Luxottica Group, S.p.A. (LUX)

Investing Activities. Our cash used in investing activities was Euro (102.1) million for the first six months of 2009 as compared to Euro (158.0) million for the same period in 2008. The cash used in investing activities mainly consists of capital expenditures which primarily relate to the investment in both the IT for the manufacturing and wholesale distribution segment and in the opening, remodeling and relocation of stores in the retail distribution segment.

 

Investing Activities. The Company’s net cash used in investing activities was Euro 322.6 million, Euro 1,788.0 million and Euro 259.4 million in 2008, 2007 and 2006, respectively. The decrease of Euro 1,465.4 million in 2008 as compared to 2007 mainly related to the numerous business acquisitions that occurred in 2007. In 2008, the Company’s acquisitions of businesses used cash in the amount of Euro 13.3 million. In 2007, the Company’s acquisitions of businesses used cash in the amount of Euro 1,491.1 million. These acquisitions included the Oakley business for a total purchase price of U.S.$2.1 billion, D.O.C Optics and its affiliates, an optical retail business with approximately 100 stores located primarily in the Midwest United States, for approximately Euro 83.7 million (U.S.$110.2 million) in cash, two prominent specialty sun chains in South Africa with a total of 65 stores for approximately Euro 10 million, and some minor acquisitions in the retail segment in Australia and New Zealand. In 2006, the Company’s acquisitions of businesses used cash in the amount of Euro 134.1 million and included Shoppers Optical, a Canadian-based optical chain, for approximately Euro 48.7 million, Beijing Xueliang Optical Technology Co. Ltd. for approximately Euro 17.0 million and the remaining 49 percent of the Turkish-based distributor Luxottica GuzlukEndustri Ve Ticaret Anonim for approximately Euro 14.0 million. Cash used for acquisitions in 2006 was partially offset by the sale in 2006 of Things Remembered, a specialty gifts retail business previously included in the North American retail division, for net proceeds of Euro 128.0 million.

 

Our capital expenditures, excluding acquisitions, which were Euro 296.4 million in 2008 as compared to Euro 334.8 million in 2007 and Euro 272.2 million in 2006, primarily relate in each year to investment in manufacturing facilities for the manufacturing and wholesale segment and the opening, remodeling and relocation of stores in the retail division. Capital expenditures were Euro 44.6 million in the three-month period ended March 31, 2009. It is our expectation that 2009 net capital expenditures will be approximately Euro 200 million, not including investments for any currently unanticipated acquisitions. The Company will pay for these future capital expenditures with its currently available borrowing capacity and available cash.

 

Net cash provided by disposals of property, plant and equipment was insignificant in 2008 as compared to Euro 29.7 million in 2007 and Euro 21.6 million in 2006.  In 2007, the cash provided by the disposal of fixed assets was primarily attributable to the sale of a building located in Milan. In 2006, the cash provided by the disposal of fixed assets was primarily attributable to the sales of an obsolete aircraft for a net price of Euro 15.6 million, unused manufacturing facilities in the wholesale division in Italy and a building in the United Kingdom. No such non-recurring sales occurred in 2008. Acquisitions of other intangible assets resulted in a use of cash of Euro 4.6 million in 2008 as compared to Euro 3.9 million in 2007 and Euro 1.1 million in 2006.

 

Investing Activities.  The Company’s cash used in investing activities was Euro 1,800.0 million, Euro 263.7 million and Euro 166.4 million in 2007, 2006 and 2005, respectively. The increase of Euro 1,536.3 million in 2007 as compared to 2006 was primarily attributable to the acquisition of Oakley which occurred in November 2007, for a total purchase price of US $2.1 billion, partially offset by the sale of Things Remembered, which occurred in 2006 and which generated a cash inflow of approximately Euro 128 million in 2006. Total 2007 acquisitions, net of the acquired cash and cash equivalents, generated a cash outflow of Euro 1,491.1 million and was mainly due to the Oakley acquisition, as well as the acquisition of the D.O.C Optics optical retail business for approximately Euro 83.7 million (U.S.$110.2 million) in cash, the acquisition of two specialty sun chains in South Africa, for approximately Euro 10 million and some other minor acquisitions in the retail segment in Australia and New Zealand. Total 2006 acquisitions, net of acquired cash and cash equivalents, generated a cash outflow of Euro 134.1 million, mainly due to the acquisition of Shoppers Optical, a Canadian-based optical chain, for approximately Euro 48.7 million, the acquisition of Beijing Xueliang Optical Technology Co. Ltd. for approximately Euro 17.0 million, the acquisition of Ming Long Optical for approximately Euro 29.0 million and the acquisition of Modern Sight Optics for approximately Euro 14.0 million.

 

Our capital expenditures were Euro 334.8 million in 2007 as compared to Euro 272.2 million in 2006. The increase was primarily attributable to the investment in manufacturing facilities for the wholesale division and the opening, remodeling and relocation of stores in the retail division. Capital expenditures were Euro 49.7 million in the three-month period ended March 31, 2008. We believe that 2008 annual capital expenditures will be approximately Euro 300.0 million, in addition to investments for any acquisitions. We will pay for these future capital expenditures with our currently available borrowing capacity and available cash.

 

Cash received from disposals of property, plant and equipment was Euro 29.7 million in 2007 as compared to Euro 21.6 million in 2006. Cash provided by the disposal of fixed assets is primarily attributable to the sale of a building located in Milan in May 2007. Acquisitions of intangible assets resulted in a use of cash of Euro 3.9 million in 2007 compared to Euro 1.1 million in 2006.

