<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ---------------
Commission File Number: 0-23214
-------------
SAMSONITE CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3511556
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 East 45th Avenue, Denver, CO 80239
- ---------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(303) 373-2000
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------
(Former name, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 20,667,258 shares of common
stock, par value $0.01 per share, as of June 10, 1998.
<PAGE>
FORM 10-Q
---------
CONTENTS
--------
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I - FINANCIAL INFORMATION
---------------------
Unaudited Consolidated Balance Sheets as of April 30, 1998
and January 31, 1998.................................................................... 1
Unaudited Consolidated Statements of Operations for the three months
ended April 30, 1998 and 1997........................................................... 3
Unaudited Consolidated Statement of Stockholders' Equity
for the three months ended April 30, 1998............................................... 4
Unaudited Consolidated Statements of Cash Flows for the three months
ended April 30, 1998 and 1997........................................................... 5
Unaudited Notes to Consolidated Financial Statements.................................... 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................... 15
PART II - OTHER INFORMATION
-----------------
Item 1: Legal Proceedings............................................................... 21
Item 2: Changes in Securities........................................................... 21
Item 3: Defaults upon Senior Securities................................................. 21
Item 4: Submission of Matters to a Vote of Security Holders............................. 21
Item 5: Other Information............................................................... 21
Item 6: Exhibits and Reports on Form 8-K................................................ 21
Signature ............................................................................. 22
Index to Exhibits....................................................................... 23
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
as of April 30, 1998 and January 31, 1998
(In thousands)
<TABLE>
<CAPTION>
April 30, January 31,
Assets 1998 1998
- ------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................. $ 6,911 3,134
Trade receivables, net of allowances for doubtful accounts
of $8,891 and $8,766................................................... 91,839 99,620
Notes and other receivables............................................... 11,299 10,129
Inventories (Note 2)...................................................... 186,347 172,665
Deferred income tax assets................................................ 33,437 31,623
Prepaid expenses and other current assets................................. 15,899 13,873
Assets held for sale...................................................... 8,471 11,471
---------- ----------
Total current assets................................................... 354,203 342,515
Investments in affiliates..................................................... 2,204 2,425
Property, plant and equipment, net (Note 3)................................... 140,964 142,351
Intangible assets, less accumulated amortization of $207,756 and
$206,260 (Note 4)......................................................... 115,506 116,908
Other assets and long-term receivables, net of allowances
for doubtful accounts of $706............................................. 4,881 5,850
---------- ----------
$ 617,758 610,049
========== ==========
</TABLE>
(Continued)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
as of April 30, 1998 and January 31, 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
April 30, January 31,
Liabilities and Stockholders' Equity 1998 1998
- ------------------------------------ ----------- -----------
<S> <C> <C>
Current liabilities:
Short-term debt (Note 5)........................................................ $ 9,084 5,640
Current installments of long-term obligations (Note 5).......................... 4,662 6,977
Accounts payable ............................................................... 48,096 49,221
Accrued liabilities............................................................. 76,168 85,368
-------- ---------
Total current liabilities 138,010 147,206
Long-term obligations, less current installments (Note 5)........................... 203,629 172,246
Deferred income tax liabilities..................................................... 13,252 15,730
Other noncurrent liabilities........................................................ 59,164 59,838
-------- ---------
Total liabilities............................................................ 414,055 395,020
-------- ---------
Minority interests in consolidated subsidiaries..................................... 6,194 6,143
Stockholders' equity (Note 7):
Preferred stock ($.01 par value; 2,000,000 shares authorized;
no shares issued)............................................................ -- --
Common stock ($.01 par value; 60,000,000 shares authorized;
20,420,902 and 20,371,068 shares issued and
outstanding)................................................................. 204 204
Additional paid-in capital...................................................... 419,283 418,462
Accumulated deficit............................................................. (206,098) (195,171)
Foreign currency translation adjustment......................................... (15,857) (14,449)
Unearned compensation - restricted shares....................................... (23) (160)
-------- ---------
Total stockholders' equity................................................... 197,509 208,886
-------- ---------
Commitments and contingencies (Notes 1B and 1D)
$ 617,758 610,049
======== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
for the three months ended April 30, 1998 and 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Net sales (Note 1G).......................................................... $156,676 169,562
Cost of goods sold ......................................................... 97,273 99,293
------- -------
Gross profit............................................................. 59,403 70,269
Selling, general and administrative expenses................................. 59,621 54,656
Provision for restructuring operations (Note 1B)............................. 2,608 (600)
Amortization of intangible assets ........................................... 1,526 1,824
------- -------
Operating income (loss).................................................. (4,352) 14,389
Other income (expense):
Interest income ......................................................... 791 465
Interest expense and amortization of debt issue costs.................... (4,808) (6,207)
Other - net (Note 6)..................................................... 998 6,899
------- -------
Income (loss) before income taxes, minority interest,
and extraordinary item ............................................... (7,371) 15,546
Income tax benefit (expense)................................................. 2,924 (6,829)
Minority interest in earnings of subsidiaries................................ (256) (218)
------- -------
Income (loss) before extraordinary item.................................. (4,703) 8,499
Extraordinary item - loss on extinguishment of debt,
net of income tax benefit of $3,815 and $4,609 (Note 5).................. (6,224) (6,633)
------- -------
Net income (loss)........................................................ $(10,927) 1,866
======= =======
Income (loss) per share - basic:
Continuing operations before extraordinary item....................... $ (0.23) 0.43
Extraordinary loss.................................................... (0.31) (0.34)
------- -------
Net income (loss) per share....................................... $ (0.54) 0.09
======= =======
Income (loss) per share - assuming dilution:
Continuing operations before extraordinary item....................... $ (0.23) 0.41
Extraordinary loss.................................................... (0.31) (0.32)
------- -------
Net income (loss) per share....................................... $ (0.54) 0.09
======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statement of Stockholders' Equity
for the three months ended April 30, 1998
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Foreign Unearned
Additional Currency Compensation-
Preferred Common Paid-In Accumulated Translation Restricted
Stock Stock Capital Deficit Adjustment Shares
----- ----- ------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1998 $ -- 204 418,462 (195,171) (14,449) (160)
Issuance of 1,372 shares to
directors for services -- -- 44 -- -- --
Amortization of restricted
stock award to
compensation expense -- -- -- -- -- 137
Compensation expense
accrued for stock bonus
awards -- -- 118 -- -- --
Exercise of employee stock
options, issuance of stock
award shares, and related
income tax benefits -- -- 659 -- -- --
Foreign currency
translation adjustment -- -- -- -- (1,408) --
Net income (loss) -- -- -- (10,927) -- --
----- ----- ------- --------- -------- -------
Balance, April 30, 1998 $ -- 204 419,283 (206,098) (15,857) (23)
===== ===== ======= ========= ======== =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
for the three months ended April 30, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss).......................................................... $(10,927) 1,866
