LensCrafters 2007 Annual Report Download - page 66

154,900 in 2006, which was attributable to increased production in both the Italian and Chinese
manufacturing facilities.
Gross profit
Our gross profit increased by Euro 202.0 million, or 6.3%, to Euro 3,390.4 million in 2007 from Euro
3,188.5 million in 2006, of which Euro 49.3 million is attributable to the inclusion of Oakley’s gross
profit for the period from the acquisition date. As a percentage of net sales, gross profit increased
to 68.3% in 2007 from 68.2% in 2006.
Operating expenses
Total operating expenses increased by Euro 124.7 million, or 5.1%, to Euro 2,557.1 million in 2007
from Euro 2,432.5 million in 2006, of which Euro 45.6 million is attributable to the inclusion of
Oakley’s operating expenses for the period from the acquisition date. As a percentage of net
sales, operating expenses decreased to 51.5% in 2007 from 52.0% in 2006 primarily due to the
maintenance of strong cost controls in our manufacturing and wholesale segment.
Selling and advertising expenses (including royalty expenses) increased by Euro 120.8 million, or
6.2%, to Euro 2,069.3 million in 2007 from Euro 1,948.5 million in 2006, primarily due to increases in
sales, for which we were required to pay additional commissions to sales associates and royalty
expenses to designers of our licensed brands of Euro 65.7 million and Euro 25.1 million, respectively.
Euro 28.7 million of the increase is attributable to the inclusion of Oakley’s selling and advertising
expenses (including royalty expenses) for the period from the acquisition date. As a percentage of
net sales, selling and advertising expenses remained flat at 41.7% both in 2007 and in 2006.
General and administrative expenses, including intangible asset amortization, increased by Euro
3.8 million, or 0.8%, to Euro 487.8 million in 2007 from Euro 484.0 million in 2006, primarily due to
an increase of Euro 16.9 million attributable to the inclusion of Oakley general and administrative
expenses, including intangible asset amortization, for the period from the acquisition date and was
partially offset by a one time gain of Euro 20.0 million due to a real estate sale in Milan, Italy in May.
As a percentage of net sales, general and administrative expenses decreased to 9.8% in 2007
from 10.4% in 2006.
Income from operations
For the reasons described above, income from operations in 2007 increased by Euro 77.3 million,
or 10.2%, to Euro 833.3 million from Euro 756.0 million in 2006, of which Euro 3.7 million is
attributable to the inclusion of Oakley’s income of operations for the period from the acquisition
date. As a percentage of net sales, income from operations increased to 16.8% in 2007 from
16.2% in 2006. Income from operations without the one time gain from the real estate sale
described in the previous paragraph would have been equal to Euro 813.3 million, or 16.4% of net
sales, with an increase of Euro 57.3 million, or 7.6%, as compared to 2006.
Other income (expense) - net
Other income (expense) - net was Euro (52.6) million in 2007 as compared to Euro (77.8) million in
2006, of which Euro (10.9) million is attributable to the inclusion of Oakley’s other income
(expense) - net for the period from the acquisition date. This decrease in net expense is mainly
attributable to a net realized and unrealized foreign exchange transaction and remeasurement gain
in 2007 as compared to a loss in 2006. Net interest expense was Euro 72.4 million in 2007 as
compared to Euro 60.8 million in 2006, attributable to an increase in outstanding indebtedness.
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