LensCrafters 2007 Annual Report Download - page 137

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> 136 | ANNUAL REPORT 2007
3. INVENTORIES - NET
Inventories - net consisted of the following:
4. SALE OF THINGS REMEMBERED
On September 29, 2006, the Company sold its Things Remembered (“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. In the
consolidated statements of income, for 2005 and 2006, 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, 2005 and 2006, are as follows:
The promissory note has a stated interest rate of 15.0%. Interest is “paid-in-kind” annually in the
form of an additional principal amount added to the outstanding principal balance. All unpaid
interest and outstanding principal is due in March 2013. The promissory note is subordinated to
certain other outstanding senior debt of the acquirer as defined in the promissory note. The
promissory note has been classified as an “available-for sale” security and as such changes in its
fair value will be included in accumulated other comprehensive income and reclassified to earnings
when realized. For fiscal 2006 and 2007 there were no amounts reclassified from other
comprehensive income into earnings.
Inventories - net consisted of the following - Euro/000 2007 2006
Raw materials and packaging 117,191 76,352
Work in process 52,132 49,650
Finished goods 492,839 320,146
Less: Inventory obsolescence reserves (87,146) (45,253)
Total 575,016 400,895
(Euro/000) 2006 (1) 2005
Revenues 157,110 236,478
Income from operations 3,250 21,153
Income before provision for income taxes 761 18,260
Income tax provision (45) (6,756)
Gain/loss on sale 13,278 n.a.
Income taxes on sale (20,413) n.a.
(Loss)/Gain on discontinued operations (6,419) 11,504
(1) From January 1, 2006 through September 29, 2006.