LensCrafters 2007 Annual Report Download - page 68

FINANCING RESOURCES AND ARRANGEMENTS
We have relied primarily upon internally generated funds, trade credit and bank borrowings to
finance our operations and expansion.
Bank overdrafts represent negative cash balances held in banks and amounts borrowed under
various unsecured short-term lines of credit obtained by us and certain of our subsidiaries
through local financial institutions. These facilities are usually short-term in nature or contain
evergreen clauses with a cancellation notice period. Certain of these subsidiaries’ agreements
require a guarantee from Luxottica Group S.p.A. Interest rates on these lines vary based on the
country of borrowing, among other factors. We use these short-term lines of credit to satisfy our
short-term cash needs.
On September 3, 2003, Luxottica U.S. Holdings Corp. (“U.S. Holdings”) closed a private placement
of US$ 300.0 million of senior unsecured guaranteed notes (the “Notes”), issued in three series
(Series A, Series B and Series C). Interest on the Series A Notes accrues at 3.94% per annum and
interest on each of the Series B and Series C Notes accrues at 4.45% per annum. The Series A and
Series B Notes mature on September 3, 2008 and the Series C Notes mature on September 3, 2010.
The Series A and Series C Notes require annual prepayments beginning on September 3, 2006
through the applicable dates of maturity. The Notes are guaranteed on a senior unsecured basis by
the Company and Luxottica S.r.l., the Company’s wholly owned subsidiary. The Notes can be prepaid
at U.S. Holdings’ option under certain circumstances. The proceeds from the Notes were used for
the repayment of outstanding debt and for other working capital needs. The Notes contain certain
financial and operating covenants. As of December 31, 2007, the Company was in compliance with
all of its applicable covenants including calculations of financial covenants when applicable.
In September 2003, the Company entered into a credit facility with Banca Intesa S.p.A. of Euro
200.0 million. The credit facility includes a Euro 150.0 million term loan, which requires repayment
of equal semiannual installments of principal of Euro 30 million starting September 30, 2006 until
the final maturity date. Interest accrues on the term loan at Euribor (as defined in the agreement)
plus 0.55% (5.315% on December 31, 2007). The revolving loan provides borrowing availability of
up to Euro 50.0 million; amounts borrowed under the revolving portion can be borrowed and
repaid until final maturity. As of December 31, 2007, Euro 25.0 million had been drawn from the
revolving portion. Interest accrues on the revolving loan at Euribor (as defined in the agreement)
plus 0.55% (4.988% on December 31, 2007). The final maturity of the credit facility is September
30, 2008. The Company can select interest periods of one, two or three months. The credit facility
contains certain financial and operating covenants. As of December 31, 2007, the Company was in
compliance with all of its applicable covenants including calculations of financial covenants when
applicable. Euro 85.0 million was borrowed under this credit facility as of December 31, 2007.
In June 2005, the Company entered into four interest rate swap transactions with various banks
with an aggregate initial notional amount of Euro 120.0 million which will decrease by Euro 30.0
million every six months starting on March 30, 2007 (“Intesa OPSM Swaps”). These swaps will
expire on September 30, 2008. The Intesa OPSM Swaps were entered into as a cash flow
hedge on a portion of the Banca Intesa Euro 200.0 million unsecured credit facility discussed
above. The Intesa OPSM Swaps exchange the floating rate of Euribor for an average fixed rate
of 2.45% per annum.
On June 3, 2004, as amended on March 10, 2006, the Company and U.S. Holdings entered into a
credit facility with a group of banks providing for loans in the aggregate principal amount of Euro
1,130.0 million and US$ 325.0 million. The facility consists of three tranches (Tranche A, Tranche B
and Tranche C). The March 2006 amendment, increased the available borrowings, decreased the
FINANCING RESOURCES
AND ARRANGEMENTS | 67 <