LensCrafters 2009 Annual Report Download

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ANNUAL REPORT 2009

Table of contents

  • Page 1
    AnnuAl report 2009

  • Page 2
    2

  • Page 3
    ANNUAL REPORT 2009 FISCAL YEAR ENDED DECEMBER 31, 2009

  • Page 4
    All pictures in this Annual Report are from OneSight and are portraits of some of the thousands of people worldwide who received free eyecare from this Luxottica Group Foundation in 2009. Further information on the OneSight Foundation can be found in the section dedicated to it on page 34 and on www...

  • Page 5
    ... highlights Luxottica Group Profile History Mission and strategy Design and product development Operations Brand portfolio Distribution Structure of the Group OneSight Welfare Annual Review 2009 Key events Financial overview Outlook Risk management Human resources Consolidated financial statements...

  • Page 6

  • Page 7
    ... operating results. In particular, Luxottica managed to increase its penetration in all major markets during the course of the year despite a contraction in its target markets. This was achieved by implementing actions to stimulate sales and by the strength of two powerful brands, Ray-Ban and Oakley...

  • Page 8
    ... 1,000 500 0 2005 millions of Euro 2006 2007 2008 2009 2,761 3,390 3,188 3,450 3,326 60% 13% 27% North America Asia-Pacific Rest of the world NET SALES GROSS PROFIT 900 NET SALES BY DISTRIBUTION Retail Wholesale 62% 38% 813 800 700 600 500 400 300 200 581 583 756 750 600 500 431 400 331 300...

  • Page 9
    LUXOTTICA GROUP

  • Page 10
    >8

  • Page 11
    ..., Luxottica also operates licensed brand points of sale, with over 1,200 stores under the Sears Optical and Target Optical brands. In addition, Luxottica is one of the largest managed vision care operator in the United States, through EyeMed, and the second biggest lens finisher, having a network...

  • Page 12
    ... Prada and Versace (2003), Donna Karan (2005), Dolce & Gabbana and Burberry (2006), Polo Ralph Lauren (2007), Tiffany (2008), Stella McCartney and Tory Burch (2009). As for house brands, the Company slowly expanded in the sun business by buying Vogue (1990), Persol (1995), Ray-Ban (1999) and Oakley...

  • Page 13
    ...production and wholesale distribution and increasing penetration of its products through LensCrafters stores. RAY-BAN In 1999, Luxottica acquired Ray-Ban, one of the world's best-known sunglass brand. Through this acquisition, the Company obtained crystal sunglass lens technology and the associated...

  • Page 14
    ...products and services it intends to offer. Direct control of the entire production platform makes it possible to verify the quality of products and processes, introduce innovations, discover synergies and new operating methods, and optimize times and costs. Direct distribution thus enables Luxottica...

  • Page 15
    ... Strong in-house design and product development An extensive list of owned trade names, patents and technology processes A well balanced brand portfolio A wholesale distribution network spanning 130 countries Strong in-house lens finishing capacity Over 6,200 retail locations worldwide

  • Page 16
    > 14 DESIGN AND PRODUCT DEVELOPMENT Emphasis on product design and the continuous development of new styles is key to success. Each year, Luxottica adds approximately 2,300 new styles to its eyewear collections. Design is at the focal point where vision, technology and creativity converge. Ever in ...

  • Page 17
    OPERATIONS MANUFACTURING Luxottica's manufacturing system has two main platforms: Italy and China. Alongside these, the Foothill Ranch facility in California (US) manufactures high performance sunglasses and prescription frames and lenses and assembles most of Oakley's eyewear products, while Oakley...

  • Page 18
    > 16 | ANNUAL REPORT 2009 QUALITY The "Made in Italy" feature of Luxottica products represents the "culture of quality" that has been central to the whole organization. Only recently has quality taken on a wider meaning, becoming global quality and assuming a highly strategic role. It is the ...

  • Page 19
    ... to 140,000 frames per day. In late 2009, the facility, which was originally a retail-only distribution center, started serving both Luxottica's retail and wholesale businesses in the North American market. During 2010 Luxottica plans to fully integrate the Oakley logistic's operation in the Atlanta...

  • Page 20
    ...sunglasses under the brands Tory Burch and TT. The first eyewear collection under the Tory Burch name was launched in November 2009 and is currently distributed in the US through Tory Burch boutiques, selected department stores and independent optical locations, as well as Luxottica's retail chains...

  • Page 21
    ... technology, design and art across all its products. In addition to its sun and prescription eyewear and ski goggles, it offers branded apparel, footwear and accessories in collections addressing specific consumer categories: Sport/Active, Lifestyle and Women. Oakley is also well-known for its lens...

  • Page 22
    ...Italy" eyewear brand, debuted in 1917 and was acquired by Luxottica in 1995. With its evocative name, meaning "for sun", it is the proud heir to a culture of excellence and craftsmanship, a perfect alchemy of aesthetics and technology. The irresistible appeal of timeless design and high quality make...

  • Page 23
    ...six collections: Chaps Chaps features easy-to-wear designs in the classic tradition of Polo Ralph Lauren. The line offers a designer name to the young consumer of competitively priced sportswear. Club Monaco Club Monaco offers quality eyewear of style and affordable luxury. The styling targets men...

  • Page 24
    ... and style. Ralph Lauren The Ralph Lauren eyewear collection embraces a youthful sophisticated elegance that mixes refined luxury with cinematic glamour and an air of mystery. Prada The Prada license agreement was signed in 2003. Prada collections offer a range of optical frames and sunglass...

  • Page 25
    ... premium-priced eyewear, such as independent opticians, optical retail chains, specialty sun retailers and duty-free shops. In North America and some other areas, the main customers also include independent optometrists, ophthalmologists and premium department stores. Certain brands including Oakley...

  • Page 26
    ... RETAIL 6,217 stores managed in the world (of which 535 in franchising) NORTH AMERICA Prescription LensCrafters Pearl Vision Sears Optical Target Optical The Optical Shop of Aspen Prescription/Sun Oliver Peoples Sun Sunglass Hut, Sunglass Icon ILORI Sun/Clothing Oakley Stores & Vaults 4,723 stores...

  • Page 27
    ... 20 (of which 6 in franchising) CHINA Prescription LensCrafters Sun Sunglass Hut ASIA-PACIFIC Prescription OPSM Laubman & Pank Budget Eyewear Prescription/Sun Oliver Peoples Sun Sunglass Hut Bright Eyes Sun/Clothing Oakley Stores & Vaults 248 stores 242 6 963 stores 333 (of which 1 in franchising...

  • Page 28
    ... 2009, Luxottica retail business consisted of 6,217 stores. OPTICAL RETAIL Luxottica's optical retail operations are anchored by leading brands such as LensCrafters and Pearle Vision in North America, and OPSM, Laubman & Pank and Budget Eyewear, which are active throughout Australia and New Zealand...

  • Page 29
    ... offering brands such as Ray-Ban and Vogue. As of December 31, 2009, Luxottica operated 866 Sears Optical and 337 Target Optical locations throughout North America. OPSM OPSM, the largest of the three optical chains Luxottica operates in Australia and New Zealand, is a leading eyewear retail brand...

  • Page 30
    ... Shop of Aspen is known in the optical industry for its luxury brands for both prescription and sun and its first class customer service. As of December 31, 2009, Luxottica operated 23 stores in some of the most upscale and exclusive locations throughout the United States. Oliver Peoples Luxottica...

  • Page 31
    ... service, quality and fashion; its marketing is targeted to reinforce these brand values and build long-term relationships with customers. In addition to operating optical stores, David Clulow operates a number of sunglass concessions in upmarket department stores, further reinforcing its position...

  • Page 32
    ... average price of Euro 17.13 per share, for a total aggregate purchase price of Euro 22,714,251. The General Meeting of October 29, 2009 authorised, for a period of 18 months from such date, the purchase and subsequent transfer - the latter with no time limits - of 18,500,000 ordinary Company shares...

  • Page 33
    ..., and a Human Resources Committee, which provides consulting and recommendations on compensation for top management positions and incentive plans and the composition of management structures for the main subsidiaries); Board of directors in office until the approval of the financial statements as...

