LensCrafters 2006 Annual Report Download - page 140
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The estimated net loss and prior service cost for the defined benefit pension plans that will be
amortized from accumulated other comprehensive income into net periodic benefit cost over the
next fiscal year are Euro 2.8 million and Euro 0.6 million, respectively. The estimated net loss and
prior service cost for the SERP plans that will be amortized from accumulated other
comprehensive income into net periodic benefit cost over the next fiscal year are Euro 0.3 million
and Euro 0.01 million, respectively.
Assumptions Pension plans SERP
2005 2006 2005 2006
Weighted-average assumption used to determine benefit obligations
Discount rate 5.75% 6.00% 5.75% 6.00%
Rate of compensation increase 4.25% 4.50% 4.25% 4.50%
Weighted-average assumption used to determine net periodic benefit cost for years
ended December 31, 2006 and 2005
Discount rate 5.75% 5.75% 5.75% 5.75%
Expected long-term return on plan assets 8.50% 8.25% n.a. n.a.
Rate of compensation increase 4.25% 4.25% 4.25% 4.25%
Mortality table RP-2000 RP-2000 RP-2000 RP-2000
For 2006, the Company’s long-term rate of return assumption on the pension plans’ assets was
8.25%. In developing this assumption, the Company considered input from its third-party pension
asset managers, investment consultants and plan actuaries, including their review of asset class
return expectations and long-term inflation assumptions. The Company also considered the
pension plans’ historical average return over various periods of time (through December 31, 2005).
The resulting assumption was also benchmarked against the assumptions used by other U.S.
corporations as reflected in several surveys to determine consensus thinking at that time on this
assumption.
Plan assets -The pension plan’s target and actual asset allocations at September 30, 2006 and
2005, by asset category are as follows:
Category Assets Luxottica pension Cole pension
allocation plan asset plan asset
target September 30 September 30
2005 2006 2005 2006
Equity securities 65% 60% 64% 66% 67%
Debt securities 35% 36% 34% 32% 29%
Other - 4% 2% 2% 4%
Total 100% 100% 100% 100% 100%
The actual allocation percentages at any given time may vary from the targeted amounts due to
changes in stock and bond valuations as well as timing of contributions to and benefit payments
from the pension plan trusts.
Plan assets are invested in diversified portfolios consisting of an array of asset classes within the
above target allocations and using a combination of active and, in the case of the Cole plan,
passive investment strategies. Active strategies employ multiple investment management firms.
>140 | ANNUAL REPORT 2006