Other income / Personnel costs / Amortization, depreciation and impairments / Other expenses / Financial income

30. Other income

“Other income” amounts to Euros 175,928 thousand compared to Euros 274,939 thousand in 2007 and includes income from rent, commissions, royalties, compensation, insurance refunds and other minor items.

The decrease compared to 2007 is mainly in reference the subsidiary Shared Service Center, which was sold at the end of 2007 (Euros 110,011 thousand).

Total other income includes income from nonrecurring events for Euros 17,000 thousand for the consideration received by Pirelli & C. Real Estate Società di Gestione del Risparmio S.p.A. on the sale of the management of Fondo Berenice to another SGR, which, in fact, represents a advance on what would have been due as fees in future years. The percentage of income from nonrecurring events to total other income is equal to 9.7 percent. Last year, income from nonrecurring events amounted to Euros 2,818 thousand and included compensation for the expropriation of land located in Settimo Torinese for Euros 1,746 thousand and the refund of the events tax for the periods it was not due for Euros 1,072 thousand.

31. Personnel costs

Personnel costs consist of the following:

(in thousands of euros)

 

2008

2007

Salaries and wages

851,374

843,801

Social security costs

173,956

183,843

Leaving indemnity and similar costs (*)

30,136

25,191

Defined contribution pension fund costs

18,906

17,164

Defined benefit pension fund costs

(2,188)

(3,444)

Defined benefit medical care plan costs

1,224

1,373

Long-service bonus costs

782

984

Defined contribution medical care plan costs

23,739

20,120

Other costs

76,922

6,913

 

1,174,851

1,095,945

* Includes Italian and foreign companies.

With regard to amounts relating to employees’ leaving indemnity, pension funds and medical care defined benefit plans, reference should be made to “Employee benefit obligations” (Note 23).

Personnel costs include Euros 132,352 thousand of costs from nonrecurring events, equal to 11.2 percent of total personnel costs. They refer to special employee termination benefit incentives for Euros 41,252 thousand put into place by the Real Estate sector and Euros 91,100 thousand by the Tyre sector.

In 2007, costs from nonrecurring events included Euros 5,186 thousand relating to income for curtailment relating to the provision for employees’ leaving indemnity following legislative changes which altered the nature of the provision to a defined contribution plan.

32. Amortization, depreciation and impairments

Amortization, depreciation and impairments are as follows:

(in thousands of euros)

 

2008

2007

Amortization of intangible assets

9,938

8,927

Depreciation of property, plant and equipment

198,742

199,985

Impairment loss on intangible assets

105

3,823

Impairment loss on property, plant and equipment

9,770

811

 

218,555

213,546

Amortization, depreciation and impairments include Euros 7,100 thousand of impairments associated with the restructuring plans of the Tyre sector which qualify as a nonrecurring event. The percentage of impairments to the total line item is 3.2 percent.

33. Other expenses

Other expenses include the following:

(in thousands of euros)

 

2008

2007

Selling expenses

279,052

307,408

Purchases of merchandise for resale

200,801

221,819

Utilities and power

188,907

171,658

Advertising expenses

148,813

127,480

Consulting fees

95,816

140,480

Maintenance

69,892

67,756

Rent and hires

73,473

78,464

Commissioned work by third parties

60,362

93,680

Traveling expenses

41,875

48,582

Software and information services expenses

35,831

40,252

Other accruals

36,129

35,666

Revenues stamps, duties and local taxes

27,549

25,369

Receivables impairment

27,389

15,009

Insurance

26,853

28,919

Contract work expenses

24,149

23,296

Operating lease payments

17,121

9,032

Cleaning expenses

12,127

10,932

Security expenses

12,981

18,307

Telephone expenses

11,681

13,922

Urbanization fees

4,946

5,479

Other

291,822

220,347

 

1,687,569

1,703,857

Research expenses went from Euros 173 million in 2007 (3.6 percent of sales net of the DGAG deconsolidation) to Euros 156 million in 2008 (3.3 percent of sales). These are expensed to income since they do not meet the conditions for capitalization under IFRS.

Other expenses include costs from nonrecurring events totaling Euros 4,764 thousand (0.3 percent of total operating expenses) for the restructuring plans of the Tyre sector (Euros 1,800 thousand) and the Real Estate sector (Euros 2,964 thousand).

34. Financial income

Financial income includes the following:

(in thousands of euros)

 

2008

2007

Interest

81,957

89,419

Other financial income

46,637

12,914

Gains on exchange

420,497

171,800

Gains on disposal of available-for-sale financial assets

6,855

9,922

Gains on disposal of investments in subsidiaries

21,391

11,234

 

577,337

295,289

Other financial income includes the gain of Euros 27,300 thousand realized on the difference between the purchase value of the minority stakes in Turkey, recognized in the third quarter of 2008, and the corresponding accounting equity drawn up according to Group accounting principles.

Gains on exchange include the adjustment to the year-end exchange rates for open positions at the end of the year expressed in currencies other than the functional currency and the gains realized on closed positions.

Gains on the disposal of available-for-sale financial assets mainly include Euros 5,584 thousand from the sale of the fund shares of Berenice Fondo Uffici –Closed-end real estate investment fund held by the subsidiary Pirelli & C. Real Estate Società di Gestione del Risparmio S.p.A. and the sale of Intek S.p.A. shares by the Parent, Pirelli & C. S.p.A., for Euros 1,151 thousand.

Gains on the disposal of investments in subsidiaries refer to the release of amounts set aside following the sale, in 2006, of the 38.9 percent stake in Pirelli Tyre S.p.A. which are no longer due under the contractual agreements with the counterparts. In 2007, the amount of Euros 11,234 thousand referred to the gain realized by the Real Estate sector on the sale of the 20 percent interest in the German-registered company Mertus AchtunddreiBigste GmbH.

The total includes Euros 48,691 thousand (equal to 8.4 percent of financial income) which qualifies as a nonrecurring event, of which Euros 21,391 thousand is for the “gains on the disposal of investments in subsidiaries” described above and Euros 27,300 thousand from the positive impact of the minority stakes purchased in the Turkish subsidiaries where the cost of acquisition was below the accounting equity, as mentioned previously.