LensCrafters 2008 Annual Report Download - page 82

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>80 |ANNUAL REPORT 2008
at the inception date and every three month. The results of the tests indicated that the cash flow hedges
are highly effective. As a consequence approximately US$ (17.3) million, net of taxes, is included in other
comprehensive income as of December 31, 2008. Based on current interest rates and market conditions,
the estimated aggregate amount to be recognized as earnings from other comprehensive income for
these cash flow hedges in fiscal 2009 is approximately US$ (6.3) million, net of taxes.
(d)Other loans consist of several small credit agreements. Certain subsidiaries’ fixed assets are pledged
as collateral for such loans.
(e) On November 14, 2007, the Group completed the merger with Oakley for a total purchase price of
approximately US$ 2.1 billion. In order to finance the acquisition of Oakley, on October 12, 2007 the
Company and its subsidiaryUS Holdings entered into two credit facilities with a group of banks
providing for certain term loans and a bridge loan for an aggregate principal amount of US$ 2.0 billion.
The term loan facility is a term loan of US$ 1.5 billion, with a five-year term, with options to extend the
maturity on two occasions for one year each time. The term loan facility is divided into two facilities,
Facility D and Facility E. Facility D consists of an amortizing termloan in an aggregate amount of US$
1.0 billion, made available to US Holdings, and Facility E consists of a bullet term loan in an aggregate
amount of US$ 500 million, made available to the Company. Each facility has a five-year term, with
options to extend the maturity date on two occasions for one year each time. Interest accrues on the
term loan at LIBOR plus 20 to 40 basis points based on “ Net Debt to EBITDA” ratio, as defined in the
agreement (1.545 percent for Facility D and 2.346 percent for Facility E on December 31, 2008). On
September 2008, the Company exercised an option included in the agreement to extend the maturity
date of Tranches D and E to October 12, 2013. These credit facilities contain certain financial and
operating covenants. The Company was in compliance with those covenants as of December 31, 2008.
US$ 1,500.0 million was borrowed under this credit facility as of December 31, 2008.
During the thirdquarter of 2007 the Group entered into ten interest rate swap transactions with an
aggregate initial notional amount of US$ 500.0 million with various banks (“ Tranche E Swaps” ). These
swaps will expireon October 12, 2012. The Tranche E Swaps were entered into as a cash flow hedge on
Facility E of the credit facility discussed above. The Tranche E Swaps exchange the floating rate of Libor
for an average fixed rate of 4.26 percent per annum. The ineffectiveness of cash flow hedges was tested
at the inception date and at least every three months. The results of the tests indicated that the cash flow
hedges are highly effective. As a consequence approximately US$ (30.1) million, net of taxes, is included
in other comprehensive income as of December 31, 2008. Based on current interest rates and market
conditions, the estimated aggregate amount to be recognized in earnings from other comprehensive
income for these cash flow hedges in fiscal 2009 is approximately US$ (9.5) million, net of taxes.
During the fourth quarter of 2008 US Holdings entered into ten interest rate swap transactions with an
aggregate initial notional amount of US$ 500.0 million with various banks (“ Tranche D Swaps” ).The last
maturity of these swaps will be October 12, 2012. The Tranche D Swaps were entered into as a cash flow
hedge on Facility D of the credit facility discussed above. The Tranche D Swaps exchange the floating rate
of Libor for an average fixed rate of 2.77 percent per annum. The ineffectiveness of cash flow hedges was
tested at the inception date and at least every three months. The results of the tests indicated that the cash
flow hedges are highly effective. As a consequence approximately US$ (10.7) million, net of taxes, is
included in other comprehensive income as of December 31, 2008. Based on current interest rates and
market conditions, the estimated aggregate amount to be recognized in earnings from other
comprehensive income for these hedges in fiscal 2009 is approximately US$ (4.7) million, net of taxes.
The shorttermbridge loan facility was for an aggregate principal amount of US$ 500 million. Interest
accrued on the short term bridge loan at LIBOR (as defined in the agreement) plus 0.15 percent. The
final maturity of the credit facility was eight months from the first utilization date. On April 29, 2008, the
Company and its subsidiary US Holdings entered into an amendment and transfer agreement to the
US$ 500.0 million short-term bridge loan facility entered into to finance the Oakley acquisition. The