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Loss on extinguishment of debt.......................................... 6,224 6,633
Loss (gain) on disposition of fixed assets.............................. (737) 8
Depreciation and amortization of property,
plant and equipment................................................. 5,417 5,384
Amortization of intangible assets....................................... 1,526 1,824
Amortization of debt issue costs........................................ 76 468
Provision for doubtful accounts......................................... 459 1,052
Amortization of stock awards and stock issued for services.............. 299 358
Adjustment of reserve for discontinued operations....................... -- (1,458)
Provision (adjustment) to restructuring reserve 2,608 (600)
Changes in operating assets and liabilities:
Trade and other receivables......................................... 6,231 (8,618)
Inventories......................................................... (13,682) 773
Prepaid expenses and other current assets........................... (2,026) (2,593)
Accounts payable.................................................... (1,125) 5,531
Accrued liabilities................................................. (8,364) (4,196)
Other adjustments - net................................................. (3,378) (2,352)
--------- --------
Net cash provided by (used in) operating activities ....................... (17,399) 4,080
--------- --------
</TABLE>
(Continued)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
for the three months ended April 30, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows provided by (used in) investing activities:
Purchases of property, plant and equipment.................................... $(7,433) (8,002)
Net cash received from (used in) operations discontinued
and sold................................................................... (894) (1,350)
Proceeds from sale of assets held for sale and property and equipment......... 5,250 305
------- -------
Net cash provided by (used in) investing activities........................ (3,077) (9,047)
------- -------
Cash flows provided by (used in) financing activities:
Proceeds from public stock offering, net of offering costs.................... -- 130,297
Proceeds from exercise of employee stock options.............................. 133 7,258
Retirement of subordinated notes.............................................. (52,269) (80,800)
Redemption premium and expenses on retirement of subordinated notes........... (8,512) (8,684)
Net borrowings (payments) of short-term obligations........................... 3,344 (580)
Net borrowings (payments) on long-term obligations............................ 82,520 (44,611)
Other, net.................................................................... 106 1,101
------- -------
Net cash provided by (used in) financing activities........................ 25,322 3,981
------- -------
Effect of exchange rate changes on cash and cash equivalents...................... (1,069) (5,247)
------- -------
Net decrease in cash and cash equivalents.................................. 3,777 (6,233)
Cash and cash equivalents, beginning of period ................................... 3,134 9,343
------- -------
Cash and cash equivalents, end of period.......................................... $ 6,911 3,110
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ..................................... $ 5,000 2,851
======= =======
Cash paid during the period for income taxes.................................. $ 479 1,132
======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements
1. GENERAL
A. Business
--------
Samsonite Corporation and subsidiaries (the "Company") was formerly known
as Astrum International Corp. ("Astrum"). On July 14, 1995, Astrum merged
with its wholly-owned subsidiary, Samsonite Corporation, and changed its
name to Samsonite Corporation. The Company is engaged in the manufacture
and sale of luggage and related products throughout the world, primarily
under the Samsonite, American Tourister, and Lark brand names. The
principal customers of the Company are department/specialty retail stores,
mass merchants, catalog showrooms and warehouse clubs. The Company also
sells its luggage and other travel related products through its
Company-owned stores.
B. Recent Events and Proposed Recapitalization
-------------------------------------------
The Company recently announced a planned recapitalization of the Company
(the "Recapitalization") involving the repurchase pursuant to a tender
offer (the "Tender Offer") of up to 10.5 million shares of the Company's
common stock at a purchase price of $40.00 per share (up to $420 million in
the aggregate) and the refinancing of certain existing indebtedness. The
Company intends to finance the Recapitalization through the sale of $350
million of senior subordinated notes, $175 million of redeemable senior
preferred stock, and a new senior credit facility. The Recapitalization is
conditioned on the Company's having obtained sufficient financing to
purchase the shares of common stock pursuant to the Tender Offer, to
refinance existing indebtedness and to pay related fees and expenses.
Certain pro forma financial information giving effect to the
Recapitalization is included in the Form 8-K filed by the Company on May
20, 1998.
On January 7, 1998, the Company announced it had engaged Goldman, Sachs &
Co. as financial advisor to assist in the process of exploring various
strategic alternatives designed to enhance shareholder value. This process
ultimately resulted in the Recapitalization plan. In addition to the
charges discussed below, the Company expects to record charges in the
second quarter of fiscal 1999 for financial, legal and other expenses
associated with the process of exploring these alternative plans which were
not ultimately consummated.
During the three months ended April 30, 1998, the Company completed a
tender offer for the Series B Notes (the "Notes") and retired $52,269,000
principal amount of the Notes and paid redemption premium and other
expenses of the tender offer totaling approximately $8,512,000. These
costs, along with $1,527,000 of deferred financing costs, were charged to
expense and classified as an extraordinary item, net of tax effects, in the
accompanying statement of operations for the three months ended April 30,
1998. The Company's existing credit facility was amended to allow for
financing the retirement of the Series B Notes from borrowings thereunder.
On March 23, 1998, the Company announced a restructuring of its Torhout,
Belgium manufacturing operations. The Company recorded a pre-tax charge of
approximately $2.6 million during the three months ended April 30, 1998 in
connection with the restructuring. The restructuring provision is primarily
related to termination and severance costs for the elimination of
approximately 111 positions.
7
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (Continued)
On May 14, 1998, the Company approved a plan to further restructure its
U.S. production operations to bring the unit volume and workforce in the
Denver plant into line with expected sales and to achieve a better balance
between fixed and variable costs with respect to this facility. The
restructuring plan calls for a substantial reduction in workforce, as well
as the disposal of certain molding and other equipment that represents
excess capacity. As a result, during the second quarter of fiscal 1999, the
Company will record a restructuring charge of approximately $5.5 million
(of which approximately $2.2 million is non-cash). The Company also expects
to incur additional cash costs of approximately $0.3 million in connection
with the restructuring plan that will be expensed as they are incurred. The
Company expects that the restructuring will be completed by approximately
July 1, 1998.
The Company is evaluating its investment in Chia Tai Samsonite (H.K.) Ltd.,
a 50% owned joint venture formed to manufacture and distribute luggage in
China which is encountering difficulties in achieving an adequate level of
sales and distribution to support operational expenses and finding
qualified personnel to manage the joint venture. As a result of this
evaluation, the Company may incur a charge in fiscal 1999 related to the
disposal or liquidation of this investment. At April 30, 1998, the Company
had a net investment of approximately $2.2 million in this joint venture.
C. Basis of Presentation
---------------------
On May 25, 1993, the United States Bankruptcy Court for the Southern
District of New York confirmed the Amended Plan of Reorganization (the
"Plan") for Astrum. Pursuant to the terms of the Plan, which became
effective on June 8, 1993, Astrum completed a comprehensive financial
reorganization which reduced debt and annual interest expense (the
"Restructuring").
The Restructuring has been accounted for pursuant to the American Institute
of Certified Public Accountants Statement of Position 90-7, entitled
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"). SOP 90-7 requires that assets and liabilities be
adjusted to their fair values ("fresh-start" values) and that a new
reporting entity be created. On June 30, 1993, for accounting purposes, the
Plan was consummated and SOP 90-7 was adopted. The consolidated financial
statements include the ongoing impact of fresh-start reporting. The most
significant fresh start adjustment relates to recording Reorganization
Value in Excess of Identifiable Assets. In addition, the Company recorded
fresh start adjustments to reflect tradenames, licenses, patents and other
intangibles at their fair values.
