LensCrafters 2007 Annual Report Download - page 166

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS | 165 <
Total royalties and related advertising expenses for the fiscal years 2007, 2006 and 2005 aggregated
Euro 181.6 million, Euro 184.1 million and 121.2 million, respectively.
Total payments for royalties and related advertising expenses for the fiscal years 2007, 2006 and
2005 aggregated Euro 278.2 million, Euro 225.1 million and Euro 119.8 million, respectively.
Leases
The Company leases through its worldwide subsidiaries various retail store, plant, warehouse and
office facilities, as well as certain of its data processing and automotive equipment under operating
lease arrangements expiring between 2007 and 2025, with options to renew at varying terms. The
lease arrangements for the Company's U.S. retail locations often include escalation clauses and
provisions requiring the payment of incremental rentals, in addition to any established minimums
contingent upon the achievement of specified levels of sales volume. In addition, with the
acquisition of Cole, the Company operates departments in various host stores paying occupancy
costs solely as a percentage of sales. Certain agreements which provide for operations of
departments in a major retail chain in the United States contain short-term cancellation clauses.
Total rental expense under operating leases for each year ended December 31 is as follows:
Future minimum annual rental commitments for operating leases are as follows:
Other commitments. The Company, with its acquisition of Oakley, is committed to pay amounts in
future periods for endorsement contracts and supplier purchase commitments. Endorsement
contracts are entered into with selected athletes and others who endorse Oakley products. Oakley
is often required to pay specified minimal annual commitments and, in certain cases, additional
amounts based on performance goals. Certain contracts provide additional incentives based on
the achievement of specified goals. Purchase commitments have been entered into with various
suppliers in the normal course of business. Oakley has a five-year agreement with a supplier that is
Oakley’s sole source of the uncoated lens blanks from which the majority of its sunglass lenses
are cut. This agreement gives Oakley the right to purchase lens blanks from the supplier in return
for Oakley’s agreement to fulfill the majority of the requirements of the supplier, subject to certain
conditions. Amounts expensed in 2007 for the endorsement contracts and supplier purchase
commitments were immaterial to the financial statements.
(Euro/000) 2007 2008 2009
Minimum rent 264,496 236,546 224,913
Contingent rent 60,177 64,091 57,776
Sublease (38,806) (35,955) (27,645)
Total 285,867 264,682 255,044
Year ending December 31 (Euro/000)
2008 240,946
2009 217,460
2010 178,189
2011 144,829
2012 115,214
Thereafter 328,050
Total 1,224,688