LensCrafters 2005 Annual Report Download - page 139

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> 138 | ANNUAL REPORT 2005
Financial Statements. The weighted-average discount rate used in determining the accumulated post-
retirement benefit obligation was 5.75% at September 30, 2004 and 6.00% at September 30, 2005.
The weighted-average discount rate used in determining the net periodic benefit cost for 2004 and
2005 was 5.75% and 6.0%, respectively.
Certain of the Company’s non-Italian and non-U.S. subsidiaries provide limited non-pension benefits to
retirees in addition to government sponsored programs. The cost of these programs is not significant
to the Company.
On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003
(the “Act”) was signed into law. In accordance with FASB Staff Position 106-2, the Company’s
measures of accumulated postretirement benefit obligation and net periodic benefit cost in the
Consolidated Financial Statements reflect the effects of the Act. The adoption of FASB Staff Position
106-2 did not have a material effect on the Company’s Consolidated Financial Statements.
10. STOCK OPTION AND INCENTIVE PLANS
Stock Option plan
Beginning in April 1998, certain officers and other key employees of the Company and its subsidiaries
were granted Stock Options of Luxottica Group S.p.A. under the Company’s Stock Option plan. The
Stock Options were granted at a price equal to the market value of the shares at the date of grant.
These options become exercisable in either three equal annual installments beginning on January 31
one year after the date of grant or for the 2005 grant two annual equal instalments beginning on
January 31 two years after the date of grant and expire on or before January 31, 2014.
As the Company applies APB 25, no compensation expense was recognized because the exercise
price of the options was equal to the fair market value on the date of grant. However, as some of those
individuals were U.S. citizens/taxpayers and as the exercise of such options created taxable income,
the Company was afforded a tax benefit in its Federal tax return equal to the income declared by the
individuals. U.S. GAAP does not permit the aforementioned tax benefit to be recorded in the Statement
of Income. Therefore, such amount is recorded as a reduction of taxes payable and an increase to
additional paid-in capital. For the years ended December 31, 2004 and 2005, the benefit recorded
approximated Euro 0.8 million and Euro 4.7 million, respectively.