D. Interim Financial Statements
----------------------------
The accompanying unaudited consolidated financial statements reflect all
adjustments, which are normal and recurring in nature, and which, in the
opinion of management, are necessary to a fair statement of the financial
position as of April 30, 1998 and results of operations for the three
months ended April 30, 1998 and 1997. These consolidated financial
statements and related notes should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 31,
1998.
See Note 14 to the aforementioned consolidated financial statements
included in the 1998 Form 10-K for a description of litigation, commitments
and contingencies. A discussion of the effect of Year 2000 issues on the
Company's operations is included in the 1998 Form 10-K under Item 7.
Management's Discussion and Analysis of Financial Conditions and Results of
Operations.
8
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (Continued)
E. Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
F. Per Share Data
--------------
The Company has adopted and retroactively applied the requirements of
Statement of Financial Account Standards No. 128, Earnings Per Share ("SFAS
128") to all periods presented. This change does not have a material impact
on the computation of the earnings per share data. SFAS 128 requires the
disclosure of "basic" earnings per share and "diluted" earnings per share.
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding.
Diluted earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding increased for potentially dilutive common shares outstanding
during the period. The dilutive effect of stock options, warrants, and
their equivalents is calculated using the treasury stock method.
Loss from continuing operations before extraordinary item per share and net
loss per share for the three months ended April 30, 1998 is computed based
on a weighted average number of shares of common stock outstanding during
the period of 20,413,536. Basic earnings per share and earnings per share -
assuming dilution are the same for the three months ended April 30, 1998
because of the antidilutive effect of stock options and awards when there
is a loss from continuing operations.
The following table presents a reconciliation of the numerators and
denominators of basic earnings per share and the earnings per share -
assuming dilution for the three months ended April 30, 1997:
<TABLE>
<CAPTION>
Income from
Continuing Per-Share
Operations Shares Amount
-------------- ------------ ------------
<S> <C> <C> <C>
Basic Earnings per Share:
Income before extraordinary item........................... $8,499,000 19,848,865 $ .43
=====
Added dilutive effect of stock options and awards.......... -- 841,445
--------- ----------
Earnings per Share-Assuming Dilution:
Income before extraordinary item available to
common stockholders and shares including assumed
conversions.............................................. $8,499,000 20,690,310 $ .41
========= ========== =====
</TABLE>
G. Royalty Revenues
----------------
The Company licenses its brand names to certain unrelated third parties as
well as certain foreign subsidiaries and joint ventures. Net sales include
royalties earned of $3,777,000 and $4,763,000 for the three months ended
April 30, 1998 and 1997, respectively.
H. Reclassifications
-----------------
Certain items previously reported in specific financial statement captions
have been reclassified to conform with the fiscal 1999 presentation.
9
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (Continued)
2. Inventories
-----------
Inventories consisted of the following:
April 30, January 31,
1998 1998
-------- -----------
(In thousands)
Raw Materials ................................ $ 53,909 47,814
Work in Process .............................. 9,624 10,476
Finished Goods ............................... 122,814 114,375
-------- --------
$186,347 172,665
======== ========
3. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
April 30, January 31,
1998 1998
---- ----
(In thousands)
Land ......................................... $ 11,996 12,266
Buildings .................................... 64,438 60,524
Machinery, equipment and other ............... 130,259 133,778
--------- ---------
206,693 206,568
Less accumulated amortization and depreciation (65,729) (64,217)
--------- ---------
$ 140,964 142,351
========= =========
Depreciation included in cost of goods sold and selling, general and
administrative expenses related to adjustments of assets and liabilities to
fair value in connection with the adoption of SOP 90-7 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Three months ended April 30,
----------------------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
"Fresh Start" Depreciation in Cost of Goods Sold............... $411 685
"Fresh Start" Depreciation in Selling, General and
Administrative Expenses................................... 90 151
---- -----
Total "Fresh Start" Depreciation.......................... $501 836
==== =====
</TABLE>
Property and equipment revalued in connection with the adoption of SOP 90-7
are being depreciated over their respective estimated useful lives,
primarily ranging from two to six years.
4. Intangible Assets
Intangible assets, net of accumulated amortization, consisted of the
following:
April 30, January 31,
1998 1998
---- ----
(In thousands)
Trademarks ......................... $107,682 108,556
Licenses, Patents and Other ........ 7,824 8,352
------- --------
$115,506 116,908
======= ========
10
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (Continued)
Amortization of intangible assets, including amortization related to the
adjustments of assets and liabilities to fair value in connection with the
adoption of SOP 90-7, consisted of the following (in thousands)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
"Fresh Start" Amortization of Tradenames, Licenses, Patents
and Other................................................... $1,432 1,607
Other........................................................... 94 217
----- -----
$1,526 1,824
===== =====
</TABLE>
"Fresh Start" amortization represents the expense arising from the adoption
of "fresh start" accounting in accordance with SOP 90-7. The reorganization
value in excess of identifiable assets was amortized over a three-year
period ending June 1996; licenses, patents and other are amortized over a
period ranging from one to twenty-three years, and tradenames are amortized
primarily over a period of forty years.
5. Debt
Debt consisted of the following:
<TABLE>
<CAPTION>
April 30, January 31,
1998 1998
---- ----
(In thousands)
<S> <C> <C>
Senior Credit Facility (a).................................. $185,596 102,533
Other (b) .................................................. 24,771 25,227
Capital lease obligations................................... 6,476 4,302
Series B Senior Subordinated Notes (c)...................... 532 52,801
------- -------
Total debt.............................................. 217,375 184,863
Less short-term debt and current installments of
long-term obligations................................... (13,746) (12,617)
------- -------
$203,629 172,246
======= =======
</TABLE>
(a) The Senior Credit Facility provides for a $200 million revolving credit
facility due June 12, 2002 ("Revolving Credit Facility A") and a $50
million revolving credit facility ("Revolving Credit Facility B") due June
10, 1999. The Revolving Credit Facility A is a multicurrency facility which
allows for loans of $160 million U.S. dollars and $40 million in various
European currencies.
The following amounts were outstanding at April 30, 1998 under the Senior
Credit Facility:
Revolving Credit Facility A:
Borrowings ............................ $135.5 million
Letters of Credit ..................... $15.6 million
Revolving Credit Facility B ............... $50.0 million
Available borrowings were $48.9 million at April 30, 1998.
11
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (Continued)
The Senior Credit Facility is secured by 100% of the stock of significant
domestic subsidiaries and 66% of the stock of the Company's principal
foreign subsidiaries. The agreement contains financial covenants requiring
the Company to maintain certain financial ratios and minimum stockholders'
equity. The agreement also contains covenants which limits the incurrance
of additional indebtedness, the payment of dividends, the disposition of
assets, and other restrictions. The agreement generally allows the Company
to pay dividends not to exceed 30% of its net income.
(b) Other obligations consist of various notes payable to banks by foreign
subsidiaries aggregating $19.6 million and $5.1 million of secured
financing arrangements with foreign banks.
(c) The Series B Senior Subordinated Notes (the "Notes") bear interest at
11 1/8% and have a maturity date of July 15, 2005. During the three months
ended April 30, 1998, the Company completed a tender offer for the Series B
Notes and retired $52,269,000 principal amount of the Notes and paid
redemption premium and other expenses of the tender offer totaling
approximately $8,512,000. These costs, along with $1,527,000 of deferred
financing costs, were charged to expense and classified as an extraordinary
item, net of tax effects, in the accompanying statement of operations for
the three months ended April 30, 1998.
