LensCrafters 2011 Annual Report Download - page 228

ANNUAL REPORT 2011> 152 |
principal amount of Euro 740 million and US$ 325 million. The five-year facility
consisted of three Tranches (Tranche A, Tranche B and Tranche C). The March 10,
2006 amendment increased the available borrowings to Euro 1,130 million and US$
325 million, decreased the interest margin and defined a new maturity date of five
years from the date of the amendment for Tranche B and Tranche C. In February
2007, the Company exercised an option included in the amendment to the term and
revolving facility to extend the maturity date of Tranches B and C to March 2012. In
February 2008, the Company exercised an option included in the amendment to the
term and revolving facility to extend the maturity date of Tranches B and C to March
2013. Tranche A, which was to be used for general corporate purposes, including the
refinancing of existing Company debt as it matures, was a Euro 405 million amortizing
term loan requiring repayment of nine equal quarterly installments of principal of Euro
45 million beginning in June 2007. Tranche A expired on June 3, 2009 and was repaid
in full. Tranche B is a term loan of US$ 325 million which was drawn upon on October 1,
2004 by US Holdings to finance the purchase price of the acquisition of Cole National
Corporation (“Cole”). Amounts borrowed under Tranche B will mature in March 2013.
Tranche C is a Revolving Credit Facility of Euro 692 million-equivalent multi-currency
(Euro/US Dollar). Amounts borrowed under Tranche C may be repaid and reborrowed
with all outstanding balances maturing in March 2013. The Company can select interest
periods of one, two, three or six months with interest accruing on Euro-denominated
loans based on the corresponding EURIBOR rate and US Dollar-denominated loans
based on the corresponding LIBOR rate, both plus a margin between 0.20 percent and
0.40 percent based on the “Net Debt/EBITDA” ratio, as defined in the agreement. The
interest rate on December 31, 2011 was 0.790 percent for Tranche B while Tranche C
was not used. The credit facility contains certain financial and operating covenants.
The Company was in compliance with those covenants as of December 31, 2011.
Under this credit facility, Euro 226.6 million was borrowed as of December 31, 2011.
During the third quarter of 2007, the Group entered into 13 interest rate swap transactions
with an aggregate initial notional amount of US$ 325.0 million with various banks
(“Tranche B Swaps”). These swaps will expire on March 10, 2012. The Tranche B Swaps
were entered into as a cash flow hedge on Tranche B of the credit facility discussed
above. The Tranche B Swaps exchange the floating rate of LIBOR for an average fixed
rate of 4.634 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$
(1.4) million, net of taxes, is included in other comprehensive income as of December 31,
2011. 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 2012 is approximately US$ (1.5) million, net of taxes.
(d) 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
US Holdings entered into two credit facilities with a group of banks providing for
certain term loans and a short-term bridge loan for an aggregate principal amount of
US$ 2.0 billion.