  • Page 34
    ...Information Technology C. Privitera Communications I. Dompé Investor Relations A. Senici Wholesale P. Alberti Operating processes Retail Luxury & Sun F. d'Angelantonio Oakley C. Baden Retail Optical North America K. Bradley Retail Optical Australasia & Greater China C. Beer Marketing, Style...

  • Page 35
    ... all the main markets to track new styles and trends. The Operations Department, based in Agordo, is responsible for planning, engineering and product manufacturing and distribution. The Quality Department, also based in Agordo, is responsible for Quality and product quality control processes in all...

  • Page 36
    ... in North America, Australia and China were 17 in total and have allowed 350 volunteers to help more than 34 thousand people. In addition, the Vision Vans operated for a total of 76 days in 2009. Lastly, OneSight gave US$ 230,000 to 13 research organizations in the United States and Italy, and...

  • Page 37
    ... to leverage Luxottica's global dimensions to extend its reach, especially in Europe and the Asia-Pacific region. In 2010, the efforts of OneSight will concentrate on further improving the quality of the services offered during global clinics by giving precedence to quality versus number of clinics...

  • Page 38
    ... collected - within certain sales points with stipulated agreements - a package containing primary food items with a total sales value of Euro 110. In order to help employees with children, Luxottica also built a nursery school in Sedico (Belluno) and reimbursed the families for any costs sustained...

  • Page 39
    37 < ANNUAL REVIEW 2009

  • Page 40
    > 38

  • Page 41
    ... in 2009, of 24 new Sunglass Hut sales points within major Edgars department stores. December Macy's Inc. and Luxottica signed an agreement which provides for the opening of approximately 430 additional Sunglass Hut sales points within Macy's department stores in the United States. The total number...

  • Page 42
    ... powerful house brands, Ray-Ban and Oakley. Both posted double digit growth during the year. Also, the Group's diversified geographic footprint and strong balance sheet enabled Luxottica to increase its penetration in all major markets in 2009, despite a contraction in its target markets. Thanks to...

  • Page 43
    ... FOCUS ON GROWTH Luxottica worked to achieve external growth both in the developing and developed markets. It started by acquiring a 40% stake of Multiopticas, a company which owns more than 390 eyewear stores in Chile, Perù, Ecuador and Colombia. Sunglass Hut reinforced its worldwide presence by...

  • Page 44
    ... "optical prescription" business, with additional investments in marketing programs, design and technology. Oakley is a brand that is expected to provide a fundamental contribution to Luxottica's sustainable growth over the long term. Further expansion in emerging markets In 2010, Luxottica expects...

  • Page 45
    .... In 2009, SAP was launched at the Sedico, Italy-based main logistics hub, in all of Sunglass Hut globally and at the newly-created European Service Center, all of which will support the optimization of purchasing and accounting processes at the continental level, with substantial cost savings and...

  • Page 46
    ...; principles for organizing risk and financial risk management activities; principles for risk management reporting and control. Luxottica's financial risks are related to financial assets and liabilities denominated in local and foreign currencies (interest rate risk), to incomes and expenses...

  • Page 47
    ... in foreign currency rates at the time of pricing or stipulating a contract and that of realization of a transaction. Transaction risk is defined in relation to the base currency of a company. • Translation risk is defined as the sum of the effects of changes in foreign currency...

  • Page 48
    > 46 HUMAN RESOURCES GROUP WORKFORCE Luxottica Group employees as of December 31, 2009 numbered 60,767, of whom 66.9% engaged in Retail Business, 8.4% in Wholesale Business and 24.3% in Operations. Corporate central services employ 0.4% of the Group's total workforce. On a regional basis, 62.7% of ...

  • Page 49
    HUMAN RESOURCE | 47 < systems designed to achieve greater organizational ï¬,exibility and continual improvement of product quality. HUMAN RESOURCES DEVELOPMENT 2009 was another year in which Luxottica was one of the organizations most highly rated in terms of human resources management and ...

  • Page 50
    ... corporate process for defining objectives and assessing results. • Long-term Incentive and Retention Systems: three-year equity systems for providing incentives to the Group's senior management and talent were confirmed (stock options and performance shares). LUXOTTICA'S PEOPLE CHARACTERISTICS...

  • Page 51
    49 < CONSOLIDATED FINANCIAL STATEMENTS UNDER US GAAP

  • Page 52
    > 50 | ANNUAL REPORT 2009

  • Page 53
    ... OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007 (*) 2009 2008 2007 (Euro/000, unless otherwise indicated) NET SALES COST OF SALES GROSS PROFIT OPERATING EXPENSES: Selling and advertising General and administrative Total INCOME FROM OPERATIONS OTHER INCOME (EXPENSE): Interest...

  • Page 54
    ... and cash equivalents Marketable securities Accounts receivable - net (Less allowance for doubtful accounts, Euro 30.9 million in 2009 and Euro 29.1 million in 2008) Sales and income taxes receivable Inventories - net Prepaid expenses and other Deferred tax assets - net Total current assets PROPERTY...

  • Page 55
    ... < 2009 (Euro/000) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank overdrafts Current portion of long-term debt Accounts payable Accrued expenses Payroll and related Customers' right of return Other Deferred tax liability - net Income taxes payable Total current liabilities LONG-TERM...

  • Page 56
    ... gain on available-for-sale securities, net of taxes of Euro 0.2 million Excess tax benefit on stock options Change in fair value of derivative instruments, net of taxes of Euro 20.7 million Diluted gain on business combinations Dividends declared (Euro 0.49 per share) Net income BALANCES, DECEMBER...

  • Page 57
    ... 377,683 2,860,233 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2009, 2008 AND 2007 (*) 2009 2008 (Euro 000) NET INCOME Other comprehensive income, net of taxes Adjustment to pension liability, net of taxes Change in fair value of derivative instruments, net of...

  • Page 58
    ... year - net Changes in operating assets and liabilities, net of acquisition of businesses: Accounts receivable Prepaid expenses and other Inventories Accounts payable Accrued expenses and other Accrual for customers' right of return Income taxes payable Total adjustments Cash provided by operating...

  • Page 59
    ... STATEMENTS OF CASH FLOWS | 57 < 2009 2008 (Euro/000) 2007 CASH FLOWS FROM FINANCING ACTIVITIES Long-term debt: Proceeds Repayments Repayment of acquired lines of credit (Decrease) increase in overdraft balances Sale of treasury shares Exercise of stock options Excess tax benefit from stock...

  • Page 60
    > 58 | ANNUAL REPORT 2009

  • Page 61
    ...North America retail division for the 52-week period ended January 2, 2010, for the 53-week period ended January 3, 2009 and for the 52-week period ended December 29, 2007 respectively. In 2009, the fiscal year for the retail distribution divisions in Asia-Pacific (China, Hong Kong, Australia, New...

  • Page 62
    ...of credit when needed. Inventories - Luxottica Group's manufactured inventories, approximately 58.2 percent and 66.1 percent of total frame inventory for 2009 and 2008, respectively, are stated at the lower of cost, as determined under the weighted-average method, or market value. Retail inventories...

  • Page 63
    ... at the reporting unit level which consists of four units, Wholesale, Retail North America, Retail Asia-Pacific and Retail Other, as required by the provisions of ASC No. 350. For the fiscal years 2009, 2008 and 2007, the Company did not recognize any goodwill impairment charge. Trade Names and...

  • Page 64
    ... with local statutory requirements. Revenue Recognition - Revenues include sales of merchandise (both wholesale and retail), insurance and administrative fees associated with the Company's managed vision care business, eye exams and related professional services, and sales of merchandise to...

  • Page 65
    ... coverage period. Premiums are generally billed in the month of benefit coverage. Any unearned premium revenue is deferred and recorded within accrued liabilities on the balance sheet. For fee for service plans, the plan sponsor pays the Company a fee to process its claims. Revenue is recognized...

