LensCrafters 2006 Annual Report Download - page 136

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>136 | ANNUAL REPORT 2006
corresponding Euribor rate and US Dollar denominated loans based on the corresponding Libor
rate, both plus a margin between 0.20% and 0.40% based on the “Net Debt/EBITDA” ratio, as
defined in the agreement. The interest rate on December 31, 2006 was 3.972% for Tranche A,
5.620% for Tranche B, 5.60% on Tranche C amounts borrowed in US Dollar and 3.957% on
Tranche C amounts borrowed in Euro. The credit facility contains certain financial and operating
covenants. The Company was in compliance with those covenants as of December 31, 2005
and 2006. Under this credit facility, Euro 974.3 million and Euro 895.2 million was outstanding as
of December 31, 2005 and 2006, respectively.
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 each 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 5.2 million, net of taxes, is included in Other Comprehensive Income as of
December 31, 2006. 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 2007 is approximately Euro 3.6 million, net of taxes.
(e) Other loans consist of several 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 29.96 million (AU$ 50 million),
which was reduced to Euro 17.97 million (AU$ 30 million) in August 2006. 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
0.275% margin (at December 31 2006, the Hibor was 4.11%, ). At December 31, 2006, the facility
was utilized for an amount of Euro 12,11 million (AU$ 20.219 million). The final maturity of all
outstanding principal amounts and interest is August 31, 2007. 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, 2006.
Long-term debt, including capital lease obligations, matures in the years subsequent to December
31, 2006 as follows:
December 31, (Euro/000)
2007 359,527
2008 358,988
2009 99,927
2010 9,087
2011 490,967
Thereafter 766
Total 1,319,262