LensCrafters 2003 Annual Report Download - page 59

117116
Stock Incentive Plan - Luxottica Group granted stock options to certain employees under an incentive plan.
These options vest and became exercisable only if certain financial performance measures are met over a three year
period ending December 2004. As of December 31, 2003, there are 970,000 shares outstanding at an exercise price
of 12.75 (US$ 16.06) per share. Compensation expense will be recognized for the options issued under the
incentive plan based on the market value of the underlying ordinary shares when the number of shares to be issued is
known. For the years ended December 31, 2002, and 2003, management believes that it is not probable that the
financial performance measures will be met and, as such, no interim measures of compensation expense have been
included in the statements of income for the periods presented.
11 SHAREHOLDERS’ EQUITY
In June 2002, and 2003, at the Company’s Annual Shareholders Meetings, cash dividends of 77.2 million and 
95.4 million, respectively, were approved. These amounts became payable in July 2002, and 2003, respectively. Italian
law requires that five percent of net income be retained as a legal reserve until this reserve is equal to one-fifth of the
issued share capital. As such, this legal reserve is not available for dividends to shareholders. Legal reserves of the
Italian entities included in retained earnings at December 31, 2002, and 2003, aggregated 6.4 million and 8.3
million, respectively. In addition, there is an amount of 2.6 million, which represents other legal reserves of foreign
entities that is not available for dividends to shareholders.
On June 26, 2001, as consequence of the Euro conversion, an amount of 3.8 million was recognized as free
capital stock increase.
In accordance with SFAS No. 87, Employer’s Accounting for Pensions, Luxottica Group has recorded a minimum
pension liability for underfunded plan of 41.6 million and 35.2 million as of December 31, 2002, and 2003,
respectively, representing the excess of unfunded accumulated benefits obligations over previously recorded pension
cost liabilities. A corresponding amount is recognized as an intangible asset except to the extent that these additional
liabilities exceed related unrecognized prior service cost and net obligation, in which case the increase in liabilities is
charged directly to shareholders’ equity. The principal cause of the deterioration of the funded status in the pension
liability was caused by negative returns from investments held in the worldwide equity market. As of December 31,
2002, and 2003, 26.5 million and 1.2 million, respectively, of the excess minimum liability, net of income taxes,
resulted in a charge to equity.
U.S. Holdings held at December 31, 2001, 1,205,000 of Luxottica Group’s ordinary shares, which had been
previously purchased at a cost of US$ 3.1 million (2.9 million at December 31, 2002, noon buying rate). These
shares were sold during 2002, for proceeds of US$ 8.8 million (9.3 million). The after-tax net gain of US$ 6.5 million
(6.9 million) was recorded as an increase to the Company’s additional paid-in capital balance (Note 2).
In September 2002, the Board of Directors authorized U.S. Holdings to repurchase in the open market up to
The following table summarizes information about stock options for each year:
Number of Options Weighted Average
Outstanding Exercise Price
(Denominated in Euro) (3)
Outstanding as of January 1, 2001 6,731,900 6,80
Granted 2,079,300 17,08
Forfeitures (119,900) 10,34
Exercised (1,283,517) 6,49
Outstanding as of December 31, 2001 7,407,783 9,67
Granted 2,348,400 16,98
Forfeitures (248,367) 14,54
Exercised (1,397,783) 6,67
Outstanding as of December 31, 2002 8,110,033 11,51
Granted 2,397,300 10,51
Forfeitures (176,600) 11,77
Exercised (213,433) 6,97
Outstanding as of December 31, 2003 10,117,300 10,29
(3) For convenience all amounts are translated at the New York City Noon Buying Rate in effect at the end of each year
Stock options outstanding as of December 31, 2003, are summarized as follows:
Exercise Price denominated Number Number Remaining Life
in Euro (4) Outstanding Exercisable (Years)
7.38 908,000 908,000 3.1
4.38 1,409,000 1,409,000 4.1
9.52 1,473,100 1,473,100 5.1
12.07 1,801,400 1,179,100 6.1
14.13 2,181,000 727,000 7.1
10.51 2,344,800 - 8.1
(4) Certain options were granted in U.S. Dollars and have been converted for the footnote as of December 31, 2003, conversion rate of
1.00 = US$ to 1.2597
Included as an addition to the Company’s paid-in-capital account in fiscal 2002, and 2003, were 3.9 million and
0.3 million, respectively, of tax benefits the Company received from employees exercising these stock options.