LensCrafters 2008 Annual Report Download - page 100

> 98 |ANNUAL REPORT 2008
sub-lease agreements with LensCrafters violate the TOA. The suit seeks recovery of a civil penalty of up
to US$ 1,000 for each day of a violation of the TOA, injunctive relief, punitive damages, and attorneys’
fees and costs. In August 2008, plaintiffs filed a first amended complaint, adding claims for fraudulent
inducement and breach of contract. In October 2008, plaintiffs filed a second amended complaint
seeking to certify the case as a class action on behalf of all current and former LensCrafters’ sub-lease
optometrists. Luxottica Group S.p.A. filed a motion to dismiss for lack of personal jurisdiction in October
2008. That motion is currently pending. The case was transferred to the Western District of Texas, Austin
Division, in January, 2009, pursuant to the defendants’ motion to transfer venue. Although the Company
believes that its operational practices in Texas comply with Texas law, if this action results in an adverse
decision, LensCrafters may have to modify its activities in Texas. Further, LensCrafters and Luxottica
Group might be required to pay statutory damages, the amount of which might have a material adverse
effect on the Company’s operating results, financial condition and cash flow.
Costs associated with this litigation for the year ended December 31, 2008 were not material.
Management believes, based in part on advice from counsel, that no estimate of the range of possible
losses, if any, can be made at this time.
The Company is a defendant in various other lawsuits arising in the ordinary course of business. It is the
opinion of the management of the Company that it has meritorious defenses against all such outstanding
claims, which the Company will vigorously pursue, and that the outcome of such claims, individually or in
the aggregate, will not have a material adverse effect on the Company’s consolidated financial position or
results of operations.
16. FAIR VALUES
Certain assets and liabilities of the Company are recorded at fair value on a recurring basis while others
are recorded at fair value based on specific events. SFAS No. 157 specifies a hierarchy of valuation
techniques consisting of three levels:
•Level 1 - Inputs are quoted prices in an active markets for identical assets or liabilities
•Level 2 - Inputs are quoted for similar assets or liabilities in an active market, quoted prices for identical
or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are
observable (for example interest rates and yield curves observable at common quoted intervals) or
market-corroborated inputs
•Level 3 - Unobservable inputs used observable inputs are not available in situations when there is little,
if any market activity for the asset or liability
At December 31, 2008 the fair value of the Company’s financial assets and liabilities measured on a
recurring basis are as follows (thousands of Euro):
Fair value measurements
at reporting date using
Description Balance sheet classification December 31, 2008 Level 1 - Level 2 - Level 3 -
Marketable securities Prepaid expenses and other 23,550 23,550
Foreign Exchange Contracts Prepaid expenses and other 7,712 7,712
Interest Rate Derivatives Other assets 138 138
Interest Rate Derivatives Other long term liabilities 64,213 64,213
Foreign Exchange Contracts Other accrued expenses 5,022 5,022
As of December 31, 2008 the Company did not have any Level 3 fair value measurements.
The Company maintains policies and procedures with the aim of valuing the fair value of assets and
liabilities using the best and most relevant data available.