LensCrafters 2003 Annual Report Download - page 16

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On June 26, 1999, Luxottica Group acquired the Ray-Ban business for a purchase price of approximately
US$ 655 million (635 million based on the exchange rate in effect at such time), subject to post-closing
adjustments. The acquisition was accounted for under the purchase method. As such, the results of the Ray-Ban
business have been accounted for in the Company’s consolidated financial statements since the date of acquisition.
Since the acquisition, Luxottica Group has closed Ray-Ban’s frame manufacturing facilities outside Italy and integrated
these operations into its existing manufacturing structure. This integration was substantially completed by the second
quarter of 2000. In January 2002, Luxottica Group settled a purchase price dispute with Bausch & Lomb
Incorporated, along with certain other litigation between the two companies. The settlement resulted in a reduction in
the purchase price of approximately US$ 42 million and, accordingly, goodwill and a liability to Bausch & Lomb
previously recorded were reduced at December 31, 2001. A receivable was recorded at December 31, 2001, for the
final settlement amount. Luxottica Group received a payment of US$ 23 million in January 2002 as the final settlement
payment.
On March 31, 2001, through the completion of a tender offer and subsequent merger, Luxottica Group acquired
all of the outstanding common stock of Sunglass Hut International for a purchase price of approximately 558 million
(including approximately 33.9 million of acquisition-related expenses). The acquisition was accounted for under the
purchase method and the results of Sunglass Hut International have been included in Luxottica Group’s consolidated
financial statements since the date of acquisition
In September 2003, through the completion of a tender offer and subsequent merger, Luxottica South Pacific Pty
Limited, an Australian subsidiary of Luxottica Group, acquired 82.57 percent of OPSM Group’s (“OPSM”) ordinary
shares, and more than 90 percent of OPSM’s options and performance rights, which entitled Luxottica Group to
require the cancellation of all the options and performance rights still outstanding. The aggregate purchase price for
the OPSM shares, performance rights and options was A$ 442.7 million (253.7 million based on the exchange rate
in effect at such time). The acquisition was accounted for under the purchase method and the financial condition and
results of operations of OPSM have been included in Luxottica Group’s consolidated financial statements since
August 1, 2003.
On January 26, 2004, Luxottica Group and Cole National Corporation jointly announced that they have entered
into a definitive merger agreement as of January 23, 2004, with the unanimous approval of the Boards of Directors of
both companies. Under the agreement, Luxottica Group will acquire all of the outstanding shares of Cole National for
a cash purchase price of US$ 22.50 per share, together with the purchase of all outstanding options and similar
equity rights at the same price per share, less their respective exercise prices, for a total purchase price of
approximately US$ 401 million. The merger is subject to the approval of Cole National's stockholders and the
satisfaction of other customary conditions, including compliance with applicable antitrust clearance requirements. The
transaction is expected to close in the second half of 2004.
For additional information regarding this transaction, please see the section “Subsequent Events” in the notes to
the consolidated financial statements attached to this Annual Report.
REVIEW OF RESULTS FOR FISCAL YEAR 2003,COMPARATED WITH RESULTS FOR FISCAL YEAR 2002
Consistent financial measures (Non-GAAP) - Luxottica Group uses certain measures of financial performance
that exclude the impact of fluctuations in currency exchange rates in the translation of operating results into Euro,
exclude the results of operations for the 53rd week in the U.S. retail calendar(1) for the fiscal year, when applicable, and
include the results of operations of OPSM for the five-month period ended December 31, 2002.
Constant exchange rates results - Luxottica Group believes that these adjusted financial measures provide
useful information to both management and investors by allowing a comparison of operating performance on a
consistent basis. In addition, since Luxottica Group has historically reported such adjusted financial measures to the
investment community, Luxottica Group believes that their inclusion provides consistency in its financial reporting.
Further, these adjusted financial measures are one of the primary indicators management uses for planning and
forecasting for future periods. Operating measures that assume constant exchange rates between fiscal years 2003
and 2002 are calculated using for each currency the average exchange rate for the year ended December 31, 2002.
Operating measures that exclude the impact of fluctuation in currency exchange rates are not measures of
performance under U.S. GAAP. These non-GAAP measures are not meant to be considered in isolation or as a
substitute for results prepared in accordance with U.S. GAAP. In addition, Luxottica Group’s method of calculating
operating performance excluding the impact of changes in exchange rates may differ from methods used by other
companies. See the table below for a reconciliation of the operating measures excluding the impact of fluctuations in
currency exchange rates to their most directly comparable U.S. GAAP financial measures. The adjusted financial
measures should be used as a supplement to results reported under U.S. GAAP to assist the reader in better
understanding the operational performance of Luxottica Group.
(Millions of Euro) FY 2002 FY 2003 Adjustment FY 2003
U.S. GAAP U.S. GAAP for constant Adjusted
Results Results exchange rates results
Consolidated net sales 3,178.6 2,824.6 400.2 3,224.8
Manufacturing/Wholesale net sales 1,128.7 995.1 77.9 1,073.0
Less: intercompany sales (154.9) (172.7) (29.6) (202.3)
Wholesale sales to third parties 973.8 822.4 48.3 870.7
Retail net sales 2,204.8 2,002.3 351.8 2,354.1
(1) Luxottica Group’s fiscal year for its retail operations ends on the Saturday closest to December 31 and, as a result, a 53rd week may be added every
five to six years. Fiscal 2003 was such a year.