LensCrafters 2009 Annual Report Download - page 66

> 64 | ANNUAL REPORT 2009
The Wholesale and Retail Divisions may offer certain promotions during the year. Free frames given to
customers as part of a promotional offer are recorded in cost of sales at the time they are delivered to the
customer. Discounts and coupons tendered by customers are recorded as a reduction of revenue at the
date of sale.
Total shipping costs in fi scal 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 Underwriting and Expenses - The Company sells vision insurance plans which gener-
ally have a duration of up to fi ve years. Based on its experience, the Company believes it can predict utiliza-
tion and claims experience under these plans, including claims incurred but not yet reported ("IBNR"),
with a high degree of confi dence. These estimates of IBNR are based on past experience adjusted for
current trends and changes to the contractual arrangements. The methods and assumptions are continu-
ally reviewed. Claims are recorded as they are incurred and certain other membership costs are amortized
over the covered period. Corresponding administrative costs to process outstanding claims are estimated
and accrued as incurred.
Advertising and Direct Response Marketing - Costs to develop and create newspaper, radio and other me-
dia advertising are expensed as incurred. Costs to develop and create television advertising are expensed
the fi rst time the airtime is used. The costs to communicate the advertising are expensed as the airtime
or advertising space is used with the exception of certain direct response advertising programs. Costs for
certain direct response advertising programs are capitalized if such direct response advertising costs are
expected to result in future economic benefi t and the primary purpose of the advertising is to elicit sales
to customers who could be shown to have responded specifi cally to the advertising. Such costs related to
the direct response advertising are amortized over the period during which the revenues are recognized,
not to exceed 90 days. Generally, other direct response program costs that do not meet the capitalization
criteria are expensed the fi rst time the advertising occurs. Advertising expenses incurred during fi scal years
2009, 2008 and 2007 were Euro 312.1 million, Euro 339.3 million and Euro 348.2 million, respectively, and no
signifi cant amounts have been reported as assets.
The Company receives a reimbursement from its acquired franchisees for certain marketing costs. Operat-
ing expenses in the consolidated statements of income are net of amounts reimbursed by the franchisees
calculated based on a percentage of their sales. The amounts received in fi scal years 2009, 2008 and 2007
for such reimbursement were Euro 14.4 million, Euro 15.1 million and Euro 16.8 million, respectively.
Earnings Per Share - Luxottica Group calculates basic and diluted earnings per share in accordance with
ASC No. 260, Earnings per Share. Net income available to shareholders is the same for the basic and
diluted earnings per share calculations for the years ended December 31, 2009, 2008 and 2007. Basic earn-
ings per share are based on the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share are based on the weighted average number of shares of common
stock and common stock equivalents (options) outstanding during the period, except when the common
stock equivalents are anti-dilutive or relate to performance share-based plans for which the performance
measure has not been met. The following is a reconciliation from basic to diluted shares outstanding used
in the calculation of earnings per share: