LensCrafters 2005 Annual Report Download - page 146
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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS | 145 <
Total royalties and related advertising expenses for the years ended December 31, 2003, 2004 and
2005 aggregated Euro 64.3 million, Euro 83.0 million and Euro 82.0 million, respectively.
Total payments for royalties and related advertising expenses for the years ended December 31, 2003,
2004 and 2005 aggregated Euro 124.2 million, Euro 68.5 million and Euro 119.8 million, respectively.
Leases and licenses
The Company leases through its worldwide subsidiaries various retail store, plant, warehouse and
office facilities, as well as certain of its data processing and automotive equipment under operating
lease arrangements expiring between 2006 and 2025, with options to renew at varying terms. The
lease and license arrangements for the Company’s U.S. retail locations often include escalation
clauses and provisions requiring the payment of incremental rentals, in addition to any established
minimums contingent upon the achievement of specified levels of sales volume. In addition, with the
acquisition of Cole, the Company operates departments in various host stores paying occupancy
costs solely as a percentage of sales. Certain agreements which provide for operations of
departments in a major retail chain in the United States contain short-term cancellation clauses.
Total rental expense under operating leases for each year ended December 31 is as follows:
In thousands of Euro 2003 2004 2005
Minimum rent 204,406 208,134 224,913
Contingent rent 4,883 15,051 57,776
Sublease income (44,739) (49,247) (27,645)
164,550 173,938 255,044
Future minimum annual rental commitments for operating leases are as follows:
Years ending December 31 - In thousands of Euro
2006 209,934
2007 173,425
2008 137,466
2009 106,979
2010 76,740
Thereafter 186,170
Total 890,714
Guarantees
The United States Shoe Corporation, a wholly owned subsidiary of the Company, remains contingently
liable on seven store leases in the United Kingdom. These leases were previously transferred to third
parties. The third parties have assumed all future obligations of the leases from the date each
agreement was signed. However, under the common law of the United Kingdom, the lessor still has
the right to seek payment of certain amounts from the Company if unpaid by the new obligor. If the
Company is required to pay under these guarantees, it has the right to recover amounts from the new
obligor. These leases will expire during various years until December 31, 2015. At December 31, 2005,
the maximum amount for which the Company’s subsidiary is contingently liable is Euro 10.6 million.