ANNUAL REPORT 2004 - Luxottica Group

MANAGEMENT’S DISCUSSION AND ANALYSIS
expiration of the credit facility agreement. As of
December 31, 2004, Euro 25 million of the revolving
portion of the loan had been utilized. Luxottica
Group has the option to renew the loan for one, two,
or three month periods until the expiration of the
agreement, at an interest rate defined in the
agreement, or EURIBOR plus 0.55% (2.697% on
December 31, 2004). The financing agreement
contains certain financial and operating covenants
and, as of December 31, 2004, Luxottica Group was
in full compliance with these covenants. This
financing expires on September 30, 2008.
On June 3, 2004, Luxottica Group entered into a
new credit facility agreement with a group of banks
for Euro 740 million and US$ 325 million. This fiveyear
credit facility is in three tranches (Tranche A,
Tranche B, Tranche C). Tranche A is for Euro 405
million, to be amortized in nine quarterly installments
of Euro 45 million each, beginning in June 2007,
and will be used according to the Group’s needs,
including the refinancing of existing lines of credit
upon expiry. Tranche B is for US$ 325 million in
favor of the Luxottica Group subsidiary U.S.
Holdings, and was used on October 1, 2004 for the
Cole National Corp. acquisition. The Tranche B
loans mature in June 2009. Tranche C consists of a
multi-currency, (Euro/US$), revolving line of credit
for Euro 335 million. Tranche C amounts may be
repaid and re-borrowed until their expiration in June
2009. As of December 31, 2004, US$ 280 million
(Euro 206.8 million) of Tranche C had been utilized
by U.S. Holdings to finance the buying back of all
Cole National bonds issued and not yet repaid.
Luxottica Group may choose one, two, three or six
month interest periods at the EURIBOR for the Euro
portion, and at the LIBOR for the U.S. Dollar portion,
plus a margin of between 0.40% and 0.60%,
calculated as the ratio of Net Financial
70
Position/EBITDA, as defined in the agreement. The
financing agreement contains certain financial and
operating covenants with which Luxottica Group
was in full compliance as of December 31, 2004.
On December 31, 2004, interest accrued at 2.628%
for Tranche A, 2.456% for Tranche B and 2.889% for
Tranche C. The banks behind these financing
agreements are ABN AMRO, Banca Intesa, Bank of
America, Citigroup, HSBC, Mediobanca, The Royal
Bank of Scotland and UniCredit Banca Mobiliare.
UniCredito Italiano - New York branch - and
UniCredit Banca d’Impresa act as Facility Agents.
As of December 31, 2004, Euro 852 million of this
credit facility had been utilized.
In August 2004, OPSM Group refinanced the
multicurrency loan (A$ and HK$) with Westpac
Banking Corporation for a A$ 100 million line of
credit. Interest on loans in Australian Dollars
accrues at the BBR (Bank Bill Rate), and those in
Hong Kong Dollar, at the HIBOR (HK Interbank
Rate) plus 0.40%. At December 31, 2004, the
interest rate were 5.85% and 0.59%, respectively. At
December 31, 2004, the facility was utulized for an
amount of Euro 11.9 million (A$ 20.7 million). It
expires on August 31, 2006. OPSM Group has the
option to choose weekly or monthly interest
periods. The credit facility contains certain financial
and operating covenants with which, as of
December 31, 2004, OPSM Group was fully
compliant.
Investments of capital for 2004 were Euro 117.4
million. Of these, Euro 86.0 million in capital
investments were related to the Group’s retail
division, primarily by its headquarters in North
America, and Euro 31.4 million to manufacturing and
wholesale distribution activities, mainly for
improvements to manufacturing facilities and
equipment.