of 6.30 VEF to U.S. Dollar. In late March 2014, the Venezuelan government introduced an additional auction-based foreign exchange system, referred to as the “SICAD II rate”. The SICAD II rate had ranged from 49 to 51.9 VEF to U.S. Dollar in the period since its introduction through December 31, 2014. The SICAD II rate is expected to be used primarily for imports and has been limited to amounts of VEF that can be exchanged into other currencies, such as the U.S. Dollar. As a result of the recent exchange agreement between the Central Bank of Venezuela and the Venezuelan government and the limitations of the SICAD II rate, the Group believes any future remittances of dividends would be transacted at the SICAD I rate. As a result, we determined that the SICAD I rate is the most appropriate rate to use. At December 31, 2014, the SICAD I rate was 12.0 VEF to U.S. Dollar.

For the year ended December 31, 2013, Other unusual expenses amounted to €686 million and primarily related to write-downs totaling €272 million as a result of the rationalization of architectures associated with the new product strategy, particularly for the Alfa Romeo, Maserati and Fiat brands; specifically, €226 million related to development costs and €46 million to tangible assets. In addition, in relation to the expected market trends, the assets of the cast-iron business in the Components segment (Teksid) were written down by €57 million. Moreover, there was a €56 million write-off of the book value of the Equity Recapture Agreement Right considering the agreement closed on January 21, 2014 to purchase the remaining ownership interest in FCA US from the VEBA Trust (as described above). Other unusual charges also included a €115 million charge related to the June 2013 voluntary safety recall for the 1993-1998 Jeep Grand Cherokee and the 2002-2007 Jeep Liberty, as well as the customer satisfaction action for the 1999-2004 Jeep Grand Cherokee. This item also includes a €59 million foreign currency translation loss related to the February 2013 devaluation of the official exchange rate of the Venezuelan Bolivar (“VEF”) relative to the U.S. Dollar from 4.30 VEF per U.S. dollar to 6.30 VEF per U.S. Dollar. During the second and third quarter of 2013, certain monetary liabilities, which had been submitted to the Commission for the Administration of Foreign Exchange (“CADIVI”) for payment approval through the ordinary course of business prior to the devaluation date, were approved to be paid at an exchange rate of 4.30 VEF per U.S. Dollar. As a result, €12 million in the second quarter of 2013 and €4 million in the third quarter of 2013 of foreign currency transaction gains were recognized due to these monetary liabilities being previously remeasured at the 6.30 VEF per U.S. Dollar at the devaluation date.

In 2012, Other unusual expenses, net were €138 million mainly including €145 million of costs arising from disputes relating to operations terminated in prior years and costs related to the agreement with PSA Peugeot Citroën providing for the transfer of the Group’s interest in the company Sevelnord Société Anonyme at a symbolic value.

In 2014, Other unusual income amounted to €249 million which primarily included €223 million related to the fair value measurement of the previously exercised options for approximately 10 percent interest in FCA US that were settled in connection with the acquisition of the remaining interest in FCA US as described in the section Changes in the Scope of Consolidation, above.

In 2013, Other unusual income amounted to €187 million which primarily included the impacts of a curtailment gain and plan amendments of €166 million with a corresponding net reduction to FCA US’s pension obligation. During the second quarter of 2013, FCA US amended its U.S. and Canadian salaried defined benefit pension plans. The U.S. plans were amended in order to comply with Internal Revenue Service regulations, cease the accrual of future benefits effective December 31, 2013, and enhanced the retirement factors. The Canada amendment ceased the accrual of future benefits effective December 31, 2014, enhanced the retirement factors and continued to consider future salary increases for the affected employees. An interim remeasurement was required for these plans, which resulted in an additional €509 million net reduction to the pension obligation, a €7 million reduction to defined benefit plan assets and a corresponding €502 million increase in Total other comprehensive income/(loss).

9. Net financial income/(expenses)

The following table sets out details of the Group’s financial income and expenses, including the amounts reported in the Consolidated income statement within the Financial income/(expenses) line item, as well as interest income from financial services activities, recognized under Net revenues, and Interest cost and other financial charges from financial services companies, recognized under Cost of sales.