  • Page 66
    ... customers are recorded as a reduction of revenue at the date of sale. Total shipping costs in fiscal years 2009, 2008 and 2007 for the Wholesale and Retail divisions, associated with the sale of goods were Euro 14.5 million, Euro 14.2 million and Euro 8.3 million, respectively. Managed Vision Care...

  • Page 67
    ... employee requisite service period. The fair value of stock options is estimated using a binomial lattice valuation technique. Deferred tax assets are recorded for awards that result in deductions on income tax returns, based on the amount of compensation cost recognized and the statutory tax rate...

  • Page 68
    ...retained earnings. Service cost represents the actuarial present value of participant benefits earned in the current year. Interest cost represents the time value of money associated with the passage of time. Certain events, such as changes in employee base, plan amendments and changes in actuarial...

  • Page 69
    ... TO CONSOLIDATED FINANCIAL STATEMENTS | 67 < Recent Accounting Pronouncements In January 2010, the FASB issued ASU 2010-6, Improving Disclosures About Fair Value Measurements, which requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including...

  • Page 70
    > 68 | ANNUAL REPORT 2009 2. RELATED PARTY TRANSACTIONS Stock Incentive Plan - On September 14, 2004, the Company announced that its majority shareholder, Mr. Leonardo Del Vecchio, had allocated shares held through La Leonardo Finanziaria S.r.l. (subsequently merged into Delfin S.à r.l.), a ...

  • Page 71
    ... for tax purposes. the acquisition of oakley was made as a result of the Company's strategy to strengthen its performance sunglass wholesale and retail businesses worldwide. the purchase price allocation was finalized in 2008 resulting in no material changes to the final fair values allocated...

  • Page 72
    ... 100 stores located primarily in the Midwest United States of America for approximately Euro 83.7 million (US$ 110.2 million) in cash. The purchase price, including direct acquisition-related expenses, was allocated to the assets acquired and liabilities assumed based on their fair value at the date...

  • Page 73
    ... into the financial statements. The total cost of the shares acquired was approximately Euro 13 million (US$ 17.2 million). The Company recorded the acquisition as a "stepacquisition" and allocated the purchase price paid over the newly acquired proportional share of the fair value of RBSO assets...

  • Page 74
    ... of 25 years (except for the Ray-Ban trade names, which are amortized over a period of 20 years), as the Company believes these trade names to be finite-lived assets. The weighted average amortization period is 24 years. (b) Distributor network, customer relation contracts and lists, and franchise...

  • Page 75
    ... to ConSolIDateD FInanCIal StateMentS | 73 < amortization expense for 2009, 2008 and 2007 was euro 83.1 million, euro 73.9 million and euro 69.6 million, respectively. estimated annual amortization expense relating to identifiable assets is shown below (thousands of Euro): Years ending December...

  • Page 76
    ... of Euro): 2009 2008 Deferred Income Tax Assets Inventory Insurance and other reserves Right of return reserve Net operating loss carryforwards Occupancy reserves Employee-related reserves (including pension liability) Tradename Deferred tax on derivatives Other Fixed assets Total deferred income...

  • Page 77
    ... regional tax rate (referred to as "IRAP") from 4.25% to 3.9%. The effect of this change created an additional Euro 8 million of deferred tax expense in 2007. The Company does not provide for an accrual for income taxes on undistributed earnings of its non Italian operations to the related Italian...

  • Page 78
    ... Change in exchange rates Balance - December 31, 2008 Gross increase - tax positions in prior periods Gross decrease - tax positions in prior periods Gross increase - tax position in current periods Settlements Lapse of statute of limitations Change in exchange rates Balance - December 31, 2009...

  • Page 79
    ... in full. The credit facility contains certain financial and operating covenants. The Company was in compliance with those covenants during 2008, prior to the final maturity date. In June 2005, the Company entered into four interest rate swap transactions with various banks with an aggregate initial...

  • Page 80
    ... EURIBOR plus 0.375 percent. The Company could select interest periods of one, three or six months. In June 2009, the Company renegotiated this credit facility. The new facility consists of a 2 year unsecured credit facility that is a revolving loan that provides borrowing availability of up to Euro...