6. Other Income (Expense) - Net
Other income (expense) - net consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Net gains from foreign currency forward delivery contracts (a)...... $ 1,428 3,647
Rental income....................................................... 252 522
Equity in loss of unconsolidated affiliate.......................... (235) (61)
Pension expense related to merged plans............................. -- --
Foreign currency transaction losses, net............................ (77) (370)
Gain (loss) on disposition of fixed assets, net..................... 737 (7)
Other, net.......................................................... (1,107) (418)
Favorable settlement of claims (b).................................. -- 2,128
Adjustment of allowances relating to previous operations (c)........ -- 1,458
------ ------
$ 998 6,899
====== ======
</TABLE>
(a) Net gains from foreign currency forward delivery contracts for the three
months ended April 30, 1998 includes $753,000 of unrealized exchange gains
related to open forward exchange contracts entered into to reduce foreign
currency exposure on certain foreign operations.
(b) Other income of $2,128,000 for the three months ended April 30, 1997
resulted from the favorable settlement for approximately $11,000, including
legal expenses, of claims against the Company. The Company had previously
accrued $2,139,000 for such claims as part of its reorganization in
bankruptcy. The claims are part of the Contingent Liability with Respect to
the Old Notes described in Note 14 to the consolidated financial statements
in the 1998 Form 10-K and relate to interest on overdue installments of
interest occurring prior to the bankruptcy of the Company's predecessor in
1993.
(c) During the three months ended April 30, 1997, the Company recorded other
income of $1,458,000 for the reversal of allowances for factored
receivables from previous operations which were no longer necessary upon
the favorable settlement of receivables for which such allowances were
established.
12
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (Continued)
7. Employee Stock Options
The Company has authorized 2,550,000 shares for the granting of options
under the 1995 Stock Option and Award Plan. See Note 10 to the consolidated
financial statements included in the 1998 Form 10-K for a description of
such plan. In addition, the Company has outstanding options and stock bonus
awards to current executives in connection with employment agreements.
At April 30, 1998, the Company had outstanding options for a total of
2,494,319 shares at options prices ranging from $10.875 to $47.875 per
share. Options for 1,042,357 shares were exercisable at April 30, 1998 at a
weighted average exercise price of $21.93 per share. Options for 9,573
shares under the 1995 Stock Option and Award Plan were exercised at an
average exercise price of $13.875 per share during the three months ended
April 30, 1998.
In May 1996, the Company granted stock bonuses for a total of 116,667
shares to certain officers payable if the officer remains continually
employed by the Company through the earlier of May 15, 1999 or one year
after a change of control event or in the event of certain types of
termination. The Company is recognizing compensation expense equal to the
fair market value at the date of the grant ($18.25 per share) over the
vesting period. Upon the termination of one of the executive's employment
with the Company, 38,889 of such shares vested and were issued to the
executive during the three months ended April 30, 1998.
8. Segment Information
The Company has one line of business: the manufacture and distribution of
luggage and other travel-related products. Management of the business and
evaluation of operating results is organized along geographic lines
dividing responsibility for the Company's operations as follows: The
Americas, which include the United States, Canada, Mexico, and South
America; Europe; Asia, which includes India, China, Singapore, South Korea,
and Hong Kong; and Other which primarily includes licensing revenues from
non-luggage brand names owned by the Company and royalties from the
Japanese luggage licensee, and corporate overhead. Net outside sales and
operating income by segment for the three months ended April 30, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Net outside sales:
Europe (a)............................ $ 71,949 65,700
Americas.............................. 77,470 95,296
Asia.................................. 4,889 5,035
Other................................. 2,368 3,531
------- -------
$156,676 169,562
======= =======
Operating income (loss):
Europe (a)............................ $ 5,872 8,564
Americas.............................. (8,130) 7,493
Asia.................................. (81) 87
Other................................. (1,253) (218)
Eliminations.......................... (760) (1,537)
-------- -------
$ (4,352) 14,389
======= =======
</TABLE>
13
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Notes to Consolidated Financial Statements (Continued)
(a) Without the effect of the provision for restructuring operations, Europe's
operating income would have been approximately $8.5 million for the three
months ended April 30, 1998. Additionally, the depressing effects of the
strengthened U.S. dollar versus the Belgian franc causes reported sales and
operating income for the three months ended April 30, 1998 to be reduced by
approximately $8.0 million and $0.7 million, respectively.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Three Months Ended April 30, 1998 ("fiscal 1999" or "current year") Compared to
Three Months Ended April 30, 1997 ("fiscal 1998" or "prior year")
General. The following discussion analyzes the Company's results of operations
along the lines of the Company's organizational structure as disclosed in Note 8
to the consolidated financial statements included elsewhere herein as follows:
(i) "European operations" which consist of its European sales manufacturing and
distribution operations whose reporting currency is the Belgian franc, (ii) "the
Americas operations" which include sales, manufacturing, and distribution
operations in the United States, Mexico, Canada, Latin America, (iii) "Asian
operations" which include the sales, manufacturing and distribution operations
in India, China, Singapore, South Korea and Hong Kong, and (iv) non-luggage
licensing operations and corporate overhead.
Results of European operations were translated from Belgian francs to U.S.
dollars in fiscal 1999 and fiscal 1998 at average rates of approximately 37.60
and 33.86 francs to the U.S. dollar, respectively. This decrease in the value of
the Belgian franc of approximately 10% resulted in decreases in reported sales,
cost of sales and other expenses in fiscal 1999 compared to fiscal 1998. The
most significant effects from the difference in exchange rates from last year to
the current year are noted in the following analysis and referred to as an
"exchange rate difference". The Company enters into forward foreign exchange
contracts and option contracts to reduce its economic exposure to fluctuations
in currency exchange rates for the Belgian franc and other foreign currencies.
Such instruments are marked to market at the end of each accounting period;
realized and unrealized gains and losses are recorded in other income. During
fiscal 1999, the Company had net gains from such instruments of $1.4 million
($0.8 million of which was unrealized); during fiscal 1998, the Company had net
gains on such instruments of $3.6 million ($2.7 million of which was
unrealized). The Company estimates the reduction in operating income from the
strengthening of the U.S. dollar versus the Belgian franc from the same quarter
in the prior year to be approximately $0.7 million and $1.1 million for the
three months ended April 30, 1998 and 1997, respectively.
Net Sales. Consolidated net sales decreased from $169.6 million in fiscal 1998
to $156.7 million in fiscal 1999, a decrease of $12.9 million. Fiscal 1999 sales
were adversely affected by depressed U.S. wholesale sales and the strengthening
of the U.S. dollar versus the Belgian franc.
Sales from European operations increased from $65.7 million in fiscal 1998 to
$71.9 million in fiscal 1999, an increase of $6.2 million. Expressed in the
local European reporting currency (Belgian francs), fiscal 1999 sales increased
by 21.6%, or the U.S. constant dollar equivalent of $14.2 million, from fiscal
1998; however, the increase was offset by an $8.0 million exchange rate
difference. Sales of hardside product were increased by approximately 18% from
prior year while softside product sales were increased by approximately 17%.