 

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Investing Activities.  The Company’s cash used in investing activities was Euro 263.7 million, Euro 166.4 million and Euro 479.7 million in 2006, 2005 and 2004, respectively. The Euro 97.3 million increase in 2006 as compared to 2005 was primarily attributable to acquisitions of businesses and capital expenditures. In 2006, the Company’s acquisitions of businesses were Euro 134.1 million, net of cash acquired, and included Shoppers Optical, a Canadian-based optical chain, for approximately Euro 48.7 million, Beijing Xueliang Optical Technology Co. Ltd. for approximately Euro 17.0 million, the remaining 49 percent stake of the Turkish-based distributor Luxottica Gozluk Ticaret A.S. for approximately Euro 11.7 million, Ming Long Optical for approximately Euro 29.0 million, and Modern Sight Optics for approximately Euro 14.0 million.  Such increase was partially offset by the sale of Things Remembered, a specialty gifts retail business previously included in the North American retail division, with net proceeds of Euro 128.0 million. In 2005, the Company acquired the remaining minority stake of OPSM for Euro 61.9 million and also completed two asset acquisitions by the North American retail division for an aggregate amount of Euro 11.1 million and the acquisition of 27 stores in Canada for approximately Euro 13.8 million. These uses of cash from investing activities were partially offset by the sale of Pearle Europe, with net proceeds of Euro 144 million. The Euro 313.3 million decrease in 2005 as compared to 2004 was primarily attributable to the Cole acquisition in 2004, for an aggregate amount of Euro 363.0 million, net of cash acquired and including direct acquisition-related expenses.

Our capital expenditures were Euro 272.2 million in 2006 as compared to Euro 220.0 million in 2005. This increase was primarily attributable to the investment in manufacturing facilities for the wholesale division and the opening, remodeling and relocation of stores in the retail division, in addition to the costs associated with the expansion of the North American retail division’s home office. Capital expenditures were Euro 53.5 million in the three-month period ended March 31, 2007. It is our expectation that 2007 annual capital expenditures will be approximately Euro 300.0 million, in addition to

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investments for any acquisitions. We will pay for these future capital expenditures with our currently available borrowing capacity and available cash.

Cash received from disposals of property, plant and equipment was Euro 21.6 million in 2006 as compared to Euro 1.0 million in 2005. This increase in cash provided by the disposal of fixed assets is primarily attributable to the sale of an obsolete aircraft in October 2006 for a net price of Euro 15.6 million, the sale of unused manufacturing facilities in the wholesale division in Italy and a building in the United Kingdom. Acquisitions of intangible assets resulted in a use of cash of Euro 1.1 million in 2006 compared to Euro 4.5 million in 2005.

Investing Activities.  The Company’s cash from investing activities was a use of Euro 190.0 million for the first six months of 2006 as compared to a use of Euro 33.9 million for the same period of 2005. This Euro 156.1 million decrease in cash flow from investment activities is primarily attributable to the sale of Pearle Europe for Euro 144.0 million in January 2005. Purchase of businesses, net of cash acquired, was  Euro 83.7 million in the first six months of 2006 mainly due to the acquisitions of Shoppers Optical, a Canadian-based optical chain, for approximately Euro 50.2 million and of Beijing Xueliang Optical Technology Co. Ltd. for approximately Euro 17.0 million. Purchase of businesses, net of cash acquired, was Euro 73.1 million in the first six months of 2005, due to the Company’s acquisition of the remaining minority stake of OPSM for Euro 62.0 million which was completed in February 2005, and two asset acquisitions by the North American retail division for an aggregate amount of Euro 11.1 million. Capital expenditures were Euro 105.2 million for the first six months of 2006 as compared to Euro 101.7 million for the same period of 2005. This increase is due to investment in the manufacturing facilities of the wholesale division and the opening, remodeling and relocation of stores in the retail division, in addition to the costs associated with the expansion of the North American

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retail division’s home office, which is expected to be completed in 2006, and the integration of the North American distribution centers.

Investing Activities. Our cash used in investing activities was Euro 175.8 million in 2005. Cash used in investing activities consisted primarily of capital expenditures made to purchase fixed assets which included construction costs to expand our new North American Retail headquarters in Mason, Ohio and the acquisition of the remaining minority stake in OPSM offset by the sale of our investment in Pearle Europe. In 2004, our cash used in investing activities was Euro 480.5 million primarily attributable to the Cole National acquisition, for an aggregate amount, net of cash acquired and including direct acquisition-related expenses, of Euro 363.0 million. In 2003, our cash used in investing activities was Euro 468.6 million, primarily due to the acquisitions of I.C. Optics, E.I.D. and 82.57 percent of OPSM’s ordinary shares and all of OPSM’s options and performance rights, for an aggregate amount of Euro 342.4 million. The Euro 11.9 million increase is also attributable to an increase in fixed assets relating to the U.S. retail segment in 2004.

Investing Activities. Our cash used in investing activities was Euro 480.5 million for 2004, primarily attributable to the Cole National acquisition, for an aggregate amount, net of cash acquired and including direct acquisition-related expenses, of Euro 363.0 million. In 2003, our cash used in investing activities was Euro 468.6 million, primarily due to the acquisitions of I.C. Optics, E.I.D. and 82.57 percent of OPSM’s ordinary shares and all of OPSM’s options and performance rights, for an aggregate amount of Euro 342.4 million. The Euro 11.9 million increase is also attributable to an increase in fixed assets relating to the U.S. retail segment in 2004. In 2002, cash used in investing activities consisted primarily of capital expenditures made to purchase fixed assets which included the purchase of our headquarters in Milan, and the land and construction costs to build our new North American Retail headquarters in Mason, Ohio.