  • Page 81
    ...A and Series C Notes require annual repayments 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., a wholly owned subsidiary. The Notes contain certain financial and operating covenants. US...

  • Page 82
    ... 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 US Holdings entered into two credit facilities with a group of banks providing for certain term loans and a bridge...

  • Page 83
    ... 31, 2009. the fair value of the long term borrowings equals the net present value of the future flows, calculated using the current market rate available for similar debt facilities, adjusted to take into account the company's credit worthiness. the financial and operating covenants included...

  • Page 84
    ... years 2009, 2008, and 2007, the Company continued to sponsor a qualified noncontributory defined benefit pension plan, the Luxottica Group Pension Plan ("Lux Plan"), which provides for the payment of benefits to eligible past and present employees of the Company upon retirement. Pension bene...

  • Page 85
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 83 < The following tables provide key information pertaining to the Company's pension plans and SERPs. (Euro 000) Pension Plans 2009 Change in benefit obligations: Benefit obligation - beginning of period Service cost Interest cost Actuarial (gain)/...

  • Page 86
    ... Comprehensive Income Net Periodic Benefit Cost: Service cost Interest cost Expected return on plan assets Amortization of actuarial loss Amortization of prior service cost Net periodic benefit cost Adjustment due to change in measurement date Other Changes in Plan Assets and Benefit Obligations...

  • Page 87
    ... Pension Plans 2009 2008 SERP 2009 2008 Weighted-average assumption used to determine benefit obligations: Discount rate Rate of compensation increase Weighted-average assumption used to determine net periodic benefit cost for years ended December 31, 2009 and 2008: Discount rate Expected long...

  • Page 88
    ... on an ongoing basis to evaluate performance against the established market benchmarks and return targets. The defined benefit pension plans have an investment policy that was developed to serve as a management tool to provide the framework within which the fiduciary's investment decisions are...

  • Page 89
    ... of Euros): Fair Value Measurement Using Significant Unobservable Inputs (Level 3) Partnerships Beginning balance at December 31, 2008 Actual return on plan assets: Relating to assets still held at the reporting date Relating to assets sold during the period Purchases, sales, and settlements...

  • Page 90
    ... 2009 and 2008, these contributions did not include a discretionary match. Upon the acquisition of Oakley, effective November 14, 2007, the Company also sponsors a tax incentive savings plan for all United States Oakley associates with at least six months of service. This plan is funded by employee...

  • Page 91
    ... retiree health care benefits when they retire from active service between the ages of 55 and 65. Benefits are discontinued at age 65. During 2009, the Company provided for a one-time special election of early retirement to certain associates age 50 or older with 5 or more years of service. Bene...

  • Page 92
    .... The Company adopted, ASC 718, Stock Compensation (formerly SFAS No. 123(R), Share-Based Payment) as of January 1, 2006, and at such point began expensing stock options over their requisite service period based on their fair value as of the date of grant. For the years ended December 31, 2009, 2008...

  • Page 93
    ... that cost is expected to be recognized over a period of 1.95 years. Stock Performance Plans In October 2004, under a Company performance plan, the Company granted options to acquire an aggregate of 1,000,000 shares of the Company to certain employees of the North American Luxottica Retail Division...

  • Page 94
    ... the market values of Luxottica shares, being equal to the greater of the stock price on the grant date of the new options or the previous 30 day average. In connection with the reassignment of options the employees who surrendered their options, received new options to purchase the same number of...

  • Page 95
    ... 2006 plan employees domiciled in the USA Dividend yield Risk-free interest rate Expected option life (years) Expected volatility 1.43% 2.90% 5.65 35.52% PSP 1.43% PSP 1.65% - As of December 31, 2009 there was Euro 33.3 million of total unrecognized compensation cost related to non-vested share...

  • Page 96
    ...,500,000 of the Company's ordinary shares for a period of 18 months. Under the 2008 program, launched on September 21, 2009, the Company purchased an aggregate amount of 1,325,916 ordinary shares on the Milan Stock Exchange's Mercato Telematico Azionario (MTA) at an average unit price of Euro 17.13...

  • Page 97
    ...brand and designer lines of mid- to premium-priced prescription frames and sunglasses. The Company operates in the retail segment through its Retail Division, mainly consisting of LensCrafters, Sunglass Hut, Pearle Vision, Oakley and OPSM. Following several changes over recent years within Luxottica...

  • Page 98
    ...include europe, United states and canada (which includes the United states of america, canada and caribbean islands), asia-pacific (which includes Australia, New Zealand, China, Hong Kong and Japan) and Other (which includes all other geographic locations including, South and Central America, South...

  • Page 99
    ..., design and distribute prescription frames and sunglasses with selected fashion brands. Under these license agreements, which typically have terms ranging from three to ten years, Luxottica Group is required to pay a royalty which generally ranges from 5 percent to 14 percent of the net sales...

  • Page 100
    .... On July 28, 2009, Luxottica Group announced the renewal for a further period of 10 years of the license agreement with Gianni Versace S.p.A. for the design, manufacture and global distribution of sun and prescription eyewear under the Versace and Versus brands. Minimum payments required in each of...

  • Page 101
    ... - The Company is committed to pay amounts in future periods for endorsement contracts, supplier purchase and other long term commitments. Endorsement contracts are entered into with selected athletes and others who endorse Oakley products. Oakley is often required to pay specified minimal annual...

  • Page 102
    .... Trade letters of credit are for purchases from foreign vendors and are generally outstanding for a period that is less than six months. Substantially all the fees associated with maintaining the letters of credit fall within the range of 50 to 100 basis points annually. Litigation The Company and...

  • Page 103
    ... TO CONSOLIDATED FINANCIAL STATEMENTS | 101 < Pearle Vision stores in California, including violations of California laws governing relationships among opticians, optical retailers, manufacturers of frames and lenses, and optometrists, and other unlawful or unfair business practices. The parties...

  • Page 104
    > 102 | annUal report 2009 Texas LensCrafters Class Action Lawsuit in may 2008, two individual optometrists commenced an action against lenscrafters, inc. (now luxottica retail north america inc.) and luxottica Group s.p.a. in the United states district court for the eastern district of texas, ...

  • Page 105
    ... of such instrument with changes in its fair value recorded into operations during the period of change. As of December 31, 2009, and for the year then ended, the Company has not elected to account for any of its financial instruments under ASC 825. 17. SUBSEQUENT EVENTS On January 4, 2010 the...

  • Page 106
    .... On March 31, 2010, Retail Brand Alliance, Inc., and Luxottica Group S.p.A. announced a five-year extension of the licence agreement for the design, production and worldwide distribution of prescription frames and sunglasses under the Brooks Brothers brand. The new agreement will run through...

  • Page 107
    .... The ordinary shares listed on the Milan Stock Exchange, and the ADSs listed on the New York Stock Exchange, will be traded ex-dividend on May 24, 2010. The dividend will be paid on May 27, 2010, in Euro, by Monte Titoli S.p.A., authorized intermediary, to all depository banks of the stockholders...

  • Page 108
    ... 2009. Concurrently with the delivery of the Proxy Statement, the Depositary has mailed to all ADS holders a document and necessary forms setting forth the detailed procedure to be used by ADS holders for the purpose of obtaining the direct application of the reduced tax rate under an applicable tax...

  • Page 109
    ...to request more detailed information as to the exact procedure to be followed from Deutsche Bank Trust Company Americas (ADR Department, telephone +1-800-876-0959; fax +1-866-888-1120, attn. Gina Seroda) or directly from the Company's headquarters in Italy (Investor Relations Department, tel. +39 02...

  • Page 110
    > 108 independent Auditor's report

  • Page 111
    independent Auditor's report | 109

  • Page 112
    > 110 | ANNUAL REPORT 2009

  • Page 113
    ANNEXES | 111 < ANNEXES

  • Page 114
    > 112 | ANNUAL REPORT 2009 2005-2009 FINANCIAL HIGHLIGHTS (Euro 000) Net sales Gross profit Operating income Income before taxes Net income from continuing operations Discontinued operations Net income Per ordinary share/(ADS) (1) Earnings from continuing operations: Euro US$ Total earnings Euro ...