Sales in almost all the European countries showed significant improvement from
the prior year.
Sales from the Americas operations decreased from $95.3 million in fiscal 1998
to $77.5 million in fiscal 1999, a decrease of $17.8 million or 18.7%. U.S.
wholesale sales for the first quarter decreased by $25.3 million from the prior
year, retail sales increased by $5.6 million, and sales in the other Americas
operations increased by $1.9 million from the prior year. U.S. wholesale sales
were adversely affected by the impact of price increases and other pricing
strategies instituted during fiscal 1998 and market disruptions and retailer
discounting taken in connection with various forms of cross distribution-channel
selling during fiscal 1998. For a further discussion of the issues affecting
U.S. Wholesale operations and actions being taken with respect
15
<PAGE>
to such operations, see Recent Events and Proposed Recapitalization. U.S. retail
sales continued to improve, increasing from $20.2 million in the prior year to
$25.8 million in the first quarter of fiscal 1999, an increase of 28%.
Comparable store sales increased by approximately $1.0 million or 4.9% from the
same quarter in the prior year.
First quarter sales in fiscal 1999 from Asian operations of $4.9 million were
approximately equal to the prior year sales of $5.0 million. Sales in the
Pacific Rim operations were decreased by approximately $1.7 million or 34% from
the prior year due to the effect of the Asian economic difficulties. This
decrease was offset by sales from the new manufacturing and distribution
facility in India of approximately $1.6 million.
Revenues from the Japanese licensee declined $0.7 million due to Asian economic
problems and non-luggage licensing revenues also declined $0.3 million from the
prior year.
Gross profit. Consolidated gross profit for fiscal 1999 declined from fiscal
1998 by $10.9 million. Consolidated gross margin decreased by 3.5 margin points,
from 41.4% in fiscal 1998 to 37.9% in fiscal 1999.
Gross margins from European operations declined 3.1 percentage points, from
41.4% in fiscal 1998 to 38.3% in fiscal 1999. The decrease in gross profit
margins is due to a higher sales mix of lower gross profit margin mass merchant
sales and obsolescence reserves.
Gross margins for the Americas declined from 41.3% in fiscal 1998 to 36.0% in
fiscal 1999. Margins decreased due to lower absorption of manufacturing overhead
due to the decrease in sales, discounting on slow moving and obsolete product
lines, price reductions on certain product lines, and price markdowns given to
customers for existing inventories.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
increased by $5.0 million from fiscal 1998 to fiscal 1999. As a percent of
sales, SG&A was 38.1% in fiscal 1999 and 32.2% in fiscal 1998.
As a percent of sales, Europe's SG&A was 25.8% in fiscal 1999 versus 27.7% in
fiscal 1998. On an absolute basis, SG&A for European operations increased by
$0.4 million from fiscal 1998 to fiscal 1999. The exchange rate difference
caused SG&A to decrease by $2.1 million. The remainder, an increase of $2.5
million, resulted from an increase in SG&A expressed in Belgian francs of 13.7%.
The increase in SG&A was primarily to support the increased sales levels in
fiscal 1999.
Combined SG&A for the Americas increased by $4.5 million due primarily to an
increase of $3.7 million in the retail division related to the increase in the
number of stores over the prior year and an increase in SG&A for operations in
Mexico and Brazil of $0.7 million.
SG&A for Asia increased by $0.7 million from the prior year primarily due to
operations of the new India manufacturing plant.
SG&A for non-luggage licensing declined by $0.2 million and corporate overhead
declined by $0.4 million.
Provision for restructuring operations. The provision for restructuring
operations in the first quarter of fiscal 1999 results from the a restructuring
of its Torhout, Belgian manufacturing operations. The restructuring provision is
primarily related to termination and severance costs for the elimination of
approximately 111 positions. In fiscal 1998, certain excess restructuring
reserves of $0.6 million were reversed.
16
<PAGE>
Amortization of intangible assets. Amortization of intangible assets decreased
from $1.8 million in fiscal 1998 to $1.5 million in fiscal 1999 primarily
because the cost of intangibles was reduced in fiscal 1998 as a result of the
sale of certain trademarks.
Operating income (loss). Operating income decreased from $14.4 million in fiscal
1998 to an operating loss in fiscal 1999 of $4.4 million, a decrease of $18.8
million. This decrease is a result of the decline in sales and resulting
reduction of gross profit of $10.9 million, the increase in SG&A of $5.0
million, the increase in the restructuring provision of $3.2 million, net of the
decrease in amortization of intangibles of $0.3 million.
Interest income. Interest income increased by $0.3 million due to interest
income received on a refund of state income taxes.
Interest expense and amortization of debt issue costs. Interest expense and
amortization of debt issue costs decreased from $6.2 million in fiscal 1998 to
$4.8 million in fiscal 1999. The decrease was caused primarily by lower average
interest rates during fiscal 1999 as a result of the retirement throughout
fiscal 1998 and fiscal 1999 of the 11 1/8% Series B Subordinated Notes with the
proceeds of lower rate bank financing and an equity offering in fiscal 1998 and
lower debt levels in fiscal 1999 as compared to the prior year.
Other, net. See Note 6 to the consolidated financial statements included
elsewhere herein for a comparative analysis of other income (expense). The
Company has entered into certain forward exchange contracts to hedge its
exposures to changes in exchange rates. The Company estimates the reduction in
operating income from the strengthening of the U.S. dollar versus the Belgian
franc from the same quarter in the prior year to be approximately $0.7 million
and $1.1 million for the three months ended April 30, 1998 and 1997,
respectively. Other income for the first quarter of fiscal 1999 includes income
from forward exchange contracts of $1.4 million, $0.8 million of which was
unrealized. In the first quarter of fiscal 1998, such transactions resulted in
income of $3.6 million, $2.7 million of which was unrealized. The income
recorded for the three months ended April 30, 1998 results primarily from
forward exchange contracts selling forward the Belgian franc which has declined
against the U.S. dollar since the contracts were executed. Of the income
recorded through April 30, 1998, approximately $0.7 million is unrealized; the
ultimate realization of this amount is subject to fluctuations in the exchange
rate of the U.S. dollar against the Belgian franc.
Other income for the three months ended April 30, 1997 includes $2.1 million
from favorable settlement of claims for interest on overdue installments of
interest accruing prior to the commencement of the bankruptcy of the Company's
predecessor in 1993. Other income for the three months ended April 30, 1997 also
includes income of approximately $1.5 million for the reversal of allowances for
factored receivables from previous operations which were no longer necessary
upon the favorable settlement of the receivables for which such allowances were
established. See Notes 6(b) and 6(c) to the consolidated financial statements
included elsewhere herein for further discussion of these items.
Income tax benefit (expense). Income tax expense decreased from $6.8 million in
fiscal 1998 to an income tax benefit of $2.9 million in fiscal 1999. The
decrease in tax expense is due primarily to the consolidated pretax loss in
fiscal 1999 and the receipt of $0.8 million of state income tax refunds which
related to taxes accrued and paid in prior years. The relationship between the
expected income tax benefit computed by applying the U.S. statutory rate to
pretax income (loss) and income tax expense recognized results primarily because
of (i) foreign income tax expense provided on foreign earnings, and (ii) state
and local income taxes.