                  

For the years ended December 31,
201420132012
(€ million)
Financial income:
Interest income and other financial income: 226 201 266
Interest income from banks deposits 170 153 180
Interest income from securities 7 8 14
Other interest income and financial income 49 40 72
Interest income of financial services activities 275 239 277
Gains on disposal of securities 3 4 2
Total Financial income 504 444 545
Total Financial income relating to:
Industrial companies (A) 229 205 268
Financial services companies (reported within Net revenues) 275 239 277
Financial expenses:
Interest expense and other financial expenses: 1,916 1,904 1,973
Interest expenses on bonds 1,204 959 921
Interest expenses on bank borrowing 427 367 382
Commission expenses 21 25 21
Other interest cost and financial expenses 264 553 649
Write-downs of financial assets 84 105 50
Losses on disposal of securities 6 3 9
Net interest expenses on employee benefits provisions 330 371 388
Total Financial expenses 2,336 2,383 2,420
Net expenses/(income) from derivative financial instruments and exchange rate differences 110 (1) (84)
Total Financial expenses and net expenses from derivative financial instruments and exchange rate differences 2,446 2,382 2,336
Total Financial expenses and net expenses from derivative financial instruments and exchange rate differences relating to:
Industrial companies (B) 2,276 2,192 2,178
Financial services companies (reported with Cost of sales) 170 190 158
Net financial income expenses relating to industrial companies (A - B) 2,047 1,987 1,910

Other interest cost and financial expenses includes interest expenses of €33 million (€326 million in 2013 and €342 million in 2012) related to the VEBA Trust Note and interest expenses of €50 million (€61 million in 2013 and €71 million in 2012) related to the Canadian Health Care Trust Note.

Net income/(expenses) from derivative financial instruments and exchange rate differences include net income of €31 million in 2013 and net income of €34 million in 2012 arising from the equity swaps on FCA and CNH Industrial N.V. (“CNHI”) shares relating to certain stock option plans. These equity swaps expired in 2013.

10. Tax expense/(income)

Income tax was as follows:

For the years ended December 31,
201420132012
(€ million)
Current tax expense 677 615 691
Deferred tax income (145) (1,570) (71)
Taxes relating to prior periods 12 19 8
Total Tax expense/(income) 544 (936) 628

For the year ended December 31, 2014 Total tax expense amounted to €544 million. In 2013, Total tax income was €936 million and included a €1,500 million positive one-time recognition of net deferred tax assets related to tax loss carry- forwards and temporary differences within the NAFTA segment.

In 2014, the Regional Italian Income Tax (“IRAP”) recognized within current taxes was €62 million (€58 million in 2013 and €64 million in 2012) and IRAP recognized within deferred tax costs was €18 million (€11 million in 2013 and €21 million in 2012).

The applicable tax rate used to determine the theoretical income taxes was 21.5 percent in 2014, which is the statutory rate applicable in the United Kingdom, the tax jurisdiction in which FCA is resident. The applicable tax rate used to determine the theoretical income taxes was 27.5 percent in 2013 and 2012, which was the statutory rate applicable in Italy, the tax jurisdiction in which Fiat was resident. The change in the applicable tax rate is a result of the change in tax jurisdiction in connection with the Merger. The reconciliation between the theoretical income taxes calculated on the basis of the theoretical tax rate and income taxes recognized was as follows:

For the years ended December 31,
201420132012
(€ million)
Theoretical income taxes 253 279 419
Tax effect on:
Recognition and utilization of previously unrecognized deferred tax assets (173) (1,745) (529)
Permanent differences (148) 8 (79)
Deferred tax assets not recognized and write-downs 379 380 472
Differences between foreign tax rates and the theoretical applicable tax rate and tax holidays 66 24 164
Taxes relating to prior years 12 19 8
Unrecognized withholding tax 57 84 95
Other differences 18 (54) (7)
Total Tax expense/(income), excluding IRAP 464 (1,005) 543
Effective tax rate 39.5% n.a. 35.7%
IRAP (current and deferred) 80 69 85
Total Tax expense/(income) 544 (936) 628

Because the IRAP taxable basis differs from Profit before taxes, it is excluded from the above effective tax rate calculation.

In 2014, the Group’s effective tax rate is equal to 39.5%. The difference between the theoretical and the effective income taxes is primarily due to €379 million arising from the unrecognized deferred tax assets on temporary differences and tax losses originating in the year in EMEA, which is partially offset by the recognition of non-recurring deferred tax benefits of €173 million.

In 2013, the Group’s effective tax rate includes a significant tax benefit and is not comparable to prior periods primarily due to FCA US recognizing previously unrecognized deferred tax assets of €1,500 million. Excluding this effect, the effective tax rate of the Group in 2013 would have been 48.7 percent. The difference between the 2013 theoretical and effective income tax was primarily due to the above-mentioned recognition and utilization of previously unrecognized deferred tax assets of €1,734 million (€1,500 million of which was recognized in income taxes and €234 million in Other Comprehensive income/(loss). These benefits were partially offset by the negative impact of  €380 million arising from the unrecognized deferred tax assets on temporary differences and tax losses originating in the year.

