LensCrafters 2011 Annual Report Download - page 85

| 9 >MANAGEMENT REPORT
December
Luxottica and Grupo Tecnol Ltda, a leading Brazilian eyewear player, signed an agreement
pursuant to which Luxottica will acquire 80 percent of Grupo Tecnol capital. As a result
of this acquisition, Luxottica will significantly strengthen its presence in Brazil, a country
with significant growth potential. Utilizing Tecnol’s vertically integrated platform will allow
Luxottica to increase service levels to customers and its presence in the Brazilian market.
Tecnol has a highly efficient production plant, a portfolio comprising both house and
licensed brands, strong wholesale distribution activities, an optical retail chain of 90 stores
and a central, leading-edge, laboratory.
On December 15, 2011, Luxottica US Holdings Corp. (“US Holdings”), a direct wholly-
owned subsidiary of Luxottica Group S.p.A., closed a private placement of US$ 350 million
of senior unsecured guaranteed notes (“Series I”). Interest on the Series I Notes accrues
at 4.35 percent per annum. The Series I Notes mature on December 15, 2021. The Notes
contain certain financial and operating covenants. The Company was in compliance with
those covenants as of December 31, 2011.
We are a global leader in the design, manufacture and distribution of fashion, luxury
and sport eyewear, with net sales reaching Euro 6.2 billion in 2011, approximately 6 5,000
employees and a strong global presence. We operate in two industry segments: (i)
manufacturing and wholesale distribution; and (ii) retail distribution. See note 5 to the
Notes to the Consolidated financial statements as of December 31, 2011 for additional
disclosures about our operating segments. Through our manufacturing and wholesale
distribution segment, we are engaged in the design, manufacture, wholesale distribution
and marketing of house and designer lines of mid- to premium-priced prescription frames
and sunglasses. We operate our retail distribution segment principally through our retail
brands, which include, among others, LensCrafters, Sunglass Hut, Pearle Vision, OPSM,
Laubman & Pank, Bright Eyes, Oakley “O” Stores and Vaults, David Clulow, Multiopticas
and our Licensed Brands (Sears Optical and Target Optical).
As a result of our numerous acquisitions over the years and the subsequent expansion
of our business activities in the United States through these acquisitions, our results of
operations, which are reported in Euro, are susceptible to currency rate fluctuations
between the Euro and the US Dollar. The Euro/US Dollar exchange rate has fluctuated from
an average exchange rate of Euro 1.00 = US$ 1.3257 in 2010 to Euro 1.00 = US$1.3920 in
2011. Our results of operations are susceptible to currency fluctuations between the Euro
and the Australian Dollar through our large retail presence in that country. Additionally,
we incur part of our manufacturing costs in Chinese Yuan; therefore, the fluctuation of
the Chinese Yuan relative to other currencies in which we receive revenues could impact
the demand for our products or our profitability as reported in the Group’s consolidated
financial reports. However, in 2011, the fluctuation of the Chinese Yuan did not significantly
affect demand for products or decrease the Group’s reported profitability. Although the
Group engages in certain foreign currency hedging activities to mitigate the impact of
these fluctuations, they have impacted our reported revenues and expenses during the
periods discussed herein.
3. FINANCIAL
RESULTS