Extraordinary loss. The extraordinary loss for the three months ended April 30,
1998 resulted from the completion of a tender offer for the Company's 11 1/8%
Series B Subordinated Notes. The Company retired $52,269,000 principal amount of
the Notes and paid redemption premiums and other expenses of the tender offer
totaling approximately $8,512,000. These costs along with $1,527,000 of deferred
financing costs were charged to expense and classified as an extraordinary item,
net of tax effects, for the three months ended April 30, 1998. The extraordinary
loss for the three months ended April 30, 1997 resulted from redemption
17
<PAGE>
premiums of $8.7 million on the early retirement of $80.8 million principal
amount of the Notes and the write-off of related deferred financing costs of
$2.6 million, net of tax effects.
Earnings Before Interest and Taxes. The Company's EBIT (earnings (loss) before
net interest expense and taxes), adjusted for certain items recorded in other
income which the Company believes should be included in its calculation of EBIT,
was $(1.1) million and $15.3 million for the three months ended April 30, 1998
and 1997, respectively. The Company's EBITDA (earnings before interest, taxes,
depreciation and amortization) was $5.9 million and $23.2 million for the three
months ended April 30, 1998 and 1997, respectively. Items recorded in other
income (expense) which management believes should be included in the calculation
of EBIT and EBITDA in order to reflect recurring operating performance include
realized gains from foreign currency forward delivery contracts, rental income,
and equity in loss of unconsolidated affiliate. Other companies may calculate
EBIT and EBITDA in a different manner than the Company. EBIT or EBITDA do not
take into consideration substantial costs and cash flows of doing business such
as interest expense, income taxes, extraordinary items, restructuring
provisions, depreciation and amortization and should not be considered in
isolation to or as a substitute for other measures of performance. EBIT and
EBITDA are not accounting terms and are not used in generally accept accounting
principles.
Net income (loss). The Company had net income in fiscal 1998 of $1.9 million and
a net loss in fiscal 1999 of $10.9 million. The decrease in the net income from
the prior year of $12.8 million is caused by the effect of the decreases in
operating and other income, offset by the decrease in income taxes, interest
expense, and extraordinary loss.
Liquidity and Capital Resources
- -------------------------------
For the three months ended April 30, 1998, cash used in operations as reflected
on the Consolidated Statements of Cash Flows included elsewhere herein was $17.4
million; primarily as a result of the loss from operations for the first
quarter, increases in inventory, and decreases in accrued liabilities and
accounts payable, net of the decrease in accounts receivable, since January 31,
1998. At April 30, 1998, the Company had working capital of $216.2 million
compared to $187.2 million at January 31, 1998, an increase of $29.0 million.
Current assets increased by $11.7 million primarily due to an increase in
inventory of $13.7 million, an increase in cash of $3.8 million, increases in
other current assets of $0.8 million, net of the decrease in receivables of $6.6
million. Inventories increased primarily because of sales forecasting issues
which caused excess production in the U.S. wholesale division and depressed U.S.
wholesale sales as discussed elsewhere herein (see Recent Events and Proposed
Recapitalization). Current liabilities decreased from $147.2 million at January
31, 1998 to $138.0 million at April 30, 1998, a decrease of $9.2 million. A
decrease in accrued liabilities of $9.2 million primarily caused the decrease in
total current liabilities and was due to decreases in co-op advertising
accruals, returned goods allowances, and current income tax liabilities.
Long-term obligations increased from $172.2 million at January 31, 1998 to
$203.6 million at April 30, 1998, an increase of $31.4 million. Approximately
$8.5 million of additional borrowings were used to fund redemption premiums and
expenses of the tender offer for the Notes (as discussed elsewhere herein) and
the remainder was used to fund operational and investing requirements. At April
30, 1998, the Company had available borrowings on its Senior Credit Facility of
approximately $48.9 million.
The Company's cash flow from operations together with amounts available under
its credit facilities were sufficient to fund first quarter fiscal 1999
operations, scheduled payments of principal and interest on indebtedness and
capital expenditures. Management of the Company believes that cash flow from
operations and available borrowings under its credit facilities and new credit
facilities in emerging markets will be adequate to fund operating requirements
and expansion plans during the next 12 months. In addition, management currently
believes the Company will be able to meet long-term cash flow obligations from
cash provided by operations and other existing resources.
18
<PAGE>
The Company's principal foreign operations are located in Western Europe, the
economies of which are not considered to be highly inflationary. The Company
enters into foreign exchange contracts in order to hedge its exposure on certain
foreign operations through the use of forward delivery commitments. During the
past several years, the Company's most effective hedge against foreign currency
changes has been the foreign currency denominated debt balances maintained in
respect to its foreign operations. Geographic concentrations of credit risk with
respect to trade receivables are not significant as a result of the diverse
geographic areas covered by the Company's operations. As discussed in the
Company's Annual Report on Form 10-K under Liquidity and Capital Resources for
the year ended January 31, 1998, part of the Company's foreign operations are in
Asia where many of the local economies and currencies are slumping. Because of
the relatively small part of the Company's revenues and assets related to Asia,
the Company does not believe the Asian economic problems will have a material
impact on the overall Company operations or financial position. However, if such
conditions continue, the Company's expected growth in this area of the world
could be adversely affected.
Recent Events and Proposed Recapitalization
The Company recently announced a planned recapitalization of the Company (the
"Recapitalization") involving the repurchase pursuant to a tender offer (the
"Tender Offer") of up to 10.5 million shares of Common Stock at a purchase price
of $40.00 per share (up to $420 million in the aggregate) and the refinancing of
certain existing indebtedness. The Company intends to finance the
Recapitalization through the sale of $350 million of senior subordinated notes,
$175 million of redeemable senior preferred stock, and a new senior credit
facility. The Recapitalization is conditioned on the Company's having obtained
sufficient financing to purchase the shares of common stock pursuant to the
Tender Offer, to refinance existing indebtedness, and to pay related fees and
expenses.
On January 7, 1998, the Company announced it had engaged Goldman, Sachs & Co. as
financial advisor to assist in the process of exploring various strategic
alternatives designed to enhance shareholder value. This process ultimately
resulted in the Recapitalization plan. In addition to the charge discussed
below, the Company expects to record charges in the second quarter of fiscal
1999 for financial, legal and other expenses associated with the process of
exploring these alternative plans which were not ultimately consummated.
