D'Ieteren Executives Discuss Key Belron Trends in Consolidated Financials
March 19, 2013

by Jenna Reed, jreed@glass.com

In addition to reporting on key Belron operating results, executives from Belgium-based D'Ieteren, Belron's parent company, also outlined some key insights in its consolidated financial statement, such as discussing intangible assets as related to the auto glass business, put options, a breakout of auto glass financial performance and inventories, as well as global acquisitions and more.

"An item of intangible assets is valued at its cost, less any accumulated amortization of any and any accumulated impairment losses," writes company executives. "Customer contracts and brands acquired in a business combination are recognized at fair value at the acquisition date."

Among the company's intangible assets, as related to the auto glass business, the following are listed:
- Computer software programs: straight-line method over two to seven years;
- Safelite's customer contracts: straight-line method over 10 years (as from March 2007);
- Cindy Rowe's customer contracts: straight-line method over seven years (as from January 2009);
-Diamond's customer contracts: straight-line method over seven years (as from July 2008);
- IGD's customer contracts: straight-line method over seven years (as from October 2009);
-Car and Bus customer contracts: straight-line method over four years (as from March 2010);
- Canada's customer contracts: straight-line method between one and 10 years;
- Auto Glass Center Inc. and Alliance Claims Solutions brand (IGD acquisition): straight-line method over three years (as from October 2009); and
- Apple and Autostock brand: straight-line method over two years (as from the beginning of 2011).

According to the report, amortization periods are reassessed annually.

"The brands Carglass and Autoglass, acquired in 1999, as well as Glaspro, Speedy Glass, Apple Auto Glass and Windshield Pros acquired in 2005, as well as Safelite Auto Glass acquired in 2007, have indefinite useful lives, since, thanks to the marketing spend and advertising made, there is no foreseeable limit to the period over which these assets are expected to generate net cash flows for the group. They are therefore not amortized but tested for impairment annually," officials explain.

As for put options, which just recently came up when D'Ieteren increased its Belron stake to 94.85 percent, executives say the company is committed to acquiring the non-controlling shareholdings owned by third parties in Belron.

"The exercise price of such options granted to non-controlling interest is reflected as a financial liability in the consolidated statement of financial position. For put options granted to non-controlling interest prior to January 1, 2010, the goodwill is adjusted as period end to reflect the change in the exercise price of the options and the carrying value of non-controlling interest to which they relate," officials say.

"For put options granted to non-controlling interest as from January 1, 2010, at inception, the difference between the consideration received and the exercise price of the options granted is recognized against the group's share of equity," they continue. "At each period end, the re-measurement of the financial liability resulting from these options will be recognized in the consolidated income statement as a re-measurement item in net finance costs."

The Safelite parent also offers an income statement, which breaks out the auto glass operating segment:

Interestingly, borrowing for the auto glass segment in the statement reached $708.5 U.S. dollars million, compared to $323.9 million U.S. dollars in the automotive distribution area.

To outline cash flows in the different business divisions, company executives offer the following data:

Highlighting capital additions, which include both additions and acquisitions through business combinations, including goodwill, executives say the auto glass segment saw $227.19 million U.S. dollars, while automobile distribution saw $32.86 million U.S. dollars. The D'Ieteren group figure came in at $260.5 million U.S. dollars.

Looking specifically at sales, the company reports $3.5 billion U.S. dollars for the auto glass segment in 2012 versus $3.55 billion U.S. dollars for 2011.

Highlighting net finance costs, executives shared the following figures:

Furthermore, D'Ieteren culls out the allocation of goodwill to cash-generating units:

"The board of directors of the parent is satisfied that the carrying amount of the vehicle glass cash-generating unit is stated at no more than its value in use," officials note as a part of the report.

D'Ietern also outlined Belron's acquisitions as of January 1, which include:
- On January 1, the assets of Guangzhou Chenyu Vehicle Glass Co. Ltd., a replacement business in China;
- On February 16, the assets of Euskalglass, a replacement business in Spain;
- On February 16, the assets of Guardian Lleida, a replacement business in Spain;
- On March 1, the assets of Vetri Auto Biella, a replacement business in Italy;
- On March 1, the assets of Wuhan Sanxing Chutian Glass Distribution Co. Ltd., a replacement business in China;
- On May 1, the assets of Changsha Fuyao Vehicle Glass Distribution Co. Ltd. Hengyang Yaohua sub branch, a replacement business with one branch in China;
- On June 6, the assets of Spiridon Hatzinikolaou, a replacement business in Greece;
- On July 1, the assets of Joe Kleber Autoglas, a replacementbusiness in Austria;
- In July, D'Ieteren acquired the remaining 67 percent of its associate S.M.A.R.T & Clean Automotive Services S.A. (Wondercar), active in smart repairs on vehicles;
- On October 1, the assets of Col Mar srl, a replacement business in Italy;
- On October 31, the assets of Bergen Bilglass AS, a replacement business in Norway;
- On November 1, the assets of Ventri Auto Piemonte, a replacement business in Italy;
- On November 1, the assets of Malarglas AB, a replacement business in Sweden;
- On November 1, the assets of Klein Dickert Co., a replacement business in the U.S.;
- On November 23, the assets of ADR Accident Repair Centre Ltd., an auto damage repair business in the United Kingdom;
- On December 12, the assets of Manolopoulous & Co. EE, a replacement business in Greece;
- On December 31, the assets of Y.W.P., Inc. (doing business as Windshield World), a replacement business in the U.S.;
- On December 31, the assets of Giant Glass Co. Inc., a replacement business in the U.S.;
- On December 31, the assets of Southern Glass and Plastics Co. Inc., a replacement business in the U.S.;
- Also during the year, Belron acquired 23 branches in Canada. These were all independently owned former Apple® or Duro® brand franchisees.

"The additional sales arising subsequent to these acquisitions amount approximately to $24.48 million U.S. dollars (approximately $85 million U.S. dollars if they had occurred on the first day of the period)," write D'Ieteren officials. "The results arising subsequent to these acquisitions (even if they had occurred on the first day of the period) are not considered material to the group and accordingly are not disclosed separately."

When accounting for fuel for its vehicle glass segment, D'Ieteren executives say this is decided through a combination of options, collars and swaps, or fuel hedge instruments, to hedge the price of fuel prices.

"The fair value of fuel hedge instruments is determined using market valuations prepared by the respective banks that executed the initial transactions at the statement of financial position date based on the present value of the monthly futures forward curve for gasoline given the volume hedged and the contract period," officials explain.

They went on to report, "The fair values of forward rate agreements are calculated as the present value of future estimated cash flows. The fair values of interest rate swaps and interest rate caps are valued using option-valuation techniques."

Reviewing inventories in their consolidated financials, executives report that the auto glass segment has $319.2 million U.S. dollars of glass and related product on hand, compared to $330.3 million U.S. dollars in 2011.

The cash and cash equivalents for auto glass for the period come in at $49.9 million U.S. dollars, compared to $37.03 U.S. million U.S. dollars in the prior year.

Analyzing net debt, the officials break it out for the auto glass segment as follows:

This story is an original story by AGRR™ magazine/glassBYTEs.com™. Subscribe to AGRR™ Magazine.
Subscribe to receive the free e-newsletter.