LensCrafters 2003 Annual Report Download - page 53

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- During 2002, the Company acquired six retail companies for an aggregate amount of 35.0 million (US$ 33.5
million). All tangible assets and liabilities assumed were insignificant individually and in aggregate and, accordingly,
substantially the entire purchase price was allocated to goodwill. No pro-forma financial information is presented,
as the acquisitions were not material to the Company’s consolidated financial statements. One of these companies
is accounted for under the equity method.
- At the end of 2002, the Company established a new wholly-owned subsidiary in China, Luxottica Tristar Optical
Co., with an initial investment of 3.8 million. The subsidiary is engaged in the manufacturing and distribution of
frames worldwide.
- In 2003, Luxottica Holland B.V., a wholly-owned subsidiary, acquired the remaining interest in Mirari Japan, a
wholesale distributor for an aggregate cash consideration of 18 million. The subsidiary has been accounted for
as step acquisition and the Company has recorded goodwill of approximately 16.9 million in connection
therewith.
5PROPERTY,PLANT AND EQUIPMENT - NET
Property, plant and equipment-net consisted of the following (thousands of Euro):
December 31,
2002 2003
Land and buildings, including leasehold improvements 451,900 416,752
Machinery and equipment 366,027 428,644
Aircraft 25,185 25,908
Other equipment 263,340 268,138
Building, held under capital lease 2,332 2,332
1,108,784 1,141,774
Less: accumulated depreciation and amortization (602,239) (644,339)
TOTAL 506,545 497,435
Depreciation and amortization expense of property, plant and equipment for the years ended December 31, 2001,
2002, and 2003, was 101.1 million, 103.8 million and 92.2 million, respectively. Included in other equipment is
approximately 25.1 million and 16.5 million of construction in progress as of December 31, 2002, and 2003,
respectively.
6GOODWILL AND INTANGIBLE ASSETS - NET
Certain goodwill balances are denominated in currencies other than Euro (the reporting currency) and as such,
balances may fluctuate due to changes in exchange rates, Goodwill consisted of the following (thousands of Euro):
December 31,
2002 2003
Goodwill, which arose in connection with the acquisition of LensCrafters, (a). 489,944 407,801
Goodwill, which arose in connection with the acquisition of Ray-Ban, (b). 228,354 228,354
Goodwill, which arose in connection with the acquisition
of Sunglass Hut International, (see Note 4) (c). 409,036 373,216
Goodwill, which arose in connection with the acquisition of OPSM (see Note 4) (d). - 153,976
Goodwill, which arose in connection with other business acquisitions, (see note 4) (e).117,326 165,567
TOTAL 1,244,660 1,328,914
(a) The acquisition of LensCrafters in May 1995 was accounted for by the purchase method and, accordingly, the
purchase price has been allocated to the assets acquired and the liabilities assumed based on their fair values at
the date of acquisition. The excess of purchase price over the fair value of net assets acquired (US$ 698.9 million
at the date of acquisition) was recorded as goodwill in the accompanying consolidated balance sheets. With the
Company’s adoption of SFAS No. 142, effective January 1, 2002, goodwill is no longer subjected to periodic
amortization, but rather is subjected to an annual impairment test.
In connection with the acquisition of LensCrafters, Luxottica Group recorded certain liabilities for commitments
and other costs expected to be paid in future periods. As a result of negotiations with vendors and other
settlements, the Company settled these liabilities at an amount less than the accrual set up at the date of the
acquisition. Accordingly, included in the consolidated statements of income for fiscal 2001, and 2002, is income of
approximately 10.1 million (US$ 9 million) and 3.8 million (US$ 4.0 million), net of taxes, for the final settlement
of these liabilities, respectively.
(b) The acquisition of Ray-Ban in 1999 was accounted for by the purchase method and, accordingly, the purchase
price has been allocated to the assets acquired and the liabilities assumed based on their fair values at the date of
acquisition. The excess of purchase price over the fair value of net assets acquired (272.9 million at the date of
acquisition) was recorded as goodwill in the accompanying consolidated balance sheets. With the Company’s
adoption of SFAS No. 142 effective January 1, 2002, goodwill is no longer subjected to periodic amortization, but
rather is subjected to an annual impairment test.
(c) The acquisition of Sunglass Hut International in 2001, was accounted for by the purchase method and,