The Company expects U.S. wholesale sales to continue to be depressed through at
least the second quarter of fiscal 1999 because of various market factors which
affected U.S. wholesale sales in fiscal 1998, including the adverse impact on
sell through of price increases and pricing strategies, market disruptions and
retailer discounting issues associated with various forms of cross
distribution-channel sales, forecasting and production scheduling errors and the
rapid growth of the Company's retail operations which has caused conflicts with
wholesale customers. Commencing in February 1998, management began a detailed
study and evaluation of the Company's U.S. hardside production operations in
light of declining U.S. hardside sales and various marketing issues that the
Company is encountering in the United States. These issues, as well as the
decision to source international hardside products from other production
facilities located closer to the Company's international customers for
competitive reasons, instead of from its Denver plant, have resulted in an
inventory build-up and reduced hardside production requirements in the United
States. Based on management's evaluation, on May 14, 1998, the Company approved
a plan to further restructure its U.S. production operations to bring the unit
volume and workforce in the Denver plant into line with expected sales and to
achieve a better balance between fixed and variable costs with respect to this
facility. The restructuring plan calls for a substantial reduction in workforce,
as well as the disposal of molding and other equipment that represents excess
capacity. As a result, during the second quarter of fiscal 1999, the Company
will record a restructuring charge of approximately $5.5 million (of which
approximately $2.2 million is non-cash). The Company also expects to incur
additional cash costs of approximately $0.3 million in connection with the
restructuring plan that will be expensed as they are incurred. The Company
expects that the restructuring will be completed by approximately July 1, 1998,
and that the annualized cost savings from the restructuring will be
approximately $5.9 million. The foregoing estimate of annual cost savings
constitutes forward looking
19
<PAGE>
information within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual cost savings to be
materially different from the foregoing estimate. Such factors include, among
others, the following: general economic and business conditions; industry
capacity; changes in customer preferences; demographic changes; competition;
changes in methods of distribution and technology; the loss of any significant
customers; completion of new product developments within anticipated time
frames; changes in interest rates; and other factors beyond the Company's
control. In addition, such estimate of annual cost savings is based on a variety
of other factors and was derived utilizing numerous important assumptions,
including (i) achieving estimated reductions in headcount at currently projected
severance cost levels while maintaining work flow, (ii) achieving a sufficient
level of sales necessary to yield planned production efficiencies and absorption
of fixed costs, (iii) eliminating certain components of fixed overhead without
affecting the Company's ability to manage the downsized production facility
efficiently, (iv) the willingness of the affected employees to accept more
flexible work rules and (v) no disruption to planned production schedules. The
failure of one or more of these assumptions to be realized may cause the actual
annual cost savings to differ materially from the foregoing estimate.
The Company is evaluating its investment in Chia Tai Samsonite (H.K.) Ltd., a
50% owned joint venture formed to manufacture and distribute luggage in China
which is encountering difficulties in achieving an adequate level of sales and
distribution to support operational expenses and finding qualified personnel to
manage the joint venture. As a result of this evaluation, the Company may incur
a charge in fiscal 1999 related to the disposal or liquidation of this
investment. At April 30, 1998, the Company had a net investment of approximately
$2.2 million in this joint venture.
20
<PAGE>
SAMSONITE CORPORATION
PART II - OTHER INFORMATION
- ---------------------------
Item I - Legal Proceedings
-----------------
Reference is made to Note 14 to the consolidated financial statements included
in the Company's Annual Report on Form 10-K for the fiscal year ended January
31, 1998 which describes litigation, commitments and contingencies.
The Company and certain of its subsidiaries are subject to or are defendants in
various other claims and actions arising in the ordinary course of business.
While it is not possible to predict the outcome of such other claims or actions,
it is management's opinion that, after discussion with counsel, the ultimate
disposition of these other claims and actions will not have a material adverse
effect on the Company's consolidated financial position, results of operations
or liquidity.
Item 2 - Changes in Securities
---------------------
None.
Item 3 - Defaults Upon Senior Securities
-------------------------------
None.
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5 - Other Information
-----------------
None.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) See Exhibit Index.
(b) Reports on Form 8-K.
Reports dated March 24, 1998; May 13, 1998; and May 20, 1998.
Item 5. Other Events
21
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAMSONITE CORPORATION
(Registrant)
By /s/ Richard H. Wiley
---------------------------------------
Name: Richard H. Wiley
Title: Senior Vice President, Chief
Financial Officer, and Treasurer
Date: June 12, 1998
--------------
22
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company./1/
3.2 Certificate of Ownership and Merger dated July 14, 1995./2/
3.3 By-Laws of the Company./1/
4.1 Indenture, dated as of July 14, 1995, between the Company and United
States Trust Company of New York./2/
4.2 Registration Rights Agreement dated July 14, 1995, by and among the
Company, Donaldson, Lufkin & Jenrette Securities Corporation, and Bear,
Sterns & Co., Inc./2/
4.3 Specimen of Notes described in the Indenture./2/
4.4 Description of the Company's common stock, par value $.01 per share,
and the associated preferred stock purchase rights./3/
10.1 Third Amendment to Amended and Restated Credit Agreement, dated as of
June 12, 1997, between the Company, Samsonite Europe N.V. and
BankBoston, N.A., Generale Bank N.V., Credit Lyonnais New York Branch,
and other lending institutions, dated as of June 11, 1998.
27 Financial Data Schedule.
- ------------------
/1/ Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1997 (File No. 0-23214).
/2/ Incorporated by reference from the Registration Statement on Form S-4
(Registration No. 33-95642).
/3/ Incorporated by reference from the Company's Registration Statement on Form
8-A filed June 14, 1994 under the Exchange Act and the Company's
Registration Statement on Form 8-A filed May 13, 1998 under the Exchange
Act (File No. 0-23214).
23
<PAGE>
EXHIBIT 10.1
- --------------------------------------------------------------------------------
THIRD AMENDMENT
TO AMENDED AND RESTATED
MULTICURRENCY REVOLVING CREDIT AGREEMENT
- --------------------------------------------------------------------------------
Third Amendment, dated as of June 11, 1998, to Amended and Restated
Multicurrency Revolving Credit Agreement (this "Amendment"), by and among (a)
SAMSONITE CORPORATION, a Delaware corporation (the "Company"), (b) SAMSONITE
EUROPE N.V., a corporation organized under the laws of Belgium ("Samsonite
Europe") and (c) BANKBOSTON, N.A., GENERALE BANK N.V., CREDIT LYONNAIS NEW YORK
BRANCH and the other lending institutions listed on Schedule 1 to the Credit
-------- -
Agreement (as hereinafter defined) (collectively, the "Lenders"), amending
certain provisions of the Amended and Restated Multicurrency Revolving Credit
Agreement dated as of June 12, 1997, as amended by the First Amendment dated as
of August 26, 1997 and the Second Amendment dated as of February 27, 1998 (as
the same may be further amended, modified, supplemented, and in effect from time
to time, the "Credit Agreement") by and among the Company, Samsonite Europe, the
Lenders, BANKBOSTON, N.A. as administrative agent for the Agents (as hereinafter
defined) and the Lenders (the "Administrative Agent"), GENERALE BANK N.V. as
documentation agent for the Agents and the Lenders (the "Documentation Agent"),
CREDIT LYONNAIS NEW YORK BRANCH, as syndication agent for the Agents and the
Lenders (the "Syndication Agent"), BANKBOSTON, N.A. as competitive bid agent for
the Agents and the Lenders (the "Competitive Bid Agent"), GENERALE BANK N.V. as
foreign agent for the Agents and the Lenders (the "Foreign Agent") and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, BANQUE NATIONALE DE PARIS and
KREDIETBANK N.V. as co-agents (the "Co-Agents", and, collectively with the
Administrative Agent, the Documentation Agent, the Syndication Agent, the
Competitive Bid Agent and the Foreign Agent, the "Agents"), and GENERALE BANK
N.V. as fronting bank for the Lenders (the "Fronting Bank"). Terms not otherwise
defined herein which are defined in the Credit Agreement shall have the same
respective meanings herein as therein.
