LensCrafters 2006 Annual Report Download - page 146

>146 | ANNUAL REPORT 2006
2006 under the older plans, stock options were granted at a price that was equal to or greater than
market value of the shares at the date of grant. Under the 2006 plan, options were granted at the
greater of either the previous 30 day average stock price immediately before the date of grant or
the price on the grant date depending on certain regulatory requirements of the country that the
employee is receiving the option. These options become exercisable in either three equal annual
instalments beginning on January 31st, one year after the date of grant for grants prior to 2005 or
for the 2005 and after grants two annual equal instalments beginning on January 31 two years after
the date of grant and expire on or before January 31, 2015. Certain vested options may contain
accelerated exercising terms if there is a change in ownership (as defined in the Plans).
Prior to the adoption of SFAS 123R on January 1, 2006, the Company applied APB 25 to these
Annual plans, and as such no compensation expense was recognized because the exercise price
of the options was equal to the fair market value on the date of grant. Accounting for the
performance plans are discussed below. 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 US 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.
The Company adopted SFAS 123R as of January 1, 2006, and at such point began expensing
stock options on a straigh-line basis over the requisite service period based on their fair value as of
the date of grant. For the year ended December 31, 2006 Euro 7.0 million of compensation
expense has been recorded for these plans. Pro forma net income and earnings per share
calculated as if the compensation costs of the plans had been determined under a fair-value
based method for the previous periods are reported in Note 1.
Asummary of option activity under the Plans as of December 31, 2006, and changes during the
year then ended is as follows:
Number Weighted Weighted Aggregate
of options average average intrinsic
outstanding (denominated remaining value
in Euro) contractual (Euro/000)
(1) terms
Outstanding as of December 31, 2005 10,044,310 12.68
Granted 1,725,000 22.19
Forfeitures (228,100) 15.86
Exercised (2,240,525) 10.59
Outstanding as of December 31, 2006 9,300,685 14.15 5.33 84,899
Exercisable at December 31, 2006 5,555,285 11.05 3.95 67,917
The weighted-average fair value of grant-date fair value options granted during the years 2004,
2005, and 2006 was Euro 4.10, Euro 4.27 and Euro 5.72, respectively.
Stock performance plans
In October 2004, under a Company performance plan, the Company granted options to acquire an
aggregate of 1,000,000 shares of the Company to certain employees of North American Luxottica