LensCrafters 2005 Annual Report Download - page 131

> 130 | ANNUAL REPORT 2005
America, Citigroup Global Markets Limited, HSBC Bank plc, Mediobanca - Banca di Credito Finanziario
S.p.A., The Royal Bank of Scotland plc and UniCredit Banca Mobiliare S.p.A. UniCredito Italiano S.p.A.
- New York Branch and UniCredit Banca d’Impresa S.p.A. act as Facility Agents. Under this credit
facility, Euro 974.3 million was outstanding as of December 31, 2005.
In June 2005, the Company entered into nine interest rate swap transactions with an aggregate initial
notional amount of Euro 405 million with various banks which will decrease by Euro 45 million every
three months starting on June 3, 2007 (the “Club Deal Swaps”). These swaps will expire on June 3,
2009. The Club Deal Swaps were entered into as a cash flow hedge on Tranche A of the credit facility
discussed above. The Club Deal Swaps exchange the floating rate of Euribor for an average fixed rate
of 2.40% 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 3.5 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 0.4 million, net of taxes.
(e) Other loans consist of numerous small credit agreements and a promissory note, the most significant
of which is OPSM’s renegotiated multicurrency loan facility with Westpac Banking Corporation. This credit
facility had a maximum available line of Euro 62.4 million (A$ 100 million), which was reduced to Euro 31.2
million (A$ 50 million) in September 2005. The base rate for the interest charged varies depending on the
currency borrowed; for borrowings denominated in Australian Dollars the interest accrues on the basis of
BBR (Bank Bill Rate) and for borrowings denominated in Hong Kong Dollars the rate is based on HIBOR
(HK Inter Bank Rate) plus an overall 0.40% margin (at December 31 2005, the BBR and HIBOR were
6.03% and 4.46%, respectively). At December 31, 2005, the facility was utilized for an amount of Euro
13.59 million (A$ 21.88 million). The final maturity of all outstanding principal amounts and interest is
August 31, 2006. OPSM has the option to choose weekly or monthly interest periods. The credit facility
contains certain financial and operating covenants. OPSM was in compliance with these covenants as of
December 31, 2005.
Excluding current maturities, long-term debt matures in the years subsequent to December 31, 2006 as
follows:
Year ended December 31 - In thousands of Euro
2007 370,722
2008 369,270
2009 669,914
2010 9,686
Thereafter 457
Total 1,420,049
9. EMPLOYEE BENEFITS
Liability for termination indemnities
As required by Italian labor legislation, the benefit accrued by an employee for service to date is payable
immediately upon separation. Accordingly, the undiscounted value of that benefit payable exceeds the
actuarial present value of that benefit because payment is estimated to occur at the employee’s expected
termination date. The Company measures the vested benefit obligation at the actuarial present value of the
vested benefits to which the employee would be entitled if all employees were to resign or be terminated as