LensCrafters 2006 Annual Report Download - page 120

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>120 | ANNUAL REPORT 2006
As of January 1, 2006, the Company has adopted SFAS 123(R) in accordance with the transitional
guidance as prescribed in the statement. As such, the previous unearned compensation as of
December 31, 2005 of Euro 48.6 million has been charged against the appropriate equity
accounts. Approximately Euro 48.0 million of additional compensation expense associated with
the annual stock option plans and with the Company's October 2004 performance plan grants,
September 2004 shareholder grant and July 2006 performance plans grants was included in
general and administrative expense for the fiscal year ended December 2006.
Total receivables and payables from/to other related parties not considered in the above reported
paragraphs amount to Euro 1.3 million and Euro 0.2 million, respectively (Euro 0.5 million and
Euro 0.1 million as of December 31, 2005). These amounts mainly refer to commercial transaction
with the company RayBan Sun Optics India Ltd held by the Group at 44% as of December 31, 2006.
3. INVENTORIES
Inventories consisted of the following:
Years ended December 31, (Euro/000) 2005 2006
Raw materials and packaging 53,414 76,352
Work in process 26,932 49,650
Finished goods 349,048 317,253
Less: Inventory obsolescence reserves (59,105) (42,360)
Total 370,289 400,895
4. SALE OF THINGS REMEMBERED
On September 29, 2006, the Company sold its TR specialty gifts retail business to a private equity
consortium for net cash consideration of Euro 128.0 million (US$ 162.1 including costs of US$ 5.3
million) and a promissory note with a principal amount of Euro 20.6 million (US$ 26.1 million). The
TR business operated solely in the United States and was included in the retail segment of the
Company’s operations as of December 31, 2004 and 2005. As such, for all periods for which a
balance sheet is presented, the Company has reclassified the assets and liabilities included in the
sale for previous periods as single asset and liability line items on the balance sheet. In the
Statements of Consolidated Income, for all periods presented, the Company has reclassified
sales, cost of sales and other expenses associated with the discontinued operations as a single
line item after income from continuing operations but before net income. Revenues, income from
operations, income before provision for income taxes and income tax provision reclassified under
discontinued operations for the twelve-month periods ended December 31, 2004, 2005 and 2006,
are as follows: