LensCrafters 2011 Annual Report Download - page 246

ANNUAL REPORT 2011> 170 |
GUARANTEES
The United States Shoe Corporation, a wholly-owned subsidiary within the Group, has
guaranteed the lease payments for five stores in the United Kingdom. These lease agreements
have varying termination dates through June 30, 2017. At December 31, 2011, the Group’s
maximum liability amounted to Euro 3.3 million (Euro 4.0 million at December 31, 2010).
A wholly-owned US subsidiary guaranteed future minimum lease payments for lease
agreements on certain stores. The lease agreements were signed directly by the franchisees
as part of certain franchising agreements. Total minimum guaranteed payments under this
guarantee were Euro 1.4 million (US$1.8 million) at December 31, 2011 (Euro 1.5 million
at December 31, 2010). The commitments provided for by the guarantee arise if the
franchisee cannot honor its financial commitments under the lease agreements. A liability
has been accrued using an expected present value calculation. Such amount is immaterial
to the consolidated financial statements as of December 31, 2011 and 2010.
CREDIT LINES
As of December 31, 2011 and 2010, the Company had unused short-term lines of credit of
approximately Euro 747.9 million and Euro 559.8 million, respectively.
The Company and its wholly-owned Italian subsidiary Luxottica S.r.l. maintain unsecured
lines of credit with primary banks for an aggregate maximum credit of Euro 431.8 million.
These lines of credit are renewable annually, can be cancelled at short notice and have
no commitment fees. At December 31, 2011, these credit lines were utilized for Euro 0.5
million.
US Holdings maintains unsecured lines of credit with three separate banks for an
aggregate maximum credit of Euro 119.8 million (US$ 155.0 million). These lines of credit
are renewable annually, can be cancelled at short notice and have no commitment fees. At
December 31, 2011, there were no amounts borrowed against these lines, however, there
was Euro 63.4 million in aggregate face amount of standby letters of credit outstanding
related to guarantees on these lines of credit (see below).
The blended average interest rate on these lines of credit is approximately LIBOR plus
0.40 percent.
OUTSTANDING STANDBY LETTERS OF CREDIT
A US subsidiary has obtained various standby letters of credit from banks for an aggregate
amount of Euro 64.4 million and Euro 34.0 million, as of December 31, 2011 and 2010,
respectively. Most of these letters of credit are used for security in risk management
contracts, purchases from foreign vendors or as security on store leases. Most standby
letters of credit contain evergreen clauses under which the letter is automatically renewed
unless the bank is notified not to renew. 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 40 to 60 basis points annually.