In 2012, the Group’s effective tax rate was 35.7 percent. The difference between the theoretical and the effective income tax rate was due to the recognition and utilization of previously unrecognized deferred tax assets for €529 million, net of €472 million arising from the unrecognized deferred tax assets on temporary differences and tax losses originating in the year.

The Group recognizes the amount of Deferred tax assets less the Deferred tax liabilities of the individual consolidated companies in the Consolidated statement of financial position within Deferred tax asset, where these may be offset. Amounts recognized were as follows: 

 



At December 31,
20142013
(€ million)
Deferred tax assets 3,547 2,903
Deferred tax liabilities (233) (278)
Net deferred tax assets 3,314 2,625

In 2014, net deferred tax assets increased by €689 million mainly due to the following:

  • €145 million increase for recognition of previously unrecognized Deferred tax assets and the recognition of Deferred tax assets on temporary differences originating during the year, net of the reversal of deferred taxes relating to previous years;
  • €102 million increase for recognition directly to Equity of net deferred tax assets;
  • €190 million increase due to exchange rate differences and other changes;
  • €252 million increase in Deferred tax assets due to acquisition of the remaining 41.5 percent interest in FCA US.

The significant components of Deferred tax assets and liabilities and their changes during the years ended December 31, 2014 and 2013 were as follows:

At January 1,2014Recognized in Consolidated income statementCharged to equityChanges in the scope of consolidationTranslation differences and other changesAt December 31,2014
(€ million)
Deferred tax assets arising on:
Provisions 2,938 533 4 1,092 4,567
Provision for employee benefits 1,131 101 35 145 1,412
Intangible assets 343 (31) 16 328
Impairment of financial assets 191 (7) (10) 174
Inventories 261 41 8 310
Allowances for doubtful accounts 110 1 111
Other 1,209 (947) 42 (4) 1,460 1,760
Total 6,183 (310) 77 2,712 8,662
Deferred tax liabilities arising on:
Accelerated depreciation (1,404) (80) (1,222) (2,706)
Capitalization of development costs (1,416) (155) 2 (407) (1,976)
Other Intangible assets and Intangible assets with indefinite useful lives (640) 23 16 (695) (1,296)
Provision for employee benefits (20) 2 (2) (1) (21)
Other (562) (56) 27 (16) (24) (631)
Total (4,042) (266) 25 2 (2,349) (6,630)
Deferred tax asset arising on tax loss carry-forward 3,810 777 109 4,696
Unrecognized deferred tax assets (3,326) (56) (2) (30) (3,414)
Total net Deferred tax assets 2,625 145 102 442 3,314

At January 1,2013Recognized in Consolidated income statementCharged to equityChanges in the scope of consolidationTranslation differences and other changesAt December 31,2013
(€ million)
Deferred tax assets arising on:
Provisions 2,922 368 3 (355) 2,938
Provision for employee benefits 1,022 137 18 (46) 1,131
Intangible assets 381 (38) 1 (1) 343
Impairment of financial assets 228 13 (50) 191
Inventories 264 (1) 1 (3) 261
Allowances for doubtful accounts 90 18 2 110
Other 1,456 (224) 2 (25) 1,209
Total 6,363 273 18 7 (478) 6,183
Deferred tax liabilities arising on:
Accelerated depreciation (1,354) (128) 1 77 (1,404)
Capitalization of development costs (1,211) (252) 47 (1,416)
Other Intangible assets and Intangible assets with indefinite useful lives (784) 48 (17) 113 (640)
Provision for employee benefits (22) (1) 3 (20)
Other (527) 54 (23) (2) (64) (562)
Total (3,898) (278) (23) (19) 176 (4,042)
Deferred tax asset arising on tax loss carry-forward 3,399 437 7 (33) 3,810
Unrecognized deferred tax assets (4,918) 1,138 217 237 (3,326)
Total net Deferred tax assets 946 1,570 212 (5) (98) 2,625

The decision to recognize deferred tax assets is made for each company in the Group by critically assessing whether conditions exist for the future recoverability of such assets by taking into account recent forecasts from budgets and plans. At December 31, 2014, following the Group’s reorganization of its subsidiaries in the U.S and in consideration of the projected positive results in the U.S. and other countries, additional deferred tax assets of €226 million have been recognized. The additional recognized deferred tax assets were offset by a write-down of €232 million deferred tax assets related to the projected spin-off of Ferrari. Despite a tax loss in the Group’s wholly-owned consolidated Italian subsidiaries, the Group continued to recognize deferred tax assets of €799 million (€1,016 million at December 31, 2013) as the Group expects future taxable income in future periods and based on the fact that tax losses can be carried forward indefinitely.

