LensCrafters 2007 Annual Report Download - page 165
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>164 |ANNUAL REPORT 2007
arrangements that are short term in length. The Company believes no significant concentration of
credit risk exists with respect to these cash investments and accounts receivable.
Concentration of supplier risk
As a result of the OPSM and Cole acquisitions, Essilor S.A. has become one of the largest suppliers
to the Company’s Retail Division. For the 2007, 2006 and 2005 fiscal years, Essilor S.A. accounted
for approximately 15.0%, 15.0% and 10.0% of the Company’s total merchandise purchases,
respectively. The Company has not signed any specific purchase contract with Essilor.
Management believes that the loss of this vendor would not have a significant impact on the future
operations of the Company as it could replace this vendor quickly with other third-party suppliers.
15. COMMITMENTS AND CONTINGENCIES
Royalty agreements
The Company is obligated under non-cancellable distribution agreements with designers, which
expire at various dates through 2013. In accordance with the provisions of such agreements, the
Company is required to pay royalties and advertising fees based on a percentage of sales (as
defined) with, in certain agreements, minimum guaranteed payments in each year of the agreements.
On October 7, 2005, the Company announced the signing of a 10-year license agreement for the
design, production and worldwide distribution of prescription frames and sunglasses under the
Burberry name. The agreement began on January 1, 2006.
On February 27, 2006, the Company announced that it entered into a 10-year license agreement for
the design, production and worldwide distribution of prescription frames and sunglasses under the
Polo Ralph Lauren name. The agreement commenced on January 1, 2007. Based on the
agreement, Luxottica Group provided for an advance payment on royalties to Ralph Lauren in
January 2007 for a total amount of Euro 150.2 million (US$ 199 million).
In December 2006, the Company announced the signing of a 10-year license agreement for the
design, manufacturing and worldwide distribution of exclusive ophthalmic and sun collections under
the Tiffany & Co. name. The Company launched the first collection in 2008. The distribution of
Tiffany’s collections started with Tiffany’s own stores as well as in North America, Japan, Hong
Kong, South Korea, key Middle East markets and Mexico and will extend over time to additional
markets and through new distribution channels.
Minimum payments required in each of the years subsequent to December 31, 2007 are detailed
as follows:
Year ending December 31 (Euro/000)
2008 85,462
2009 81,683
2010 72,989
2011 52,319
2012 37,081
Thereafter 128,549
Total 458,083