WHEREAS, the Borrowers and the Lenders have agreed to modify certain
terms and conditions of the Credit Agreement as specifically set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
(S)1. Amendments to the Credit Agreement. Subject to the satisfaction of
----------------------------------
the applicable conditions precedent set forth in (S)2 hereof, the definition of
Revolving Credit B Loan Maturity Date contained in Section 1.1 of the Credit
Agreement is hereby amended by
<PAGE>
-2-
deleting the date "June 11, 1998" and inserting in its place the date "June 10,
1999" immediately before the period at the end of such definition.
(S)2. Conditions to Effectiveness. This Amendment shall become effective on
---------------------------
and as of June 11, 1998, subject to the receipt on such date by the
Administrative Agent of one or more counterparts of this Amendment, duly
executed by the Company, Samsonite Europe, and each of the Lenders (such date
being hereinafter referred to as the "Amendment Date").
(S)3. Representations and Warranties. Each of the Company and Samsonite
------------------------------
Europe hereby repeats, on and as of the date of the execution and delivery
hereof and the Amendment Date, each of the representations and warranties made
by it in (S)8 of the Credit Agreement (except to the extent of changes resulting
from matters contemplated or permitted by the Credit Agreement and the other
Loan Documents, changes occurring in the ordinary course of business that singly
or in the aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date), provided,
that all references therein to the Credit Agreement shall refer to such Credit
Agreement as amended hereby. In addition, each of the Company and Samsonite
Europe hereby represents and warrants that the execution and delivery by the
Company and Samsonite Europe of this Amendment and the performance by each of
the Company and Samsonite Europe of all of its respective agreements and
obligations under this Amendment and the Credit Agreement as amended hereby are
within the corporate power and authority of the Company and Samsonite Europe, as
the case may be, and have been duly authorized by all necessary corporate action
on the part of the Company and Samsonite Europe, and each further represents and
warrants that the execution and delivery by each of the Company and Samsonite
Europe, as the case may be, of this Amendment and the performance by the Company
and Samsonite Europe, as the case may be, of the transactions contemplated
hereby will not contravene any term or condition set forth in any agreement or
instrument to which the Company or Samsonite Europe is a party or by which the
Company or Samsonite Europe is bound, including, in the case of the Company, but
not limited to, the Subordinated Indenture.
(S)4. Ratification, Etc. Except as expressly amended hereby, the Credit
------------ ---
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Amendment shall be read and construed as a single
agreement. This Amendment shall constitute one of the Loan Documents, and the
obligations of the Borrowers under this Amendment shall constitute Obligations
for all purposes of the Loan Documents. All references in the Credit Agreement,
the Loan Documents or any related agreement or instrument to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended hereby.
(S)5. No Waiver. Nothing contained herein shall constitute a waiver of,
---------
impair or
<PAGE>
-3-
otherwise adversely affect any Obligations, any other obligation of the Company
or Samsonite Europe or any rights of the Agents or the Lenders consequent
thereon.
(S)6. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
(S)7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO
CONFLICT OF LAWS).
<PAGE>
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
under seal by their respective officers thereunto duly authorized.
[Signature Pages Follow]
<PAGE>
-5-
Signature Pages for Borrowers
-----------------------------
Each of the undersigned Borrowers hereby consents and agrees to all of the
provisions of the foregoing Amendment:
The Company: SAMSONITE CORPORATION
--- -------
By: /s/ Rick Wiley.............................
Name: Rick Wiley.............................
Title: Chief Financial Officer................
Samsonite Europe: SAMSONITE EUROPE N.V.
----------------
By: /s/ Luc Van Nevel..........................
Name: Luc Van Nevel..........................
Title: Director...............................
By: /s/ Karlheinz Tretter
Name: Karlheinz Tretter
Title: Managing Director
<PAGE>
-6-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
BANKBOSTON, N.A.
By: /s/ Richard D. Hill, Jr...................
Name: Richard D. Hill, Jr...................
Title: Managing Director.....................
<PAGE>
-7-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
GENERALE BANK N.V.
By: /s/ Eddie Matthews.........................
Name: Eddie Matthews.........................
Title: SVP....................................
By: /s/ Paul Cardoen
Name: Paul Cardoen
Title: SVP
By:............................................
Name:..........................................
Title:.........................................
<PAGE>
-8-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ Robert Ivosevich.......................
Name: Robert Ivosevich.......................
Title: Senior Vice President..................
<PAGE>
-9-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By: /s/ Elizabeth R. Borow...................
Name: Elizabeth R. Borow...................
Title: Managing Director....................
<PAGE>
-10-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
THE BANK OF NEW YORK
By: /s/ Robert Louk.............................
Name: Robert Louk.............................
Title: Vice President..........................
<PAGE>
-11-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION
By: /s/ Randall Schmidt............................
Name: Randall Schmidt............................
Title: Vice President.............................
<PAGE>
-12-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
BANQUE NATIONALE DE PARIS
By: /s/ Clive Bettles..............................
Name: Clive Bettles..............................
Title: Senior Vice President & Manager............
By: /s/ Marc Schaefer..............................
Name: Marc Schaefer..............................
Title: Vice President.............................
<PAGE>
-13-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Dan Dobrjanskyj............................
Name: Dan Dobrjanskyj............................
Title: Assistant Vice President...................
By: /s/ Anthony Heyman.............................
Name: Anthony Heyman.............................
Title: Assistant Vice President...................
<PAGE>
-14-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
KREDIETBANK N.V.
By: /s/ Robert Snauffer.........................
Name: Robert Snauffer.........................
Title: Vice President..........................
By: /s/ Raymond F. Murray.......................
Name: Raymond F. Murray.......................
Title: Vice President..........................
<PAGE>
-15-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
ISTITUTO BANCARIO SAN PAOLO DI
TORINO SpA
By:............................................
Name:..........................................
Title:.........................................
By:............................................
Name:..........................................
Title:.........................................
<PAGE>
-16-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
SOCIETE GENERALE, SOUTHWEST
AGENCY
By: /s/ Richard A. Erbert........................
Name: Richard A. Erbert........................
Title: Vice President...........................
<PAGE>
-17-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing
Amendment:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Wanda Headrick.............................
Name: Wanda Headrick.............................
Title: Vice President.............................
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED APRIL 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<CASH> 6,911
<SECURITIES> 0
<RECEIVABLES> 100,730
<ALLOWANCES> 8,891
<INVENTORY> 186,347
<CURRENT-ASSETS> 354,203
<PP&E> 206,693
<DEPRECIATION> 65,729
<TOTAL-ASSETS> 617,758
<CURRENT-LIABILITIES> 138,010
<BONDS> 203,629
0
0
<COMMON> 204
<OTHER-SE> 197,305
<TOTAL-LIABILITY-AND-EQUITY> 617,758
<SALES> 156,676
<TOTAL-REVENUES> 156,676
<CGS> 97,273
<TOTAL-COSTS> 97,273
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 459
<INTEREST-EXPENSE> 4,808
<INCOME-PRETAX> (7,371)
<INCOME-TAX> (2,924)
<INCOME-CONTINUING> (4,703)
<DISCONTINUED> 0
<EXTRAORDINARY> (6,224)
<CHANGES> 0
<NET-INCOME> (10,927)
<EPS-PRIMARY> (.54)
<EPS-DILUTED> (.54)
</TABLE>