At December 31, 2014, the Group had deferred tax assets on deductible temporary differences of €8,662 million (€6,183 million at December 31, 2013), of which €480 million was not recognized (€435 million at December 31, 2013). At December 31, 2014, the Group also had theoretical tax benefit on losses carried forward of €4,696 million (€3,810 million at December 31, 2013), of which €2,934 million was unrecognized (€2,891 million at December 31, 2013). At December 31, 2014, net deferred tax assets included the amount of €1,762 million in respect of benefits on unused tax losses carry-forwards (€919 million at December 31, 2013).

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.

Total deductible and taxable temporary differences and accumulated tax losses at December 31, 2014, together with the amounts for which deferred tax assets have not been recognized, analyzed by year of expiration, are as follows:

Year of expiration
Total at December 31, 20142015201620172018Beyond 2017Unlimited/ indeterminable
(€ million)
Temporary differences and tax losses relating to corporate taxation:
Deductible temporary differences 26,777 8,540 2,113 1,742 1,876 12,506
Taxable temporary differences (19,119) (757) (1,873) (1,793) (1,834) (9,933) (2,929)
Tax losses 15,852 58 163 154 113 3,695 11,669
Amounts for which deferred tax assets were not recognized (12,064) (487) (317) (171) (2) (1,176) (9,911)
Temporary differences and tax losses relating to corporate taxation 11,446 7,354 86 (68) 153 5,092 (1,171)
Temporary differences and tax losses relating to local taxation (i.e. IRAP in Italy):
Deductible temporary differences 18,007 4,665 1,622 1,556 1,568 8,596
Taxable temporary differences (17,494) (485) (1,905) (1,868) (1,881) (8,404) (2,951)
Tax losses 3,401 3 5 41 75 2,573 704
Amounts for which deferred tax assets were not recognized (1,052) (84) (36) (19) (15) (354) (544)
Temporary differences and tax losses relating to local taxation 2,862 4,099 (314) (290) (253) 2,411 (2,791)

11. Other information by nature

Personnel costs in 2014, 2013 and 2012 amounted to €10,099 million, €9,471 million and €9,256 million, respectively, which included costs that were capitalized mainly in connection with product development activities.

In 2014, FCA had an average number of employees of 231,613 (223,658 employees in 2013 and 208,835 employees in 2012).

12. Earnings per share

Basic earnings per share

The basic earnings per share for 2014 and 2013 was determined by dividing the Profit attributable to the equity holders of the parent by the weighted average number of shares outstanding during the periods. In addition, the weighted average number of shares outstanding for 2014 includes the minimum number of ordinary shares to be converted as a result of the issuance of the mandatory convertible securities described in Note 23. For 2012, the basic earnings per share takes into account the mandatory conversion of preference and savings shares by dividing the Profit attributable to the equity holders of the parent by the weighted average number of ordinary shares outstanding during the period (assuming conversion occurred at the beginning of the year).

The following table provides the amounts used in the calculation of basic earnings per share for the years ended December 31, 2014, 2013 and 2012:

For the years ended December 31,
201420132012
Ordinary sharesOrdinary sharesOrdinary shares
Profit attributable to owners of the parent € million 568 904 44
Weighted average number of shares outstanding thousand 1,222,346 1,215,921 1,215,828
Basic earnings per ordinary share 0.465 0.744 0.036

Diluted earnings per share

In order to calculate the diluted earnings per share, the weighted average number of shares outstanding has been increased to take into consideration the theoretical effect that would arise if all the share-based payment plans were exercised and if the maximum number of ordinary shares related to the mandatory convertible securities (Note 23 in the Consolidated financial statements) were converted. No other instruments could potentially dilute the basic earnings per share in the future as all contingently issuable shares existing under the stock grant plan and the mandatory convertible securities (Note 23 in the Consolidated financial statements) were included in the calculation of the diluted earnings per share. There were no instruments excluded from the calculation of diluted earnings per share for the periods presented because of an anti-dilutive impact. 

The following table provides the amounts used in the calculation of diluted earnings per share for the years ended December 31, 2014, 2013 and 2012:

For the years ended December 31,
201420132012
Ordinary sharesOrdinary sharesOrdinary shares
Profit attributable to owners of the parent € million 568 904 44
Weighted average number of shares outstanding thousand 1,222,346 1,215,921 1,215,828
Number of shares deployable for stock option plans linked to FCA shares thousand 11,204 13,005 10,040
Mandatory Convertible Securities thousand 547
Weighted average number of shares outstanding for diluted earnings per share thousand 1,234,097 1,228,926 1,225,868
Diluted earnings per ordinary share 0.460 0.736 0.036