  • Page 115
    ... cash acquired investments in equity investees other Free cash ï¬,ow dividends exercise of stock options sale of treasury shares effect of exchange adjustments to net financial position Decrease/(Increase) in net financial position Cash Bank overdraft and notes payable Current portion of long-term...

  • Page 116
    > 114 | ANNUAL REPORT 2009 1990-2009 LUXOTTICA ADS AND ORDINARY SHARE PERFORMANCES 1990-2009: LUXOTTICA ADS AT NYSE (US$) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (1) Low 0.794 0.988 2.250 2.025 2.787 3.175 5.212 5.125 3.875 5.000 7....

  • Page 117
    ... 35 30 25 20 15 10 5 0 ADS NYSE (US$) Dow Jones (rebased) S&P 500 (rebased) 20-year high US$ 39.38 on July 12, 2007 20-year low US$ 0.7938 on November 7, 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 35 30 25 20 15 10 5 0 Ordinary share MTA (Euro) S&P MIB (rebased) Eur...

  • Page 118
    > 116 | ANNUAL REPORT 2009 SHARE CAPITAL AND DIVIDEND PER SHARE ORDINARY SHARES AND ADS EVOLUTION (1) Number of shares authorized and issued as of December 31 1990 1991 1992 1993 1994 1995 1996 1997 1998 (2) 1999 2000 (2) 2001 2002 2003 2004 2005 2006 2007 2008 2009 45,050,000 45,050,000 45,050,000...

  • Page 119
    ...-2009 EVOLUTION OF NUMBER OF STORES 31 Dec. 2000 LensCrafters Pearle Vision Licensed brands Sears Optical Target Optical BJ's Optical The Optical Shop of Aspen Oliver Peoples Sun North America Sunglass Hut, Sunglass Icon ILORI Oakley Stores and Vaults NORTH AMERICA Optical Australia - New Zealand...

  • Page 120
    ... unrelated to the overall operating performance of a company's business. EBITDA and EBITDA margin are not measures of performance under accounting principles generally accepted in the United States (US GAAP). The Company includes them in this presentation in order to: • improve transparency for...

  • Page 121
    ...to assess the Company's level of leverage, which affects our ability to refinance our debt as it matures and incur additional indebtedness to invest in new business opportunities. The ratio also allows management to assess the cost of existing debt since it affects the interest rates charged by the...

  • Page 122
    > 120 | ANNUAL REPORT 2009 EBITDA and ratio of net debt to EBITDA are not measures of performance under accounting principles generally accepted in the United States (US GAAP). The Company includes them in this presentation in order to: • improve transparency for investors; • assist investors ...

  • Page 123
    ...debt service requirements and to fund discretionary investments, pay dividends or pursue other strategic opportunities. Free cash ï¬,ow is not a measure of performance under accounting principles generally accepted in the United States (US GAAP). The Company includes it in this presentation in order...

  • Page 124
    ... during the period and any impact of the exchange rate changes; • free cash flow can be subject to adjustment at the Company's discretion if the Company takes steps or adopts policies that increase or diminish its current liabilities and/or changes to working capital; and • free cash flow...

  • Page 125
    ...571,087 5,094,318 (1,768,436) 3,325,882 5,846 5,846 5,846 5,846 US GAAP 2009 IFRS 2 Stock option IAS 2 Inventories IFRS 3 IAS 19 IAS 39 Other Total IAS/IFRS 2009 Business Employee Derivatives/ combination benefit Amortized cost Adj. IAS-IFRS 5,094,318 (1,762,590) 3,331,728 (12,105) 6,330 6,330...

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    [email protected] CORPORATE WEBSITE www.luxottica.com DEPOSITARY BANK ITALY Deutsche Bank S.p.A. Piazza del Calendario, 3 - 20126 Milan - Italy Bruno Montemartini - Tel. +39 02 40242560 - Fax +39 02 40242790 E-mail: [email protected] USA Deutsche Bank Trust Company Americas ADR Department...

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    Consultancy and coordination zero3zero9 Printing Grafiche Antiga (Italy)

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