LensCrafters 2005 Annual Report Download - page 129

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> 128 | ANNUAL REPORT 2005
full all the outstanding amounts (Euro 50 million left on the term portion and Euro 75 million of the
revolving portion) under this credit facility.
In December 2002, the Company entered into two interest rate swap transactions (the “Intesa Swaps”)
beginning with an aggregate maximum notional amount of Euro 250 million, which decreased by Euro
100 million on June 27, 2004 and by Euro 25 million in each subsequent three-month period. The Intesa
Swaps expired on December 27, 2005. The Intesa Swaps were entered into as a cash flow hedge on
a portion of the Banca Intesa Euro 650 million unsecured credit facility discussed above. As such
changes in the fair value of the Intesa Swaps were included in OCI until they were recorded in the
financial statements. The Intesa Swaps exchanged the floating rate based on Euribor for a fixed rate of
2.985% per annum.
As disclosed in Note 4(a), in September 2003, the Company acquired its ownership interest of OPSM
and more than 90% of the performance rights and options of OPSM for an aggregate of A$ 442.7 million
(Euro 253.7 million), including acquisition expenses. The purchase price was paid for with the proceeds
of a new credit facility with Banca Intesa S.p.A. of Euro 200 million, in addition to other short-term lines
available. The new credit facility includes a Euro 150 million term loan, which will require repayment of
equal semi-annual installments of principal of Euro 30 million starting on September 30, 2006 until the
final maturity date. Interest accrues on the term loan at Euribor (as defined in the agreement) plus 0.55%
(3.04% on December 31, 2004). The revolving loan provides borrowing availability of up to Euro 50
million; amounts borrowed under the revolving portion can be borrowed and repaid until final maturity.
At December 31, 2005, Euro 25 million had been drawn from the revolving portion. Interest accrues on
the revolving loan at Euribor (as defined in the agreement) plus 0.55% (2.76% on December 31, 2004).
The final maturity of the credit facility is September 30, 2008. The Company can select interest periods
of one, two or three months. The credit facility contains certain financial and operating covenants. The
Company was in compliance with those covenants as of December 31, 2005.
In June 2005, the Company entered into four interest rate swap transactions with various banks with an
aggregate initial notional amount of Euro 120 million which will decrease by Euro 30 million every six
months starting on March 30, 2007 (“Intesa OPSM Swaps”). These swaps will expire on September 30,
2008. The Intesa OPSM Swaps were entered into as a cash flow hedge on a portion of the Banca Intesa
Euro 200 million unsecured credit facility discussed above. The Intesa OPSM Swaps exchange the
floating rate of Euribor for an average fixed rate of 2.38% per annum. The ineffectiveness of cash flow
hedges was tested both at the inception date and at year end. The results of the tests indicated that the
cash flow hedges are highly effective and the amounts of ineffectiveness, if any, on each date of testing
were immaterial. As a consequence approximately Euro 0.9 million, net of taxes, is included in Other
Comprehensive Income as of December 31, 2005. Based on current interest rates and market
conditions, the estimated aggregate amount to be recognized as earnings from other comprehensive
income for these cash flow hedges in fiscal 2006 is approximately Euro 0.1 million, net of taxes.
In December 2005, the Company entered into a new unsecured credit facility with Banco Popolare di
Verona e Novara. The 18-month credit facility consists of a revolving loan that provides borrowing
availability of up to Euro 100 million; amounts borrowed under the revolving portion can be borrowed
and repaid until final maturity. At December 31, 2005, Euro 100 million had been drawn from the
revolving portion. Interest accrues on the revolving loan at Euribor (as defined in the agreement) plus
0.25% (2.73% on December 31, 2005). The final maturity of the credit facility is June 1, 2007. The
Company can select interest periods of one, three or six months. Under this credit facility, Euro 100
million was outstanding as of December 31, 2005.
(b) In June 2002, US Holdings entered into a US$ 350 million credit facility with a group of four Italian
banks led by UniCredito Italiano S.p.A. which was paid in full upon its maturity in June 2005. The credit